VAL RR:IT:VA 546067 LPF
Karen Bysiewicz, Esq.
Steven H. Becker, Esq.
Coudert Brothers
1114 Avenue of the Americas
New York, NY 10036-7703
RE: Appraisement of rubber dams and marine fenders; Bona Fide Sale; HRLs 545105, 545709, 545144
Dear Ms. Bysiewicz and Mr. Becker:
This is in response to your request for a binding ruling concerning the appraisement of
rubber dams and marine fenders. We are in receipt of your correspondence, submitted on behalf
of Bridgestone Engineered Products, Inc. (BEP) of Nashville, TN. We have granted confidential
treatment to the information requested in your February 14, 1996 letter. We regret the delay in
reply.
FACTS:
BEP imports industrial rubber products manufactured and sold to BEP by Bridgestone
Corporation of Japan (BCJ). The imported merchandise includes: rubber track, rubber dams,
marine fenders, marine hose, conveyor belts and multi-rubber bearings. BEP is a wholly-owned
subsidiary of BCJ's U.S. subsidiary Bridgestone/Firestone Inc. (BFI). By oral agreement
between the parties, BEP is the exclusive distributor of BCJ products throughout the U.S. and
Canada. No written distribution agreement exists to this effect.
Since 1993, you explain that BEP has operated as a separate corporate entity from BFI.
You provide that BEP typically obtains an inquiry from a U.S. customer concerning a potential
order and then makes an initial cost calculation based on its knowledge of the cost of
domestically-sourced (i.e., non-BCJ made products) and BCJ components. In order to determine
the selling price to its U.S. customer, BEP will calculate the sum of: (1) the BCJ factory cost; (2)
BCJ's targeted profit; (3) the cost of any domestically-sourced materials; (4) BEP's targeted
profit margin; and (5) duty, brokerage and freight. BEP then will issue a price quote to the U.S.
customer. You state that BCJ exercises no control or approval over the price quote or final
contract price to the U.S. customer, although BCJ is aware of the amount of that quote and of the
final contract price between BEP and its U.S. customer.
You submit that BEP's manner of pricing and daily operations indicate it acts as a
buyer/seller. In this regard, you have provided a purchase order from BEP to BCJ and invoices
between BEP and its U.S. customer, including proof of payment, reflecting a price mark-up.
You also have included entry documents indicating that BEP acts as importer of record for the
imported merchandise and instructs its customs broker to arrange for transport of the imported
merchandise, at BEP's risk and expense, directly to the U.S. job site from the U.S. port of entry.
Additionally, you have provided a list of principal BEP employees showing that BEP employs a
staff responsible for accounting, engineering services, administration and sales. You also submit
that BEP provides instructions to BCJ (demonstrated by the BEP purchase order), is free to sell
its merchandise at any price (evinced by its pricing calculations and quotes), may select its own
customers (insofar as BCJ has no interest in, liability or responsibility for, or control over BEP's
customers) and places merchandise into inventory (as shown by BEP's purchase order and rubber
track products inventory chart).
Moreover, you provide that the terms of sale are reflective of a bona fide sale. As
supported by a purchase order and invoice, the terms of sale between BEP and BCJ typically are
"CIF US port of destination." With regard to the U.S. resale of the imported merchandise, the
submitted invoices indicate that BEP sells to its U.S. customers on an FOB landed, duty paid
basis for delivery at the job site or DDP basis at the job site. You submit that consistent with the
understanding of the parties, these terms provide that title and risk of loss pass to BEP once the
imported merchandise has passed over the ship's rail at the foreign port of exportation. Further,
you explain that BEP is responsible for pursuing any claims arising from damage or loss that
may occur during the international shipment of the merchandise and, moreover, if a customer
cancels an order BEP remains responsible for payment to BCJ.
Because you believe a bona fide sale has occurred between BEP and BCJ and Customs'
precedent establishes the presumption that transaction value is based on the price paid by the
importer, you provide, assuming the transaction value between the related parties is acceptable
under 402(b)(2)(B) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979
(TAA), codified at 19 U.S.C. 1401a, that transaction value appropriately is based on the
BEP/BCJ price.
ISSUE:
Based on the facts presented, whether bona fide sales occur between the transacting
parties and, assuming the transaction value between the related parties is acceptable under
402(b)(2)(B), transaction value appropriately is based on the BEP/BCJ price.
LAW AND ANALYSIS:
The preferred method of appraising merchandise imported into the United States is
transaction value pursuant to 402(b) of the TAA. Section 402(b)(1) provides, in pertinent part,
that the transaction value of imported merchandise is the "price actually paid or payable for the
merchandise when sold for exportation to the United States" plus amounts for the enumerated
statutory additions (emphasis added). Accordingly, a bona fide sale must exist between BEP and
BCJ if transaction value is based on the price paid by the former to the latter.
In determining whether a bona fide sale has taken place between a potential buyer and
seller of imported merchandise, no single factor is determinative. Rather, the relationship is to
be ascertained by an overall view of the entire situation, with the result in each case governed by
the facts and circumstances of the case itself. Dorf International, Inc. v. United States, 61 Cust.
Ct. 604, A.R.D. 245 (1968). Customs recognizes the term "sale," as articulated in the case of
J.L. Wood v. U.S., 62 CCPA 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406 (1974), to be defined as:
the transfer of property from one party to another for consideration.
However, several factors may indicate whether a bona fide sale exists between a potential
buyer and seller. In determining whether property or ownership has been transferred, Customs
considers whether the potential buyer has assumed the risk of loss and acquired title to the
imported merchandise. In addition, Customs may examine whether the potential buyer paid for
the goods, and whether, in general, the roles of the parties and circumstances of the transaction
indicate that the parties are functioning as buyer and seller.
Based on the information and documentation you have provided, it appears that bona fide
sales occur between BEP and BCJ. The terms of sale support your position that BEP possesses
title and risk of loss. Specifically, based on the shipping terms provided in the "shipment
contract" (CIF US port of destination) between BEP and BCJ and "destination contract" (FOB
landed, delivered duty paid at the job site and DDP at the job site) between BEP and the U.S.
customers, it appears that BEP maintains title and risk of loss from the time of delivery aboard
the vessel at the port of shipment until delivery to BEP's U.S. customers.
In this regard, we note that it has been Customs position that, "unless otherwise agreed by
the parties, title and risk of loss pass from the seller to the buyer in 'shipment' contracts when the
merchandise is delivered to the carrier for shipment, and in 'destination' contracts when the
merchandise is delivered to the named destination." HRL 545105, issued November 9, 1993.
Moreover, the additional evidence made available concerning the roles of the parties and of the
transaction in general, confirm that bona fide sales have occurred.
The submitted BEP/BCJ purchase order, BEP/U.S. customer invoices, proof of payment,
and entry documents, including BEP's broker instructions, indicate consideration is paid for the
merchandise and that the parties conduct bona fide sales. The list of BEP employees responsible
for accounting, engineering, administration and sales, also indicates that BEP's daily operations
are characteristic of a buyer/seller. Finally, from the evidence submitted it appears that BEP is:
1) in a position to give instructions to BCJ; 2) free to sell the merchandise from BCJ at any price
it desires; 3) able to select its own customers and negotiate with them without consulting BCJ;
and 4) able, if desired, to have the merchandise delivered for its inventory. See Dorf, supra and
HRL 545709, issued May 12, 1995.
Furthermore, we agree that Customs' presumption of basing transaction value on the price
paid by the importer supports the use of the BEP/BCJ price as the basis for transaction value. As
explained in HRL 545144, issued January 19, 1994, Customs finds this position consistent with
judicial and administrative precedent and with the general understanding that an importer's
declared transaction value reflects the price paid by the importer.
However, regardless of this determination, we still recognize that the subject merchandise
is appraised under transaction value only if the buyer and seller are not related, or if related
pursuant to 402(g)(1), as is the case between BEP and BCJ, the transaction value is deemed to
be acceptable. Insofar as counsel has requested that for purposes of this decision we assume the
transaction value between the related parties is acceptable under 402(b)(2)(B), transaction value
based on the BEP/BCJ price would be appropriate for purposes of appraisement.
HOLDING:
Based on the evidence presented, it has been demonstrated that bona fide sales occur
between the transacting parties. Furthermore, assuming the transaction value between the related
parties is acceptable under 402(b)(2)(B), transaction value based on the BEP/BCJ price would
be appropriate for purposes of appraisement.
Sincerely,
Acting Director
International Trade Compliance Division