RR:IT:VA 546421 er
Brian Goldstein, Esq.
Tompkins & Davidson
One Astor Plaza
1515 Broadway, 43rd Floor
New York, NY 10036-8901
RE: Glaxo Wellcome Inc. T.R.U.E. TEST; Appraisement; Transaction Value; Deductive Value.
Dear Mr. Goldstein:
This is in response to your submission dated June 18, 1996, in which you request a ruling on behalf of your client, Glaxo Wellcome Inc. (“Glaxo”) concerning the proper basis of appraisement for certain merchandise described as T.R.U.E. Test imported at the port of Atlanta, Georgia. With some exceptions, your request for confidential treatment for certain information contained in this ruling is granted. Accordingly all material in brackets is privileged and will be deleted from any published version of this decision. We regret the delay in responding.
FACTS:
T.R.U.E. TEST is an allergen patch test consisting of a thin-layer, rapid use, epicutaneous test system containing twenty-four (24) of the most common allergens suspected of causing allergic contact dermatitis. By letter dated May 16, 1995, to the District Director of Customs in Atlanta, your client advised that the subject merchandise was sold to it by Pharmacia (formerly known as Kabi Pharmacia) located in Denmark. []
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In addition to your claim that transaction value does not exist, you claim that there is no identical or similar merchandise for appraisement under 19 U.S.C. 1401a(c), transaction value of identical or similar merchandise. Instead, you claim that the merchandise should be appraised under deductive value, as described under 19 U.S.C. 1401a(d). You state that resale prices in the United States between the importer and its unrelated customer are available within the required time periods set forth under 19 CFR 152.105 and would be provided to Customs by Glaxo on a time schedule mutually agreeable between Customs and Glaxo.
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LAW AND ANALYSIS:
Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401a). The preferred method of appraisement under the TAA is transaction value, defined as the “price actually paid or payable for the merchandise when sold for exportation to the United States,” plus certain enumerated additions. 19 U.S.C. 1401a(b)(1).
Section 402(b)(4) of the TAA provides in relevant part:
(A) The term “price actually paid or payable” means the total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for the imported merchandise by the buyer to, or for the benefit of, the seller. 19 U.S.C. 1401a(b)(4).
There is a rebuttable presumption that all payments made by a buyer to a seller, or party related to a seller, are part of the price actually paid or payable. See, HRL 545663 dated July 14, 1995. This position is based on the meaning of the term “price actually paid or payable” as addressed in Generra Sportswear Co. V. United States, 8 CAFC 132, 905 F.2d 377 (1990). In Generra, the court considered whether quota charges paid to the seller on behalf of the buyer were part of the price actually paid or payable for the imported goods. In reversing the decision of the lower court, the appellate court held that the term “total payment” is all-inclusive and that “as long as the quota payment was made to the seller in exchange for merchandise sold for export to the United States, the payment properly may be included in transaction value, even if the payment represents something other than the per se value of the goods.” The court also explained that it did not intend that Customs engage in extensive fact-finding to determine whether separate charges, all resulting in payments to the seller in connection with the purchase or imported merchandise, were for the merchandise or something else.
Additionally, we note that in Chrysler Corporation v. United States, 17 CIT 1049 (September 22, 1993), the Court of International Trade applied the Generra standard and determined that although tooling expenses incurred for the production of the merchandise were part of the price actually paid or payable for the imported merchandise, certain shortfall and special application fees which the buyer paid to the seller were not a component of the price actually paid or payable. With regard to the latter fees, the court found that the evidence established that the fees were independent and unrelated costs assessed because the buyer failed to purchase other products from the seller and not a component of the price of the imported engines. Therefore, this presumption may be rebutted by evidence which clearly establishes that the payments, like those in Chrysler, are completely unrelated to the imported merchandise. Accordingly, in the instant matter there is a rebuttable presumption that the various payments, including royalties, option payments, etc. made by Glaxo to the seller of the merchandise are dutiable as part of the price actually paid or payable for the merchandise if the merchandise can be appraised under transaction value.
Counsel, however, claims that a “price actually paid or payable” for the merchandise does not exist and hence that transaction value is not the proper method of appraisement under the circumstances. As regards transaction value, section 152.103(a)(1), Customs Regulations 19 CFR 152.103(a)(1)) provides that in determining transaction value, the price actually paid or payable will be considered without regard to its method of derivation. It may be the result of discounts, increases, or negotiations, or may be arrived at by the application of a formula, such as the price in effect on the date of export in the London Commodity Market.
In HRL 544346, September 11, 1990, we emphasized that a formula in a contract can be acceptable under transaction value if it is a formula that is based on a future event over which neither the seller nor the buyer has control. It must be an objective standard over which neither the buyer nor the seller has control, such as the price in effect on the date of export in the London Commodity Market, the example of an acceptable means of a formula used to determine the price actually paid or payable for the imported merchandise cited in 19 CFR 152.103(a)(1).
[] Without a fixed price at the time of importation, we have ruled transaction value to be inapplicable. Consequently, for purposes of this decision, the merchandise may not be appraised under transaction value and consideration must be given to one of the other hierarchical methods of appraisement.
We have no information regarding the availability of appraisement under transaction value of identical or similar merchandise (19 U.S.C. 1401a(c)); therefore, if as counsel claims, transaction value of identical or similar merchandise does not exist then it is appropriate to consider appraisement under deductive value. As regards the use of deductive value, the merchandise is appraised based on the price at which the merchandise concerned is sold in the U.S. in its condition as imported, in the greatest aggregate quantity at or about the date of importation of the merchandise being appraised. Section 402(d)(2)(A)(i). If the merchandise concerned is sold in the U.S. in its condition as imported, but not sold at or about the date of importation, the price at which the merchandise is sold in the greatest quantity after the date of importation, but before ninety days after such importation, is utilized. Section 402(d)(2)(A)(ii). The unit price at which merchandise is sold in the greatest aggregate quantity means the unit price at which it is sold to unrelated persons at the first commercial level after importation. Section 402(d)(2)(B).
The price determined under section 402(d) is reduced by an amount equal to the following:
(i) any commission usually paid or agreed to be paid, or the addition usually made for profit and general expenses, in connection with the sales in the United States of imported merchandise that is of the same class or kind, regardless of the country of exportation, as the merchandise concerned;
(ii) the actual costs and associated costs of transportation and insurance incurred with respect to international shipments of the merchandise concerned from the country of exportation to the United States;
(iii) the usual costs and associated costs of transportation and insurance incurred with respect to shipments of such merchandise from the place of importation to the place of delivery in the United States, if such costs are not included as a general expense under clause (i).
(iv) the customs duties and other Federal taxes currently payable on the merchandise concerned by reason of its importation, and any Federal excise tax on, or measured by the value of, such merchandise for which vendors in the United States are ordinarily liable...
Section 402(d)(3)(A)(i)-(iv).
Counsel claims that resale prices in the U.S. between the importer and its unrelated customer are available within the required time periods set forth in 19 CFR 152.105 and would be provided to Customs by Glaxo on a time schedule mutually agreeable between Customs and Glaxo. We have not been provided with any other details concerning the use of deductive value including the particulars of any deductions as provided for under 19 U.S.C. 1401a(d)(3)(A)(i)-(iv), quoted above. If the appraising officers at the port of importation agree that the merchandise cannot be appraised on the basis of transaction value of identical or similar merchandise and that appraisement is proper under deductive value, then the merchandise should be so appraised. Based on the information submitted we cannot determine what adjustments and deductions are proper from the resale price of the merchandise. These details will have to be worked out with the port. Providing the details of appraisement under deductive value can be worked out with Customs officials at the port of entry, then appraisement under deductive appears to be appropriate.
HOLDING:
Based on the information submitted, it appears the merchandise may not be appraised under transaction value at this time. Providing transaction value of identical or similar merchandise does not exist (19 U.S.C. 1401a(c)), and providing the circumstances are appropriate and the information is available to appraise the merchandise under deductive value (19 U.S.C. 1401a(d)), the details for appraising the merchandise under deductive value should be worked out with the Customs officials at the port of entry.
Sincerely,
Acting Director
International Trade Compliance Division