RR:IT:VA 546999 DWS
Port Director of Customs
P.O. Box 3130
Laredo, Texas 78044 3130
RE: Request for Internal Advice; Transaction Value of Identical or Similar Merchandise; Del Monte Fresh Produce NA, Inc.
Dear Port Director:
This is in response to your memorandum dated February 13, 1998, forwarding an internal advice request asking our office to review the method of appraisement used to appraise importations of fresh watermelons by Del Monte Fresh Produce Company (Del Monte). Your office contends that the transaction value of identical or similar merchandise you have obtained represents the proper method of appraisement notwithstanding the results of the Compliance Assessment Audit Report of Del Monte dated [XXXXXXXXX], which recommended that the watermelons at issue should be appraised using deductive value. We regret the delay in responding.
FACTS:
Pursuant to your submission, Customs Service Team (CST) 688 withheld liquidation on entry summaries for importations of fresh watermelons for the 1996 season, pending appraisement information. In October, 1996, requests for information were sent to all of the importers involved. In response to a questionnaire dated October 31, 1996, to Del Monte regarding their 1996 watermelon importations, Del Monte responded that the watermelons were shipped to them on consignment. As the watermelons were shipped on a consignment basis, CST-688 concluded that transaction value was not a viable basis of appraisement for Del Monte’s watermelon importations.
In response to CST-688's request for information, numerous importers indicated that their shipments were on consignment; however, three importers responded that their importations were the result of arm’s length purchases. CST-688 used two importers’ prices to appraise Del Monte watermelon entries based on the dates of exportation to the U.S. In response to Customs’ request for information, the two importers (Javi Farms Incorporated and Hinojosa Brothers Produce Company)
indicated that the watermelons were purchased based upon verbal agreements with the shipper and the price was agreed to before exportation. The importers also declared that there were no cash advances, assists, or related parties involved in these purchases. CST-688 interviewed each of these importers to clarify their responses to the CF-28 questions, and requested proof of payment information for their watermelon shipments to determine if a valid transaction value existed.
Proof of payment was provided in the form of canceled checks and wire transfer deposit tickets. The invoices were in Mexican pesos with currency conversion rates annotated on the entry summaries. In your memorandum to our office, you state that the currency exchange rates noted on the proof of payment do not match the currency exchange rates on the entry summaries, however, the proof of payment is accurate when the originally invoiced Mexican peso amounts are converted to U.S. currency using the exchange rates indicated on the proof of payment. You also noted that service charges for the processing of foreign currency were included in a few of the wire transfer deposit tickets that the importer provided.
After your office interviewed the importers who supported their declared values, a master list was prepared of the lowest transaction value for each day. You concluded that the exportations from the two importers you interviewed (Javi Farms Incorporated and Hinojosa Brothers Produce Company) were exportations of identical or similar merchandise. It is our understanding from the information submitted that the importations by Javi Farms Incorporated and Hinojosa Brothers Produce Company were the same article (fresh watermelons), from the same country, and shipped in substantially the same commercial quantities. Each of the Del Monte importations was appraised using the transaction value of identical or similar merchandise established for the specific date of exportation to the U.S.
CST-688 used these importers’ transaction values to appraise Del Monte’s watermelons because the importation dates were the same dates for Del Monte’s importations. On May 15, 1997, CST-688 issued a Customs Form (CF) 29 to Del Monte notifying the company that Customs appraised the watermelons imported, into the U.S. during 1996, pursuant to the transaction value of identical or similar merchandise.
ISSUE:
Whether the proper basis of appraisement of the watermelons at issue is the transaction value of identical or similar merchandise as determined under 19 U.S.C. 1401a(c)(1).
LAW AND ANALYSIS:
The preferred method of appraising merchandise imported into the U.S. is transaction value pursuant to section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. §1401a). Section 402 (b)(1) of the TAA 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 if the goods are to be appraised based on their transaction value.
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. U.S., 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. In the present matter, Customs cannot find that a bona fide sale and, hence, a sale for exportation to the U.S. occurred, as it is Customs position that transactions involving goods which are shipped on consignment do not constitute bona fide sales. See HQ 545755, dated May 18, 1995.
Having determined that no sale occurred and transaction value basis is therefore inapplicable, we must consider the next alternative basis of appraisement. In part, section 402 of the TAA provides:
(a) IN GENERAL. - (1) Except as otherwise specifically provided for in this Act,
imported merchandise shall be appraised, for the purposes of this Act, on the basis of the
following:
(A) The transaction value provided for under section (b).
(B) The transaction value of identical merchandise provided for under subsection (c), if the value referred to in subparagraph (A) cannot be determined, or can be determined but cannot be used by reason of subsection (b)(2).
(C) The transaction value of similar merchandise provided for under subsection (c), if the value referred to in subparagraph (B) cannot be determined.
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(c) TRANSACTION VALUE OF IDENTICAL MERCHANDISE AND SIMILAR
MERCHANDISE. - (1) The transaction value of identical merchandise, or of similar
merchandise, is the transaction value (acceptable as the appraised value for purposes of this Act
under subsection (b) but adjusted under paragraph (2) of this subsection) of imported
merchandise that is --
(A) with respect to the merchandise being appraised, either identical
merchandise or similar merchandise, as the case may be; and
(B) exported to the United States at or about the time that the merchandise
being appraised is exported to the United States.
(2) Transaction values determined under this subsection shall be based on sales of
identical merchandise or similar merchandise, as the case may be, at the same commercial level
and in substantially the same quantity as the sales of the merchandise being appraised. If no
such sale is found, sales of identical merchandise or similar merchandise at either a different
commercial level or in different quantities, or both, shall be used, but adjusted to take account
of any such difference. Any adjustment made under this paragraph shall be based on
sufficient information. If in applying this paragraph with respect to any imported merchandise,
two or more transaction values for identical merchandise, or for similar merchandise, are
determined, such imported merchandise shall be appraised on the basis of the lower or lowest of such values.
Therefore, we must now determine whether the transaction value of identical or similar merchandise basis of appraisement is applicable to the instant case.
In accordance with T.D. 91 15, 25 Cust. Bull. 31 (1991), it must be demonstrated that the transaction value of the merchandise under consideration is fully acceptable under section 402(b) of the TAA, to be applied as the transaction value of identical or similar goods under section 402(c) of the TAA. The determination concerning the acceptability of the transaction value may be based on information provided by the importer or already available to Customs.
In this case, you have provided information that your office received in response to requests for information. Two importers (Javi Farms Incorporated and Hinojosa Brothers Produce Company) indicated that the watermelons they imported were purchased based upon verbal agreements with the shipper and that the price was agreed to before exportation. The importers also declared that there were no cash advances, assists, or related parties involved in these purchases. CST-688 interviewed each of these importers to clarify their responses to the CF-28 questions and requested proof of payment information for their watermelon shipments to determine if a valid transaction value existed.
As we have stated previously, proof of payment was provided in the form of canceled checks and wire transfer deposit tickets. The invoices were in Mexican pesos with currency conversion rates annotated on the entry summaries. In your memorandum to our office, you state that the currency exchange rates noted on the proof of payment do not match the currency exchange rates on the entry summaries; however, the proof of payment is accurate when the originally invoiced Mexican peso amounts are converted to U.S. currency using the exchange rates indicated on the proof of payment. You also note that service charges for the processing of foreign currency were included in a few of the wire transfer deposit tickets that the importer provided.
After your office interviewed the importers and supported their declared values, a master list was prepared of the lowest transaction value for each day. You concluded that the exportations to the U.S. from the two importers you interviewed were exportations of the same merchandise, from the same country, but from different exporters. It is our understanding that each of the Del Monte importations was appraised using the transaction value of similar merchandise established for the specific date of exportation.
In HQ 546217, dated April 8, 1998, Customs addressed the issue of what is meant by the requirement of “at or about the same time” under section 402(c) of the TAA, with respect to the transaction value of identical or similar merchandise. In HQ 546217, Customs concluded that “at or about the same time” should cover a period of time, as close to the date of exportation as possible, within which commercial practices and market conditions which affect the price remain the same. Customs also noted in HQ 546217 that these types of determinations will vary as between different kinds of goods and the circumstances unique to the particular merchandise and industry at issue. In the case of perishable produce (asparagus was the merchandise at issue), Customs concluded that a time period of one week before or after the date of exportation (a total of fourteen days) to represent a time period “about” the time of exportation. Customs further concluded that this time period is presumptively appropriate for perishable produce unless overcome by evidence of market or production conditions that warrant a shorter or longer time period. The watermelons at issue are also perishable articles whose appraisement is subject to this same standard.
In HQ 546217, Customs also determined that the terms “at” or “about”, included in the language of section 402(c) of the TAA, are applied in a hierarchical fashion. Hence, in selecting a transaction value of identical or similar merchandise in accordance with section 402(c) of the TAA, it would first be appropriate to consider transaction values for the watermelons at issue which have been exported “at” the same time as the subject watermelons being appraised. If no transaction value is available for watermelons exported on the exact date as the watermelons being appraised, it would then be appropriate to consider transaction values for watermelons exported “about” the same time as the watermelons at issue.
In HQ 546217, Customs discussed that it would be appropriate to use the transaction value for the produce at issue exported on the date closest to the date of export of the produce being appraised, followed by the next closest date, and so forth. If several transaction values are provided for the merchandise being appraised on the exact or closest date of exportation, the lowest will be utilized. If no such values are found within the fourteen day period, Customs must resort to an alternate method of appraisement.
Based upon our review of the documentation provided, it appears that, consistent with the rationale embodied in HQ 546217, your office properly ascertained previously accepted transaction values for identical or similar merchandise. Therefore, the instant watermelons should be appraised pursuant to section 402(c) of the TAA.
HOLDING:
It appears from our review of the documentation provided that your office properly ascertained previously accepted transaction values for identical or similar merchandise. Therefore, we agree that the instant watermelons should be appraised pursuant to section 402(c) of the TAA, consistent with the parameters set forth in HQ 546217.
On the 60th day from the date of this letter, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Thomas L. Lobred
Chief, Value Branch