RR:IT:VA 548161 LR
Port Director
U.S. Customs Service
Blaine, Washington
RE: Application for Further Review of Protest 300402100086; Goods and Services Tax (GST); taxes paid in country of exportation; Caterpillar Inc. v. United States; HRL 548128
Dear Port Director:
The above-referenced protest was forwarded to this office for further review. We received it on June 24, 2002. The protest was submitted by Border Brokerage Company Inc. on behalf of the importer, Timothy Earl Hostetler ("Protestant"). It concerns the valuation of an automobile purchased in Canada and imported into the United States.
FACTS:
Protestant purchased the subject automobile from Don Docksteader Motors in Canada. A copy of the purchase contract was submitted. One of the items included in the contract price was an amount for "GST" (Goods and Services Tax). This amount is separately shown on the contract. Protestant entered the automobile based on the contract price, but did not include the GST in the entered value. The Customs Service appraised the automobile using the transaction value method and value advanced the entry to include the GST and other amounts not relevant here. Protestant protests the inclusion of the GST amount in the transaction value.
GST is a 7% tax on the sale of most goods and services in Canada. A non-resident-visitor can claim a refund to GST paid if certain requirements are met. Among other things, the goods must be removed from Canada within 60 days of the date they were purchased. See www.ccra- adrc.gc.ca/tax/nonresidents/ visitors/tax-e.html, "Welcome to Canada Customs & Revenue Agency's Tax Refund for Visitors Page."
Some time after the automobile was imported, Protestant applied for and received a refund of the GST from the Canadian Government Protestant submitted a copy of the form from the Canadian Commissioner of Customs and Revenue approving the application and a copy of the check from the Government of Canada.
ISSUE:
Whether Customs decision to include the refunded GST in transaction value was proper.
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 Agreement 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) The "price actually paid or payable" is defined in 19 U.S.C. 1401a(b)(4)(A) as "the total payment (whether direct or indirect . . . ) made, or to be made, for the imported merchandise by the buyer to, or for the benefit of, the seller."
The question of whether refunded internal taxes are part of transaction value was addressed in a court case and a recent Customs ruling. In Caterpillar Inc. v. United States, 20 C.I.T. 1169, 941 F. Supp. 1241 (1996), the Court of International Trade addressed the issue of whether a Value Added Tax (VAT) assessed by the British government was properly included in transaction value. In that case, Caterpillar purchased truck components from a British company and the British revenue authorities assessed a VAT upon the sale of the merchandise. The invoice issued by the seller to Caterpillar included an amount for the merchandise and a separate amount for the VAT. Subsequently, the truck was exported to the United States, and the British government refunded the VAT paid to Caterpillar. Upon importation, Customs appraised the merchandise including the VAT taxes in transaction value.
The court noted that VAT taxes were not explicitly listed as one of the five statutory enumerated additions to transaction value; nor were they one of the listed exclusions to transaction value to 19 U.S.C. ยง1401a(b)(3). After a comprehensive analysis of the statutory language, the legislative history, and the GATT, the court determined that when VAT taxes are separately identified and are refunded, they may not be included in the transaction value of the merchandise. Part of the reasoning for this result was the court's finding that the drafters of Article VII of the GATT "did not intend for refunded internal taxes to be included in the definition of 'the price actually paid or payable' for purposes of determining transaction value." Caterpillar, Inc., supra, at p. 1175.
In HRL 548128, July 15, 2002, Customs specifically addressed the issue of whether a refunded GST was covered by Caterpillar. In that case, a U.S. resident purchased a automobile in Canada. The submitted bill of sale included an amount to GST and PST (Provincial Sales Tax) in the total price. An amount for each of these taxes was separately listed on the bill of sale. The importer paid the internal Canadian taxes and the claim was made that these amounts were subsequently refunded to the importer. Customs determined that there were no material differences between the facts presented and those in Caterpillar and that the case should be followed. Accordingly, Customs held that neither the GST nor PST should be included in the price actually paid or payable assuming that the taxes paid in the country of exportation were refunded to the importer.
The facts presented in the instant case are essentially the same as those presented in HRL 548128, supra. Here, the imported automobile was purchased by Protestant (presumably, a U.S. resident). The purchase contract sets forth the contract price, and includes an amount for GST. Such amount is separately itemized. The contract also indicates that Protestant paid the entire purchase price. In addition, the evidence presented by Protestant indicates that the GST amount paid to the seller was refunded to Protestant by the Canadian government. Accordingly, based on Caterpillar and HRL 548128, we find that the GST is not properly included in the transaction value as part of the price actually paid or payable. It is also not an addition to the price actually paid or payable.
HOLDING:
The protest should be GRANTED. In accordance with Section 3A11(b) of Customs Revised Protest Directive 099 35500-065, dated August 4, 1993, you are to mail this decision, together with Customs Form 19, to the Protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days form the date of the decision, 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,
Virginia L. Brown
Chief, Value Branch