VAL CO:R:C:V 544628 ML
Area Director, JFK
New York, New York
RE: Transaction Value of Imported Merchandise Subject To A Price
Renegotiation After Exportation
Dear Sir:
This is in response to a memorandum, dated December 28,
1990, regarding file APP-2-K:C:B5 MP, forwarded from your office.
We met with counsel for the importer on April 11, 1991, and
received additional submissions on April 19, 1991, May 10, 1991,
and November 5, 1991. The issue for our review is the
appraisement of imported merchandise subject to a price
renegotiation after the date of exportation.
FACTS:
The facts, as stated by counsel for the importer in a
memorandum, dated December 5, 1990, are that Louise Paris Ltd,
(hereinafter referred to as the "importer"), imported ladies
wearing apparel from a manufacturer in Taiwan, (hereinafter
referred to as the "manufacturer"). The date of exportation
agreed on by the parties was February 1, 1990. The letter of
credit expired on February 22, 1990. The merchandise was shipped
(exported) in bond to New Jersey on October 4, 1990 and arrived
in the United States on October 22, 1990. Upon notification by
the manufacturer that the merchandise was exported, the importer
notified it's bank to refuse payment. Rather than repudiate the
contract, the importer negotiated with the manufacturer, seeking
a 40% reduction in the invoiced price and allegedly agreeing to a
25% reduction of the invoiced purchase price on October 22, 1990,
the day the merchandise arrived in the United States. Entry was
made on October 29, 1990. Counsel for the importer stated that
the renegotiation of the purchase price was arrived at after the
date of exportation, but prior to importation of the merchandise.
The merchandise was entered based on the pre-shipment invoices.
ISSUE:
Whether transaction value was the appropriate basis of
appraisement for the imported merchandise, and if so, what was
the "price actually paid or payable" for the imported merchandise
when sold for exportation to the United States.
LAW AND ANALYSIS:
The basis of appraisement used in connection with this
merchandise was transaction value. Transaction value, the
preferred method of appraisement, is defined in section 402(b) of
the Tariff Act of 1930, as amended by the Trade Agreements Act of
1979 (TAA; 19 U.S.C. 1401(b)) as "the price actually paid or
payable for the merchandise when sold for exportation to the
United States", plus certain enumerated additions not relevant
here (emphasis added). The term "price actually paid or payable"
is defined in section 402(b)(A) of the TAA as:
...the total payment (whether direct or indirect...)
made, or to be made, for imported merchandise by the
buyer to, or for the benefit of, the seller.
In determining transaction value, a sale for exportation to
the United States must take place at some unspecified time prior
to the exportation of the merchandise. If the sale for
exportation does not take place prior to the export of the goods,
transaction value is inapplicable as a means of appraisement. In
Headquarters Ruling Letter (HRL) 543868, dated March 5, 1987, the
parent company of the importer purchased merchandise from China
National Metals and Minerals Import and Export Corp. (China
National). The terms of sale were CIF New Orleans. The
merchandise was shipped (exported) in October 1981, and arrived
at New Orleans on January 29, 1982. While the merchandise was in
transit, the parent company sold the merchandise to the importer.
Based on the evidence presented, Customs held that the "sale for
exportation" to the United States was the sale between China
National and the parent company.
In the instant case, the merchandise was sold for
exportation to the United States by the manufacturer to the
importer. While a term of the contract between the parties may
not have been met, i.e., the delivery date, a sale for
exportation nonetheless occurred, as the contract was not
repudiated. (See HRL 543609, dated October 7, 1985, wherein we
held that merchandise which did not meet contractual terms
requiring visas for entry were not considered to be "defective
goods." This ruling also held that a post-importation price
reduction was not considered in determining the price actually
paid or payable).
Having concluded that there was a sale for exportation to
the United States, we must determine what the "price actually
paid or payable" was when the merchandise was sold. In the case
at bar, the price actually paid or payable is represented by the
invoices submitted to Customs which represent the original
contract price. Those invoiced prices were the prices in effect
when the merchandise was sold for exportation to the United
States. The importer and the manufacturer's renegotiated price
of 25% less than the invoiced value of the merchandise was
subsequent to exportation.
In HRL 543014, dated February 15, 1983, a seller failed to
deliver merchandise to a buyer on a specified delivery date, and
the contract for the merchandise provided for a reduction in the
invoice price of the goods prior to their shipment. Customs
found that the reduced price became the price actually paid or
payable for the imported merchandise.
In the instant case, counsel for the importer has not
submitted a contract between the parties relating to the
merchandise which reduced the price in the event of late
delivery. We can only conclude that there was nothing in the
agreement between the parties which allowed for a price reduction
due to the manufacturer's late delivery. Here, the price was not
reduced prior to exportation so the 25% discount will be
disregarded in determining transaction value.
HOLDING:
Based upon the information available and viewed in it's
entirety we believe transaction value was the appropriate basis
of appraisement for the imported merchandise and that the price
actually paid or payable for the imported merchandise when sold
for exportation was the original invoiced amounts.
Sincerely,