VAL CO:R:C:V 544878 CRS
District Director
U.S. Customs Service
P.O. Box 3130
Laredo, TX 78044-3130
RE: Application for Further Review of Protest No. 2304-90-000228
Dear Madam:
This is in reply to your memorandum of December 3, 1991,
forwarding an application for further review of the above
referenced protest, filed by counsel Webster & Sheffield,
subsequently replaced by Baker & Hostetler, on behalf of Climatex,
Inc. (the "protestant"). We regret the delay in responding.
FACTS:
Protestant imported the subject merchandise (copper tubing)
from a related party "seller" in Mexico. The merchandise was
"purchased" through a debt-equity swap (the "swap") agreement with
the Mexican government. Under this agreement, the protestant
purchased, at less than face value, Mexican sovereign debt held by
creditor banks. The debt was exchanged with the Mexican Treasury
for pesos, which were deposited in the account of the related
party. The related party used these funds to purchase copper from
a Mexican manufacturer, which used the copper to manufacture the
imported merchandise. The swap price apparently represented the
full "purchase" price of the imported merchandise. The invoice
accompanying the merchandise showed both the intercompany transfer
price, and the swap price, in U.S. dollars. However, it should be
noted that through the swap mechanism, the protestant received a
more favorable exchange rate than it otherwise would have. Counsel
states that had protestant engaged in a straightforward currency
exchange, it would have received forty-seven percent fewer pesos
than it did through the swap. Counsel for protestant nevertheless
maintains that the imported merchandise should be appraised under
transaction value (section 402 of the Tariff Act of 1930, as
amended by the Trade Agreements Act of 1979; 19 U.S.C. 1401a)
based on the cost of a debt-equity swap (the "swap") with the
Mexican government pursuant to which the merchandise was acquired.
However, you contend that the cost of the swap is not an
appropriate basis on which to determine transaction value.
Furthermore, in a letter dated May 4, 1994, counsel for protestant
requested that the protest be withdrawn.
ISSUE:
The issue presented is whether payments in respect of a debt-
equity swap constitute the price actually paid or payable of the
imported merchandise.
LAW AND ANALYSIS:
Section 174.28, Customs Regulations, provides that '[i]n
determining whether to allow or deny a protest filed within the
time allowed a reviewing officer may consider . . . additional
grounds or arguments submitted in writing by the protesting party
. . . ." 19 C.F.R. 174.28. In a letter dated May 4, 1994, the
protestant requested that the protest and application for further
review be withdrawn. However, the Customs Regulations do not
provide for the withdrawal of protests. Accordingly, pursuant to
protestant's request of May 4, 1994, the protest should be denied.
We also note that in a companion case (HRL 545549), an offer in
compromise submitted by protestant was accepted. The offer in
compromise resulted in a full and complete settlement of all civil
claims and charges related to valuation issues.
HOLDING:
Pursuant to the foregoing, the protest should be denied in
full. A copy of this decision should be attached to the Form 19
Notice of Action.
In accordance with section 3A(11)(b), Customs Directive 099
3550-065, dated August 4, 1993, this decision should be mailed by
your office to the protestant no later than sixty days from the
date of this letter. Sixty days from the date of this decision
the Office of Regulations and Rulings will take steps to make the
decision available to Customs personnel via the Customs Rulings
Module in ACS, and to the public via the Diskette Subscription
Service, Lexis~, the Freedom of Information Act and other public
access channels.
Sincerely,
John Durant, Director