VAL CO:R:C:V 545542 LPF
District Director
U.S. Customs Service
1000 2nd Avenue - Room 2200
Seattle, WA 98104
RE: Application for Further Review of Protest No. 3004-93-100193;
Proper Transaction Value of Imported Merchandise; Sale for Exportation
Dear Sir:
This is a decision on an application for further review of a
protest filed November 10, 1993, against your decision concerning
the valuation of footwear. The entry was liquidated on August
13, 1993. We regret the delay in responding.
FACTS:
Genfoot Inc. ("GFI"), a Canadian corporation, purchases
goods from the Far East and ships these goods to the United
States. The protestant explains that Genfoot America Inc.
("GFA") is a wholly owned subsidiary of GFI and is the exclusive
wholesaler and distributor of all merchandise manufactured by GFI
for sale in the U.S. The protestant adds that GFA employs sales
agents and full time manufacturing and warehousing employees at
its manufacturing facility. It also is stated that once orders
are received from customers and approved by the company, GFA
places a corresponding order for the merchandise with one of its
three principal supply sources: (i) its manufacturing facility in
New Hampshire, (ii) its parent company in Canada, or (iii) its
various foreign suppliers off shore. GFA then sends an order
confirmation to its American customer.
The protestant claims that if GFA's order is sourced from
Canada, GFI transfers title of the required merchandise to GFA
and invoices the company for the goods sold and then GFA arranges
either to have the goods shipped directly from Canada to the
American customer or to have the goods shipped to one of its
warehousing facilities in the U.S. for final distribution to its
American customers. Once the merchandise is shipped, GFA
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supposedly invoices its customer on net payment terms and
subsequently deposits its accounts receivable balances in its
bank account maintained in Boston.
However, with regard to the shipment at issue, the Entry
Summary (Customs Form 7501) indicates that the importer of record
for the shipment was GFI of Montreal, Canada. In response to a
Request for Information (Customs Form 28), dated April 1, 1993,
from the Seattle District, the protestant tendered a purchase
order and invoice for the shipment. The purchase order, dated
September 8, 1992, from G.I. Joe's, the American customer, is to
GFA with a Montreal address. Moreover, the invoice dated March
10, 1993, indicates that GFI invoiced G.I. Joe's directly for the
footwear. Although these documents refer to GFA but contain a
Montreal, Canada address, it is our understanding, according to
GFA, that only GFI and not GFA exists in Canada. Additional
invoices included in the file indicate that the merchandise was
invoiced and shipped from GFI to G.I. Joe's. Finally, a bill of
lading shows that the footwear was shipped directly from GFI in
Montreal to G.I. Joe's.
You appraised the merchandise based on the price paid by
G.I. Joe's to GFI. The protestant submits that the transaction
value should be based on the price paid by GFA to GFI.
ISSUE:
Based on the facts presented, whether a bona fide sale
exists between GFI and GFA or between GFI and G.I. Joe's.
LAW AND ANALYSIS:
As you are aware, the preferred method of appraisement is
transaction value pursuant to section 402(b) of the Tariff Act of
1930, as amended by the Trade Agreements Act of 1979 (TAA),
codified at 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). A bona fide sale must exist between GFA and GFI for
appraisal of the imported merchandise to be based on the
transaction value represented by that price.
In J.L. Wood v. U.S., 62 CCPA 25, 33, C.A.D. 1139, 505 F.2d
1400, 1406 (1974), the U.S. Court of Customs and Patent Appeals
defined the term "sale" as the transfer of property from one
party to another for consideration. Although J.L. Wood was
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decided under the prior appraisement statute, Customs recognizes
this definition under the TAA.
Several factors may indicate whether a bona fide sale exists
between a potential seller and buyer. In determining whether
property or ownership has been transferred, Customs considers
whether the alleged buyer has assumed the risk of loss and
acquired title to the imported merchandise. In addition, Customs
may examine whether the alleged buyer paid for the goods, whether
such payments are linked to specific importations of merchandise,
and whether, in general, the roles of the parties and
circumstances of the transaction indicate that the parties are
functioning as buyer and seller.
The information submitted in this regard appears to indicate
that, insofar as the transaction at issue is concerned, a bona
fide sale did not exist between GFA and GFI, but rather between
GFI and G.I. Joe's. The evidence does not indicate that GFA
assumed the risk of loss and acquired title to the merchandise.
On the contrary, the bill of lading from GFI to G.I. Joe's
appears to indicate that risk of loss and title to the goods were
transferred from the former to the latter without an assumption
of risk or title on the part of GFA. The purchase order from
G.I. Joe's to GFA with a Montreal address corroborates this
finding. In addition, the direct invoice from GFI to G.I. Joe's
further illustrates that a bona fide sale does not exist between
GFA and GFI. We reiterate that although these documents may
refer to GFA, they contain a Montreal, Canada address and it is
our understanding that only GFI and not GFA exists in Canada.
Insofar as payments for the merchandise are concerned, it appears
that they are linked to the transaction between GFI and G.I.
Joe's.
The protestant has not provided purchase orders or proof of
payment from GFA to GFI which, on the other hand, could indicate
that a bona fide sale occurred. This is distinguishable from
prior Customs decisions wherein the importer had produced sales
contracts or proof of agreed upon consideration between the
parties which allowed Customs to deduce that the parties were
functioning as a buyer and seller. See Headquarters Ruling
Letters 543511, issued May 29, 1986, and 543633, issued July 7,
1987.
Because the protestant has not controverted these findings
factually or through documentation indicating otherwise, we
conclude that the appraising officer correctly based the
transaction value of the imported merchandise on the price
actually paid or payable by G.I. Joe's to GFI.
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HOLDING:
Based on the evidence submitted, and for the reasons cited
above, the appraising officer correctly based the transaction
value of the imported merchandise on the price actually paid or
payable by G.I. Joe's to GFI.
You are directed to deny the protest. A copy of this
decision with the Form 19 should be sent to the protestant.
In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065, dated August 4, 1993, Subject: Revised Protest
Directive, this decision should be mailed by your office to the
protestant no later than 60 days from the date of this letter.
Any reliquidation of the entry in accordance with the decision
must be accomplished prior to mailing of the decision. Sixty
days from the date of the 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, the Freedom of
Information Act and other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division