RR:IT:VA 546120 RSD
Port Director
U.S. Customs Service
200 St. Paul Place
Baltimore, Maryland 21202
RE: Application for further review of Protest No. 1303-94-100202; deductive value;
19 U.S.C. 1401a(d); 19 U.S.C. 1401a(f)
Dear Sir:
This is in response to a memorandum from the district
director of the former Baltimore District regarding Protest No.
1303-94-100202 filed by Customs broker John S. Connor on behalf
of Decometal against your decision concerning the appraisement of
a metallic product called ferro-vanadium. We have received an
additional submission from the broker that you transmitted to us
by fax on January 25, 1996.
FACTS:
The protest file does not provide much information regarding
the protested entry. It does indicate, however, that the
importer is an Austrian based company, Decometal. Decometal
imported a shipment of a metallic product known as ferro-vadium.
The date of entry was June 28, 1993. The importation was shipped
on consignment and stored in the importer's name at a warehouse.
The invoice filed with the entry was provisional and did not
reflect the price at which the goods were actually sold to
unrelated purchasers in the United States.
Because the merchandise was consigned, the district
concluded that there was not a sale for exportation on which the
merchandise could be appraised. Therefore, the district rejected
transaction value as the method of appraisement. The Baltimore
district also determined that there was insufficient information
to appraise the merchandise under transaction value of identical
or similar and identical merchandise or computed value. In
addition, the technical time limits for using deductive value
were not met. Accordingly, the merchandise was appraised using
an adjusted form of deductive value under 402(f). The only
dispute raised by protestant concerns whether certain fess should
be deducted. The district disallowed deductions for packing,
repacking, demurrage fees due to devanning, customs devanning
exam, harbor maintenance fee, warehouse storage charges, and
labor and materials to repackage the merchandise.
ISSUE:
Whether certain fees and expenses should have been deducted
from the adjusted deductive value under 402(f) that was used to
appraise the imported merchandise?
LAW AND ANALYSIS:
As you know, merchandise imported into the United States is
appraised in accordance with section 402 of the Tariff Act of
1930, as amended by the Trade Agreements Act of 1979 (TAA: 19
U.S.C. 1401a). The preferred method of appraisement is
transaction value, which is defined by 402(b)(1) as the "price
actually paid or payable for merchandise when sold for
exportation to the United States," plus certain enumerated
additions specified in 402(b)(1)(A) through (E). 19 U.S.C.
1401a(b)(1). However, the TAA provides that merchandise will be
appraised under transaction value only if, inter alia: the sale
of, or the price actually paid or payable for the imported
merchandise is not subject to a condition or consideration for
which a value cannot be determined; or the buyer and seller are
not related, or if related, the transaction value is acceptable
under 402(b)(2)(B) of the TAA. We agree that since the
imported merchandise was consigned rather than sold, it cannot be
appraised under transaction value. See HRL 545303, September 24,
1993.
When imported merchandise cannot be appraised on the basis
of transaction value, it is appraised in accordance with the
remaining methods of valuation, applied in sequential order. 19
U.S.C. 1401a(a)(1). The alternative bases of appraisement in
order of precedence are: the transaction value of identical or
the transaction value of similar merchandise (19 U.S.C.
1401a(c)); deductive value (19 U.S.C. 1401a(d)); computed value
(19 U.S.C. 1401a(e)); and the "fall back" method (19 U.S.C.
1401a(f)). In the instant case, there is no information
concerning the existence of identical or similar merchandise.
Similarly, there is no information concerning computed value.
The importer had requested that the merchandise be
appraisement under deductive value. When utilizing deductive
value, merchandise is appraised based on the price at which it is
sold in the U.S. in it condition as imported and in the greatest
aggregate quantity either at or about the time of importation or
before the close of the ninetieth day after the date of
importation. Provided the merchandise is not further processed,
the unit price at which imported merchandise is sold in the
greatest aggregate quantity means the unit price at which it is
sold to unrelated persons at the first commercial level after
importation. Section 402(d)(2)(B) of the TAA.
The price determined under 402(d) is to be reduced by an
amount equal to the following:
(i) any commission usually paid or agreed to be paid, or the
addition usually made for profit and general expenses, in
connection with sales in the United States of imported merchandise that is of the same class or kind regardless of the
country of exportation, as the merchandise concerned;
ii) the actual costs and associated costs of transportation
and insurance incurred with respect to international shipments
of the merchandise concerned from the country of exportation to
the United States;
iii) the usual costs and associated costs of transportation
and insurance incurred with respect to shipment of such
merchandise from the place of importation to the place of delivery in the United States, if such costs are not included as
a general expense under (i);
iv) the customs duties and other Federal taxes currently
payable on the merchandise concerned by reason of its
importation and any Federal excise tax on or measured by the value of, such merchandise for which vendors in the United
States are ordinarily liable...
Section 402(d)(3)(A)(i)-(iv). The deduction for profit and
general expenses, to be taken as a whole, shall be based on the
importer's profits and general expenses, unless these are
inconsistent with those reflected in sales in the U.S. of
imported merchandise of the same class or kind. Section
402(d)(3) (B)(i); section 152.105(e)(1), Customs Regulation (19
CFR 152.105(e)(1)).
Because the merchandise was not resold within the allowable
time contraints, the district appraised the merchandise by using
402a(f) based on a method derived from deductive value under
401a(d). Section 402a(f) provides that if the value of imported
merchandise cannot be determined or otherwise used for the
purposes of the TAA, under subsection (b) through (e), the
merchandise shall be appraised for purposes of this Act on the
basis of a value that is derived from the methods set forth in
such subsections, with such methods being adjusted to the extent
necessary to arrive at a value.
In applying this adjusted deductive value, the question that
must be resolved is whether the district should have made
deductions for costs that the importer incurred in importing and
reselling the merchandise in the United States. As noted above,
the district disallowed deductions for packing, repacking,
demurrage fees due to devanning, customs devanning exam, harbor
maintenance fee, warehouse storage charges, and labor and
materials to repackage the merchandise. In determining whether
any of these expenses should be allowed as deductions, it is
necessary to ascertain whether these expense were incurred before
or after Customs released the merchandise. If an expense was
incurred after the merchandise was released from Customs custody
it is likely that it would be a general expenses made in
connection with the sale of the imported merchandise in the
United States. In HRL 545187, February 14, 1995, we ruled that
expenses designated on an income statement as salaries and wages,
rent, taxes travel, advertising, automotive expense, and contract
services are deductible as "general expenses" from the unit price
at which the merchandise is sold to the unrelated U.S.
purchasers. Based on the importer's most recent submission, it
appears that the expenses for repacking and repackaging the
merchandise were incurred after Customs release merchandise.
Accordingly, the costs of repacking and repackaging the
merchandise would be deductible expenses incurred in connection
with the selling of the merchandise in the United States. A
deduction would also be allowed for the harbor maintenance. With
respect to demurrage fees due to the Customs devanning exam,
since these expenses were incurred while the merchandise was in
Customs custody, they were not incurred in connection with
selling the merchandise in the United States and thus cannot be
deducted from the price that the goods were sold at in the United
States. We have no information regarding the warehouse storage
fees and thus there is no basis to deduct such fees from the
price of selling the merchandise to unrelated buyer in the United
States used to calculate the adjusted deductive value.
Finally with regard to the expenses referred to as
"packing", it is not clear what the importer meant by this term.
Section 402a (h) (3) defines the term "packing costs" as the cost
of all containers and covering whatever nature and of packing
whether for labor or materials, used in placing merchandise in
condition placed ready for shipment to the United States. Under
402a(d)(C) the price determined under deductive value shall be
increased (but only to extent that such costs are not otherwise
included) by an amount equal to the packing incurred by the
importer or buyer, as the case may be with respect to the
merchandise concerned. On this basis, the packing costs cannot
be deducted from the price used to calculate the deductive value.
Rather, if the packing costs fit within the definition indicated
above, and they are not already included in the unit price, they
should be added to that unit price to determine the adjusted
deductive value.
HOLDING:
In calculating the adjusted deductive value under 402(f),
the costs incurred for repacking and repackaging the goods after
Customs release and the Harbor Maintenance fee are to be deducted
from the price that the merchandise is sold to an unrelated buyer
in the United States. The packing costs, warehouse fees and the
demurrage fees will not be deducted from the price of the
merchandise used to calculate the adjusted deductive value.
Sincerely,
Acting Director,
International Trade Compliance Division