RR:IT:VA 546427 er
Port Director
U.S. Customs Service
Buffalo, NY
RE: Request for Internal Advice 24/96; Women's Wearing
Apparel; Transaction Value; Sale for Exportation.
Dear Port Director:
This is in response to your request for internal advice
dated June 19, 1996, and the memorandum from the Chief, Wearing
Apparel Branch, National Commodity Specialist Division, dated
September 26, 1996, concerning the same, which address the
appraisement of women's wearing apparel exported from Germany by
Wolff & Olsen. We regret the delay in responding.
FACTS:
You state that Wolff & Olsen exports women's wearing apparel
to both the United States and Canada. The Canadian company,
Olsen European Fashions ("Olsen Canada") and the United States
company, Olsen European Fashions, NY ("Olsen NY"), are related
firms. At the present time there is no indication whether Wolff
& Olsen and the importer are also related.
You state that it is the importer's contention that the
goods at issue are sold for exportation to the United States and
are destined for the United States market at the time they are
exported from Germany. All goods, both those intended for the
United States market and those intended for the Canadian market,
are shipped to Canada. In Canada, the goods are placed in a
bonded warehouse, and a quality control inspection is performed.
Any goods intended for the United States which are of inferior
quality are either entered into the commerce of Canada, where an
attempt is made to sell them, or they are returned to Germany,
and the account of the United States importer is credited.
ISSUE:
Whether the transactions between Wolff & Olsen and Olsen NY
involve goods which are destined for the United States such that
a sale for exportation exists and appraisement should proceed
under transaction value?
LAW AND ANALYSIS:
Section 402(b)(1) of the Tariff Act of 1930, as amended by
the Trade Agreement Act of 1979 (TAA; 19 U.S.C. 1401a) 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
enumerated additions. The "price actually paid or payable" is
defined in section 402(b)(4)(A) of the TAA as the "total payment
(whether direct or indirect, and exclusive of any costs, charges,
or expenses incurred for transportation, insurance, and related
services incident to the international shipment of the
merchandise...) made, or to be made, for the imported merchandise
by the buyer to, or for the benefit of the seller."
As stated in the facts, it is not known whether Wolff &
Olsen and Olsen NY are related parties and whether, if they are,
the price between these parties could form the basis of
transaction value under the tests set forth under section
402(b)(1)(B) of the TAA. According to you, this matter is
presently being reviewed by your office. However, even if you do
determine that the price negotiated between the parties is not
influenced by their relationship, we must first determine whether
the the transaction is a sale for exportation to the United
States.
Merchandise must be destined for export to the United States
at the time of the sale for it to be considered to be sold for
exportation. See, HRLs 544973 dated January 11, 1993 and 542310
dated May 22, 1981. As described above, you state that the
importer contends that the goods should be appraised under
transaction value, because at the time they are sold to Olsen NY,
they are destined for the United States market. You are
concerned because the seller also sells to Olsen Canada, and
shipments intended for both the Canadian and the United States
market arrive in a bonded warehouse in Canada. In Canada, goods
intended for the United States market which do not meet the
quality standards, are either diverted into the Canadian commerce
and are sold or else they are returned to Germany for a credit.
In HRL 545254 dated November 22, 1994, Customs ruled that a
sale between a foreign company and a United States company which
included an intermediate shipment through a Canadian bonded
warehouse operation was found to be a sale for exportation to the
United States, and transaction value was determined to be the
proper method of appraisement. Hence, the fact that the goods in
the subject transactions are first shipped to Canada and placed
in a bonded warehouse, does not preclude the use of transaction
value. The critical difference between the facts at hand and
those in HRL 545254, is that in HRL 545254, no contingency of
diversion existed with regard to an alternative disposition of
the goods. Namely, merchandise that did not meet the quality
standards was not sold in Canada; instead it was removed from the
bonded warehouse and was returned to the exporter.
In this respect, the facts in the instant matter are similar
to those in HRL 546069 dated August 1, 1996, where Customs found
transaction value inapplicable as a means of appraisement. There,
cheese intended for the United States market was first shipped
through Holland and was placed in a bonded warehouse for
inspection to ensure the cheese met contract specifications. If
the cheese did not meet specifications, it could be sold in the
European market. Given those facts Customs found that the
evidence submitted did not establish that the cheese was destined
for the United States market at the time of exportation.
Similarly, in the instant matter, the fact that some or all of
the shipment could be sold in Canada creates a contingency of
diversion. We, accordingly, find that the merchandise at issue
was not sold for exportation to the United States. Under these
circumstances, even if your office concludes that the prices
negotiated between Wolff & Olsen and Olsen NY are not influenced
by their relationship, the goods may not be appraised under
transaction value.
In instances where transaction value cannot be determined,
or cannot be used, sections 402(a)(B) and (C) of the TAA provide
for appraisement under section 402(c) -- transaction value of
identical or of similar merchandise. (The terms "identical
merchandise" and "similar merchandise" are defined in sections
402(h)(2) and 402(h)(4), respectively.) This means of
appraisement is acceptable provided sufficient information is
available in order for Customs to make any adjustment that may be
necessary under section 402(c)(2). No specific information
pertaining to section 402(c) has been submitted to Headquarters.
If in fact a section 402(c) appraisement is possible, this means
of appraisement may not be disregarded by either Customs or the
importer. (HRL 543912 dated April 19, 1988).
So long as transaction value of identical or similar
merchandise is not available, then appraisement under deductive
value is appropriate provided the statutory requirements of
section 402(d) are met and that the necessary documentation and
information is obtainable. In the event a section 402(d)
appraisement is not possible, then appraisement should proceed
under computed value as defined by section 402(e) provided the
statutory requirements of this section are satisfied. Only if
none of the above methods of appraisement is possible, may you
appraise the merchandise in accordance with section 402(f).
HOLDING:
Based on the information submitted, we find that the goods
were not sold for exportation to the United States and, hence,
that transaction value does not exist. Under these
circumstances, the merchandise must be appraised in accordance
with the hierarchal means of appraisement set forth under section
402 of the TAA, as discussed above.
The Office of Regulations and Rulings will take steps to
make this decision available to Customs personnel via the Customs
Rulings Module in ACS and the public via the Diskette
Subscription Service, Freedom of Information Act and other public
access channels 60 days from the date of this decision.
Sincerely,
Acting Director, International
Trade Compliance Division