OT:RR:CTF:VSP H270586 tmf
Port Director
U.S. Customs and Border Protection
1100 Raymond Boulevard
Newark, New Jersey 07102
RE: Application for Further Review of Protest No. 4601-15-150065; discount
Dear Port Director:
This is in response to an Application for Further Review (“AFR”) of Protest No. 4601-15-150065 which was timely filed by Cargo Trans Inc. (VS) on behalf of its client, Jemca Creations (“protestant”). This protest, which was received by your office on August 12, 2015, contests the denial of a discount. The AFR was properly approved by the port.
The broker has requested confidential treatment be accorded to certain information submitted in connection with this Protest. In consideration of the request and justification presented, this office will not identify the suppliers or any of the financial information provided to CBP related to these transactions. Information for which confidentiality is being accorded will be denoted in brackets in this Protest and will be redacted in any public version. This protest decision is based upon our review of the protest submission and all accompanied documents.
FACTS: The broker filed entry August 3, 2014 at the Port of New York/Newark. On September 2, 2014, the broker filed a post entry amendment requesting a discount to which CBP import specialist issued a CBP Form (CF) 28 Request for Information on October 10, 2014 requesting a purchase order, sales contract, pro forma invoice and proof of payment for invoice numbers 3145 and 3814. The broker failed to provide satisfactory documentation as required by the 30 day deadline of the CF 28, and therefore the port disregarded the claimed discount.
On June 19, 2015, CBP liquidated the entry. On August 5, 2015, the broker filed a protest claiming a refund of duty on the basis that the importer purchased the ladies wearing apparel from an Italian supplier at a discount. The protest contained two purchase orders; two proof of payments from American Express; two revised invoice numbers and a revised entry summary. However, the broker did not provide any contract to support an agreement for a discount between Jemca Creations and the Italian seller. As the protest did not include any evidence of an agreement with a discount between the importer and the seller, and no further evidence was provided in response to the port’s CF 28, the port recommended that the protest be denied in full.
We reviewed the documents and note that the purchase order consists of two parts: Part A, dated January 10, 2014 (which totals [ ]); and Part B, dated January 28, 2014 (which totals [ ]). The commercial invoices are dated May 14, 2014 (representing Purchase Order (hereinafter “PO”) #3145), in the amount of [ ], and June 26, 2014 (representing PO #3814), in the amount of [ ]. Both purchase orders state in Italian in the block for condition of payment that there is “a prepayment discount of [ ]”, which we will assume under the circumstances to be a “[ ] percent discount.” The discount amount is indicated as “sconto”, which means discount in Italian. In addition, the purchase orders were paid by an American Express card as follows: PO #3145, in the amount of [ ] on January 10, 2014; and PO #3814, in the amount of [ ] on June 25, 2014. The CBP Form 7501 shows the goods were entered August 6, 2014.
The broker claims there was an agreement between Jemca Creations and the Italian seller in which the buyer would receive a [ ] percent discount upon payment for the goods. The broker also claims that the total amount paid for the discounted merchandise by the importer equals the amount paid for the purchase orders #3145 and #3814, for a total of [ ]. The broker claims the merchandise was discounted/marked down since it is merchandise from a prior season.
Your office states that the protestant submitted a post entry amendment on September 2, 2014 for goods imported on August 3, 2014. In response, your office issued a Customs Form (CF) 28 Request for Information and noted that the protestant did not provide a contract to support the agreement between it and the seller for a [ ] percent discount. Your office stated that the purchase order does not indicate the [ ] percent discount, but that it is referenced on the invoices. Your office recommended that the protest should be denied in full.
ISSUE:
Whether the evidence sufficiently establishes that an agreed discount existed between the protestant and its foreign seller prior to importation, and should be taken into account in determining the price actually paid or payable for the imported merchandise.
LAW AND ANALYSIS: 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 as the “price actually paid or payable for the merchandise when sold for exportation to the United States,” plus certain enumerated additions.
Section 402(b)(4)(A) of the TAA defines the term “price actually paid or payable” as: The total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller. 19 U.S.C. § 1401a(b)(4)(A).
The Customs and Border Protection (“CBP”) Regulations further provide that the price actually paid or payable “will be considered without regard to its method of derivation. It may be the result of discounts, or negotiations, or may be arrived at by the application of a formula.” 19 CFR § 152.103(a)(1). Thus, where a seller discounts its price for certain merchandise to a buyer, and the discount is agreed to and effected prior to importation of the merchandise, the discounted price constitutes the “price actually paid or payable” for the merchandise. See Headquarters Ruling Letters (HQ) 547019, dated March 31, 2000; and HQ, dated October 25, 1995.
CBP has consistently enumerated three criteria in determining whether a discount or price adjustment should be considered part of the transaction value of imported merchandise. See HQ W563462, dated October 11, 2006. First, the discount or price adjustment must be agreed on prior to the importation of the merchandise. See Allied International v. United States, 16 CIT 545, 795 F. Supp. 449 (1992) (importer required to affirmatively show that there was a pre-importation agreement for the claimed discount).
The second criterion is that the importer must be able to furnish CBP with sufficient documentary evidence to support the existence of the discount and establish that it was agreed to before the time of entry. See HQ 547144, dated November 20, 1998 (CBP determined the appraised value reflected a discount when supplier’s invoice indicated total price, [ ] percent reduction and the discounted price); and HQ 545659, dated October 25, 1995 (CBP found the unconditional discount, factored into the value declared at the time of entry and reflected on the invoice presented to CBP, may be taken into account in determining transaction value); and HQ 546037, dated January 31, 1996 (CBP disallowed the discount when the importer failed to submit evidence that it took advantage of a 2 percent discount for payment within 45 days of the invoice date).
The third criterion requires that the discount or price adjustment be unconditional, or if conditional, all the conditions must be met prior to importation. This criterion was discussed in HQ 545659, supra, in which CBP determined that a discount was unconditional when there were no specified purchasing obligations placed on the customer. In that case, CBP held that unconditional discounts, which were reflected on the invoices presented to CBP, could be factored into the declared value of the merchandise. CBP also concluded that, if a conditional discount is agreed to before entry at the time of order placement, and the discount is reflected on the entry documentation presented to CBP, the conditional discount may be used to determine transaction value.
We find the submitted evidence is sufficient to support the existence of a discount, and that the parties agreed upon the discount prior to the time of the entry date of August 6, 2014. Further the discount is reflected in the commercial invoices which were dated May 14, 2014 (see PO #3145) and June 26, 2014 (see PO #3814) and payment was made January 10, 2014 and June 25, 2014. Although there is no evidence of a sales contract reflecting any discount, or addressing any conditional or unconditional price adjustments prior to importation or entry of the merchandise, the absence of these factors does not preclude a finding of a discount in this case. The submitted commercial invoices and purchase orders show that there was an agreed discount in the amount of [ ] percent between the seller and buyer for prepayment, i.e., payment before receipt of the merchandise. Further, there is evidence to support that the payment was made prior to entry of the merchandise. Based upon our review of the information provided, we find a discount or price adjustment is part of the transaction value of the entered merchandise. Therefore, we find that the [ ] percent discount meets CBP’s established criteria for any price adjustment, and it may be used to determine the price actually paid or payable for the imported merchandise.
HOLDING:
On the basis of the information provided, we find there is sufficient evidence to substantiate that a discount should be factored into the transaction value of the goods. Therefore, the protest should be ALLOWED.
In accordance with the Protest/Petition Processing Handbook (CIS HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with this decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision, Regulations and Rulings of the Office of International Trade will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial Trade and Facilitation Division