OT:RR:CTF:VS H321160 AP
Center Director
Apparel, Footwear and Textiles CEE
U.S. Customs and Border Protection
1100 Raymond Blvd.
Newark, NJ 07102
Attn.: Patrick J. McCabe, Supervisory Import Specialist
RE: Application for Further Review of Protest No. 4601-21-127889; Men’s Apparel; Fallback Method under 19 U.S.C. § 1401a(f)
Dear Center Director:
This is in response to an Application for Further Review (“AFR”) of Protest No. 4601-21-127889, timely filed on behalf of the surety Lexon Insurance Company (“protestant” or “surety”), concerning the appraisement of men’s jackets imported by Taizhou Xingen Import and Export Co. Ltd. (“importer” or “Taizhou”) under 19 U.S.C. § 1401a.
FACTS:
On July 12 and August 12, 2019, the importer filed two entries of men’s apparel. The first shipment consisted of men’s 70% cotton 30% polyester knitted jackets, hoodies and sweatshirts and men’s 100% polyester knitted hoodies and polos. The entered value listed on the entry summary was $25,129. The second entry consisted of men’s 100% polyester knitted jackets and pants/hoodies and men’s 100% polyester woven vests and men’s 70% cotton 30% polyester knitted hoodies. The entered value listed on the entry/immediate delivery was $24,093. The merchandise was imported from China and the ultimate consignee was Ipartmonster LLC in Windsor, New Jersey. The arrival notices indicate that the port of loading was Ningbo, China, and the port of discharge/place of delivery was New York. The bill of lading reveals that Ningbo Bridge Power Imp. and Exp. Co. Ltd. in China was the shipper. The first entry contained 722 cartons and the second 954 cartons.
The May 29, 2019 commercial invoice from the shipper to importer Taizhou pertaining to the first entry indicates that the delivery terms were landed duty paid (“LDP”), the total value of the 722 cartons was $25,129, and the payment terms were “T/T” (telegraphic transfer). The packing list included 722 cartons.
The June 11, 2019 commercial invoice from the shipper to Taizhou pertaining to the second entry indicates that the delivery terms were LDP, the total value of the 954 cartons was $24,092.60, and the payment terms were “T/T.” The packing list included 954 cartons.
On May 11, 2020, U.S. Customs and Border Protection (“CBP”) issued two separate Requests for Information (CBP Form 28) for the two entries stating:
Please provide the following information: Explain the relationship/roles of all parties involved with this shipment i.e. manufacturer, importer, consignees, freight forwarder etc. Original purchase orders/contracts on company letterhead between all buyers and sellers detailing the exact merchandise and services to be rendered. Please submit the actual cost breakdown for the garments with supporting documentation. Resale invoices/contracts between all buyers and sellers. Quality, detailed pictures in lieu of sample(s) of the garment(s) (for now). Rated master bill of lading for this shipment. Proof of all payment transactions specific to this shipment. Copy of the power of attorney (CF5291). Proof of duty payments to the broker.
CBP did not receive responses to the two CBP Forms 28. On August 24, 2020, CBP’s Apparel, Footwear and Textiles Center of Excellence and Expertise (“CEE”) issued Notices of Action (CBP Form 29) rate advancing the two entries and explaining that the merchandise covered by both entries “is reappraised per 19 USC 1401a(f).” On September 4, 2020, the two entries were both liquidated. The CEE determined that the total entered value was $124,551 for the July 12, 2019 entry and $119,418 for the August 12, 2019 entry. Each entry was covered by a $50,000 surety bond. After the importer failed to pay the outstanding duties, on March 21, 2021, CBP mailed notices of demands for payment to the surety for the unpaid duties amounting to $21,973.80 (July 12, 2019 entry) and $19,511.30 (August 12, 2019 entry).
The CEE appraised the merchandise based on the fallback method by using purchase orders from an earlier February 25, 2020 entry of men’s 70% cotton 30% polyester knitted hoodies with the same manufacturer and importer of record. The CEE determined that the price of $11.40/per unit listed on the purchase order pertaining to the February 25, 2020 entry was 495.65 percent greater than the invoice price of $2.30/per unit listed for the same entry. The CEE applied the 495.65 percentage increase to the two protested entries to determine the appropriate entry values. On May 28, 2021, the surety filed this protest/AFR.
ISSUE:
What is the proper method of appraisement for the men’s apparel subject to this protest/AFR?
LAW AND ANALYSIS:
We note that the matter protested is protestable under 19 U.S.C. § 1514(a)(1) as a decision on the value of merchandise. The protest was timely filed on May 28, 2021, within 180 days from the notices of demand for payment against the bond, which were mailed to the surety on March 21, 2021. See Miscellaneous Trade and Technical Corrections Act of 2004, Pub. L. 108-429, § 2103(2)(B)(ii)-(iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)); 19 C.F.R. § 174.12(e). Further review of this protest is properly accorded to the surety pursuant to 19 C.F.R. § 174.24(b) because the issues protested involve questions of law or fact, which have not been ruled upon.
In its protest/AFR, the surety argues that the CBP Forms 29 failed to offer sufficient information regarding the basis of CBP’s appraisement of the goods. The surety states that CBP liquidated the entries with a valuation increase resulting in increased duty bills and valued the merchandise at approximately 4.27 times the commercial invoice value of $4.70-$10.80/per unit. The surety argues that it was improper for CBP to liquidate the two entries based on the fallback appraisement method at 4.27 times the invoice price when it could have determined the merchandise value of similar or identical merchandise. The surety advises that it conducted an independent price research on Alibaba, a Chinese online suppliers’ platform. When using “men polo” as a keyword, the surety’s search result showed a price of $1.10 per unit and when using “men jacket” as a keyword, the search result showed prices of $2.10-$2.50 per unit.
Merchandise imported into the United States is appraised for customs purposes 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 amounts for certain statutorily enumerated additions to the extent not otherwise included in the price actually paid or payable. See 19 U.S.C. § 1401a(b)(1). In the instant case, due to the importer’s lack of cooperation and failure to respond to the CBP Requests for Information (CBP Forms 28), we have insufficient information to determine whether the imported merchandise was a bona fide sale for exportation the United States. Therefore, the imported merchandise cannot be appraised under the transaction value method set forth in 19 U.S.C. § 1401a(b)(1). 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 hierarchical order. See 19 U.S.C. § 1401a(a)(1).
The second method of appraisement is the transaction value of identical or similar merchandise. See 19 U.S.C. § 1401a(c). This method refers to a previously accepted transaction value of identical or similar merchandise that was exported at or about the same time as the merchandise being valued.
Title 19 U.S.C. §1401a(h)(2) defines “identical” merchandise as:
(A) merchandise that is identical in all respects to, and was produced in the same country and by the same person as, the merchandise being appraised; or
(B) if merchandise meeting the requirements under subparagraph (A) cannot be found (or for purposes of applying subsection (b)(2)(B)(i), regardless of whether merchandise meeting such requirements can be found), merchandise that is identical in all respects to, and was produced in the same country as, but not produced by the same person as, the merchandise being appraised ….
Title 19 U.S.C. §1401a(h)(4) defines “similar” merchandise as:
(A) merchandise that — (i) was produced in the same country and by the same person as the merchandise being appraised, (ii) is like the merchandise being appraised in characteristics and component material, and (iii) is commercially interchangeable with the merchandise being appraised; or
(B) if merchandise meeting the requirements under subparagraph (A) cannot be found (or for purposes of applying subsection (b)(2)(B)(i), regardless of whether merchandise meeting such requirements can be found), merchandise that —
(i) was produced in the same country as, but not produced by the same person as, the merchandise being appraised, and (ii) meets the requirement set forth in subparagraph (A)(ii) and (iii) ….
Title 19, C.F.R. § 152.107(b) states, in relevant part:
The requirement that identical merchandise, or similar merchandise, should be exported at or about the same time of exportation as the merchandise being appraised may be interpreted flexibly.
The term “at or about the same time” covers a period of time, as close to the date of exportation as possible. Determinations as to whether similar/identical merchandise is exported “at or about the same time of exportation” will vary for different kinds of goods. Factors influencing supply and demand, such as fluctuations in the quality, availability, and desirability of a product may have a profound impact on the price a buyer will pay for merchandise.
It is not possible to appraise the merchandise on the basis of the transaction value of identical or similar merchandise because the CEE was unable to ensure that other entries in the same subheading and from the same country of origin were of the same component materials and characteristics as, or were commercially interchangeable with, the goods being appraised. The surety has not shown that the men’s apparel that resulted from its independent price search on Alibaba is identical or similar to the subject men’s apparel consistent within the definitions of “identical” or “similar” merchandise under 19 U.S.C. § 1401a(h)(2). The Alibaba research does not indicate when the located men’s polo and jacket were exported to the United States. Since the surety has failed to demonstrate that the Alibaba search results were contemporaneous to the instant entries, the Alibaba search results would not be applicable.
If transaction value of identical or similar merchandise cannot be determined, then the customs value will be based upon deductive value, unless the importer has elected computed value, which is not the case here. Deductive value under 19 U.S.C. § 1401a(d) is based upon the resale price in the United States. We have no information regarding the resale of the merchandise in the United States. In the absence of such information, deductive value is not available.
The computed value method is the next method of appraisement, and it is based upon, among other things, information regarding the cost of materials, processing, profit, and general expenses. See 19 U.S.C. § 1401a(e). Absent such information, computed value is not available either.
The last appraisement method is fallback under 19 U.S.C. § 1401a(f). Pursuant to the fallback method of valuation in 19 U.S.C. § 1401a(f)(1):
If the value of imported merchandise cannot be determined, or otherwise used for the purposes of this chapter, under subsections (b) through (e), the merchandise shall be appraised for the purposes of this chapter on the basis of a value that is derived from the methods set forth in such subsections, with such methods being reasonably adjusted to the extent necessary to arrive at a value.
Certain limitations exist under 19 U.S.C. § 1401a(f)(1). For example, merchandise may not be appraised on the basis of the price in the domestic market of the country of export, the selling price in the United States of merchandise produced in the United States, minimum values for appraisement, or arbitrary or fictitious values. Under 19 U.S.C. § 1500(a), the appraising officer may “fix the final appraisement of merchandise by ascertaining or estimating the value thereof, under section 1401a of this title, by all reasonable ways and means in his power, any statement of cost or costs of production in any invoice, affidavit, declaration, other document to the contrary notwithstanding….” Pursuant to 19 C.F.R. § 152.107(a), “If the value of imported merchandise cannot be determined or otherwise used for the purposes of this subpart, the imported merchandise will be appraised on the basis of a value derived from the methods set forth in §§ 152.103 through 152.106, reasonably adjusted to the extent necessary to arrive at a value. Only information available in the United States will be used.”
The subject goods may be appraised based on the fallback method of 19 U.S.C.
§ 1401a(f) because the importer refused to cooperate in appraising the merchandise by failing to respond to the two CBP Forms 28 and all other valuation methods previously discussed are unavailable. Under these circumstances, the CEE properly used a modified version of the transaction value of similar and identical merchandise under the fallback method as specified in 19 U.S.C. § 1401a(f) to appraise the men’s apparel. See HQ H235529, dated May 8, 2014 (due to the importer’s lack of cooperation and insufficient information to appraise children’s apparel under 19 U.S.C. §§ 1401a(b)-(e), CBP applied a modified version of transaction value of identical or similar merchandise under the fallback valuation method). The CEE reviewed the purchase order price of men’s 70% cotton 30% polyester knitted hoodies produced by the same manufacturer and entered by the same importer of record on February 25, 2020. The CEE determined that the price of $11.40/per unit listed on the purchase order was 495.65 percent greater than the invoice price of $2.30/per unit listed for the February 25, 2020 entry. The CEE applied this 495.65 percentage increase to the protested entries. The CEE acted properly in appraising the merchandise when it used a modified version of the transaction value of similar and identical merchandise under the fallback method consistent with CBP’s authority under 19 U.S.C. §§ 1401a(f) and 1500.
HOLDING:
Based on the circumstances of this case, we find that the merchandise should be appraised based on a modified version of transaction value of identical or similar merchandise under the fallback valuation method set forth in 19 U.S.C § 1401a(f) as explained. Therefore, this protest should be DENIED. The surety’s bond remains liable for the entries covered under the protest.
You are instructed to notify the protestant of this decision no later than 60 days from the date of this decision. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to this notification. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel and the public on the Customs Rulings Online Search System (“CROSS”) at https://rulings.cbp.gov/ or other methods of public distribution.
Sincerely,
for Yuliya A. Gulis, Acting Director
Commercial and Trade Facilitation Division