VAL CO:R:C:V 544455 LPF
U.S. Customs Service
555 Battery Street
San Francisco, CA 94111
RE: Application for Further Review of Protest No. 28099-89- 001022; Appraisement of Optoelectronic Components; Related Party Transactions; 19 U.S.C. 1401a(b); Transaction Value; 19
CFR 10.112; HRL 555269
This is a decision on an application for further review of a
protest filed May 18, 1989, concerning the appraisement of
optoelectronic components. The entries were liquidated on
February 17, 1989. We received numerous submissions from, and
held several meetings (most recently on September 27, 1994) with,
counsel concerning the matter. We regret the delay in
This decision concerns the appraisement of optoelectronic
components imported by Siemens Components, Inc., Optoelectronics
Division ("Siemens Opto"), a U.S. corporation, during November
and December 1988. As the parent company, Siemens Opto is the
buyer of the merchandise and provides raw materials on a
consignment basis to its foreign subsidiary seller, Siemens
Litronix Malaysia, Sdn., Bhd. ("Siemens Malaysia"). Siemens
Malaysia manufactures optoelectronic components and related
products primarily for sale to its parent, Siemens Opto, in the
United States and also to related companies in Canada and Europe.
Although Siemens Opto also has world-wide sales to unrelated
parties, there are no sales of identical or similar merchandise
to unrelated parties in the U.S.
Cash is provided by Siemens Opto to Siemens Malaysia on an
as-needed basis, without regard to the value of the product sold
to Siemens Opto or other related companies. The cash payments
are not related to any specific shipment of merchandise.
Counsel provided two separate profit and loss statements.
The "Profit and Loss Statement with GSP" pertains to all sales to
Europe that qualify for European GSP and include raw materials in
their cost of sales. The "Profit and Loss Statement without GSP"
pertains to related sales to Siemens Opto, Siemens Canada,
Siemens AG (for non-qualifying European GSP products), and
unrelated trade sales. Raw materials are not included because
they are consigned to Siemens Malaysia for all sales of non
European GSP-qualified products. In addition, the sales to the
U.S. do not reflect amounts for general expenses and profit.
For each of the fiscal years 1986, 1987, and 1988, the respective
"Profit and Loss Statement without GSP" shows that Siemens
Malaysia has operated at a loss for sales other than European
GSP-qualified products. However, for the fiscal years ending
September 1988 and onward, the combined Siemens Malaysia profit
and loss statements, reflecting sales to the U.S. and the rest of
the world, showed an overall profit.
The parent company, Siemens Opto, sets the transfer prices
to be charged to it by Siemens Malaysia, without negotiation.
The transfer prices, reflected on intercompany invoices, are
based on the standard costs of direct labor and factory overhead
in effect at the time of the transaction, plus a five percent
margin to account for general and administrative expenses, etc.
Because raw materials are consigned to Siemens Malaysia for all
sales that are not European GSP-qualified products, they are not
reflected in the transfer price. These transfer prices are not
used for Customs entry purposes.
Products manufactured by Siemens Malaysia and shipped to
Siemens Opto are invoiced at special prices for U.S. Customs
entry purposes, that are not recorded in the books of either
company. They reflect amounts for consigned materials, general
and administrative expenses, and assists, in addition to standard
costs of direct labor and factory overhead. Counsel provides
that, "the special invoice prices are estimates by Siemens Opto
to ensure that there is little or no additional duty liability as
a result of its year-end computed value cost reconciliation."
For fiscal years 1986 and 1987, and in all years prior, you
appraised the merchandise produced by Siemens Malaysia under
computed value, pursuant to 19 USC 1401a(e). Annual
reconciliations of entered values with actual costs, for each of
those years, were accepted for final computed value appraisement
purposes, because Customs had previously concluded that there was
no transaction value for the imported merchandise.
In March 1989, the appraising officer issued a Notice of
Action (Customs Form 19) indicating that all outstanding entries
would be appraised on the basis of transaction value instead of
computed value. Counsel contends that the transaction between
the buyer and seller is not acceptable as representing the
transaction value because the relationship of the parties
influences the price actually paid or payable. Moreover, while
the appraising officer, based on his review of past annual cost
reconciliation submissions believes that the previously accepted
computed values closely approximate the values declared at the
time of entry, counsel has submitted a comparison of values which
he believes demonstrates that the appraised values do not closely
approximate the computed values.
It also is your position that because no GSP claim via the
proper documentation (Customs Form A) was made for the
merchandise at the time of entry or within 90 days of
liquidation, the merchandise should not be entitled to a free
rate of duty under the GSP.
Based on the evidence submitted, whether it has been
demonstrated that the merchandise was improperly appraised based
on transaction value and whether the merchandise may be entitled
to entry under the GSP.
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. However, imported merchandise is
appraised under transaction value only if the buyer and seller
are not related, or if related, the transaction value is deemed
to be acceptable. In this case, Siemens Malaysia, the seller,
and Siemens Opto, the buyer, are related pursuant to section
402(g)(1)(G) of the TAA. Section 402(b)(2)(B) of the TAA
provides that a transaction value between related parties will be
deemed acceptable if an examination of the circumstances of sale
indicates that the relationship between the parties did not
influence the price actually paid or payable or where the
transaction value closely approximated certain "test" values.
At issue in this case is whether, as counsel contends, the
test value (i.e., computed value for identical merchandise) does
not closely approximate the transaction value between Siemens
Malaysia and Siemens Opto (i.e., special invoice prices). In
this regard, we note that "test values" should reflect values
previously accepted by Customs for appraisement purposes. In
this case, it appears that counsel's analysis is based on a
comparison of the reconciled computed values and the entered
values (reflected by the special invoice prices) both for the
1988 fiscal year.
It continues to be Customs position that in determining
whether a test value closely approximates an instant transaction
value, that the test value reflect a value previously accepted as
a customs value. We have no legal authority to utilize values
for the same entries of merchandise, based on different valuation
methods, as evidence as to whether a test value closely
approximates the instant transaction value. Insofar as this
understanding accurately reflects what counsel's analysis
represents, the protestant has not substantiated its position
that the values at issue do not closely approximate each other.
In addition, we presume that in reaching your determination that
the instant entered values closely approximate test values, the
appraising officer properly considered previously accepted test
values, in this case computed values, by which prior entries of
such merchandise had been liquidated.
Furthermore, based on the information currently before us, we
cannot, at this time, confirm that the figures presented by
counsel would, in any event, accurately reflect the computed
value for the merchandise entered during 1988. Accordingly, in
the event that 1) any of the assumptions made above are incorrect
and 2) you cannot find that the circumstances of the sale
indicate that the price actually paid or payable for the
merchandise was not influenced by the relationship between the
parties, we would instruct you to accurately appraise the instant
merchandise based on the appropriate computed value as determined
by your office.
With regard to the protestant's GSP claim, section 10.112,
Customs Regulations (19 CFR 10.112) explains that although the
proper documentation, in this case the Customs Form A,
establishing protestant's GSP claim, was not filed at the time of
entry, as long as failure to file it was not due to willful
negligence or fraudulent intent, the documentation may be filed
any time before liquidation or, if the entry was liquidated,
before liquidation became final. In Headquarters Ruling Letter,
555269, issued December 20, 1990, Customs recognized that if
liquidation was timely protested, the protestant should be
afforded an opportunity to submit documentation establishing free
or reduced duty entry. Accordingly, in this case, because
liquidation was timely protested, the protestant, if desired, is
entitled to submit such documentation. We note, however, that
the accuracy of such documentation would be subject to the above
findings concerning the appropriate appraisement of the
Based on the evidence submitted, with the assumptions
discussed above, it has not been demonstrated that the
merchandise was improperly appraised based on transaction value.
Although the protestant is entitled to submit documentation
concerning its GSP claim, the accuracy of such documentation
would be subject to the findings reached in this decision
concerning the appropriate appraisement of the merchandise. You
are directed to dispose of the protest in accordance with the
foregoing. 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.
John Durant, Director
Commercial Rulings Division