VAL CO:R:C:V 545705 LPF
District Director
U.S. Customs Service
101 East Main Street
Norfolk, VA 23510
RE: Application for Further Review of Protest No. 1401-94- 100129; Proper
Transaction Value; Sale for Exportation
Dear Sir:
This is a decision on an application for further review of a protest filed May 19, 1994,
against your decision concerning the valuation of imported beer. The entries at issue were
liquidated on April 8, 1994.
FACTS:
Van Munching & Company (VMC) of New York is a wholly owned subsidiary of its
parent the Heineken Brewery B.V. (Heineken) of Holland. The protestant, VMC, provides that it
is the sole distributor for Heineken products in the U.S. and, accordingly, selects
customers/distributors who sell the products throughout the U.S. VMC further provides that it
has sole discretion in the selection and confirmation of the distributors and negotiates prices with
them on an individual basis in a manner which ensures a reasonable profit to VMC. Likewise,
VMC states that it negotiates prices with Heineken with the intent of minimizing its costs and
ensuring a reasonable profit in exchange for its activities.
It is our understanding that VMC pays Heineken for the goods, forty-five days after the
end of the month in which the goods were shipped. VMC invoices the distributors when the bill
of lading is sent to permit them to take possession of the goods. Furthermore, as a seller to the
distributors, the protestant states that it also bears the responsibility for invoicing as well as for
collections and bad debts. The appropriate Field National Import Specialist (FNIS) visited VMC
and confirms that it conducts the accounting and advertising for the products and employs sales
managers, traffic managers, and other staff to help conduct their business.
Finally, the protestant submits that it pays for freight and marine insurance and usually
purchases the goods FOB Rotterdam. In case of damage or loss in transit, VMC is the
responsible party and is covered by the insurer.
With regard to the shipment at issue, the Entry Summary (Customs Form 7501) indicates
that VMC was the importer of record. Our office also has copies of an invoice dated December
16, 1993, from Heineken to VMC and an invoice dated December 31, 1993, from VMC to Grant
Imp. & Dist. Co., Inc. (Grant) of Illinois. The Heineken-VMC invoice indicates that the shipment
is to be marked "Van Munching & Co. Inc." and that Grant is to be notified concerning the
importation. Attached to the referenced commercial invoice, a certificate executed December 30,
1993 by VMC (on their letterhead) certifies that the beer discharged at the port of Richmond was
sold to Grant.
It appears you considered VMC to be a selling agent and therefore appraised the
merchandise based on the price paid to VMC by its U.S. customers/distributors. It is the
protestant's position that VMC functions as a buyer/seller and that the transaction value of the
merchandise should be based on the price paid by VMC to Heineken.
ISSUE:
Based on the facts presented, whether a sale for exportation occurred between Heineken
and VMC or whether a sale for exportation occurred between Heineken and the U.S. consumers/
distributors with VMC serving as a selling agent.
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. Section 402 (b)(1) of the TAA 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 amounts for the enumerated
statutory additions (emphasis added). Accordingly, a bona fide sale must exist between
Heineken and VMC for appraisal of the imported merchandise to be based on the transaction
value represented by that price.
In J.L. Wood v. U.S., 62 CCPA 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406 (1974), the
U.S. Court of Customs and Patent Appeals defined the term "sale" as the transfer of property
from one party to another for consideration. Although J.L. Wood was
decided under the prior appraisement statute, Customs recognizes this definition under the TAA.
Several factors may indicate whether a bona fide sale exists between a potential seller and
buyer. In determining whether property or ownership has been transferred, Customs considers
whether the alleged buyer has assumed the risk of loss and
acquired title to the imported merchandise. In addition, Customs may examine whether the
alleged buyer paid for the goods, whether such payments are linked to specific importations of
merchandise, and whether, in general, the roles of the parties and
circumstances of the transaction indicate that the parties are functioning as buyer and seller.
The information and facts presented to our office indicate that, insofar as the transaction at
issue is concerned, a bona fide sale occurred between Heineken and VMC. We note that the
protestant submits that it pays for freight and marine insurance and in case of damage or loss in
transit, it is the responsible party. The submitted invoices indicate that Heineken sells the goods
to VMC who in turn sells them to its distributors. We recognize that the certificate executed by
VMC certifying that VMC sold the beer to Grant, who was then able to take possession of the
goods, serves as some evidence that VMC's role was that of a buyer/seller and that they possessed
title at the time of importation.
We reiterate that it is our understanding that VMC has sole discretion in the selection and
confirmation of its distributors and negotiates prices with them as well as with Heineken in order
to ensure a reasonable profit. It is not apparent that the U.S. distributors are able to negotiate or
deal directly with Heineken in such a manner. In fact, VMC explains that it pays Heineken for the
goods and then invoices the distributors when the bill of lading is sent, giving them possession of
the goods. These facts coupled with the comprehensive daily operations of VMC as evidenced by
the appropriate FNIS (for instance its management of its own accounting, advertising, and debt
collection as well as its employment of sales managers, traffic managers, and other staff to help
conduct business) indicates that VMC functioned as a buyer/seller of the goods as opposed to a
selling agent. Finally, we note that although it appears that VMC and Heineken may be related
parties pursuant to section 402(g) of the TAA, discussions with the appropriate FNIS indicate
that the circumstances of the sale demonstrate that the relationship between the parties did not
influence the price actually paid or payable.
HOLDING:
Based on the evidence submitted, a sale for exportation occurred between Heineken and
VMC and, consequently, the transaction value of the merchandise is correctly based on the price
actually paid or payable by VMC to Heineken.
You are directed to grant the protest. 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.
Sincerely,
John Durant, Director
Commercial Rulings Division