VAL R:C:V 545709 LPF
Joel K. Simon, Esq.
Serko & Simon
One World Trade Center
New York, NY 10048
RE: Appraisement of crystal glassware; Bona Fide Sale; Sale for Exportation; Nissho
Iwai; Dorf International; J.L. Wood
Dear Mr. Simon:
This is in response to your initial letter dated June 30, 1994, and several subsequent
letters, submitted on behalf of Waterford Wedgwood USA, Inc., concerning the appraisement of
Waterford Wedgwood USA, Inc. of Wall Township, New Jersey, (Waterford USA) is an
importer and distributor of lead crystal glassware, which includes, but is not limited to, stemware,
bowls, vases, ornaments and similar items. You provide that, in the present matter, Waterford
Crystal Limited of Kilbarry Waterford, Ireland (Waterford Ireland) sells such merchandise to
Waterford USA. Waterford Ireland, you explain, manufactures most of its products in Waterford,
Ireland. However, it also sources and purchases Waterford Ireland branded products from other
factories in West Germany, Czechoslovakia, and Slovenia which we understand are unrelated to
You stated in your June 30, 1994 submission that although Waterford USA and Waterford
Ireland both are under common ownership and control that they are two separate entities. You
further stated telephonically on March 10, 1995 that Waterford USA and Waterford Ireland
operate as separate, independent profit centers. In particular both operations have their own
employees and salespeople, conduct their own accounting, billing, and financial operations, and
advertise in their respective country. Although Waterford Ireland but not Waterford USA has its
own factory, the latter does have a showroom for sales purposes.
You state that Waterford USA determines the quantities to be ordered and places the
orders for all of the merchandise with Waterford Ireland. We assume that purchase orders from
Waterford USA, or other applicable evidence, would confirm such a finding. Subsequently,
Waterford Ireland orders a portion of the merchandise from the unrelated factories and produces
a portion of the merchandise from its own factories. Shipping times are determined by the
factories based upon their production schedules. Waterford USA is aware that the glassware
manufacturers sell similar products directly to the U.S. to companies other than Waterford USA,
such as Miller-Rogaska, Gorham, and Lenox.
You also explain that Waterford Ireland negotiates the prices with the factories, and that
Waterford USA meets with Waterford Ireland to negotiate and determine their prices. The selling
price from Waterford Ireland to Waterford USA for non-Waterford Ireland produced
merchandise will include Waterford Ireland's markup. Waterford Ireland will supply Waterford
USA with copies of the original invoices from the manufacturer evidencing the purchase price of
the merchandise for export to the U.S.
On all occasions you maintain that Waterford Ireland will notify the manufacturers at the
time of order that the merchandise will be destined for the U.S. In particular, the manufacturers,
upon such instruction, will ship the merchandise directly to Waterford USA. However, you
explained telephonically on January 27, 1995, that Waterford Ireland has the risk of loss and the
responsibility for defects and damage to, as well as shortages in supply of, the merchandise. The
manufacturers' invoices also will indicate directly on its invoices to Waterford Ireland that the
merchandise is intended to be shipped directly to Waterford USA. You also state that Waterford
USA bears the freight charges.
You add that neither Waterford Ireland nor Waterford USA will have any interest in the
manufacturers of the merchandise at issue herein and that all purchases by Waterford Ireland will
be conducted at arm's length. Accordingly, it is your position that in accordance with Nissho
Iwai American Corp. v. United States, 786 F. Supp. 1002 (CIT 1992) rev'd 982 F.2d 505 (Fed.
Cir. 1992), the proper basis of appraisement for the glassware is transaction value, based upon the
sales price from the manufacturers to Waterford Ireland.
You have provided an affidavit from the Chairman and Chief Executive of Waterford
Ireland attesting that: 1) Waterford Ireland contracts with factories in Germany, Poland, Austria,
Slovenia, Slovakia, the Czech Republic, and Hungary to produce lead crystal products for export
to the U.S.; 2) when Waterford Ireland contracts with a factory to produce a particular product,
both Waterford Ireland and the factory know the countries to which their product initially will be
exported; 3) in each transaction where products are exported to the U.S. both Waterford Ireland
and the factory are aware that the product is being produced for export to the U.S. before the
product is produced; 4) neither Waterford Ireland nor anyone related to it has any interest in any
of the factories which produces products contracted for by Waterford Ireland for export to the
U.S. and; 5) all terms of the purchases are negotiated at arms-length between Waterford Ireland
and the factories.
You also have submitted invoices from Nachtmann Bleikristallwerke GmbH (Nachtmann),
a German manufacturer of the glassware, to Waterford Ireland as well as invoices from Waterford
Ireland to Waterford USA. The Nachtmann-Waterford Ireland invoices reflect that the
merchandise was sold to Waterford Ireland, but shipped Ex Factory to Waterford USA. In
addition, these invoices indicate that the boxes and/or packaging are marked Waterford Crystal
USA.' The Waterford Ireland-Waterford USA invoices reflect the markup from the prices
reflected in the Nachtmann-Waterford Ireland invoices. Purchase orders from Waterford Ireland
indicating Nachtmann as the supplier and Waterford USA as the consignee of the merchandise are
consistent with the invoices.
Based on the facts presented, whether a sale for exportation to the U.S. occurred between
the manufacturers and Waterford Ireland which serves as the appropriate basis for valuation of the
LAW AND ANALYSIS:
As you are aware, the preferred method of appraising merchandise imported into the United
States 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 the foreign manufacturers and Waterford Ireland for appraisement of the
imported merchandise to be based on the transaction value represented by that price.
Customs recognizes the term "sale," as articulated in the case of J.L. Wood v. U.S., 62
CCPA 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406 (1974), to be defined as: the transfer of
property from one party to another for consideration. In determining whether a bona fide sale has
taken place between a potential buyer and seller of imported merchandise, no single factor is
determinative. Rather, the relationship is to be ascertained by an overall view of the entire
situation, with the result in each case governed by the facts and circumstances of the case itself.
Dorf International, Inc. v. United States, 61 Cust. Ct. 604, A.R.D. 245 (1968).
However, several factors may indicate whether a bona fide sale exists between a potential
buyer and seller. In determining whether property or ownership has been transferred, Customs
considers whether the potential buyer has assumed the risk of loss and acquired title to the
imported merchandise. In addition, Customs may examine whether the potential buyer paid for
the goods, and whether, in general, the roles of the parties
and circumstances of the transaction indicate that the parties are functioning as buyer and seller.
In determining whether the relationship of the parties to the transaction in question is that of
a buyer-seller, where the parties maintain an independence in their dealings, as opposed to that of
a principal-agent, where the former controls the actions of the latter, Customs will consider
whether the potential buyer:
a. provided (or could provide) instructions to the seller;
b. was free to sell the items at any price he or she desired;
c. selected (or could select) his or her own customers
without consulting the seller; and
d. could order the imported merchandise and have it delivered for his or her own
Based on the information provided, and the submitted documentation, it appears that a bona
fide sale occurred between the foreign manufacturer and Waterford Ireland. You advise that
although unsure whether Waterford Ireland acquires title to the goods at issue, that it maintains
the risk of loss for the merchandise. The shipping terms provided on the submitted invoices are
inconclusive in this regard. However, in this case, because other relevant evidence has been made
available concerning the roles of the parties and of the transaction in general, such evidence
should be examined and afforded substantial weight in determining whether only one such sale in
fact has occurred.
In this regard, you advise that Waterford Ireland negotiates and agrees to the prices with the
producers, while Waterford USA independently meets with Waterford Ireland to negotiate and
determine their prices. Accordingly, it is our understanding that Waterford USA does not
negotiate their prices with the foreign manufacturers and as such does not control or influence, in
any manner, the negotiations between Waterford Ireland and the factories. This is substantiated
by the submitted Nachtmann-Waterford Ireland invoices indicating that the merchandise was sold
to Waterford Ireland as well as by the purchase orders from Waterford Ireland to Nachtmann
showing Nachtmann as the supplier and Waterford USA as the consignee. The Waterford-Waterford invoices, reflecting a markup from the factory prices, provide further indication of this
We note, as well, that based on the submitted affidavit, it is our understanding that
Waterford Ireland contracts with the foreign manufacturers to produce the products. Although
not available for our review, we assume that such contracts, proof of payment, and other
documentation would be consistent with the arrangements between, and roles of, the parties as
With regard to the daily operations or role of Waterford Ireland, from the information
provided, it appears Waterford Ireland is functioning as a buyer/seller. In particular, you explain
that Waterford Ireland has its own employees and salespeople, conducts its own accounting,
billing, financial, and advertising operations, and has a factory on site. In sum, it appears that
Waterford Ireland, in this case, purchases specific types of merchandise from the factories,
pursuant to the terms agreed upon, and then sells the merchandise based on its agreements with
Waterford USA for sale in the U.S.
Finally, from the evidence submitted, it appears that Waterford Ireland was: 1) in a position
to give instructions to the manufacturer/seller; 2) free to sell the merchandise from the seller at
any price it desired; 3) able to select its own customers and negotiate with them without
consulting the seller; and 4) able, if desired, to have the merchandise delivered for its inventory.
These factors indicate that Waterford Ireland was not subject to control by either the
manufacturer/seller or Waterford USA and acted primarily for its own account, as is characteristic
of an independent buyer/seller as opposed to an agent. See Dorf, supra.
For these reasons, the information and supporting documentation, submitted for our review,
establishes that a bona fide sale exists between the foreign manufacturer and Waterford Ireland.
Accordingly, the decisions reached in Nissho Iwai American Corp. v. United States, 786 F. Supp.
1002 (CIT 1992) rev'd 982 F.2d 505 (Fed. Cir. 1992) and Synergy Sport International, Ltd., v.
United States, Slip. Op. 93-5 (Ct. Int'l Trade, decided January 12, 1993) are relevant.
In Nissho Iwai and Synergy, the U.S. Court of Appeals for the Federal Circuit and the Court
of International Trade, respectively, addressed the proper dutiable value of merchandise imported
pursuant to a three-tiered distribution arrangement involving a foreign manufacturer, a
middleman, and a U.S. purchaser. In both cases the middleman was the importer of record. Both
courts held that the manufacturer's price, rather than the middleman's price, was valid as long as
the transaction between the manufacturer and the middleman fell within the statutory provision for
valuation. The courts explained that in order for a transaction to be viable under the valuation
statute, it must be a sale negotiated at "arm's length" free from any nonmarket influences and
involving goods "clearly destined for export to the United States."
In regard to this particular matter, you have advised, along with an affidavit, that the
middleman, Waterford Ireland, and the foreign manufacturers are not related and that the sales
from the foreign manufacturers to Waterford Ireland constitute independent, arm's length
transactions. Moreover, you have presented evidence demonstrating that the merchandise is
clearly destined for the U.S. The submitted Nachtmann-Waterford Ireland invoices and purchase
orders indicate that the merchandise is to be shipped (specifically the merchandise contains
shipping marks) to Waterford USA. Furthermore, you explain that Waterford Ireland customarily
orders a portion of its merchandise from the manufacturers due to orders placed with them by
Waterford USA. In addition, the affidavit provides that when Waterford Ireland contracts with
the manufacturers, both parties know where their products will be exported and, moreover, before
the merchandise for export to the U.S. is produced, the parties are aware that the product is being
produced for export to the U.S.
Based on the evidence presented, the sale between the middleman and the foreign
manufacturer is an arm's length sale, and the merchandise is "sold for exportation to the U.S."
within the meaning of section 402(b)(1).
Based on the evidence submitted, a sale for exportation to the U.S. occurred between
Waterford Ireland and the foreign manufacturer/seller, with the former assuming a role
characteristic of a buyer-seller. Consequently, the transaction value of the merchandise is
correctly based on the price actually paid or payable by Waterford Ireland to the manufacturers.
John Durant, Director
Commercial Rulings Division