VAL-2 OT:RR:CTF:VS H204776 HkP
Port Director
Port of Cleveland
U.S. Customs and Border Protection
6747 Engle Road Middleburg Heights, OH 44130
RE: Application for Further Review of Protest no. 4103-09-100176; Women’s Apparel; 19 U.S.C. § 1401a; Method of Appraisement
Dear Port Director:
This is in response to the Application for Further Review (“AFR”) of Protest no. 4103-09-100176, timely filed by counsel on October 13, 2009, on behalf of the importer of record, Asia2America, LLC. The protest concerns the appraisement of six entries of women’s apparel liquidated on April 17, 2009. We regret our delayed response.
FACTS:
According to the information submitted, the protestant Asia2America acts as a “clearing agent” for Crown Smart Ltd. (“CSL”). In turn, CSL acts as a sourcing agent for Urban Apparel Group, (“UAG”), a U.S. company which purchases the imported merchandise for other U.S. buyers. CSL is responsible for negotiating favorable prices and passing on UAG’s purchase orders to factories, visiting factories, inspecting merchandise, obtaining samples, ensuring that foreign delivery dates are met, arranging for transportation to the United States, and for customs clearance and U.S. delivery. In addition, CSL pays manufacturers and other service providers, including Asia2America, which is paid 7.5 percent of international transportation and clearance charges. CSL is paid when it issues an invoice to UAG that details gross charges and CSL’s commission, characterized as the Landed Duty Paid (LDP) cost of merchandise. According to counsel, none of the parties to the transaction are related and their commercial arrangements have not been reduced to writing.
Between November 12, 2008, and January 16, 2009, six entries of three styles of women’s apparel (styles 75P7764, 75P7904, and 86P3072) were entered and appraised at a value of $3 per unit, based on factory invoices. The entries were filed by customs broker Goodship International, and Asia2America was listed as the importer of record (“IOR”). On March 27, 2009, the importer was notified by U.S. Customs and Border Protection (“CBP”) that the entries had been rate advanced. All entries were liquidated on April 17, 2009. On October 13, 2009, the importer protested CBP’s actions.
Because the transactions underlying all the entries are similarly structured, we will examine one transaction as representative of all the transactions covered by the entries.
For style 75P7764 garments, CSL negotiated an FOB, Manila, unit price of $3.00, stated to include the cost of materials, trimmings and labor, with the factory in The Philippines (Jenny’s Garments), which was approved by U.S. buyer UAG for ultimate U.S. buyer Express. On August 20, 2008, UAG issued to Jenny’s Garments four purchase orders (POs) for a total of 68,340 garments. The POs listed the customer as Express and stated that the carton markings must be according to Express protocol, but did not list any prices.
On October 18, 2008, Jenny’s Garments issued invoice 6703 for 31,022 garments at a unit price of $3.00 ($93,066). The IOR, Asia2America, was listed as consignee and CPTR Express was listed as the party to be notified. The terms of payment are listed as “TT” (telegraphic transfer). The packing list records Jenny’s Garments as the shipper/exporter, and indicates that the freight is prepaid.
On October 25, 2008, Jenny’s Garments issued a similar invoice (6712), for 31,658 garments at a unit price of $3.00 ($94,974.00). On October 19, and 26, 2008, Aeromax issued to Jenny’s Garments prepaid invoices 04723 and 05543 in the amounts of $5,500 each for ocean freight and terminal handling charges and fees.
On November 12, 2008, CSL invoiced UAG for 31,022 garments at a unit price of US $4.46 LDP ($138,358.12) (Jenny’s Garments – Inv. 6703), and on November 21, 2008, issued invoice CS-009/8 A (Jenny’s Garments – Inv. 6712) for 31, 658 garments at US $4.46 LDP ($141,194.68). On November 20 and 25, 2008, the IOR issued invoices to CSL in the amounts of $7,336.87 and $7,105.75, respectively, for ocean freight, handling charges, customs duty and fees, container drop, door delivery, and cash disbursement charges.
On November 26, 2008, the customs broker, Goodship International, issued an invoice to Connected International, a freight forwarder, for entry, delivery, and container pre-pull fees. On December 4, 2008, the HongKong and Shanghai Banking Corporation Ltd. issued Electronic Banking Transfer Debit Advice to CSL advising that US $186,952.32 had been transferred to a particular account. A handwritten annotation states that $94,974 was attributed to Jenny’s Garment invoice 6712 (31,658 garments at $3.00 each) and $93,066 was for Jenny’s Garment invoice 6703 (31,022 garments at $3.00 each), and that $1,987.68 paid to Jenny’s Garment by CSL for elastic was deducted from the total of $188,040 to arrive at the transferred amount of $186,052.32.
ISSUE:
Whether transaction value may be used to appraise the merchandise under 19 U.S.C. § 1401a(b).
LAW AND ANALYSIS:
The preferred method of appraising merchandise imported into the United States is the transaction value method as set forth in 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. 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 five enumerated statutory additions. 19 U.S.C. § 1401a(b). In order for imported merchandise to be appraised under the transaction value method, it must be the subject of a bona fide sale between a buyer and a seller, and it must be a sale for exportation to the United States. In VWP of America, Inc. v. United States, 175 F.3d 1327 (Fed. Cir. 1999), the CAFC found that the term “sold” for purposes of 19 U.S.C. § 1401a(b)(1) means a transfer of title from one party to another for consideration (citing J.L. Wood v. United States, 62 C.C.P.A. 25, 33; C.A.D. 1139; 505 F.2d 1400, 1406 (1974)).
In determining whether a bona fide sale has occurred between a potential buyer and seller, no single factor is determinative. CBP reviews all the facts and circumstances of the transaction and makes its determination on a case-by-case basis. Dorf International, Inc. v. United States, 61 Cust. Ct. 604, A.R.D. 245 (1968). In making its determination as to whether property or ownership has been transferred, CBP initially considers whether the alleged buyer has assumed the risk of loss and acquired title to the imported merchandise. In addition, CBP may examine whether the purported buyer paid for the goods, and whether, in general, the parties are functioning as buyer and seller. See Headquarters Ruling Letters (“HQ”) HQ H006576, dated December 19, 2007; HQ 547071, dated November 1, 2001; HQ 545709, dated May 12, 1995; and HQ 545474, dated August 25, 1995.
The port advanced the values of the entries because it found that there was no evidence to support the values of the transactions between the Philippine seller and the U.S. buyer’s agent, CSL, claimed as the bases of appraisement at entry. Accordingly, the port appraised the merchandise based on a review of production documents provided by the manufacturer, claiming it used transaction value.
Counsel for the IOR asserts that the price paid to the factory represents transaction value, either as the price paid by the U.S. buyer UAG through its agent CSL or under the first sale principle with CSL acting as an independent middleman. Moreover, counsel argues that transaction value is appropriate because the factory sales were for export to the U.S., the parties were not related, and there are no royalties, assists or shared proceeds. In addition, counsel states that because CSL is a buying agent, its compensation is not dutiable. In the alternative, counsel argues that the transaction value is represented by the total amount paid by UAG, the LDP price, adjusted as necessary for non-dutiable costs such as customs duties and international freight. In addition, counsel questions the method of appraisement used by the port.
In this case, there is no evidence of a sale between the importer, Asia2America, and the factory, Jenny’s Garments; that is, there are no contracts with or payments by the importer for the imported merchandise. The only payments for merchandise were made by the buying agent, CSL, on behalf of the U.S. buyer, UAG, to the factory. In addition, although counsel characterizes the IOR as the “clearing agent” for the buying agent, CSL, there is nothing in the record to substantiate an agency relationship. A review of the record shows that customs clearance procedures were carried out by the broker, Goodship International, and the freight forwarder, Connected International. The invoices issued by Asia2America listed ocean freight as one of its expenses, but the record indicates that freight had been prepaid by Jenny’s Garments, the manufacturer. Also, we note counsel’s statements that CSL was responsible for customs clearance and that none of the parties are related. We find therefore, that the importer or record was not the purchaser of the imported merchandise and was neither a buying nor selling agent.
Given that the importer of record was not a party to any of the transactions detailed in the documents submitted to CBP, and was not acting as an agent of any of the parties, we find that there was no bona fide sale from Jenny’s Garments to Asia2America. As a result, the price indicated by the invoice from Asia2America cannot be used. Moreover, the FOB Manila sales between the manufacturer, Jenny’s Garments, and the U.S. buyer, UAG, through its agent CSL, cannot be used to establish the value of the imported merchandise. The PO had no price and the bank payment did not specify what the payment was for. For the same reason, the alleged LDP prices of the goods cannot be relied upon to appraise the goods. Therefore, transaction value is not available as a method of appraisement.
When imported merchandise cannot be appraised on the basis of transaction value, it is to be appraised in accordance with the remaining methods of valuation, applied in sequential order. The alternative methods of appraisement in order of precedence are: the transaction value of identical merchandise; the transaction value of similar merchandise; deductive value; and computed value. If the value of imported merchandise cannot be determined under these methods, it is to be determined in accordance with section 402(f) of the TAA. 19 U.S.C. § 1401a(a)(1). In this case, the port appraised the merchandise based upon a review of production records obtained from the manufacturer, which is the computed value method of appraisement, not transaction value as claimed by the port. Before using the computed value method, the port must first attempt to appraise the merchandise following the hierarchy of methods, starting with the transaction value of identical or similar merchandise.
HOLDING:
The imported merchandise may not be appraised on the basis of transaction value because the importer was not a party to any of the transactions on which it sought to rely.
The protest should be denied. In accordance with the Protest/Petition Processing Handbook (CIS HB, December 2007), you are to mail this decision together with the Customs Form 19 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 the mailing of the decision. Sixty days from the date of the decision the Office of International Trade, Regulations and Rulings, will make the decision available to CBP personnel and to the public at www.cbp.gov by means of the Freedom of Information Act and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division