VAL CO:R:C:V 545144 ph

District Director
101 East Main Street
Norfolk, VA 23510

RE: Application for Further Review of Protest No. 1401-92-100064; Proper Transaction Value of Imported Merchandise; Sale for Exportation

Dear Sir:

The above-referenced protest and application for further review is against your decision regarding the proper transaction value of certain dolls imported by QVC Network (a television homeshopping company; hereinafter referred to as "QVC").


According to a November 10, 1992 Customs Protest and Summons Information Report, and an August 12, 1992 submission from QVC, QVC was the importer of the merchandise. The imported merchandise consists of Marie Osmond dolls. QVC ordered 5041 dolls from Knickerbocker Creations Ltd. (hereinafter referred to as "Knickerbocker"). As indicated by the respective invoices, Knickerbocker purchased the dolls from Jui Shan Co., Ltd. (hereinafter referred to as "Jui Shan") in Taiwan, at a total price of $185,279.00. Knickerbocker, in turn, sold the dolls to QVC at a total price of $246,537.50, FOB Taiwan. QVC paid for the merchandise by means of a transferrable open letter of credit to Knickerbocker. Further, according to a July 22, 1991 letter from Knickerbocker to QVC, Knickerbocker has a contractual agreement with Marie Osmond, according to which Knickerbocker holds the licensing and distribution rights for developing and marketing a Marie Osmond doll. In response to an inquiry from the concerned import specialist, QVC stated that they had not utilized any sales contracts in the transaction with Knickerbocker. Neither the purchase order from QVC to Knickerbocker nor the invoice from Knickerbocker to QVC indicates the sale or transfer of the right to use the "Marie Osmond" name on the dolls.


Whether the transaction between Jui Shan and Knickerbocker or the transaction between Knickerbocker and QVC determines the "price actually paid or payable" for the merchandise when sold for exportation.


The 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; 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 enumerated additions.

The "price actually paid or payable" is defined in section 402(b)(4)(A) of the TAA as "the total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise...) made,or to be made, for the imported merchandise by the buyer to, or for the benefit of, the seller."

In Nissho Iwai American Corp. v. United States, No. 92- 1239, slip op. (Fed. Cir. Dec. 28, 1992) and Synergy Sport International, Ltd. v. United States, No. 93-5, slip op. (Ct. Int'l. Trade Jan. 12, 1993), 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. In each case the court held that the price paid by the middleman/importer was the proper basis for transaction value. Each court further stated 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 the United States.

Likewise, we note that in the context of filing an entry, Customs Form 7501, an importer is required to make a value declaration. As indicated by the language of CF 7501 and the language of the valuation statute, there is a presumption that such transaction value is based on the price paid by the importer.

In keeping with the the courts' respective holdings and our own precedent, we will continue to presume that an importer's declared transaction value is based on the price the importer paid. In further keeping with the courts' holdings, we note that in those situations where an importer requests appraisement based on the price paid by the middleman to the foreign manufacturer (and the importer is not the middleman), the importer may do so. However, it will be the importer's responsibility to show that such price is acceptable under the standard set forth in Nissho Iwai and Synergy. That is, the importer must present sufficient evidence that the sale was an "arm's length sale," and that it was "a sale for export to the United States," within the meaning of 19 U.S.C. 1401a(b).

In this case, QVC is the importer and, therefore, based on the above-noted presumption, the appraising officer correctly based the transaction value of the imported merchandise on the price that QVC paid to Knickerbocker. With regards to whether or not transaction value may be based on the transaction between Knickerbocker and the foreign manufacturer, we note that it is not clear from the evidence that such transaction was "a sale for export to the United States," within the standard set forth by the court. That is, in accordance with the court's standard, the evidence must establish that at the time Knickerbocker purchased, or contracted to purchase, the imported goods, they were "clearly destined for the United States." No such evidence has been submitted here. In addition, no evidence has been submitted that goes toward the courts' second requirement, i.e. that the sale was "at arm's length." That is, the file contains no evidence on the relationship between Knickerbocker and Jui Shan. Consequently, we cannot make a determination here that the transaction of the imported merchandise should be based on the sale between Jui Shan and Knickerbocker.

Lastly, we note that while it appears from the materials submitted that the transfer of a royalty (for use of the name "Marie Osmond") was involved in the transaction between Knickerbocker and QVC, QVC has stated that a royalty fee was neither discussed nor contracted for. Therefore, we cannot make a determination with regard to that issue other than to assume that any such fee was included in the invoiced price of the merchandise, from Knickerbocker to QVC.


Based on the evidence submitted, and for the reasons cited above, the appraising officer correctly based the transaction value of the imported merchandise on the price paid by the importer, QVC, to Knickerbocker. 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 sixty days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing 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 the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other public access channels.


John Durant, Director
Commercial Rulings Division