OT:RR:CTF:VS H257520 AJR
Port Director
Port of Seattle
U.S. Customs and Border Protection
1000 Second Avenue, Suite 2100
Seattle, WA 98104-1020
RE: Application for Further Review of Protest No. 3001-13-100496; Garlic; Method of Appraisement
Dear Port Director:
This is in response to the Application for Further Review of Protest No. 3001-13-100496, timely filed by counsel on behalf of Bankers Insurance Company (“Bankers”) and forwarded to our office by your port. Bankers is the surety for the importer of record, The Best USA International Trading Inc. (“Best USA”). At issue is the method of appraisement used by U.S. Customs and Border Protection (“CBP”) to determine the value of dehydrated garlic granules entered by Best USA.
FACTS:
From January 1, 2012 to December 31, 2012, Best USA imported 2,126,518 kilograms (kg) of dehydrated garlic granules at various ports. On December 6, 2012, the Office of Regulatory Audit (“Regulatory Audit”) contacted Best USA to initiate an audit of the company. Regulatory Audit was unable to make contact with the company after several attempts to contact the company by phone, mail, and physical visit of the importer’s listed address of 13411 Franklin Ave., Flushing, New York 11355-4657.
For one entry made by Best USA on October 21, 2012, the Port of Jamaica, New York issued a Notice of Proposed Action on January 23, 2013, proposing to rate advance the value of the dehydrated garlic granules from $0.26 per kg to $2.06 per kg. The following documents were received from the customs broker:
An entry summary (CBP Form 7501) dated October 31, 2012, and an entry/immediate delivery (CBP Form 3461) dated October 19, 2013, showing Best USA as the Importer of Record and Ultimate Consignee for 25,424 kg of dehydrated garlic granules valued at $6,610 ($0.26/kg), shipped from China to New York;
A commercial invoice and packing list dated August 28, 2012, issued by Jining Dongyun Foods Co., Ltd (“JDF”) with an address in Shandong, China, to Jinxiang Lihua Freezing Storage Trading Co., Ltd. (“JLFST”) with an address in Jinxiang County, China, and to an unnamed consignee with an address in Brooklyn, New York, for 25,424 kg of dehydrated garlic granules valued at $6,610.24 ($0.26/kg), packed into 40 bags and weighing a total of 26,000 kg, with shipment from Qingdao, China to New York;
A phytosanitary certificate, which lists JLFST as the consignee with an address in Brooklyn, New York for dehydrated garlic granules. The rest of this document is either in Chinese without translation or illegible, but appears to have JDF listed as the consignor and the date of inspection during September of 2012;
A certificate of the producer dated October 10, 2012, issued by JDF with an address in Shandong, China and made to JLFST with an address in Jinxiang County, China, and to an unnamed consignee with an address in Brooklyn, New York, certifying that the shipment by JDF contains dehydrated garlic granules from China;
A bill of lading dated September 20, 2012, which lists JDF as the shipper; JLFST as the consignee with an address in Brooklyn, New York; the “notify party” as Best USA located at 136-20 38th Ave. Suite 10E, Flushing, New York 11354, with phone number 718-713-0329; and T.J. Expediters as the contact for delivery of the 40 bags of dehydrated garlic granules weighing 26,000 kg, shipped from Qingdao, China to New York, NY; and
A freight invoice dated October 11, 2012, issued by T.J. Expediters for the cargo release of 40 bags of dehydrated garlic granules weighing 26,000 kg, billed to Best USA in the amount of $60, and with JDF listed as the shipper.
Best USA failed to respond and pay the liquidated duties on the revalued merchandise, prompting CBP to make formal demands on Bankers in its capacity as surety for payment of the duties owed. The demands were sent to Bankers on June 2, 2013. Bankers, as the surety, protests the liquidation of one entry, exported on July 31, 2012, and entered on August 16, 2012, that it states allegedly was imported by Best USA (Vandergrift Forwarding Co., Inc. was the customs broker). The August 16, 2012, entry was made at the Port of Seattle for 17,706 kg of dehydrated garlic granules at $0.26 per kg. In a Notice of Action dated April 8, 2013, your office assessed the dehydrated garlic granule for this entry at $2.06 per kg after no response was received from Best USA, and with the assistance of Regulatory Audit that reviewed 185 values of entries of garlic from China for 2012, and which included those values entered by Best USA.
Protestant argues that the dehydrated garlic granules should be valued at $0.26 per kg as entered, or based on the transaction values of identical or similar merchandise on the same day or within one week of the date of importation. As evidence that $0.26 per kg is likely the correct price, a United States Department of Agriculture (“USDA”) article, dated March 29, 2013, was submitted showing that the average unit value of China exports of garlic in 2012 was $0.84 per kg.
In the course of evaluating Best USA’s valuation, CBP received the sales confirmation, vendor invoices, freight invoices, and proof of payment for three entries of dehydrated garlic granules from another importer. One, exported on May 15, 2012, and entered on June 2, 2012, declared the value of 16,321 kg of dehydrated garlic granules exported from Shandong, China at $33,901 ($2.07/kg).
ISSUE:
What is the proper method of appraisement for the imported dehydrated garlic granules involved in this case?
LAW AND ANALYSIS:
Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. § 1401a). The preferred method of appraisement is transaction value, which is defined as the "price actually paid or payable for merchandise when sold for exportation to the United States," plus five statutorily enumerated additions. 19 U.S.C. § 1401a(b)(1). 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 Court of Appeals for the Federal Circuit 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 Headquarter Ruling (“HQ”) H204776 dated December 27, 2012, the issue was whether there was a bona fide sale between an importer, buyer, and a factory, seller, in order to appraise the imported merchandise on the basis of transaction value. The importer had bought merchandise from a factory in the Philippines through buying agents. However, though there was evidence of the transaction between the buying agents and the factory, there was no evidence the importer paid for the imported merchandise or of an agency relationship. Accordingly, no bona fide sale from the factory to the importer was found, and transaction value was not available as a method of appraisement.
In this case, there is no evidence of a sale between Best USA and JDF; that is, there are no contracts with or payments by Best USA for the imported merchandise. The only documents appearing to show payments for the merchandise are the invoices, packing lists, and certificates between JDF and JLFST for another entry, but there is nothing to show that JLFST was acting on behalf of Best USA. The bill of lading and freight invoice are the only documents that mention Best USA. Though such documents suggest Best USA’s role as the importer of record, neither demonstrate that Best USA was a party to the transaction between JDF and JLFST. Further, JLFST has an address in China and is shown as a consignee in New York. Therefore, we find that the invoice presented does not necessarily show a sale for exportation to the United States. Best USA’s address listed on the invoice is actually for another entity. This entity also has a different phone number from the one listed for Best USA on the invoice.
Given that no sale can be substantiated with Best USA as a party to the sale, and because there is no evidence that JLFST was acting on behalf of Best USA, we find that the price indicated on the invoice from JDF cannot be used, and transaction value is not available as a method of appraisement. Further, Regulatory Audit sent several requests for information to Best USA to verify the invoice price claimed, but no purchase orders or payment information for the merchandise was received, and though several attempts were made to obtain this information, including a visit to Best USA’s address as listed in CBP’s Automated Commercial System, Regulatory Audit was unable to make contact with Best USA. Accordingly, under the provisions of 19 U.S.C. §§ 1401a(b)(1) and 1401a(h)(5)(A)(i), the port was correct in not using transaction value to appraise the imported merchandise because there was insufficient information to verify the accuracy of the invoiced values.
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 or similar merchandise (19 U.S.C. § 1401a(c)); deductive value (19 U.S.C. § 1401a(d)); computed value (19 U.S.C. § 1401a(e)); and the “fallback” method (19 U.S.C. § 1401a(f)).
Bankers argues that even if CBP has grounds for claiming the invoice values are inaccurate and transaction value is inapplicable, CBP should use the value of similar or identical merchandise on the same day or within one week of the entry in question.
The transaction value of identical or similar merchandise is based on sales at the same commercial level and in substantially the same quantity of merchandise exported to the United States at or about the same time as the merchandise being appraised. See 19 U.S.C. § 1401a(c). To use this method, the transaction value of the identical or similar merchandise must be a previously accepted value; that is, it must be demonstrated that the transaction value is fully acceptable under section 402(b) of the TAA at the time of appraisement of the merchandise under consideration in order to be applied as the transaction value of identical or similar goods under section 402(c). See T.D. 91-15, 25 Cust. Bull. 31 (1991); see HQ H234029 dated April 22, 2013. As explained in T.D. 91-15, the previously accepted value is determined on the basis of information provided by the importer or already available to CBP.
HQ 546217 dated April 8, 1998, addressed the issue of what is meant by the requirement of “at or about the same time” under section 402(c) of the TAA, with respect to the transaction value of identical or similar merchandise. The ruling concluded that “at or about the same time” should cover a period of time, as close to the date of exportation as possible, within which commercial practices and market conditions which affect the price remain the same. It was also stated that these types of determinations will vary as between different kinds of goods and the circumstances unique to the particular merchandise and industry at issue. In the case of perishable produce (asparagus was the merchandise at issue), it was concluded that “about” the time of exportation is a time period of one week before or after the date of exportation (a total of 14 days). Customs further concluded that this time period is presumptively appropriate for perishable produce unless overcome by evidence of market or production conditions that warrant a shorter or longer time period. The dehydrated garlic granules at issue are also perishable articles. Therefore, their appraisement is subject to this same standard.
HQ 546217 also determined that the terms “at” or “about”, included in the language of section 402(c) of the TAA, are applied in a hierarchical fashion. Hence, in selecting a transaction value of identical or similar merchandise in accordance with section 402(c) of the TAA, it would first be appropriate to consider transaction values for the dehydrated garlic granules at issue which have been exported “at” the same time as the subject dehydrated garlic granules being appraised. If no transaction value is available for dehydrated garlic granules exported on the exact date as the dehydrated garlic granules being appraised, it would then be appropriate to consider transaction values for dehydrated garlic granules exported “about” the same time as the dehydrated garlic granules at issue.
HQ 546217 further discussed that it would be appropriate to use the transaction value for the produce at issue exported on the date closest to the date of export of the produce being appraised, followed by the next closest date, and so forth. If several transaction values are available for the merchandise being appraised on the exact or closest date of exportation, the lowest will be utilized. If no such values are found within the fourteen day period, CBP must resort to an alternate method of appraisement.
In this case, it was not possible to appraise the merchandise on the basis of the transaction value of identical or similar merchandise because CBP did not have a previously accepted value for entries in the same subheading and from the same country of origin that were exported at or about the same time as the entry at issue.
When the value of the imported merchandise cannot be determined under 19 U.S.C. § 1401a(c), then CBP may resort to the deductive value method. Under the deductive value method, merchandise is appraised on the basis of the price at which it is sold in the United States in its condition as imported and in the greatest aggregate quantity either at or about the time of importation, on or before the close of the 90th day of importation. See 19 U.S.C. § 1401a(d)(2)(A)(i),(ii). This price is subject to certain enumerated deductions. See 19 U.S.C. § 1401a(d)(3). Based on the record, CBP was not given any information on the United States sales price of the merchandise. Consequently, the deductive value method was inapplicable.
When the value of the imported merchandise cannot be determined under 19 U.S.C. § 1401a(d), then CBP may resort to the computed value method. Under the computed value method, merchandise is appraised on the basis of the material and the processing costs incurred in the production of imported merchandise, plus an amount for profit and general expenses equal to that usually reflected in sales of merchandise of the same class or kind, and the value of any assists and packing costs. See 19 U.S.C. § 1401a(e). No information on these various elements was provided, making the computed value method also unavailable as an appraisement method.
When the value of imported merchandise cannot be determined under the methods set forth in 19 U.S.C. § 1401a(b)-(e), it may be appraised on the basis of a value derived from one of those methods, reasonably adjusted to the extent necessary to arrive at a value. This is known as the “fallback” valuation method. Certain limitations exist under this method, however. For example, merchandise may not be appraised on the basis of the price in the domestic market of the country of export, the selling price in the United States of merchandise produced in the United States, minimum values, or arbitrary or fictitious values. See 19 U.S.C. § 1401a(f); CBP Regulations, Part 152, Section 152.108 (19 C.F.R. § 152.108).
Under Section 500 of the Tariff Act of 1930, as amended, which constitutes CBP’s general appraisement authority, the appraising officer may:
[F]ix the final appraisement of merchandise by ascertaining or estimating the value thereof, under section 1401a of this title, by all reasonable ways and means in his power, any statement of cost or costs of production in any invoice, affidavit, declaration, other document to the contrary notwithstanding[.]
19 U.S.C. § 1500(a).
In this regard, the Statement of Administrative Action (“SAA”), which forms part of the legislative history of the TAA provides, in pertinent part:
Section 500 is the general authority for Customs to appraise merchandise. It is not a separate basis of appraisement and cannot be used as such. Section 500 allows Customs to consider the best evidence available in appraising merchandise. It allows Customs to consider the contract between the buyer and seller, if available, when the information contained in the invoice is either deficient or is known to contain inaccurate figures or calculations…. Section 500 authorize [sic] the appraising officer to weigh the nature of the evidence before him in appraising the imported merchandise. This could be the invoice, the contract between the parties, or even the recordkeeping of either of the parties to the contract.
In those transactions where no accurate invoice or other documentation is available, and the importer is unable, or refuses, to provide such information, then reasonable ways and means will be used to determine the appropriate value, using whatever evidence is available, again within the constraints of section 402.
Statement of Administrative Action, H.R. Doc. No. 153, 96 Cong., 1st Sess. Pt 2, reprinted in Department of Treasury, Customs Valuation under the Trade Agreements Act of 1979 (Oct. 1981), at 67.
Section 152.107 of the CBP Regulations (19 C.F.R. § 152.107) provides:
Reasonable adjustments. If the value of imported merchandise cannot be determined or otherwise used for the purposes of this subpart, the imported merchandise will be appraised on the basis of a value derived from the methods set forth in §§ 152.103 through 152.106, reasonably adjusted to the extent necessary to arrive at a value. Only information available in the United States will be used.
Identical merchandise or similar merchandise. The requirement that identical merchandise, or similar merchandise, should be exported at or about the same time of exportation as the merchandise being appraised may be interpreted flexibly. Identical merchandise in any country other than the country of exportation or production of the merchandise being appraised may be the basis for customs valuation. Customs valuation of identical merchandise, or similar merchandise, already determined on the basis of deductive value or computed value may be used.
In HQ H119455 dated February 16, 2011, the fallback method was approved because the port was unable to rely on documents presented by the importer and the importer failed to respond to the port’s requests for information. Likewise, in this case, CBP was unable to rely on the documents presented by the importer to determine the transaction value of the imported merchandise, and CBP did not have sufficient information to apply a method of appraisement other than the fallback method. In addition, samples of the merchandise were not provided to CBP, and Regulatory Audit’s repeated attempts to contact the importer, so that it could substantiate the values claimed were unsuccessful.
While the merchandise was appraised on the basis of merchandise classified in the same subheading and from the same country of origin, the appraisement considered values that were not previously accepted values and included values from other entries imported by Best USA. Therefore, we find that the port should have used the fallback method under 19 U.S.C. § 1401a(f) on the basis of reasonable adjustments to the transaction value of similar merchandise as provided for in 19 U.S.C. § 1401a(c). Though the port did not have a previously accepted value at or about the same time as the entry in question, it had a previously accepted value of $2.07 per kg of dehydrated garlic granules exported on May 15, 2012, and entered on June 2, 2012. The entry for this previously accepted value was verified by Regulatory Audit and contained a similar quantity of dehydrated garlic granules from China as the entry in question. Moreover, as a verified dehydrated garlic granules entry within reasonable proximity to the entry in question, using this previously accepted value is a reasonable adjustment.
Based on the information in the record, the previously accepted value of $2.07 per kilogram should have been used by the port as a reasonable adjustment, pursuant to 19 U.S.C. § 1401a(f), of the transaction values of similar merchandise as provided for under 19 U.S.C. § 1401a(c).
HOLDING:
The imported merchandise may not be appraised on the basis of the prices on the invoices from JDF to JLFST. The imported merchandise may also not be appraised under the transaction value of identical or similar merchandise because there was no previously accepted value from an entry that occurred on or about the same time as the entry in question. The correct method of appraisement is pursuant to 19 U.S.C. § 1401a(f), which allows for reasonable adjustments to the transaction value of similar merchandise under 19 U.S.C. § 1401a(c).
The protest should be denied. In accordance with the Protest/Petition Processing Handbook (CIS HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with this decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision Regulations and Rulings of the Office of International Trade will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web 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