RR:IT:VA 546161 KCC
Port Director
U.S. Customs Service
P.O. Box 3130
Juarez-Lincoln Bridge
Laredo, Texas 78044-3130
RE: Application for Further Review of Protest 2304-95-100108;
shelter operation; assembly operation; 19 CFR
152.103(a)(3)); HRL 544764; insufficient information;
transaction value of similar merchandise; 402(c) and
(h)(4); 19 CFR 152.103(i); commercial level; 19 CFR
152.108(g); arbitrary and fictitious value
Dear Port Director:
This is in regard to the Application for Further Review of
Protest 2304-95-100108 concerning whether window regulator cable
assemblies imported by Capro Incorporated are properly appraised
under transaction value of similar merchandise pursuant to
402(c) of the Tariff Act of 1930, as amended by the Trade
Agreements Act of 1979 (TAA); 19 U.S.C. 1401a(c)).
FACTS:
Capro Incorporated ("Capro"), the importer, had a Shelter
Contract from 1992 through 1994 with La Ventaja, Inc.("LVI"), the
shelter, to produce window regulator cable assemblies. Capro and
LVI are not related to one another. The entries under protest
concern those window regulator cable assemblies produced pursuant
to the Shelter Contract. The Shelter Contract called for LVI to
provide the building space, utilities, personnel, invoicing,
transportation, and miscellaneous costs related to production of
the window regulator cable assemblies. Capro was to provide the
component materials and machinery, along with two employees
domiciled in and paid out of the U.S. who were to oversee quality
control and general operations. Certain costs, such as square
footage rental, profit, and administrative costs were stable,
"set costs." Other costs ("pass-thru costs"), such as utilities,
worker overtime, and unexpected administrative expenses, varied
from month to month and were billed to Capro and paid by Capro on
a month by month basis as additions to the set costs. The
Shelter Contract, 5 Payment Terms, sets forth how LVI bills
Capro for its services and how Capro pays for LVI's services.
Basically, LVI bills Capro weekly for its labor and shelter
service which Capro must pay within thirty (30) days.
Additionally, LVI bills Capro for "pass-thru" costs for purchases
etc., made on behalf of Capro, within approximately forty-five
(45) days of the actual expenditure.
The merchandise was appraised under transaction value of
similar merchandise pursuant to 402(c) of the TAA. You chose a
previously accepted transaction value from an LVI to OHI Atwood
Automotive Corporation ("OHI") entry for merchandise exported at
or about the same time as the subject merchandise was exported to
Capro as the transaction value of similar merchandise.
Additionally, you state that the similar merchandise is of the
same commercial level. OHI is a Kentucky based parts supplier of
Japanese owned automobile plants in the U.S. According to
Capro's and OHI's broker, OHI is an unrelated Capro customer of
goods similar to the subject merchandise. Additionally, you
state that if there are OHI part numbers that more closely
approximate the value of the protested merchandise, Capro has not
supplied you with that information.
You state that transaction value pursuant to 402(b) of the
TAA is precluded because there was no sale for export of the
window regulator cable assemblies to Capro. You state it appears
that LVI never takes title to the window regulator cable
assemblies and that LVI only sells a fixed amount of direct
labor, administrative support and plant floor space, not window
regulator cable assemblies, to Capro. Additionally, you state
that the Shelter Contract did not contain a complete costing
formula in support of the LVI's proforma invoices to Capro. It
is unclear from the formula how the "pass-thru costs" are
incorporated into the invoice price. Citing Headquarters Ruling
Letter (HRL) 545622 dated April 28, 1994, you state that the
price actually paid or payable is not ascertainable under the
Shelter Contract formula. Thus, transaction value is precluded.
Capro contends that transaction value is the proper method
of appraisement. In the beginning, Capro states it used
estimated costs for LVI costs in determining the price actually
paid or payable for the imported merchandise. However, Capro
states that, for the entries subject to this protest, it used
historical data for LVI costs. Capro contends that its declared
invoice value is the total payment for the imported merchandise;
the invoice value contains all the elements needed for
transaction value, including profit realized by LVI. Citing HRL
542106 dated May 15, 1980 (TAA #2), and HRL 544764 dated January
6, 1994, Capro states that transaction value is acceptable for
assembly operations. Additionally, Capro cites HRL 542315 dated
May 13, 1981 (TAA #25), for the principle that transaction value
may exist even if there are price adjustments after importation.
Capro states that Customs appraisement of the imported
merchandise under transaction value of similar merchandise is
arbitrary and fictitious and, therefore, expressly prohibited
from use by 152.108(g), Customs Regulations (19 CFR
152.108(g)). Capro states that the appraised value under
transaction value of similar merchandise was derived by taking a
single unit value out of seven from a single invoice from OHI and
applying it to each of Capro's models on all seven entries under
protest. Capro states that OHI is a customer of Capro and their
invoice value reflects a sale in the U.S. by Capro to OHI. Capro
contends that the difference in value between Capro's invoices
and OHI's invoice is due to profit and administrative expenses
realized by Capro in the U.S. Moreover, Capro states that the
use of a single value to appraise a broad range of models, each
with different components and different production costs, is
unacceptable. Capro contends that transaction value of similar
merchandise is unacceptable. Thus, Customs should proceed to
computed or deductive value at their choosing.
ISSUE:
Whether transaction value of similar merchandise was the
proper basis of appraisement for the imported merchandise.
LAW AND ANALYSIS:
Merchandise imported into the United States is appraised in
accordance with 402 of the Tariff Act of 1930, as amended by the
Trade Agreements Act of 1979 (TAA), codified at 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 certain
statutorily enumerated additions. 19 U.S.C. 1401a(b)(1).
You state that transaction value pursuant to 402(b) of the
TAA is precluded because there was no sale for export of the
window regulator cable assemblies to Capro. You state it appears
that LVI never takes title to the window regulator cable
assemblies and that LVI only sells a fixed amount of direct
labor, administrative support and plant floor space, not window
regulator cable assemblies, to Capro. Although LVI does not
actually sell the window regulator cable assemblies to Capro,
transaction value is not precluded in this situation.
152.103(a)(3), Customs Regulations (19 CFR 152.103(a)(3)),
states that:
The price actually paid or payable may represent an
amount for the assembly of imported merchandise in
which the seller has no interest other than as the
assembler. The price actually paid or payable in that
case will be calculated by the addition of the value of
the components and required adjustments to form the
basis for the transaction value.
In HRL 544764, we found that the transaction between the
importer and the shelter represented a sale for exportation to
the United States as those words are used in 402(b) of the TAA,
and therefore, was the basis for transaction value. Likewise,
for this shelter operation, the transaction between Capro and LVI
represents a sale for exportation to the U.S. and may be the
basis for transaction value provided the price actually paid or
payable can be determined.
Based on the evidence submitted, insufficient information is
available to ascertain that the invoice price includes the total
payment for the imported merchandise. 402(b) of the TAA states
that "[i]f sufficient information is not available, for any
reason, with respect to any amount referred to in the proceeding
sentence, the transaction value of the imported merchandise
concerned shall be treated, for purposes of this section, as one
that cannot be determined." In this situation, insufficient
information is available to determine the price actually paid or
payable. Therefore, the imported merchandise cannot be appraised
pursuant to transaction value under 402(b) of the TAA.
When imported merchandise cannot be appraised on the basis
of transaction value, it is appraised in accordance with the
remaining methods of valuation, applied in sequential order.
402(a) of the TAA and 19 U.S.C. 1401a(a)(1). The alternative
bases of appraisement, in order of precedence, are: the
transaction value of identical or similar merchandise (402(c) of
the TAA and 19 U.S.C. 1401a(c)); deductive value (402(d) of the
TAA and 19 U.S.C. 1401a(d)); computed value (402(e) of the TAA
and 19 U.S.C. 1401a(e)); and the "fallback" method (402(f) of
the TAA and 19 U.S.C. 1401a(f)).
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.
402(c)(2) of the TAA and 19 U.S.C. 1401a(c). If no such sale
is found, sales of identical merchandise or similar merchandise
at either a different commercial level or in different
quantities, or both, shall be used, but adjusted to take account
of any such difference. If two or more transaction values for
identical merchandise are determined, such imported merchandise
shall be appraised on the basis of the lower or lowest of such
values. Id.
You appraised the imported window regulator cable assemblies
under transaction value of similar merchandise pursuant to
402(c) of the TAA. You chose a previously accepted transaction
value from an LVI to OHI Atwood Automotive Corporation ("OHI")
exported at or about the same time as the subject merchandise was
exported to Capro as the transaction value of similar
merchandise. Additionally, you state that the similar
merchandise is of the same commercial level. OHI is a Kentucky
based parts supplier of Japanese owned automobile plants in the
U.S. According to Capro's and OHI's broker, OHI is an unrelated
Capro customer of goods similar to the subject merchandise.
Capro contends that the sale to OHI reflects a sale in the U.S.
by Capro to OHI. Capro states that the difference in value
between Capro's invoices and OHI's is profit and administrative
expenses realized in the U.S. Thus, Capro contends that OHI's
invoices are unacceptable for transaction value of similar goods.
Capro has not provided any evidence that OHI is its
customer, such as any correspondence, purchase orders or proof of
payment. The only information available is the invoice and
supporting documentation from LVI showing sale and shipment to
OHI dated November 18, 1993, and Customs entry documents. A
reference to Capro is not found on any of the available
documents. Based on the presented evidence, it does not appear
that the sale between LVI and OHI is at a different commercial
level than the sales between LVI and Capro.
We do not find that the ascertained appraised value of the
imported window regulator cable assemblies to be an arbitrary or
fictitious value. The transaction value of similar merchandise
was chosen from a previously accepted transaction value, an
invoice covering window regulator cable assembles manufactured by
LVI for OHI, exported on or about the same time as Capro's
imported merchandise. Additionally, there appears to be no
dispute that the products are similar as defined by 402(h)(4) of
the TAA, which provides that:
(A) merchandise that-
(i) was produced in the same country and by the
same person as the merchandise being appraised,
(ii) is like the merchandise being appraised in
characteristics and components material, and
(iii) is commercially interchangeable with the
merchandise being appraised; or
(B) if merchandise meeting the requirements under
subparagraph (A) cannot be found (or for purposes of
applying subsection (b)(2)(B)(i), regardless of whether
merchandise meeting such requirements can be found),
merchandise that-
(i) was produced in the same country as, but not
produced by the same person as, the merchandise
being appraised, and
(ii) meets the requirement set forth in
subparagraph (A) (ii) and (iii).
Such term does not include merchandise that
incorporates or reflects any engineering, development,
artwork, design work, or plan or sketch that-
(I) was supplied free or at reduced cost by the
buyer of the merchandise for use in connection
with the production or the sale for export to the
United States of the merchandise; and
(II) is not an assist because undertaken within
the United States.
See also, 152.103(i), Customs Regulations (19 CFR 152.103(i)).
Although we note that Capro states that the similar merchandise
is produced with different components and has different
production costs, no evidence was presented that the similar
merchandise is not "like the merchandise being appraised in
characteristics and components material." Additionally, pursuant
to a letter from Capro to Customs dated June 5, 1995, and Customs
response dated June 9, 1995, Capro knew the method used for the
transaction value of similar merchandise, including the OHI entry
number and OHI invoice used by Customs. However, Capro has not
provided any evidence in support of its contentions, nor have
they provided Customs with OHI part numbers that more closely
approximate the value of the protested merchandise. Thus, it
appears that OHI's imported merchandise meets the definition of
similar merchandise in 402(h)(4) of the TAA.
HOLDING:
The imported window regulator cable assemblies were properly
appraised under transaction value of similar merchandise pursuant
to 402(c) of the TAA. You are directed to DENY this protest.
In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065 dated August 4, 1993, Subject: Revised Protest
Directive, this decision, together with the Customs Form 19,
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 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, Freedom of Information Act and other public
access channels.
Sincerely,
Acting Director
International Trade Compliance
Division