RR:IT:VA 546871 RC
Robert L. Eisen, Esq.
Paula Smith, Esq.
Coudert Brothers
Attorneys at Law
1114 Avenue of the Americas
New York, New York 10036-7703
RE: Appraisement of merchandise imported pursuant to a three tiered sales transaction; Nissho Iwai American v. United States; quota charges; related parties
Dear Mr. Eisen and Ms. Smith:
This is in response to your letter dated September 16, 1997, on behalf of Speed Sourcing, Inc., requesting a prospective ruling concerning the proper basis of appraisement and appraised value of wearing apparel to be imported into the U.S. pursuant to a three-tiered import transaction. You made additional submissions on October 27, 1998, January 8 and 19, 1999. We have granted your request for confidentiality. We regret the delay in replying.
FACTS:
The “Importer,” XXXXXXX a U.S. corporation, imports wearing apparel into the U.S. pursuant to a three-tiered import transaction and proposes appraising the merchandise based on the sale price between its related middleman and an unrelated foreign Manufacturer in Asia. The “Middleman,” YYYYYYY, a Hong Kong company, is related to the Importer by common ownership. The Importer purchases from the Middleman merchandise that is ordered by the Importer’s “U.S. Customers,” mainly, large retailers.
The U.S. Customer submits its purchase orders directly to the Importer, who in turn forwards them to the Middleman. In its role as a buyer and seller of wearing apparel, the Middleman locates unrelated factories in Asia to manufacture its merchandise, negotiates the best possible prices with the Manufacturer, ensures quality, coordinates shipments, and assists the Importer in marketing the apparel in the United States. It engages in these activities only after receiving the U.S. Customer’s purchase orders forwarded by the Importer. The goods are shipped to the Importer as “consignee,” however delivered from the Manufacturer(s) directly to the U.S. Customer in the U.S. The Importer claims that the Middleman and the Importer operate at arms’ length, as independent profit centers. The Middleman’s role, as middleman, consists of locating potential Manufacturers and negotiating the terms of sale independently from the Importer. The Middleman ascertains which foreign Manufacturers are capable of producing the merchandise to be imported, negotiates prices and inspects samples of merchandise to ensure that they conform to the requirements specified in the U.S. Customer’s purchase order.
The Middleman’s purchase order to the unrelated Manufacturer refers to the U.S. Customer’s purchase order number; it describes the merchandise to be manufactured, specifies requisite U.S. labeling and care tags, states that the merchandise is to be shipped directly to the
U.S., and indicates that the Importer is the “consignee.” Furthermore, it bears the freight term
“F.O.B. Hong Kong,” meaning that the Middleman takes title to and assumes the risk of loss for the goods at the foreign port of lading (Hong Kong). The Manufacturer is aware that the goods ordered are destined for the U.S., by virtue of the fact that the Middleman’s purchase orders specify direct shipment to the U.S. The Manufacturer secures an allocation of quota as well as the visaed invoice (export license) in order to comply with U.S. textile quota restrictions. The Manufacturer prepares the commercial invoice to the Middleman, and the Middleman pays the Manufacturer for the merchandise. The Manufacturer also secures visaed and commercial invoices which are forwarded directly to the Importer for Customs clearance purposes and ships the merchandise directly to the U.S.
After the Middleman receives the Manufacturer’s invoice, it issues its own invoice to the Importer, listing the type of merchandise sold to the Importer, the quantity, and the price. The Middleman’s invoice specifies the freight term “F.O.B. U.S. port” and indicates that the merchandise will be shipped directly to the U.S. port by the Manufacturer. The Middleman’s prices to the Importer are determined through periodic negotiations. The Middleman’s “F.O.B. U.S. port” resale price consists of the following components: (1) the Middleman’s cost of acquisition, i.e., the Manufacturer price (including quota costs), (2) international freight and insurance charges incurred by the Middleman in transporting the merchandise from the port of exportation to the U.S. port, and (3) its markup. The shipping terms show that the Middleman takes title to the merchandise and assumes the risk of loss from the time the merchandise is loaded onto the vessel overseas until the time it is un laden in the U.S.
The Importer contends that the relationship of the Manufacturer and the Middleman is that of buyer/seller based on the following factors:
(1) The Middleman provides detailed instructions to the Manufacturer(s) as to the type and material of the merchandise to be produced, the quantity, the price, production schedules, and shipment routing.
(2) The Middleman is free to sell the finished merchandise at any price it can command, and makes this decision independently of both the Manufacturer(s) and the Importer. The Middleman engages in its business activities at its own risk and for its own account, and operates as an independent profit center.
(3) The Middleman does not consult with, or require the permission of, the Manufacturer(s) to sell the finished wearing apparel to the Importer or any other customer that it chooses. Because a given Manufacturer sells to the Middleman rather than to the Importer, its sole concern is with fulfilling the terms of its sale to the Middleman. The Manufacturer has no interest in, liability or responsibility for, the Middleman’s choice of the Importer, as a customer.
(4) The Middleman may order and record merchandise into its inventory. Although the Middleman will instruct the manufacturer(s) to ship the finished wearing apparel directly to the Importer, the Middleman possesses the power, authority, and facilities to provide the manufacturer(s) of the merchandise alternative routing instructions and to have the goods physically inventoried overseas prior to its exportation to the U.S.
The imports are subject to U.S. textile quota restrictions.
Concerning payment procedures, the U.S. Customer will send payment directly to the Importer’s Hong Kong bank account in an amount equal to the invoice it will have received from the Importer. The Importer will pay the Middleman’s invoice from its Hong Kong bank account and remit payment to the Middleman’s Hong Kong bank account. The Middleman will remit, to the Manufacturer, an amount equal to the Manufacturer’s invoice price (inclusive of any quota costs).
At the time of entry, the Importer will provide Customs with the invoice from the Manufacturer(s) to the Middleman (i.e., the “entered value”) as well as the invoice from the Middleman to the Importer of record (i.e., the total amount paid by the Importer).
Sets of the following pro forma transaction documents concerning three sample importations were submitted for our review. While the documents are different in the first two importations, they, in effect, represent one type of scenario. The third set of documents represents a second type of scenario. The first set of documents is listed below:
A purchase order (No. 90712 5) from the U.S. Customer to the Importer, for 4,962 pieces of ladies’ sweaters. This purchase order describes the goods to be imported with specificity in terms of style, quantity, and labeling instructions. The shipping terms are “F.O.B. Consolidator, Kowloon, Hong Kong.”
The Importer forwards the U.S. Customer’s purchase order (No. 90712 5) to the Middleman.
The Middleman issues its own purchase order (No. 9800673) to the Manufacturer, for 4,962 pieces of ladies’ sweaters. The Middleman’s purchase order specifies the Importer by name as the “consignee,” references the U.S. Customer’s purchase order number (No. 90712 5), bears the shipping terms F.O.B. Hong Kong, and requires that the brand label be placed on the labels. In addition to its purchase order, the Middleman provides a specification sheet, indicating the name of the U.S. Customer.
(The goods are manufactured and shipped directly to the U.S. Customer.)
The Manufacturer issues an invoice (No. LD/98-1499) to the Middleman, for 4,962 pieces of ladies’ sweaters. The invoice indicates that the terms of sale are F.O.B. Hong Kong with direct shipment to the U.S. Customer. The invoice references the U.S. Customer’s purchase order (No. 90712 5).
The Middleman issues an invoice to (No. LS98-655) to the Importer, for 4,962 pieces of ladies’ sweaters. The shipping terms are F.O.B. Columbus and specify direct shipment to the U.S. Customer. The invoice also references the U.S. Customer’s purchase order (No. 90712 5).
The Importer issues an invoice (No. I98-773) to the U.S. Customer, for 4,962 pieces of ladies’ sweaters.
The second set of documents is listed below:
A purchase order (No. 875564) from the U.S. Customer to the Importer, for 5,800 pieces of ladies’ sweaters. This purchase order describes the goods to be imported with specificity in terms of style, quantity, and labeling instructions. The shipping terms are “F.O.B. Consolidator, Kowloon, Hong Kong.”
The Importer forwards the U.S. Customer’s purchase order (No. 875564) to the Middleman.
The Middleman issues its own purchase order (No. 9800673) to the Manufacturer, for 5,800 pieces of ladies’ sweaters. The Middleman’s purchase order specifies the Importer by name as the “consignee,” references the U.S. Customer’s purchase order number (No. 875564), bears the shipping terms F.O.B. Hong Kong, and requires that the brand label be placed on the labels. In addition to its purchase order, the Middleman provides a specification sheet, indicating the name of the U.S. Customer.
(The goods are manufactured and shipped directly to the U.S. Customer.)
The Manufacturer issues an invoice (No. LD/98-1498) to the Middleman, for 5,800 pieces of ladies’ sweaters. The invoices indicate that the terms of sale are F.O.B. Hong Kong with direct shipment to the U.S. Customer. The invoice references the U.S. Customer’s purchase order (No. 875564).
The Middleman issues an invoice to (No. LS98-654) to the Importer, for 5,800 pieces of ladies’ sweaters. The shipping terms are F.O.B. Columbus and specify direct shipment to the U.S. Customer. The invoice also references the U.S. Customer’s purchase order (No. 875564).
The Importer issues an invoice (No. I98-772) to the U.S. Customer, for 5,800 pieces of ladies’ sweaters.
The third set of documents, which represent the second scenario, are listed below:
A purchase order (No. 410565) from the U.S. Customer to the Importer, for 41,760 pieces of ladies’ woven jackets. This purchase order describes the goods to be imported with specificity in terms of style, quantity, and labeling instructions. The shipping terms are “F.O.B. Consolidator, Kowloon, Hong Kong.”
The Importer forwards the U.S. Customer’s purchase order (No. 410565) to the Middleman.
The Middleman issues its own purchase orders (No.’s 9800088 and 9800608) to Manufacturer “A”, for 32,280 pieces of ladies’ woven jackets and its own purchase order (No. 98000603) to Manufacturer “B”, for 9,306 pieces of ladies’ woven jackets. The Middleman’s purchase order specifies the Importer, by name, as the “consignee,” references the U.S. Customer’s purchase order number (No. 410565), bears the shipping terms F.O.B. Hong Kong, and requires that the brand label be placed on the labels. In addition to its purchase order, the Middleman provides a specification sheet, indicating the name of the U.S. Customer.
(The goods are manufactured and shipped directly to the U.S. Customer.)
Manufacturer “A” issues invoices (No.’s 1063/98, 1067/98, and 1071/98) to the Middleman, for a total of 32,256 pieces of ladies’ woven jackets. The invoices indicate that the terms of sale are F.O.B. Hong Kong with direct shipment to the U.S. Customer. The invoice references the U.S. Customer’s purchase order (No. 410565). Manufacturer “B” issues an invoice (No. 1074/98) to the Middleman, for a total of 9,276 pieces of ladies’ woven jackets. The invoices indicate that the terms of sale are F.O.B. Hong Kong with direct shipment to the U.S. Customer. The invoice references the U.S. Customer’s purchase order (No. 410565).
The Middleman issues invoices (No.’s LS98-479, LS98-514, LS98-588, and LS98-589) to the Importer, for 41,532 pieces of ladies’ woven jackets. The shipping terms are F.O.B. Los Angeles and specify direct shipment to the U.S. Customer. The invoice also references the U.S. Customer’s purchase order (No. 410565).
The Importer issues an invoice (No. I98-772) to the U.S. Customer, for 41,760 pieces of ladies’ woven jackets.
You indicated that the reason for the relatively small shortfall in quantity of articles actually shipped vis-a-vis the amount actually ordered in the second scenario might be because of waste in production.
ISSUE:
Whether the imported merchandise should be appraised based on the sale between the Manufacturers and the alleged middleman or on the sale between the importer and the middleman.
LAW AND ANALYSIS:
As you know 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 for the United
States,” plus certain enumerated additions. For purposes of determining transaction value in appraising imported merchandise, a sale for exportation to the United States must take place at some unspecified time prior to the exportation of the goods.
In Nissho Iwai American Corp. v. United States, 982 F.2d 505 (Fed. Cir. 1992), the Court reaffirmed the principle of E.C. McAfee Co. v. United States, 842 F.2d 314 (Fed. Cir. 1988), that a manufacturer’s price, for establishing transaction value, is valid so long as the transaction between the manufacturer and the middleman falls within the statutory provision for valuation. In reaffirming the McAfee standard the court stated that in a three tiered distribution system:
The manufacturer’s price constitutes a viable transaction value when the goods are clearly destined for export to the United States and when the manufacturer and the middleman deal with each other at arm’s length, in the absence of any non market influence that affect the legitimacy of the sale price . . . [T]hat determination can be made on a case by case basis.
Id. at 509. See also, Synergy Sport International, Ltd. v. United States, 17 C.I.T.___, Slip Op. 93 5 (CT. Int’l Trade January 12, 1993).
As a general matter in situations of this type, Customs presumes that the price paid by the importer is the basis of transaction value. However, in order to rebut this presumption, the importer must in accordance with the court’s standard in Nissho, provide evidence that establishes that at the time the middleman purchased, or contracted to purchase, the imported merchandise the goods were “clearly destined for export to the United States” and that the manufacturer and middleman dealt with each other at “arm’s length.”
A recent notice, entitled “Determining Transaction Value in Multi Tiered Transactions,” T.D. 96 87, 30/31 Cust. Bull 52/1, January 2, 1997 clarifies some of the issues that arise in multi tiered transactions in determining which is the sale for exportation to the U.S. for the purpose of determining transaction value. Although there is a presumption that transaction value is based on the price paid by the importer, the notice sets forth the documentation and information needed to support a ruling request that transaction value should be based on a sale involving a middleman and the manufacturer or other seller, rather than on the sale in which the importer is a party. It states:
In order for an importer to rebut the presumption discussed above, certain information and documentation must be provided. Specifically, the requestor must describe, in detail, the roles of all the various parties and furnish relevant documents pertaining to each transaction that was involved in the exportation of the merchandise to the United States. If there is more than one possible sale for exportation, information and documentation about each of them should be provided. Relevant documents include, purchase orders, invoices, proof of payment, contracts and any additional documents (e.g., correspondence) which demonstrate how the parties dealt with one another and which support the claim that the merchandise was clearly destined to the United States. If any of these documents do not exist, or exist but are not available, the ruing request should so provide. What we are looking for is a complete paper trail of the imported merchandise showing the structure of the entire transaction. If the request covers many importations, it is acceptable to submit documents pertaining to some of the importations provided complete sets of documents are furnished, the underlying circumstances are the same, and the documents are representative of the documents used in all the transactions. Any differences should be explained.
In HRL 546658, dated January 30, 1998, Customs stated that it must be evident throughout the transaction that the merchandise is clearly destined for the U.S. That is, it is not sufficient to establish, after the merchandise was ordered and manufactured, at the time of shipment, near the end of the transaction, that the merchandise will be going to the U.S. There, we found that evidence that the boxes of the imported articles were addressed to the U.S. when delivered to the carrier was insufficient by itself to establish that the articles were clearly destined to the U.S.
Here, you contend that based on the Nissho and Synergy decisions, the transaction value for the imported merchandise should be based on the sales between the related Middleman and unrelated Manufacturer(s). In determining if this claim is valid, the first question to be addressed is whether there are bona fide sales between the Middleman and the Manufacturer(s).
For Customs purposes, a “sale” generally is defined as a transfer of ownership in property from one party to another, for a consideration. J.L. Wood v. United States, 62 CCPA 25, 33; C.A.D. 1139 (1974). Although J.L. Wood was decided under the prior appraisement statute, Customs recognizes this definition under the TAA. Several factors may indicate whether a bona fide sale exists between potential seller and buyer. In determining whether property or ownership has been transferred, Customs considers whether the alleged buyer has assumed the risk of loss and acquired title to the imported merchandise. In addition, Customs may examine whether the alleged buyer paid for the goods, whether such payments are linked to specific importations of merchandise, and whether, in general, the roles of the parties and circumstances of the transaction indicate that the parties are functioning as buyer and seller. See, HRL 545542, dated December 9, 1994; HRL 545705, dated January 27, 1995; HRL 545550, dated September 13, 1995; HRL 545980, dated December 12, 1995; HRL 546128, dated July 26, 1996; and HRL 546225, dated April 14, 1997.
In HRL 545474 (August 25, 1995), Customs found that the middleman took title and assumed the risk of loss as soon as the merchandise was manufactured. The terms of sale between the middleman and the importer of record (its subsidiary) were “C.I.F. foreign port.” Therefore, the middleman retained title and assumed the risk of loss from the time the goods were manufactured to the time the goods passed over the ship’s rail at the foreign port. Moreover, Customs was satisfied that the middleman was free to give instructions to the manufacturer, to select its own customers and to determine its resale price. In addition, the middleman was able to record the merchandise in its inventory, if it so desired. Upon these facts, Customs ruled that a bona fide sale took place between the manufacturer and the middleman.
The submitted documents show that the terms of sale between the Middleman and the Manufacturer(s) will be “F.O.B. Hong Kong,” as specified in the Middleman purchase order and the commercial (and we assume for purposes of this ruling, the visaed) invoices from the Manufacturer(s). Customs has recognized that under the INCOTERMS, as established by the International Chamber of Commerce, the “F.O.B. foreign port” term of sale between the Manufacturer and the Middleman requires that title and risk of loss will pass from the manufacturer to the middleman when the merchandise passes the ship’s rail at the foreign port. See, e.g., HRL 546553 (March 31, 1997). Here, the terms of sale between the Middleman and the importer will be “FOB U.S. port.” Customs has recognized that under the INCOTERMS, the “F.O.B. U.S. port” term of sale between the middleman and the importer requires that the middleman will retain title and risk of loss until the merchandise is unloaded from the cargo vessel in the U.S. port, at which time the importer will take title and assume the risk of loss.
Additionally, the Middleman provides the Manufacturer(s) with detailed instructions as to the type and material of the merchandise to be produced, the quantity, the price, production schedules, and shipment routing. The Middleman is free to sell the finished merchandise at any price it can command, and makes this decision independently of both the Manufacturer(s) and the Importer. The Middleman engages independently in its activities, that is, at its own risk and for its own account. It does not consult with, or require the permission of, the Manufacturer(s) to sell the finished wearing apparel to the Importer or any other customer it chooses. Because the Manufacturers sell to the Middleman, rather than to the Importer, their sole concern is with fulfilling the terms of their sale to the Middleman. The Manufacturers have no interest in, liability or responsibility for, the Middleman’s choice of the Importer as its customer. Although the Middleman will instruct the Manufacturer(s) to ship the finished wearing apparel directly to the Importer, the Middleman possesses the power, authority, and facilities to provide the Manufacturer(s) of the merchandise alternative routing instructions and to have the goods physically inventoried overseas prior to their exportation to the U.S. Finally, in addition to the criteria discussed above, Customs also considers whether the buyer directly pays for the merchandise and whether such payments may be linked to specific importations. See, e.g., HRL 546143, issued February 23, 1996; HRL 545985, issued December 19, 1996. In this case, the Middleman will remit payment directly to the Manufacturer(s) for the amount of the Manufacturer’s invoice. Thus, the Middleman will pay for the merchandise in a fashion that can be linked to specific sales for exportation. Consequently, the transactions between the Middleman and the foreign Manufacturers appear to be bona fide sales.
Based upon specific instructions contained in the Middleman’s purchase orders, a given Manufacturer will ship the wearing apparel directly to the U.S. The purchase order from the Middleman to the Manufacturer(s) lists the Importer as the “consignee,” and in this manner, the Manufacturer necessarily becomes immediately aware of the U.S. destination of the merchandise. The invoices issued by the Manufacturer(s) show that the merchandise will be shipped to a U.S. port. Furthermore, those invoices list the Importer as the “consignee” and contain a reference to the U.S. Customer’s original purchase order number. Consequently, at all stages of the transaction, the merchandise is destined for the U.S.
The Middleman makes its purchases from the Manufacturer(s) pursuant to a prior order by a U.S. Customer to the Importer. The U.S. Customer’s original purchase order number is used to refer to the merchandise throughout the transaction. The U.S. Customer’s original purchase order number appears on the purchase order from the Middleman to the Manufacturer(s). The purchase order from the Middleman to the Manufacturer(s) specifies the brand labels and care instructions, in English, which must be affixed to the merchandise.
Customs has also considered whether the merchandise bears special markings or labels and whether special Customs invoices are prepared for shipment to the U.S. See, HRL 545474, issued August 25, 1995, (footwear in U.S. sizes with U.S. labels and special Customs invoice for footwear prepared by overseas manufacturer). In particular, visaed invoices alone constitute solid evidence that merchandise is destined for exportation to the U.S. because those invoices must be prepared for the sole purpose of complying with the administration of U.S. textile quota restrictions. See, HRL 545360 (May 31, 1994). These brand and labeling instructions indicate that the merchandise is sold for exportation and clearly destined for export to the U.S. See, Synergy at 20; HRL 545474.
The manufacturer’s price is a statutorily viable transaction value where “the manufacturer and the middleman deal with each other at arm’s length, in the absence of any non-market influences that affect the legitimacy of the sales price.” Nissho, 982 F.2d at 509. Customs presumes that when the manufacturer and the middleman are not related, they negotiate with each other at arm’s length. See, HRL 545985; HRL 545474. Here, the Middleman will not be related to any Manufacturer(s).
With respect to the transactions between the Middleman and the Manufacturer(s), the terms of sale will be FOB Hong Kong. However, between the Importer and the Middleman, the terms of sale are FOB U.S. port. Therefore, although the merchandise is shipped directly from the Manufacturer to the U.S. Customers, as opposed to being shipped from the seller to an intermediary and then to the ultimate consignee, the terms of sale indicate that there is passage of title and a transfer of risk of loss from the Manufacturer to the Middleman, until the merchandise arrives in the U.S. The shipping terms indicate that a bona fide sale may exist between the Manufacturer(s) and the Middleman. Notwithstanding, we will consider other pertinent evidence or documentation to determine if there is in fact a bona fide sale.
The purchase orders of the Middleman show the quantity, sizes, styles, and prices of the merchandise ordered. In turn, the Manufacturer(s) will issue invoices to the Middleman for the merchandise, that will correspond with the purchase orders of the Middleman. In order to base transaction value on the sale between the Manufacturer(s) and the Middleman, there must be a complete paper trail and sufficient information regarding the statutory additions. Manufacturer invoices are generally required to be presented at the time of importation. Furthermore, we stress that final determinations will be based upon the documentation supporting the importer’s claims. These documents should be consistent with a traditional buyer seller relationship.
According to your submission, the Middleman will pay Manufacturers in exchange for the goods and the payments will be linked to specific merchandise that the Middleman orders and the Manufacturer(s) actually produce. Accordingly, we will assume that for purposes of this ruling that there will be sufficient evidence to establish that bona fide sales occur between the Middleman and the Manufacturer(s).
Once established that the sales were between the Middleman and the Manufacturer(s), whether the merchandise will be appraised based on the Manufacturer’s price depends upon whether the requirements outlined in Nissho are satisfied. As explained previously, the court in Nissho set forth a two-part test that must be met for a sale between a middleman and its supplier to be the basis of a viable transaction value: 1) the goods must clearly be destined to the United States at time they are purchased, and 2) the sale must be at arm’s length. Turning to the first part of the two-part test, the evidence must establish that the merchandise was clearly destined to the United States at the time it was sold to the middleman.
You indicate that the importer will order the imported merchandise from the Middleman only when it first gets an order from a U.S. retailer. After getting the order from the importer, the Middleman will order merchandise from the factories to meet requirements of the original order from the U.S. retailer. In addition, you indicate that the Manufacturer will place labels in the garment which identify or represent trademarks of the U.S. retailer. Moreover, the garments will require export licenses which show the United States as the country of destination. Based on
these factors, if the transaction documents and other evidence support your claims, we would be satisfied that merchandise is clearly destined to the United States at the time it is sold to the Middleman.
Regarding the second part of the test, because the Manufacturers or vendors are not related to the Middleman, it will be presumed that they negotiate with each other at arm’s length. The fact that the Middleman, and the importer are related is not relevant as long as the Middleman and the Manufacturers are not related to each other. See, HRL 545368, dated July 6, 1995.
Therefore, assuming that the evidence supports your claims, the requirements of Nissho will be met, and the transaction value of the imported merchandise would be based on the Manufacturers’ prices that the Middleman pay the Manufacturer(s). Note that our decision is limited to the circumstances presented, where none of the parties are related to the Manufacturer(s). Also, be advised that because this is a prospective ruling and proof of payment documents were not submitted, we assume that, if requested, the importer will provide proof of payment from the Middleman to the Manufacturer(s) that matches, in every respect, the visaed invoice. See, HRL 546681, dated July 31, 1998.
You indicate that the Middleman will remit to the Manufacturer(s) an amount equal to its Manufacturer invoice price inclusive of any quota costs. In Generra Sportswear Co. v. United States, 8 CAFC 132, 905 F.2d 377 (1990), the court considered whether quota charges paid to the seller on behalf of the buyer were part of the price actually paid or payable for the imported goods. In reversing the decision of the lower court, the appellate court held that the term “total payment” is all inclusive and that “as long as the quota payment was made to the seller in exchange for merchandise sold for export to the United States, the payment properly may be included in transaction value, even if the payment represents something other than the per se value of the goods.” The court also explained that it did not intend that Customs engage in extensive fact finding to determine whether separate charges, all resulting in payments to the seller in connection with the purchase of imported merchandise, were for the merchandise or something else. Quota payments remitted to the seller, directly or indirectly, are part of the price actually paid or payable. E.g., HRL 542169, dated September 18, 1980 (TAA No. 6). Consequently, the quota payments are part of the price actually paid or payable.
HOLDING:
If there is sufficient documentation to establish that there are bona fide sales between the factories and the Middleman, based on your description of the transaction, the requirements of Nissho would be satisfied. Accordingly, the merchandise should be appraised based on price that the Middleman pays the Manufacturer(s). The quota charges that are remitted, directly or indirectly, to the seller are part of the price actually paid or payable. This ruling is limited to the two described scenarios.
Sincerely,
Thomas L. Lobred, Chief
Value Branch