RR:IT:VA 547059 MWM
Port Director
U.S. Customs Service
6747 Engle Road
Middleburg Heights. Ohio 44130
RE: Protest Number 4103-97-100087; Transaction Value
Dear Port Director:
This is pursuant to the application for further review of the above mentioned protest filed
by Grunfeld, Desiderio, Lebowitz, and Silverman, LLP, on behalf of their client, Lane Bryant,
Inc., (protestant) on March 6, 1997. We regret the delay in responding.
FACTS:
On July 3, 1997, protestant received a prospective ruling regarding sales for exportation
to the United States. See, HRL 546450. In that request, protestant wanted to know the proper
transaction value of imported ladies' wearing apparel from Korea. In that ruling we stated that
sufficient documentation must be available and presented to Customs to support the contention
that the merchandise is destined for exportation to the United States at the time it is sold by the
manufacturer to the middleman. Further, as long as the documentation supported the information
submitted in the ruling request, the merchandise would be considered destined for export to the
United States, "such that the sale between Kusang Corp (manufacturer) to Suy Co., (middleman)
may constitute the appropriate basis of appraisement." (Emphasis added).
In August of 1996, protestant imported ladies wearing apparel into the United States
under various entry numbers. The entered values reflected the price the importer paid to Suy Co.
Customs liquidated the merchandise as entered. Protestant filed the instant protest/AFR claiming
that the merchandise should have been liquidated in accordance with Nissho Iwai America Corp.,
v. United States, 982 F.2d 505 (Fed. Cir. 1992), and/or Synergy Sport International, Ltd. v.
United States, 17 CIT 18 (1993). However, no action was taken pending the outcome of the
prospective ruling requests submitted by protestant on similar importations.
On March 24, 1998, the protest/AFR was submitted to headquarters. Protestant, relying
on HRL 546450, claimed that the value should be based on the sale price from manufacturer to
middleman. For each entry, the documents submitted with the protest/AFR include a
commercial invoice from Suy Co., to Lane Bryant, a packing list, a dated and stamped visaed
invoiced issued to Suy Co., from the Korean government, an air waybill, and two Korean
documents with no English translation.
ISSUE:
Based on the evidence submitted, whether the transaction value is appropriately based on
the price actually paid or payable by the importer to Suy Co. (middleman) or that between Suy
Co., and Kusang Corp. (manufacturer).
LAW AND ANALYSIS:
The preferred method of appraisement is transaction value. Transaction Value is defined
in 402, Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA: 19 U.S.C.
1401a), as the price actually paid or payable for the merchandise when sold for exportation to
the United States, plus amounts for items specifically enumerated in 402(b)(1) of the TAA.
The term "price actually paid or payable" is defined in 402(b)(4)(A) 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 from the country of exportation to the place of importation in the
United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit
of the seller."
In order for imported merchandise to be appraised pursuant to transaction value, a bona
fide sale must exist between the parties. Customs reviews all the facts and circumstances present
to determine whether there is a bona fide sale for exportation. None of the submitted documents
establish that there was a sale between Kusang Corp., and Suy Co., Ltd. The submitted
documents indicate that the vendor and the shipper is Suy Co., Ltd. Similarly, the visa invoice
from the Korean government shows Suy Co, Ltd., as the exporter, Lane Bryant, Inc., as the
consignee, and Kusang as the manufacturer. Based on the transaction documents, it would
appear that Suy Co., Ltd., was the seller of the imported merchandise.
Section 484(a)(1)(B), Tariff Act of 1930, as amended (19 U.S.C. 1484(a)(1)(B)), requires
that importers file documentation with Customs, which among other things allows Customs to
assess properly the duties on the merchandise, [and] collect accurate statistics with respect to the
merchandise. See, T.D. 86-56. Accordingly, in appraising merchandise, Customs must rely on
the accuracy of the information contained on the documents, such as invoices and contracts that
the importer submits. Consequently, because there was no evidence of the first sale (between
Kusang Corp., and Suy Co., Ltd) presented, appraisement based on the sale between Suy Co.,
Ltd and Lane Bryant, Inc., was proper.
Counsel has raised the argument that the Federal Circuit's decision in Nissho Iwai
American Corp. v. United States, 982 F.2d 505 (Fed Cir. 1992) is applicable and appraisement
should be based on the sale between the middleman and the manufacturer. In Nissho Iwai
American Corp. v. United States, the Court reaffirmed the principal 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... That determination can only be made on a
case by case basis. "
Id. at 509. See also, Synergy Sport International, Ltd., v. United States, 17 CIT __, Slip Op. 95-5
(Ct. Intn'l Trade, January 12, 1993).
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 the middleman
dealt with each other at "arm's length."
As indicated above, the submitted documentation does not establish a sale for exportation
between Kusang Corp., and Suy Co. Therefore the Nissho decision is not relevant.
Accordingly, transaction value was properly based in the sale between Lane Bryant and Suy Co.
HOLDING:
Pursuant to the foregoing, the protest should be DENIED. The imported merchandise
was properly appraised pursuant to the transaction value on the basis of the price actually paid or
payable by the protestant to Suy Co.
In accordance with section 3A(11)(b), Customs Directive 099 3550-065, dated August 4,
1993, 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 this decision must be
accomplished prior to the mailing of this 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 to the public via the Diskette
Subscription Service, the Freedom of Information Acts and other public access channels.
Sincerely,
Acting Director
International Trade Compliance Division