VAL-2 OT:RR:CTF:VS H002823 RSD
Area Director
JFK International Airport,
Building 77
United States Customs and Border Protection
Jamaica, NY 11430
RE: Application for Further Review of Protest Number 4701-04-100888; Transaction Value; Nissho Iwai; Sale for Exportation, First Sale in a Multi-Tier Transaction; Shoes
Dear Area Director:
This is in reply to the application of further review of Protest Number 4701-04-100888 filed on the behalf of Robert Clergerie of America by Grunfeld, Desiderio, Lebowitz, Silverman & Kledstadt on October 22, 2004. The protest concerns the proper method of appraisement pursuant to 19 U.S.C. 1401a for certain imported shoes.
FACTS:
This case involves an entry of imported women’s shoes from France. On October 10, 2003, the merchandise was entered into United States by the Protestant, Robert Clergerie of America, who acted as selling agent for a French Company, Societe des Chaussures de Tain (SCT). We also note that counsel for the Protestant indicated in a letter dated May 11, 2007, that a U.S. selling agent Eliot Pliner (EP Company, New York, New York) took the purchase order for the merchandise and transmitted it to SCT. The merchandise was resold to a U.S. retailer named Shoes N’ More, which was located in Livingston, New Jersey. The shoes were manufactured in Portugal by a company named Joaquim Jose Heitor, LDA (Joaquim).
The record contains a purchase order confirmation dated September 24, 2003, generated by SCT which shows that the purchaser was Shoes N’ More and that the terms of sale was DDP. In addition, the record also contains production orders between SCT and Joaquim dated September 30, 2003 and October 8, 2003, which shows that the terms of sale for the transaction between these two parties was Ex factory. The record includes an invoice dated October 31, 2007, from the manufacturer, Joachim, to SCT. The invoice covers 316 pairs of shoes, including the 14 pairs of the shoes at issue in the style EFANO which were sold at a price of 35.35 Euros per pair. Counsel has also submitted cancelled checks and bank deposit slips as evidence of the payment from Shoes N’ More, the U.S. retailer, to the selling agent Robert Clergerie.
According to counsel, SCT received the finished merchandise from Joaquim in a sealed shipping carton. A detailed packing list showing the U.S. customer order number, style and size assortment and USA destination was contained inside the shipping carton. SCT kept the cartons intact and staged them for shipment to the final customer. According to counsel, the purpose of this activity was limited to freight consolidation so that complete purchase order assortments (potentially from different suppliers) could be organized and shipped to the final customer at the same time. The subject goods arrived at SCT’s facilities on Monday, November 3, 2003, and were reshipped to the United States on Thursday, November 6, 2003.
ISSUE:
Whether the transaction between Joaquim, the foreign manufacturer, and SCT, the middleman, may be used to determine the transaction value of merchandise described above?
LAW AND ANALYSIS:
The preferred method of appraising merchandise imported into the United States is the transaction value method as set forth in section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 ("TAA"), codified at 19 U.S.C. 1401a. 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 amounts for five enumerated statutory additions. 19 U.S.C. 1401a(b). 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 seller, and it must be a sale for exportation to the United States. We will assume for the purposes of this ruling that transaction value is the appropriate basis of appraisement.
In Nissho Iwai American Corp. v. United States, 982 F.2d 505 (Fed. Cir. 1992) and Synergy Sport International, Ltd. v. United States, 17 CIT 18 (1993), the Court of Appeals for the Federal Circuit and the Court of International Trade, respectively, reviewed the standard for determining transaction value when there is more than one sale which may be considered as being a sale for exportation to the United States. Both cases involved a foreign manufacturer, a middleman, and a United States purchaser. In each case, the court held that the price paid by the middleman/importer to the manufacturer 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 conducted at arm’s length, free from any non-market influences, and involving merchandise clearly destined for export to the United States at the time of the first sale.
In accordance with the Nissho Iwai and Synergy decisions, we presume that transaction value is based on the price paid by the importer. In further keeping with the courts’ holdings, we note that an importer may request appraisement based on the price paid by the middleman to the foreign manufacturer in situations where the middleman is not the importer. However, it will be the importer’s responsibility to show that the "first sale" price is acceptable under the standard set forth in Nissho Iwai and Synergy. That is, the importer must present sufficient evidence that the alleged sale was a bona fide "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.
In Treasury Decision ("T.D.") 96-87, 30 Cust. Bull. 52/1 (January 2, 1997), CBP set forth the documentation and information needed to rebut the presumption to support a determination 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 was a party. CBP advised that the importer must provide a description of the roles of the parties involved and must supply relevant documentation addressing each transaction that was involved in the exportation of the merchandise to the United States. The documents may include, but are not limited to purchase orders, invoices, proof of payment, contracts, and any additional documents (e.g. correspondence) that establishes how the parties deal with one another. The objective is to provide CBP with "a complete paper trail of the imported merchandise showing the structure of the entire transaction." If such information is unavailable, the information provided is insufficient. T.D. 96-87 further provides that the importer must also inform CBP of any statutory additions and their amounts. If the information is insufficient, the sale between the middleman and the manufacturer cannot form the basis of transaction value.
According to Nissho Iwai, in order for a transaction to be viable for transaction value purposes, it must be a sale negotiated at arm’s length, free from any non-market influences. There is a presumption that a transaction will meet this standard if the buyer and seller are unrelated. See T.D. 96-87, supra.
In this case, it is our position that the documentation submitted does not support the Protestant’s claim that the imported merchandise should be appraised based on a sale between the manufacturer, Joaquim, and the middleman, SCT. In order to establish that transaction value should be based on the first sale in a multi-tier transaction, it is the Protestant’s responsibility to explain the transactions in a clear manner and to present the documentation in an understandable and concise format, so that CBP can easily follow how the transactions worked. In this case, the Protestant did not explain the transactions and lay out the documentation in such a manner. In other words, the information presented is not a complete paper trail, which shows the structure and scope of the entire transaction.
We first note that no actual purchase orders from the American buyer, Shoes N’ More to the middleman, SCT were submitted. Instead, the Protestant submitted purchase order confirmations prepared by SCT’s selling agent. We observe that the purchase order confirmations from the U.S. retailer to SCT that were originally submitted with the protest are different than the second set of purchase order confirmations from these parties that counsel submitted in the supplemental submission. The first purchase order confirmation was from Espace SCT, while the purchase order confirmation contained in the supplemental submission contains the name of “Elliot Pliner”. Counsel claims that “Elliot Pliner” was the U.S. selling agent who took and transmitted the orders. We find it problematic that originally in the first batch of documents submitted with the protest, the role of this selling agent in the transaction was never fully explained.
Counsel has also submitted copies of checks and bank deposit slips as evidence of the proof of payment from the U.S. buyer to SCT. However, it is not clear whether these documents can be matched to the particular invoice for the relevant transaction. Thus, in our judgment the protestant has also failed to establish payment for the imported merchandise between the U.S. buyer and the middleman.
Protestant has also failed to present sufficient evidence regarding how the merchandise was shipped from the middleman to the buyer in the United States. The shipping documents do not support that the merchandise was clearly destined to the United States when it was sold to the middleman, SCT. Consequently, we conclude that the Protestant has not established that the merchandise was clearly destined to the United States at time the manufacturer sold it to the middleman. Overall, we find that key information regarding nature of the transactions is lacking. Accordingly, the documentation fails to satisfy the requirement in T.D. 96-87 that a party claiming valuation at a "first sale" price must present a complete paper trail of the transaction. Therefore, the protestant has failed to rebut the presumption that the price the importer paid, as shown on the invoices presented to CBP at the time of entry of the merchandise, should serve as the basis of transaction value.
Protestant in its May 11, 2007 submission also presented a royalties agreement between Robert Clergerie and SCT. However, the issue of royalties was not raised in the protest submitted and will not be addressed in this decision.
HOLDING:
Based on the information presented, the imported footwear may not be appraised under transaction value on the basis of the price paid by the middleman to the manufacturer. Appraisement shall instead be based on the price paid by middleman to the importer.
The protest should be DENIED. In accordance with the Protest/Petition
Processing Handbook (CIS HB, December 2007), you are to mail this decision, together with the Customs Form 19, 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 of the decision. Sixty days from the date of the decision the office of Regulations and Rulings 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