OT:RR:CTF:VS H016107 EE
Port Director
U.S. Customs and Border Protection
#1 La Puntilla
San Juan, PR 00904
RE: Application for Further Review of Protest No. 4909-07-100027; Appraisement of Merchandise; Bread Products
Dear Port Director:
This is in response to an Application for Further Review (“AFR”) of Protest No. 4909-07-100027, filed by counsel on behalf of V.W., Inc. (hereinafter, the “protestant”), concerning the valuation of certain imported bread products.
FACTS:
The merchandise subject to the protest at issue, certain bread products, was entered by the protestant under subheading 1905.40.00, Harmonized Tariff Schedule of the United States (“HTSUS”), between February 7, 2006 and January 8, 2007. The merchandise was initially entered with a unit price of $3.59 per 10-unit box. Subsequent entries were entered with a unit price of $3.00 and then $2.50 per 10-unit box.
On July 13, 2006, the U.S. Customs and Border Protection (“CBP”) issued a Request for Information (CBP Form 28) related to the valuation of the imported merchandise asking, inter alia, whether there is a contract between the protestant and the manufacturer, Albesnacks, S.L. (“Albesnacks”), whether the protestant pays any proceeds, and whether there is any restriction or a condition of sale. CBP liquidated the entries on December 15, 2006 and March 16, 2007 under subheading 1905.40.00, HTSUS, subject to 100 percent duty under subheading 9903.02.35, HTSUS. The protestant filed a timely protest and AFR on June 13, 2007, against the classification and the appraisement of the entries. Based on the protestant’s response to the CBP Form 28, dated September 6, 2006, the port did not agree that transaction value applied to the importations but that the merchandise should be appraised according to transaction value of identical or similar merchandise pursuant to 19 U.S.C. § 1401a(c); 19 C.F.R. § 152.104.
The protestant argues that transaction value is the appropriate basis of appraisement, at the prices noted on the invoices issued by the manufacturer, Albesnacks, to the protestant. The protestant claims that due to CBP’s classification of the goods under a provision carrying a 100 percent duty as opposed to a free rate of duty, Albesnacks, agreed to grant the protestant a substantial price reduction so that the protestant could continue to supply its primary customer in the U.S. Albesnacks initially discounted the price of the merchandise to $3.59 per 10-unit box of 150g, then to $3.00 per 10-unit box of 150g, and finally to $2.50 per 10-unit box of 150g over subsequent entries.
The protestant submitted copies of documents for the nine entries that the protest at issue covers. The documents include copies of CBP Form 7501, CBP Form 3461, invoices from Albesnacks to the protestant, packing lists, checks payable to Albesnacks, as well as the bills of lading for the merchandise. For example, CBP Form 7501 for the entry dated February 7, 2006 indicates that the entered value for the merchandise was $18,636. An invoice from Albesnacks to the protestant, dated December 22, 2005, indicates the same amount for total price and a unit price of $3.59. A check payable to Albesnacks for the same amount is dated February 21, 2006. Similarly, CBP Form 7501 for the entry dated May 3, 2006 indicates that the entered value for the merchandise was $7,288. An invoice from Albesnacks to the protestant, dated March 31, 2006, indicates the same amount for total price and a unit price of $3.00. A check payable to Albesnacks for the same amount is dated November 8, 2006. CBP Form 7501 for the entry dated May 27, 2006 indicates an entered value for the merchandise of $6,050. An invoice from Albesnacks to the protestant, dated April 28, 2006, indicates the same amount for total price and a unit price of $2.50. A check payable to Albesnacks for the same amount is dated November 15, 2006. The protestant also submitted a copy of an email transmission dated July 18, 2006, from the president of Albesnacks to the protestant confirming the reduction of the price of each box to $2.50 until Albesnacks can commence production in the U.S.
ISSUE:
Whether transaction value is the appropriate basis of appraisement for the imported merchandise.
LAW AND ANALYSIS:
Initially, we note that the protest and AFR was timely filed under the statutory and regulatory provisions for protests (19 U.S.C. § 1514; 19 C.F.R. pt. 174). We also note that the issues protested are protestable issues (19 U.S.C. § 1514).
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 the merchandise when sold for exportation to the United States,” plus amounts for certain statutorily enumerated additions to the extent not otherwise included in the price actually paid or payable. 19 U.S.C. § 1401a(b)(1). If, for any reason, sufficient information is not available with respect to the additions to the price actually paid or payable, the transaction value of the imported merchandise is treated as one that cannot be determined. 19 U.S.C. § 1401a(b)(1). However, transaction value is an acceptable basis of appraisement only if, inter alia, the buyer and seller are not related, or if related, the relationship did not influence the price actually paid or payable, or the transaction value of the merchandise closely approximates certain “test values.” 19 U.S.C. § 1401a(b)(2)(B). The protestant states that it is not related to Albesnacks, the seller of the imported merchandise. The term “price actually paid or payable” is defined as:
[T]he 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.
19 U.S.C. § 1401a(b)(4)(A).
CBP Regulations (19 C.F.R. § 152.103(a)) provide that:
[i]n determining transaction value, the price actually paid or payable will be considered without regard to its method of derivation. It may be the result of discounts, increases, or negotiations, or may be arrived at by the application of a formula, such as the price in effect on the date of export in the London Commodity Market.
As previously noted, the protestant claims that the parties are not related and that the prices were negotiated at arms length. The protestant states that there is no contract between the parties and it never provided purchase orders to Albesnacks. The protestant claims that there are only invoices between the parties. The invoices from Ablesnacks to the protestant list the weight, the quantity, the unit price and the total price for the merchandise which match the information on the CBP Form 7501. The total price noted on each invoice matches the amount listed on the checks payable to Albesnacks. The quantity of the merchandise listed on the invoices match the quantity listed on the packing lists and the bills of lading.
The documents submitted support the protestant’s claim that the merchandise was renegotiated at a discounted price. Additionally, the dates noted on the invoices from Ablesnacks to the protestant and the entry dates on the CBP Form 7501 for the nine entries at issue indicate that the protestant and Albesnacks agreed to the price reduction before the merchandise was imported into the U.S. As noted in the facts section, the entered value on CBP Form 7501 for the entry dated February 7, 2006 corresponds to the total price reflected on the invoice from Albesnacks to the protestant and the check payable to Albesnacks. The entered value on CBP Form 7501 for the entry dated May 3, 2006 corresponds to the total price reflected on the invoice from Albesnacks to the protestant and the check payable to Albesnacks. The entered value on CBP Form 7501 for the entry dated May 27, 2006 corresponds to the total price reflected on the invoice from Albesnacks to the protestant and the check payable to Albesnacks.
Based on the information presented, and in the absence of evidence to the contrary, we find that the discounted price for the imported merchandise is supported by the invoices and the proof of payment from the protestant to Albesnacks and is an acceptable price actually paid or payable consistent with 19 U.S.C. § 1401a(b)(4)(A) and 19 C.F.R. § 152.103(a).
HOLDING:
In conformity with the foregoing, the protest is GRANTED. The imported merchandise may be appraised under transaction value based on the prices noted on the invoices issued by the manufacturer to the protestant.
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 sixty days from the date of this letter. 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