OT:RR:CTF:VS H082455 GG
Service Port Director
U.S. Customs and Border Protection
24735 E. 75th Avenue
Suite 100
Denver, CO 80249
RE: Application for Further Review of Protest No. 3307-09-100023; Price Actually Paid or Payable; Apportionment of Value Between Liquidated and Unliquidated Entries; Alyeska Pipeline Service Co. v. United States; C.S.D. 83-39
Dear Sir:
This is a decision on an Application for Further Review (“AFR”) of a protest filed in your port on September 14, 2009, by the Aegis Security Insurance Company (“Aegis”). Aegis is the surety that issued the continuous bond to the importer of record, CSS Trading Co. (“CSS”).
FACTS:
CSS, located in Englewood, Colorado, is a wholesaler of men’s tuxedo shirts, women’s dress shirts, and other tuxedo accessories. U.S. Customs and Border Protection (“CBP”) Regulatory Audit conducted an audit of entries made by CSS between January 1, 2006 and December 31, 2006. It was discovered that CSS had made undeclared lump-sum payments, totaling $145,500.00, to various foreign vendors. There were no records or procedures in place to enable CBP to connect the lump-sum payments to particular entries. Also, CSS was unable to provide buying agency agreements or other documentation to support its assertion that the amounts paid were non-dutiable buying commissions. The resulting loss of revenue was $39,086.25.
CBP notified CSS by Notice of Action dated March 5, 2009, that it had value advanced one of the unliquidated entries by $145,000.00, and that additional duty, taxes and fees in the amount of $39,086.25 plus interest were being assessed on this particular entry. CBP then billed CSS for $43,603.20, an amount that included $4,516.95 in interest. CSS did not pay this bill, and CBP made a formal demand on the surety on March 20, 2009. Aegis filed the subject timely protest on September 14, 2009.
The protestant claims that the entered value reflected the invoiced price and was the properly declared transaction value of the imported merchandise. It argues that the protested appraisement is not supported by any valid statutory valuation method. It also protests the assessment of interest in this case. CBP in its Customs Protest and Summons Information Report indicated that because the lump-sum payments could not be tied to specific invoices or entries, a decision was made to value advance the protested entry by the entire loss of revenue uncovered by the audit.
ISSUE:
Whether the merchandise was properly appraised under transaction value, and whether the loss of revenue was properly apportioned over one entry.
LAW AND ANALYSIS
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 (19 U.S.C. § 1401a; TAA). The preferred method of appraisement under the TAA is transaction value defined as "the price actually paid or payable for imported merchandise when sold for exportation to the United States." 19
U.S.C. § 1401a(b)(1).
Pursuant to section 402(b)(4) of the TAA the term "price actually paid or payable" is defined as "the total payment (whether direct or indirect...) 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). The Court of International Trade has held that provided a payment is 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." Generra Sportswear Company v. United States, 905 F.2d 377, 380 (Ct.
Int'l Trade 1990).
In the instant case, CSS made lump-sum payments to various foreign vendors. It claimed that these payments were non-dutiable buying commissions, but failed to provide documentation to substantiate its claim. Accordingly, under Generra they are part of the price actually paid or payable for the imported merchandise. The fact that there were lump-sum payments that could not be traced to particular entries does not preclude appraisement under transaction value. This is because, in accordance with the decision in Chrysler Corporation v. United States, 17 CIT 1049, 1059 (Sept. 22, 1993), lump-sum payments made by the buyer to the seller may be allocated under transaction value.
Nevertheless, the full value advance that was made in this case to the entry that is the subject of this protest, was improper to the extent that it reflected the value of merchandise not covered by the protested entry. In Alyeska Pipeline Service Co., v. United States, 10 CIT 510 (1986), 643 F.Supp.1128, reh'g granted, 11 CIT 931 (1987), 683 F.Supp. 817, CBP advanced the value of a single entry to cover value advances relating to twenty-three other entries, including two which were not before the court. Judge Watson stated:
The law does not permit the Customs Service to
assign to one entry the values of merchandise in other
entries or the duties owing on them. 19 U.S.C. § 1500
provides for separate, unitary appraisement . . . .
It follows that the only proper value increase for
the entry in question would be one reflecting the value
of the merchandise covered by that entry and no other
merchandise.
Alyeska Pipeline, 10 CIT 510, 516. See also C.S.D. 83-39, 17 Cust. B. & Dec. 794 (1983); and Headquarters Ruling Letters HQ 545264 (August 12, 1994), HQ 546012 (May 6, 1996), and HQ 546430 (January 6, 1997).
The facts in the instant case are similar to those in Alyeska Pipeline, in that one entry was advanced in value to reflect a value increase with regard to merchandise imported under other entries. This was done because the available information did not allow the tracing of the lump sum payments to specific shipments or entries. It is therefore our position that the value advance was improper to the extent that it related to merchandise other than that covered by the entry that was value advanced. Nevertheless, payments may be apportioned, but the method of apportionment must be reasonable and in accordance with generally accepted accounting principles. We also note that duty would not be collectable under the protest procedures of 19 U.S.C.
§ 1514 on those entries to which the payments may pertain but that have finally liquidated. Any attempt at recovery of duty on liquidated entries would have to be made pursuant to 19 U.S.C. § 1592(d).
HOLDING:
The protest should be allowed in part and denied in part in conformity with the foregoing. The merchandise was properly appraised under the transaction value method of appraisement. The lump-sum payments at issue should be apportioned over the entry that was advanced in value to the extent that they relate thereto.
In accordance with the Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), please mail this decision, together with the CBP 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 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