VAL OT:RR:CTF:VS H229701 YAG
Ms. Pam Brown, Vice President
Future Forwarding Company
5356 Georgia Highway 85, Suite 400
Forest Park, GA 30297
RE: Transaction Value; Transaction Value of Identical or Similar; No Sale
Dear Ms. Brown:
This is in response to your letter, dated July 25, 2012, in which you request a ruling, on behalf of your client, Orlebar Brown Limited (“Orlebar Brown”), concerning the appropriate method of appraisement of wearing apparel imported by Orlebar Brown into the United States.
FACTS:
Orlebar Brown Limited, a British Corporation, imports wearing apparel from various countries into the United States. Orlebar Brown purchases the garments from the unrelated foreign manufacturers and is the importer of record. Some of the garments are shipped directly to Atlanta, GA. Upon arrival to the United States, the imported garments are placed in the distribution warehouse in Atlanta. Upon the importation, garments are still the property of Orlebar Brown until U.S. customers place their purchase orders. The U.S. customers place their online orders for the imported garments after the arrival of the garments in the United States. You propose to appraise the imported garments under transaction value using the price paid by Orlebar Brown to the unrelated foreign manufacturers.
Some of the garments, which are identical to garments sent directly to Atlanta from various countries, are first shipped to Orlebar Brown’s storage facility in the United Kingdom. These garments are then imported into the United States by Orlebar Brown and transferred to the warehouse in Atlanta, GA. The garments warehoused in the United States remain the property of Orlebar Brown until sold to the U.S. customers. In this scenario, you propose to appraise the imported garments on the basis of the transaction value of identical or similar goods.
ISSUE:
What is the correct method of appraisement for the imported garments?
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 (TAA; 19 U.S.C. §1401a). The primary basis of appraisement under the TAA is transaction value, which is defined as “the price actually paid or payable for the imported merchandise when sold for exportation to the United States,” plus certain enumerated additions thereto to the extent they are not otherwise included in the price actually paid or payable. See 19 U.S.C. §1401a(b). In order for imported merchandise to be appraised using the transaction value method, it must be the subject of a bona fide sale between a buyer and a seller, and the sale must be for exportation to the United States.
In VWP of America, Inc. v. United States, 175 F.3d 1327 (Fed.Cir. 1999), the Court of Appeals for the Federal Circuit found that the term “sold” for purposes of 19 U.S.C. §1401a(b)(1) means a transfer of title from one party to another for consideration (citing J.L. Wood vs. United States, 62 CCPA, 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406 (1974)). Several factors may indicate whether a bona fide sale occurs between a potential buyer and seller of the imported merchandise. In determining whether property or ownership has been transferred, U.S. Customs and Border Protection (“CBP”) considers whether the potential buyer has assumed the risk of loss and acquired title to the imported merchandise. In addition, CBP may examine whether the potential buyer paid for the goods 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 Headquarters Ruling Letter (“HRL”) H092448, dated May 4, 2010; HRL H012659, dated November 14, 2007; and, HRL 548273, dated April 17, 2003.
Under the first scenario, you state that there is a bona fide sale between the unrelated foreign manufacturers and Orlebar Brown. Orlebar Brown places purchase orders with the unrelated foreign manufacturers for the imported garments to be shipped directly to the warehouse in the United States. Orlebar Brown also acts as the importer of record in this transaction. Since this is a prospective transaction, we are not presented with the purchase orders, invoices, any contracts, if available, and proof of payment to conclusively determine that there is a bona fide sale for export to the United States in this instance. However, provided that Orlebar Brown can establish via sufficient documentation that it assumes the risk of loss and acquires title to the imported garments from the foreign manufacturers, transaction value may be considered as the appropriate method of appraisement.
The second scenario discussed in your submission is analogous to the facts addressed by CBP in HRL H005402, dated April 11, 2007. In HRL H005402, dated April 11, 2007, a Canadian corporation imported fasteners from a related supplier in China. The fasteners were first shipped to Canada. Some of these were then transferred to the Canadian corporation’s U.S. distributor’s warehouse. The warehoused fasteners remained the property of the Canadian corporation until sold by the distributor. As there was no sale, the fasteners could not be appraised under the transaction value method. CBP ruled that the sequential bases of appraisement could be used to determine the appropriate valuation method.
Similarly in this case, the transfer of garments from the United Kingdom to the United States under the second scenario does not involve a sale. Accordingly, garments may not be appraised under the transaction value method. Under the TAA it is necessary to proceed sequentially through the remaining bases of appraisement to determine the appropriate valuation method. 19 U.S.C. §1401a(a)(1). The second appraisement method in order of statutory preference is transaction value of identical and similar merchandise under 19 U.S.C. §1401a(c). This method refers to a previously accepted transaction value of identical or similar merchandise that was exported at or about the same time as the merchandise being valued. Treasury Decision (T.D.) 91-15, dated March 29, 1991. The term “identical merchandise” is defined in 19 U.S.C. §1401a(h)(2) as:
merchandise that is identical in all respects to, and was produced in the same country and by the same person as, the merchandise being appraised; or,
if merchandise meeting the requirements under subparagraph (A) cannot be found..., merchandise that is identical in all respects to, and was produced in the same country as, but not produced by the same person as, the merchandise being appraised.
The term “similar merchandise” is defined in 19 U.S.C. §1401a(h)(4) as:
merchandise that – (i) was produced in the same country and by the same person as the merchandise being appraised, (ii) is like the merchandise being appraised in characteristics and component material, and (iii) is commercially interchangeable with the merchandise being appraised; or
if merchandise meeting the requirements of subparagraph (A) cannot be found..., merchandise that – (i) was produced in the same country as, but not produced by the same person as, the merchandise being appraised, and (ii) meets the requirement set forth in subparagraph (A) (ii) and (iii).
Based on the first scenario, where Orlebar Brown also imports identical garments directly into the United States from various foreign manufacturers, which are appraised under transaction value, it would appear that garments imported from the United Kingdom could be appraised pursuant to 19 U.S.C. §1401a(h)(2) using those previously accepted transaction values. Please note that in T.D. 91-15, it was explained that the information necessary for the determination of the transaction value of identical or similar merchandise under section 402(c) could be made on the basis of information provided by the importer or already available to CBP. Thus, provided Orlebar Brown can establish that the transaction value of the identical garments may serve as the basis for appraising the garments that are first transferred to the storage facility in the United Kingdom prior to importation to the United States, namely by showing that the products are identical, and involve the same person, country, and time of export, CBP should appraise the merchandise on the basis of transaction value of identical or similar merchandise, subject to adjustments for commercial level or quantity if supported by sufficient documentation.
HOLDING:
When garments are imported into the United States directly from the foreign manufacturers and stored in the warehouse in Atlanta, transaction value based on the purchase price between Orlebar Brown and the foreign manufacturers may be used as the appropriate method of appraisement. However, there is no bona fide sale for export to the United States when the imported garments are purchased by Orlebar Brown, shipped to a storage facility in the United Kingdom and then transferred from the United Kingdom to the United States, eliminating transaction value as an appraisement method. The imported garments must be appraised under the next available appraisement method as discussed in the ruling.
Please note that 19 C.F.R. §177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch