HQ H256333
OT:RR:CTF:VS H256333 YAG
Port Director
Port of Savannah
U.S. Customs and Border Protection
1 East Bay Street
Savannah, GA 31401
RE: Application for Further Review (“AFR”) of Protest 1703-14-100145; Transaction Value; Related Parties
Dear Port Director:
This is in response to your correspondence, dated June 17, 2014, forwarding the Application for Further Review (“AFR”) of Protest 1703-14-100145, timely filed by Kuehne Nagel, Inc., on behalf of its client, Lotus Cars USA, Inc. (“Protestant”).
FACTS:
On November 21, 2013, Protestant imported Lotus Evora vehicles into the United States. Protestant purchased these vehicles from Beijing Lotus Cars Sales Co., Ltd. (the “Seller”), a company incorporated in China. Protestant and the Seller are related parties, pursuant to 19 U.S.C. §1401a(g)(1).
At the time of entry, Protestant classified the imported vehicles under subheading 9801.00.25 of the Harmonized Tariff Schedule of the United States (“HTSUS”) and declared value for the vehicles in the amount of $1,997,182.00. During the subsequent review of Protestant’s entry, the Port determined that Protestant failed to meet the requirements of subheading 9801.00.25, HTSUS, and classified the imported vehicles under subheading 8703.23.00, HTSUS, at the rate of duty of 2.5%. On January 27, 2014, the Port sent final notice to Protestant, applying the rate advance to the imported merchandise and utilizing the value of the imported merchandise declared at the time of filing entry summary to calculate the appropriate amount of duty owed. On February 21, 2014, this entry was liquidated in accordance with the Port’s final notice of action to Protestant.
Protestant agreed with the Port’s classification of the merchandise; however, Protestant claimed that that the incorrect value was applied in calculating the duty amount. Accordingly, Protestant declared various discounts ranging from 58.2% to 63.38% to CBP at the time of protest. Thus, Protestant states that the correct entered value should have been $780.000.00 after applying these discounts. Protestant provided the following documentation in support of its argument: (1) invoice no. 120801-DN-01, dated August 1, 2013, issued by the Seller to Protestant and showing the entered value of $1,997,182.00 and the discounted value of $780,000.00; (2) purchase contract between Protestant and its related party in China, dated August 1, 2013, showing the agreed upon amount of $1,190,000.00 (Protestant claims that $480,000.00 out of the total sum in the contract is for another entry); and, (3) debit confirmation from Sun Trust Bank that shows the payment from Protestant to its related party, dated August 21, 2013, in the amount of $1,190,000.00. We note that the same invoice and contract were presented to the Port with the entry summary when the Port performed the rate advance. Furthermore, the full value of the invoice was presented, and there was no indication that the discounts were non-dutiable at that time. The Port states that there was no explanation given for the large discounts claimed, and since Protestant and the Seller are related parties, the Port could not determine whether the discounted value was accurate or whether the relationship of the parties influenced the price actually paid or payable.
ISSUE:
Whether certain discounts, as reflected on the invoice and the contract between the Protestant and its related Seller, may be considered in determining the price actually paid or payable of the imported vehicles.
LAW AND ANALYSIS:
We note that the protest and AFR were timely filed under the statutory and regulatory provisions for protests (19 U.S.C. §1514; 19 CFR Part 174). We also note that the issue protested is a protestable issue (19 U.S.C. §1514).
Merchandise imported into the United States is appraised for customs purposes 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 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. See 19 U.S.C. §1401a(b)(1). The term “price actually paid or payable” is more specifically defined in section 402(b)(4)(A) of the TAA 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 …) made, or to be made, for the imported merchandise by the buyer to, or for the benefit of, the seller.” The CBP Regulations further provide that in 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 . . .” 19 CFR §152.103(a)(1).
Nevertheless, pursuant to 19 U.S.C. §1402a(b)(2)(A)(iv), the transaction value of imported merchandise shall be acceptable only if the buyer and the seller are not related, or if the buyer and the seller are related, the transaction value is acceptable under 19 U.S.C. §1402a(b)(2)(B). A transaction value between related parties is acceptable under 19 U.S.C. §1402a(b)(2)(B) if the circumstances of the sale of the imported merchandise indicates that the relationship did not influence the price actually paid or payable; or if the transaction value closely approximates the transaction value, deductive value or computed value of identical or similar merchandise, also known as “test values.” 19 U.S.C. §1401a(b)(2)(B); 19 CFR §152.103(l). While the fact that the buyer and seller are related is not in itself grounds for regarding transaction value as unacceptable, where Customs and Border Protection (“CBP”) has doubts about the acceptability of the price and is unable to accept transaction value without further inquiry, the importer will be given the opportunity to supply such further detailed information as may be necessary to support the use of transaction value pursuant to the methods outlined above. See 19 CFR §152.103(l)(1)(i).
In this case, the buyer (Protestant) and the Seller are related parties. Considering the substantial discounts claimed by Protestant via protest after the importation and the rate advance, the Port has doubts about acceptability of the discounted price. Accordingly, in order to use the discounted value as the value of the merchandise at issue, Protestant must demonstrate that its relationship with the Seller did not influence the price actually paid or payable. In filing the protest, the Protestant has not presented any information to show that the relationship between the parties did not influence the discounted price. In fact, the Port was unaware of the Protestant’s argument regarding the discounted price until Protestant filed this AFR. Thus, we find that Protestant has not established that its relationship with the Seller did not influence the price actually paid or payable. Additionally, Protestant has not provided test values for goods imported into the United States. Therefore, the Port is unable to determine if the “test values” test has been met. Accordingly, as the Port has doubts about the acceptability of the discounted price without further inquiry and without additional information from Protestant, no discount should be afforded on this protest, and the merchandise should be valued as entered.
HOLDING:
The protest is denied. The Protestant has failed to demonstrate that the relationship between it and the Seller did not influence the discounted price.
In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision,
together with the Customs Form 19, to the Protestant no later than sixty (60) days from the date of this letter. Any re-liquidation of the entry or entries in accordance with the decision should be accomplished prior to mailing of this decision. Sixty (60) days from the date of this decision, the Office of International Trade; 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 & Trade Facilitation Division