us-cbp-cross-rulings-hq-544280•HQ 544280: Decision on Application for Further Review of Protest No. 3801-6-001204
HQ 544280: Decision on Application for Further Review of Protest No. 3801-6-001204
us-cbp-cross-rulings-hq-544280HQ 544280: Decision on Application for Further Review of Protest No. 3801-6-001204Guidance
Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.
HQ 544280
February 2, 1989
CLA-2 CO:R:CV:V 544280 VLB
CATEGORY: Valuation
District Director of Customs
Detroit, Michigan 48226-2568
RE: Decision on Application for Further Review of Protest
No. 3801-6-001204
Dear Sir:
This protest was filed against your decision in the
liquidation of various entries made by ----------------
----------- a lumber distributor (hereinafter referred to as the
"distributor"). The merchandise was appraised pursuant to
section 402(f) of the Tariff Act of 1930, as amended by the Trade
Agreements Act of 1979 (19 U.S.C. 1401a(b); TAA).
FACTS:
The merchandise in question is waferboard (particle board)
that is manufactured in Canadian mills. The valuation of
Canadian waferboard is the subject of hundreds of protests
arising out of the various importers' manner of doing business.
In correspondence dated March 28, 1988, forwarding the
protests, the National Import Specialist lists the following
three general methods used to sell the merchandise in question:
(1) A Canadian manufacturer sells to a distributor (a
Canadian or a U.S. company) for export to the United
States, e.g. F.O.B. mill. All documents, including a
through bill of lading, show that the merchandise is to be
shipped from point of manufacture or origin to the United
States port of importation or beyond.
(2) A Canadian manufacturer sells F.O.B. mill to a
distributor (a Canadian or a U.S. company) for shipment to
a "storage-reload center" located near the border but on
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the Canadian side. In turn, the distributor sells the
merchandise from the "storage-reload center" to U.S. buyers
for export to the United States (F.O.B. "storage-reload
center" or duty paid delivered).
(3) A Canadian manufacturer sells to a distributor (a
Canadian or a U.S. company) for export to the United
States, e.g. F.O.B. mill. All documents, including a
through bill of lading, show that the merchandise is to be
shipped from point of manufacture or origin to the United
States port of importation or beyond. However, the
shipment is routed through a "storage-reload center" in
Canada. The only thing that happens at the reload center
is either a change in the transportation conveyance or a
stop over (sic) on the way to the United States. There is
no change in quantities or destination.
Each of the three methods described may have variations and
the details of each transaction may differ slightly. Therefore,
we will examine the documentation submitted by each protestant.
In this case, the distributor has submitted documentation
for several transactions. There are three relevant documents in
each transaction: (1) An Entry Summary Form indicating that the
distributor is the ultimate consignee and John V. Carr (Broker)
is the importer of record; (2) A John V. Carr Invoice stating
that Newman Terminals and Transportation (Reload Center) is the
exporter and that the lumber is sold to the distributor but
shipped to the distributor's U.S. customer; (3) The
Distributor's Invoice to its U.S. customer was provided in a few
of the transactions.
Documents 1 and 2, presented to Customs at the time of
entry, contain the price that the distributor paid to the
Canadian manufacturer. Document 3 contains the price that the
U.S. customer paid the distributor for the merchandise.
You appraised the entries under section 402(f) of the TAA
using the price paid by other U.S. customers to U.S. distributors
for identical or similar merchandise as the starting point for
the appraisement. The distributor argues that the merchandise
should be appraised pursuant to section 402(b) of the TAA, and
that the transaction value is the price it paid to the Canadian
manufacturer.
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ISSUES:
(1) Whether transaction value is the proper method for the
appraisement of the merchandise.
(2) Whether the sale between the manufacturer and the
distributor, or the sale between the distributor and its
customer, is the price actually paid or payable for the
merchandise when it was sold for exportation to the United
States.
LAW AND ANALYSIS:
The first issue involves what appraisal method will be used
to determine the value of the merchandise for duty purposes.
Transaction value, the preferred method of appraisement, is
defined in section 402(b) of the TAA as the "price actually paid
or payable for the merchandise when sold for exportation to the
United States. . ." (emphasis added). From the information
provided, it appears that transaction value is the appropriate
basis of appraisement.
The second issue requires a determination of what value is
the price actually paid or payable for the merchandise. This
issue necessitates an analysis of when the goods were sold for
exportation to the United States. Section 101.1(k) of the
Customs Regulations (19 CFR 101.1(k)), defines "exportation" as a
severance of goods from the mass of things belonging to this
country with the intention of uniting them to the mass of things
belonging to some foreign country.
In C.S.D. 84-54 and Headquarters ruling 542928 cited as TAA
#57, we held:
. . . the transaction to which the phrase "when sold for
exportation to the United States" refers, when there are
two or more transactions which might give rise to a
transaction value, is the transaction which most directly
causes the merchandise to be exported to the United States.
Headquarters also issued ruling 543687 dated May 6, 1986,
in response to hypothetical questions posed by a lumber industry
trade journal. In that ruling we stated the following:
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. . . if sales for exportation to the United States
actually occur from the border reload point (in Canada),
and these sales are the sales that directly cause the
merchandise to be exported from Canada, the transaction
value would be based upon those sales. (emphasis added)
Finally, on May 22, 1986, Headquarters issued ruling 543746
involving specific waferboard entries. In that case, a U.S.
company purchased and imported waferboard products from various
unrelated sources in Canada. The terms of sale were "F.O.B.
mill". Therefore, the company took title to the merchandise at
the mill.
However, the product was shipped to reload centers in
Canada where it was stored and consolidated. The company
frequently obtained orders for resale of the product to unrelated
U.S. purchasers prior to the consolidation at the staging yards.
Relying on ruling 543687, we held that the sale from the
company (distributor) to its U.S. customer most directly caused
the merchandise to be exported to the U.S.
The facts of the present case are similar, if not identical
to the facts in ruling 543746. These facts fall under Scenario 2
that was discussed previously. The National Import Specialist
argues that under this scenario the sale between the mill and the
distributor does not cause the goods to be exported to the U.S.,
but only to be shipped to the storage-reload centers in Canada.
You state that the transaction that most directly causes the
waferboard to be exported to the U.S. is the sale that occurs at
the storage-reload center. Therefore, you conclude that the sale
between the distributor and its customer is the sale for
exportation to the U.S. and the appropriate appraisement value.
The documents submitted by the distributor in this protest
support your conclusion. The invoices presented to Customs
indicate that the reload center is the exporter, not the mill.
In addition, the date of the distributor's invoice to its
customer contains the same date as the date of exportation or a
date shortly after exportation. Finally, the file contains a
telex from the distributor to the reload center dated November 8,
1985, requesting shipment of a specified quantity of lumber from
the distributor's "inventory" (at the reload center) to its U.S.
customer.
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Based on this evidence, we conclude that the distributor
sold the merchandise at the reload center. This is the sale that
severed the goods from the mass of things belonging to Canada
with the intent of uniting them with the mass of goods belonging
to the U.S. Thus, this sale directly caused the merchandise to
be exported from Canada to the U.S. and is the price actually
paid or payable under transaction value.
If information containing the price that the distributor
charged its U.S. customer for the lumber is unavailable, it is
necessary to proceed sequentially through the remaining bases of
appraisement prior to resorting to a section 402(f) appraisement.
The next available appraisement method is 402(c) of the TAA,
transaction value of similar or identical merchandise.
HOLDING:
(1) Transaction value pursuant to section 402(b) of the
TAA is the proper appraisement method. If sufficient information
is unavailable and the transaction value cannot be determined,
Customs should proceed sequentially through the remaining bases
of appraisement prior to resorting to section 402(f) of the TAA.
(2) The facts in this case fall under Scenario 2 that was
discussed previously. We hold that in that factual pattern the
sale between the distributor and its U.S. customer is the sale
that directly caused the merchandise to be exported from Canada
to the U.S. Therefore, the amount of that sale is the price
actually paid or payable for the goods under transaction value.
You are directed to deny the protest and appraise the
merchandise under transaction value using the amount the U.S.
customer paid to the distributor as the price actually paid or
payable. A copy of this decision should be attached to Form 19,
Notice of Action, to be sent to the protestant.
Sincerely,
John Durant, Director,
Commercial Rulings Division
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