HQ 544352: Application for Further Review of Protest No. 1001-8-008353

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 544352

                                   July 12, 1990

VAL CO:R:C:V  544352 ML

CATEGORY:  Valuation

Area Director
JFK Airport
New York, New York  10048-0945

RE:  Application for Further Review of Protest
     No. 1001-8-008353

Dear Sir:

     This protest and application for further review was filed
against your appraisement decision in the liquidation of various
entries made by ------------------------., a clothing
distributor.  The merchandise was manufactured in Sri Lanka by --
-------------s.  The merchandise was appraised pursuant to
section 402(b) of the Tariff Act of 1930, as amended by the Trade
Agreements Act of 1979 (TAA; 19 U.S.C. 1401a(b)).

FACTS:

     The merchandise in question is men's shorts and belts.  The
items were manufactured in Sri Lanka by ---------------------) --
----d (hereinafter referred to as "manufacturer").  Orders for
these shorts were placed with --------------------) Ltd., a Sri
Lanka corporation, (hereinafter referred to as the "importer") by
-------------------, Ltd. (hereinafter referred to as the "U.S.
distributor").  After several failures by the importer in
delivering merchandise to the U.S. distributor, the distributor
cancelled it's order with the importer.  The importer then
shipped a portion of the order, on his own, to the United States,
whereupon he asked the U.S. distributor to aid in it's disposal.
The importer then sold the merchandise to the U.S. distributor
for $35,000 less certain expenses.  Pursuant to section 402b of
the TAA, the transaction value of the merchandise was used for
appraisement purposes.

ISSUE:

     (1)  Whether transaction value was the proper basis for the
appraisement of the imported merchandise.

LAW AND ANALYSIS:

     The issue involves whether transaction value was properly
used to appraise the imported merchandise.  The transaction value
of imported merchandise is defined in section 402(b) as "the
price actually paid or payable for the merchandise when sold for
exportation to the United States," plus amounts for the items
enumerated in section 402(b)(1).  The term "price actually paid
or payable" is defined in section 402(b)(4)(A) 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 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.

     Therefore, the "price actually paid or payable" must be
derived from an actual sale.  The word "sale" generally is
defined as a transfer of ownership in property from one party to
another for a price or other consideration.  See J.L. Wood v.
United States, 62 CCPA 25, C.A.D. 1139 (1974), and J.H. Cottman &
Co. v. United States, 20 CCPA 344, T.D. 46114 (1932).

     In the factual situation under consideration, it is clear
that the distributor and the importer entered into an agreement
to purchase men's wearing apparel.  It is also clear that the
importer failed to make delivery at the contracted for delivery
date and subsequent extensions were granted by the distributor.
The distributor asserts that the contract was ultimately canceled
and that the importer imported the merchandise on his own behalf,
only to later request that the distributor aid in its' disposal.
No documentation establishing cancellation by the distributor has
been submitted.  The distributor argues that the letter of credit
number 219376 requires shipment no later than January 15, 1987
which they changed to permit shipment before March 31,1987.
However, the same documentation states that the negotiation date
with the importer was extended to April 21, 1987, the date on
which the merchandise was ultimately shipped.  It is, therefore,
unclear that the importer shipped the merchandise on his own
behalf, as the protestant asserts.  It should be mentioned that
no information regarding the relationship between the
manufacturer and the importer has been submitted, and while
transaction value is the preferred method of appraisement,
specific limitations on it's use occurs when the parties are
related (section 402(b)(2)(B) of the TAA).  For purposes of this
decision, it is assumed that there was no legal impediment to
transaction value based on any relationship between the parties.

     It is worth mentioning, that even if the distributor had
submitted documentation that supported their contention that a
sale was never consummated between the parties prior to the
merchandise being "sold for exportation to the United States,"
the merchandise at issue would not necessarily be appraised using
the deductive value.  The next basis of appraisement under the
TAA, in order of statutory precedence, is the previously-accepted
transaction value of identical merchandise exported to the United
States at or about the same time as the instant merchandise.  If
identical merchandise cannot be found or an acceptable
transaction value for such merchandise does not exist, then the
applicable Customs value is the previously-accepted transaction
value of similar merchandise exported to the United States at or
about the same time as the merchandise being valued.  The
determination as to whether identical or similar merchandise
exists is up to the appropriate import specialist.  In the
instant case, the import specialist states that the transaction
value of similar merchandise does exist and should be used for
appraisement purposes.

HOLDING:

     From the evidence submitted, the protestant has not
satisfactorily established that the original contract was
canceled prior to the exportation to the United States of the
merchandise under appraisement.  If this fact had been clearly
established, and transaction value found to be inapplicable as
the basis for appraisement, the next basis for appraisement, in
order of statutory preference, would have been that of identical
or of similar merchandise and appraisement under deductive value
would have been inappropriate.

     The protest should be denied.  A copy of this decision
should be attached to the Form 19, Notice of Action, to be sent
to the protestant.


                                   Sincerely,


                                   John Durant, Director
                                   Commercial Rulings Division