HQ 544643: Application for Further Review of Protest No. 4909-90- 000131; Appraisement of wrapper tobacco, constructed value, allowable profit

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 544643

                          June 3, 1991

VAL CO:R:C:V  544643 DPS

CATEGORY:  Valuation

District Director 
San Juan, Puerto Rico
La Puntilla #1
Old San Juan, PR 00903

RE:  Application for Further Review of Protest No. 4909-90-
     000131; Appraisement of wrapper tobacco, constructed
     value, allowable profit

Dear Madam:

     The subject protest and application for further review,
concerns the appraisement of nine entries of U.S. grown
wrapper tobacco, exported to [country of export   ] for
sorting and stemming, and thereafter returned to the U.S. at
the port of San Juan, P.R.  The subject entries were made
during the period November 23, 1977 through July 3, 1978, and
liquidated on June 22, 1990.  Similar issues concerning the
same parties and identical merchandise are presently before
Customs Headquarters on applications for further review of
protests (protest no.'s 4909-4-000227 of 11/9/84, and 4909-
4-000292 of 12/26/84) filed at the port of San Juan, P.R.

     The subject protest involves merchandise that was
entered and liquidated under TSUS item 806.20, dutiable at
the column 1 rate provided for in TSUS item 170.15 (stemmed
wrapper tobacco).  The stemming was performed in [country  of
export  ] by xxxxxxxxxxxx xxxxxxx xxxxxxxxxxx which was a
wholly-owned subsidiary ("foreign subsidiary") of the
importer, xxxxxxxxxxxx xxxxx xxxxxxxxxxx.  The stemmed
wrappers and stems were returned to the United States at San
Juan, Puerto Rico, where they were used in the manufacture of
cigars by another wholly-owned subsidiary, xxxxxxxxxxxx
xxxxxx ("domestic subsidiary"), although the parent was
actually the importer of record of the returned wrappers and
stems.  [Foreign subsidiary] never bought nor sold the
merchandise.  Rather, the stemming was performed on a service
contract basis.

     The entered value (the value of the alterations) for
entries of wrapper tobacco in 1975 and early 1976 was the
cost of processing incurred by [foreign subsidiary] as set
forth in the entry papers, plus a 5% profit factor.  After
consultation with Customs' tobacco import specialists in New
York and Tampa, the Customs appraising officer advised the
importer that the 5% profit factor was too low.  After
numerous meetings and exchanges of information between the
importer, its representatives, and Customs officials, a 9%
profit factor was accepted as reasonable by Customs officials
at the port of entry.  We have assumed for the purposes of
this response that the reasonableness of the 9% profit figure
is no longer at issue.

     It should be noted that the appraisement issues raised
by the subject protest (as well as the other protests
presently before Headquarters) have been reviewed and
addressed by this division on six (6) previous occasions.  
With regard to the protestant's continuing argument
concerning the appraised value of the subject tobacco and
counsel's insistence on the use of English market sales
figures to determine the market value of the subject
xxxxxxxxxxx xxxxx wrapper tobacco, it is apparent that no new
information or arguments have been presented by this protest.
The arguments presented in the protestant's submission are
the same or similar to arguments advanced in the original
internal advice decisions (I.A. No. 236/79, 061819, dated May
19, 1981, 542487, dated August 14, 1981 and 543793, dated
April 20, 1987) and subsequent reconsideration requests. 
This office has given thorough consideration to these points
in our previous decisions in this case and, as a result, we
believe that no useful purpose would be served by addressing
them further.  

     In the above listed I.A. and reconsiderations thereto,
and most recently in 542487, dated April 20, 1987, we
specifically addressed the issue of determining the value of
the materials (wrapper tobacco) exported from the United
States for sorting and stemming in [country of export   ]. 
We concluded that the estimated market value of the subject
U.S. tobacco cannot be based upon contemporaneous English
market sales because the tobacco involved in those sales was
not identical to the tobacco shipped to [country of export ]. 
The English sales involved four different primings (leaf
positions on the stalk) while the tobacco sent to [country  
of export    ] consisted of seven different primings.  In
addition, certain elements of cost included in the English
sales were not present in regard to the unsorted tobacco
shipped to [country of export   ].  Accordingly, we
determined that it would be inappropriate to base the
"estimated market value" of the subject tobacco on sales of
wrapper tobacco to unrelated purchasers in England.  





     After a thorough review of the purportedly "new
information and arguments" submitted by counsel along with
the subject protest and application for further review, our
position remains unchanged with regard to the use of sales of
wrapper tobacco to unrelated purchasers in England.  Their
use in determining the "estimated market value" of U.S.
wrapper tobacco to [country of export   ] is inappropriate.

     Accordingly, you are directed to deny Protest No. 4909-
90-000131 in all respects.  A copy of this decision should be
attached to Form 19, Notice of Action, to be sent to the
protestant.




                              Sincerely,



                              John Durant, Director