HQ 543892: Internal Advice Request No. 76-86

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 543892

                                        March 10, 1988

          CLA-2 CO:R:CV:V  543892 EK

          CATEGORY:  Valuation

          District Director of Customs
          Minneapolis, Minnesota  55401

          RE:  Internal Advice Request No. 76-86

          Dear Sir:

                This is in reference to Internal Advice Request No. 76-86
          initiated on behalf of a certain company (hereinafter
          referred to as importer), regarding the proper valuation of
          merchandise pursuant to section 402(b), Tariff Act of 1930, as
          amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C.
          1401a(b)).

          FACTS:

                The entries in question occurred between November 1, 1984,
          and January 15, 1985, and were entered pursuant to computed
          value, section 402(e) of the TAA.  The entry documents submitted
          to Customs included visaed invoices which indicated an inflated
          value in order to enable the foreign seller to obtain free quota
          in Taiwan.  At the time, the importer advised Customs that the
          price information on the visaed invoice was not that which was
          agreed to between the parties.  Copies of import contracts
          reflecting the actual agreed upon prices were submitted.  The
          difference between the prices on the visaed invoice and the
          actual prices were reimbursed to the importer.

                Customs allowed the importer to make entry at the actual
          contract price rather than the amount indicated on the visaed
          invoice.  Reconciliation and copies of the cancelled checks
          received by the importer as reimbursement for the overpayments
          were received by Customs.  However, final liquidation of the
          entries was to be delayed pending an audit by Customs.

                Prior to ordering the merchandise, the importer discussed
          the effect of the rebate situation with Customs in Minneapolis.
          At that time, the rebate scenario as outlined above was governed


















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          by Internal Advice 184/81 which indicated that transaction value
          was not applicable in appraising these entries.  Apparently,
          there existed no transaction value of identical or similar
          merchandise; therefore, the importer elected computed value as a
          means of appraisement.  The importer agreed to supply the correct
          figures subsequent to entry.

                Subsequently, C.S.D. 85-15 dated September 13, 1984, was
          issued by this office which stated that in a situation such as
          that described above, transaction value was in fact applicable in
          appraising the merchandise.  This issuance of this ruling
          occurred subsequent to the importer meeting with Customs
          representatives, but prior to entry of the merchandise.
          Basically, the ruling held that where payment of the original
          agreed-upon contract price for merchandise is made by payment of
          a higher invoice price with a subsequent rebate to the importer
          by the seller, the original agreed-upon price represents the
          "price actually paid or payable" pursuant to section 402(b) of
          the TAA.

                On September 16, 1985, Customs Headquarters issued C.I.E.
          13/85 which limited the evidence which is acceptable as proof of
          the rebate transactions to direct payments from a seller to an
          importer.  A reimbursement to an importer through the account of
          a subsidiary of the seller was deemed to be an indirect payment
          and not acceptable as proof that the "price actually paid or
          payable" was less than the amount stated on the commercial
          invoice or visa.  The instructions in the ruling were to be
          applied to entries on which liquidation had not become final.

          ISSUE:

                Whether the entries should be liquidated as entered, i.e.,
          pursuant to computed value, or if transaction value is
          applicable, then whether the rebate should be considered in
          determining the "price actually paid or payable."

          LAW AND ANALYSIS:

                As indicated above, the entries which are the
          subject-matter of this Internal Advice request occurred between
          November, 1984, through January, 1985.  At that time, the Customs
          directive regarding acceptable evidence of proof of rebates had
          not been issued.  The accepted practice at the time of the
          entries was to appraise the merchandise pursuant to transaction
          value, i.e., the "price actually paid or payable", taking into
          account the rebate from the seller to the importer.  The
          instructions regarding the definition of direct payments had not
          been issued.  The importer was receiving a rebate from the












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          subsidiary of the seller.  However, at the time, Customs was
          accepting these transactions, i.e., appraising pursuant to
          transaction value with the "price actually paid or payable" at
          the invoiced amount, less the subsequent rebate.  In fact,
          Customs had approved the reimbursement method employed between
          this specific importer and seller, that is, the rebate from the
          seller's subsidiary to the importer.  It was not until the
          subsequent audit and the change in position by Customs regarding
          the accepted method of reimbursing the importer for the
          "overpayment" did such become an unacceptable practice.

                As indicated above, C.I.E. 13/85 regarding acceptable proof
          of rebates states that " . . . the instructions in this
          memorandum should be applied to all entries on which liquidation
          has not become final. "

                In this case, the Import Specialist involved has indicated
          that he is satisfied that the rebates are in fact traceable, and
          readily accountable.  This fact, coupled with Customs approval of
          the method in which the transaction was structured, mandates that
          the entries be liquidated pursuant to transaction value, that is,
          the invoiced price less the subsequent rebate.  At the time of
          the entries, transaction value was applicable and the "price
          actually paid or payable" should have been equal to the invoiced
          amount less any subsequent rebates.  The importer relied upon the
          approval of Customs regarding the rebates.  Moreover, the
          instructions regarding unliquidated entries uses the term "should
          be" rather than "shall be".

                Given the facts and circumstances of this particular case
          as a whole, retroactive application of C.I.E. 13/85 would be
          inequitable.

                Please note that T.D. 86-56 dated March 6, 1986, eliminated
          the practice of invoicing at a higher price with a subsequent
          rebate from the seller to the buyer to arrive at the agreed-upon
          contract price.

          HOLDING:

                The entries should be liquidated pursuant to transaction
          value, section 402(b) of the TAA.  The appraisement method should
          be governed by C.S.D. 85-15 dated September 13, 1985
          (Headquarters Ruling No. 543358), which held that the original
          agreed-upon price between the parties represents the "price
          actually paid or payable" pursuant to section 402(b) of the TAA.
          This takes into account the subsequent rebate made by the seller
          of the merchandise, through its subsidiary, to the buyer.  













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                This conclusion is limited to these particular entries and
          to this factual scenario.  Moreover, pursuant to T.D. 86-56 dated
          March 6, 1986, Customs no longer accepts documentation with
          respect to imported merchandise which contains inconsistencies in
          price or value information.

                                        Sincerely,




                                        John Durant
                                        Acting Director,
                                        Commercial Rulings Division