HQ 544450: Decision on Application for Further Review of Protest No. 3004-88-000017

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 544450
                              November 5, 1990

VAL CO:R:C:V  544450 ML

CATEGORY:  Valuation

District Director of Customs
Seattle, Wa  98174

RE: Decision on Application for Further Review of Protest
    No. 3004-88-000017

Dear Sir:

     This protest was filed against your decision in the
liquidation of various entries made by C.F. Liebert, Inc. on
behalf of Gordon Hunter Knitwear, Inc.(hereinafter referred to as
the "importer").  The imported merchandise was appraised pursuant
to section 402(b) of the Tariff Act of 1930, as amended by the
Trade Agreements Act of 1979 (19 U.S.C. 1401a(b); TAA).

FACTS:

     Certain shipments of wool knit sweaters were manufactured in
the United Kingdom by Dalkeith Knitwear, Inc.(hereinafter
referred to as the "manufacturer").  The importer, a Canadian
company, purchased the sweaters from the manufacturer and
imported them into the United States.  The protestant (the
"broker") performs warehousing and distribution services for the
importer and Aljean of Canada, Ltd., through its United States
division, Aljean, Inc.  Aljean, Inc. is granted exclusive
distribution rights to the manufacturer's products purchased by
the importer.  Aljean, Inc. never holds title to the merchandise.
In cases where sweaters were pre-sold to United States
purchasers, title passed from the importer to the purchaser at
the time of delivery; and in the case of merchandise that is
warehoused in the United States pending its sale to United
States purchasers, the importer retains title.  The entries
covered by this Application for Further Review (AFR) were the
subject of Headquarters Ruling Letter (HRL) No. 543624, dated
August 26, 1987, also cited as Internal Advice (IA) 70/85.

ISSUE:

     (1)  Whether the sale for exportation of the merchandise
occurred between the importer and the United States purchasers as
was found to be the case in IA 70/85?

     (2)  Whether the merchandise was appraised using prices that
were inaccurate?

LAW AND ANALYSIS:

     In IA 70/85, Headquarters held that the transaction which
caused the merchandise to be exported to the United States was
the sale between the importer and the United States purchasers,
which included the selling commissions received by Aljean, Inc.
as part of the appraised value.  We went on to say that where the
merchandise was exported to a warehouse in the United States
without any U.S. purchasers prior to that exportation, the
transaction value will be the "price actually paid or payable"
between the importer and the manufacturer.

     In IA 70/85, we explained that transaction value, the
primary means of appraisement under the TAA, 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
certain enumerated additions.  The transaction to which the
phrase "when sold for exportation to the United States" refers is
the transaction which most directly causes the merchandise to be
exported to the United States.  (See TAA #57, Headquarters Ruling
No. 542928, dated January 21, 1983).


     The protestant asserts that we misunderstood the chain of
events as between the manufacturer and the importer,
specifically, as regards the timing of reservation of factory
space and in hand purchase orders.  We do not agree with this
assertion.  The transaction which caused the merchandise to be
exported was the sale between the manufacturer and the importer,
and not the mere reservation of factory space.  Assuming that the
relationship between the parties did not influence the price
actually paid or payable, the sales price between the
manufacturer and the importer was the basis for transaction value
for the warehoused merchandise.  If the situation arises where
items are transhipped through Canada and a contingency of
diversion exists, the import specialist will need to determine
when the sale for exportation to the United States takes place.

     The protestant claims that there was a transfer of title
between Aljean, Inc. and the importer.  As regards this claim, we
affirm the initial conclusions drawn in IA 70/85.  The documents
submitted in this AFR do not substantiate this claim.
Additionally, monies deposited to an account do not demonstrate
that control over the merchandise has been transferred.
Notwithstanding assertions to the contrary, Aljean, Inc. is
merely acting as an agent.  Pre-sold sweaters are delivered
directly to the United States purchasers with title passing at
the time of delivery.  Aljean, Inc. never acts as the importer of
record, but does perform duties associated with an agency
relationship.  In this case, transaction value was based on the
sale between the importer and the United States purchaser.

     Finally, the protestant asserts that the import specialist
used the Canadian price list when appraising the merchandise
rather than using the United States price list.

     No legal authority exists to appraise imported merchandise
on the basis of price lists.  If, however, the import specialist
confirms that the merchandise was sold at a particular price as
was claimed by the importer, only later to inadvertently assign a
different price to the merchandise, then the merchandise was in
fact, appraised inappropriately and your office should make the
necessary adjustments.

HOLDING:

     The facts of this case support the conclusions drawn in IA
70/85.  The transaction which caused the merchandise to be
exported to the United States was the sale between the importer
and the United States purchasers.  The amounts retained by
Aljean, Inc. for it's marketing services are dutiable as selling
commissions.  Where the merchandise was exported to a warehouse
in the United States without any U.S. purchasers prior to that
exportation, the transaction value will be the "price actually
paid or payable" between the importer and the manufacturer,
assuming that their relationship did not influence the price.

      Accordingly, you are directed to deny this protest to the
extent necessitated by this decision.  If an inappropriate price
was used to appraise the merchandise, then the proper price needs
to be used.  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