HQ 954720: Protest 4909-93-100039; Suzuki Sidekick and Samurai; sports- utility vehicles; HQs 545144, 955723, 957352; Marubeni America Corp. v. U.S.; Nissho Iwai American Corp. v. U.S.

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 954720

                         February 6, 1995
                                                               


CLA-2 CO:R:C:M  954720 LTO

CATEGORY:  Classification

TARIFF NO.:  8703.23.00

District Director 
U.S. Customs Service
La Puntilla #1
San Juan, Puerto Rico 00903

RE:  Protest 4909-93-100039; Suzuki Sidekick and Samurai; sports-
     utility vehicles; HQs 545144, 955723, 957352; Marubeni
     America Corp. v. U.S.; Nissho Iwai American Corp. v. U.S.

Dear District Director:

     The following is our decision regarding the request for
further review of Protest 4909-93-100039, which concerns the
classification and valuation of 1990/1 model year Suzuki Sidekick
and Samurai sports-utility vehicles under the Harmonized Tariff
Schedule of the United States (HTSUS).  The subject merchandise
was entered on January 26, 1989, and the entry was liquidated on
January 15, 1993.  The protest was timely filed on April 14,
1993.

FACTS:
 
     The articles in question are 1990/1 model year Suzuki
Sidekick and Samurai (soft-top and hard-top) sports-utility
vehicles.  Both are 2-door motor vehicles with rear seats and
other rear passenger amenities, such as, seat belts, carpeting,
footwells, ashtrays (Sidekick), stereo speakers, handholds, dome
light and headliner.  The Samurai (soft-top version) and Sidekick
also have rear and side windows.  The Samurai has a leaf-spring
type rear suspension, while the Sidekick rear suspension has coil
springs and shock absorbers with a center "wishbone" arm over the
rear axle housing.  The spare tire is fitted on the outside rear,
and the jack under the front seat, of both vehicles.

     The protestant contends that the vehicles are classifiable
under heading 8703, HTSUS, as motor vehicles principally designed
for the transport of persons.  The vehicles were classified upon
liquidation under heading 8704, HTSUS, as motor vehicles for the
transport of goods.
                              - 2 -

     Suzuki del Centro (the "protestant"), is one of a number of
automobile dealerships owned by San Juan Suzuki, Inc. (SJS).  On
behalf of the protestant, and on behalf of its other dealerships,
SJS orders Suzuki automobiles from Interamericana Trading Corp.
(ITC), a Barbadian distributor responsible for the sale of Suzuki
motor vehicles throughout the Caribbean.  There is no information
as to how payment is effected in this transaction.

     Upon receipt, ITC places protestant's orders with Suzuki
Motor Co., Ltd., Japan ("Suzuki"), the manufacturer of the
vehicles.  The terms of sale governing the ITC-Suzuki transaction
are C&F.  The commercial invoices prepared by Suzuki reflect ITC
as the buyer and the protestant as the consignee.  Payment is
effected by letter of credit with ITC as principal and Suzuki as
beneficiary.  The automobiles are shipped directly from Japan to
Puerto Rico.

     The protestant, SJS and ITC share common ownership.  No
information has been presented as to the relationship between ITC
and Suzuki.

     The protestant maintains that appraisement should be based
on the sale between the manufacturer and the middleman.  However,
the entry was liquidated using the sale between the middleman and
the protestant as the basis of appraisement.

ISSUE:

1.   Whether the 1990/1 model year Suzuki Sidekick and Samurai
are classifiable as motor vehicles principally designed for the
transport of persons under heading 8703, HTSUS, or as motor
vehicles for the transport of goods under heading 8704, HTSUS.

2.   Whether the sale between the manufacturer and the middleman
constitutes a sale for exportation for the purposes of
determining transaction value.
  

LAW AND ANALYSIS:

   1.  Classification

     The General Rules of Interpretation (GRI's) to the HTSUS
govern the classification of goods in the tariff schedule.  GRI 1
states in pertinent part that "for legal purposes, classification
shall be determined according to the terms of the headings and
any relative section or chapter notes . . . ."

     The headings at issue are as follows:

                                   - 3 -

     8703      Motor cars and other motor vehicles principally
               designed for the transport of persons (other 
               than those of heading 8702), including station
               wagons and racing cars 

*    *    *    *    *    *    *    *    *    *    *    *    *    

     8704      Motor vehicles for the transport of goods

     In Marubeni America Corp. v. U.S., Appeal No. 93-1467
(September 7, 1994), the U.S. Court of Appeals for the Federal
Circuit (CAFC) affirmed the determination of the Court of
International Trade that the 1989 and 1990 model year Nissan
Pathfinder was classifiable as a motor vehicle principally
designed for the transport of persons under heading 8703, HTSUS,
dutiable at 2.5 percent, rather than as a motor vehicle for the
transport of goods under heading 8704, HTSUS, dutiable at 25
percent (pursuant to subheading 9903.87.00, HTSUS).  See Marubeni
America Corp. v. U.S., 821 F.Supp. 1521 (1993). 

     The CAFC stated that for a vehicle to be classified under
heading 8703, HTSUS, the "vehicle's intended purpose of
transporting persons must outweigh an intended purpose of
transporting goods."  In making this determination, the Court
stated that it is necessary to consider both the structural and
auxiliary design features.  Additionally, the Court found that
the number of doors on the vehicle was not determinative.
 
     Structural features that would lead to the classification of
a vehicle under heading 8703, HTSUS, include:  a rear passenger
seat; side and rear windows (in an enclosed vehicle); a rear
suspension suitable for rear passengers; and any other intrusions
into the vehicle's cargo-carrying capability, such as, the
inclusion of a spare tire in the rear of the vehicle.

     Relevant auxiliary features include:  rear seat stereo
outlets, ashtrays, cubbyholes, arm rests, handholds, footwells,
seat belts and child seat tie down hooks; carpeted cargo area;
and any other passenger amenities. 
     
     The 1990/1 model year two-door Suzuki Samurai and Sidekick
have rear passenger seats that are not removable.  The Samurai
(soft-top version) and Sidekick have rear and side windows.  The
rear suspensions of the vehicles are particularly suitable for
rear passengers (smoother ride, smaller payload than standard
pickup truck).  Further, while there are not any other intrusions
into the rear passenger area of either vehicle (i.e., the spare
tire is located on the outside rear, and the jack under the front
seat, of both vehicles), the vehicles have several features
designed for the comfort and safety of rear passengers.  For                               - 4 -

example, the Samurai has rear footwells and is semi-carpeted,
while the Sidekick has footwells, ashtrays and is fully carpeted. 
Moreover, both vehicles are fitted with rear seat belts,
handholds and stereo speakers.

     It is our opinion that the structural and auxiliary design
features of the 1990/1 model year Samurai and Sidekick, like the
Nissan Pathfinder, demonstrate that the vehicles' intended
purpose of transporting persons outweighs an intended purpose of
transporting goods.  See HQ 957352, dated December 27, 1994 (Ford
Explorer); HQ 955723, dated January 6, 1995 (Isuzu Trooper and
Amigo).  In accordance with Marubeni, the vehicles are
classifiable under heading 8703, HTSUS.


   2.  Value

     Merchandise imported into the United States is appraised in
accordance with section 402 of the Tariff Act of 1930, as amended
by the Trade Agreements Act of 1979 (TAA; 19 U.S.C.  1401a). 
The preferred method of appraisement under the TAA is transaction
value, defined as "the price actually paid or payable for the
merchandise when sold for exportation to the United States," plus
certain enumerated additions.  19 U.S.C.  1401a(b)(1).  However,
if the buyer and seller are related, transaction value is
acceptable only if the relationship did not influence the price
actually paid or payable, or the price approximates certain "test
values."  19 U.S.C.  1401a(b)(2)(B).

     In Nissho Iwai American Corp. v. United States, 982 F.2d 505
(Fed. Cir. 1992), the Court of Appeals for the Federal Circuit
reaffirmed the principle established by E.C. McAfee Co. v. United
States, 842 F.2d 314 (Fed. Cir. 1988), that a manufacturer's
price, rather than the middleman's price, is valid so long as the
transaction between the manufacturer and the middleman falls
within the statutory provision for valuation.  In reaffirming the
McAfee standard the court stated that in a three-tiered
distribution system:

     The manufacturer's price constitutes a viable
     transaction value when the goods are clearly destined
     for export to the United States and when the
     manufacturer and the middleman deal with each other at
     arm's length, in the absence of any non-market
     influences that affect the legitimacy of the sales
     price....[T]hat determination can only be made on a
     case-by-case basis.

     Id. at 509.  See also, Synergy Sport International,
     Ltd. v. United States, 17 C.I.T. ___, Slip Op. 93-5
     (Ct. Int'l. Trade January 12, 1993).
                              - 5 -

     As a general matter in situations of this type, Customs
presumes that the price paid by the importer is the basis of
transaction value.  However, in order to rebut this presumption
the importer must, in accordance with the court's standard in
Nissho, provide evidence that establishes that at the time it
purchased, or contracted to purchase, the imported merchandise,
the goods were "clearly destined for export to the United States"
and that the manufacturer and middleman dealt with each other at
"arm's length."  Customs has held that it is the importer's
responsibility to demonstrate that the standard set forth in
Nissho and Synergy has been met.  See HQ 545144, dated January
19, 1994.

     In the instant case the imported merchandise was appraised
on the basis of the price paid by the importer/protestant to
Interamericana, rather than on the basis of the price paid by
Interamericana, the middleman, to the manufacturer, Suzuki.  No
evidence has been presented with respect to whether the first
sale, i.e., that between Suzuki and Interamericana, meets the
standard of Nissho.  Specifically, no evidence has been presented
to establish that the vehicles purchased from Suzuki were
"clearly destined for exportation to the United States," nor that
the sale between the manufacturer and the middleman was
transacted at "arm's length."  Consequently, the protestant has
not met its burden of showing that the transaction value of the
protested merchandise should be based on the sale between Suzuki
and Interamericana.

HOLDING:

1.   The 1990/1 model year Suzuki Samurai and Sidekick are
classifiable under subheading 8703.23.00, HTSUS. 

2.   The sale between the middleman and the importer/protestant
constitutes the sale for exportation for the purpose of
determining transaction value.
 
     The protest should be GRANTED with regard to the
classification issue, but DENIED with regard to the valuation
issue.  In accordance with section 3A(11)(b) of Customs Directive
099 3550-065, dated August 4, 1993, Subject: Revised Protest
Directive, this decision, together with the Customs Form 19,
should be mailed by your office to the protestant no later than
60 days from the date of this letter.  Any reliquidation of the
entry in accordance with the decision must be accomplished prior
to the mailing of the decision.  Sixty days from the date of the
decision the Office of Regulations and Rulings will take steps to
make the decision available to customs personnel via the Customs                               - 6 -

Rulings Module in ACS and the public via the Diskette
Subscription Service, Freedom of Information Act and other public
access channels.

                              Sincerely,




                              John Durant, Director
                              Commercial Rulings Division