HQ 544239: Decision on Application for Further Review of Protest No. 3801-5-002675

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 544239

                                                   November 18, 1988

          CLA-2  CO:R:CV:V  544239 VLB


          CATEGORY: Valuation


          District Director of Customs
          Detroit, Michigan  48226-2568


          RE: Decision on Application for Further Review of Protest
              No. 3801-5-002675


          Dear Sir:

                This is in response to your memorandum of September 28,
          1988, (PRO-1-COD D), concerning the subject protest.  The protest
          was filed against your decision in the liquidation of entries
          made by the importer.   The merchandise was appraised pursuant to
          section 402(f) of the Tariff Act of 1930, as amended by the Trade
          Agreements Act of 1979 (19 U.S.C. 1401a(f); TAA).  You determined
          that the appraised value of the merchandise was the price paid by
          the seller plus brokerage and Canadian inland freight to the
          Canadian seller's plant.


          FACTS:

                The merchandise in question is gate valves.  The valves are
          manufactured in Japan and sold for export to the seller in
          Canada.  The seller in turn sells the valves to the importer for
          the same price that the seller paid to the manufacturer.

                The seller and the importer are related parties under
          section 402(g) of the TAA.  Nevertheless, the importer contends
          that it has a purchase agreement with the buyer to sell the
          merchandise at cost between the two companies, i.e. the purchase
          price from the Japanese manufacturer, and that transaction value
          is the appropriate appraisal method.

                You have concluded that neither the transaction value nor
          any of the other enumerated appraisement methods are applicable
          to this transaction, and therefore the merchandise must be
          appraised under section 402(f) of the TAA.














                                        - 2-

          ISSUE:


                Whether appraisement of the imported merchandise pursuant
          to section 402(f) of the TAA was proper.


          LAW AND ANALYSIS:

                Transaction value, the preferred method of appraisement is
          defined in section 402(b)(1) of the TAA as the "price actually
          paid or payable for merchandise when sold for exportation to the
          United States . . . ."  Section 402(b)(2)(B) states the
          following:

                The transaction value between a related buyer and seller is
                acceptable . . . if an examination of the circumstances of
                the sale of the imported merchandise indicates that the
                relationship between such buyer and seller did not
                influence the price actually paid or payable; . . .

                In determining whether the relationship between the parties
          influences the price of imported merchandise, the buyer and
          seller must prove that although they are related, they buy and
          sell from one another as if they are not related.  There are two
          methods for determining whether the transaction value is
          acceptable.  The first method involves an examination of the
          circumstances of sale of the imported merchandise to determine if
          the relationship between the buyer and the seller influenced the
          price actually paid or payable.  The second method involves using
          a series of test values as a basis of comparison to the
          transaction value.  If the transaction value closely approximates
          any one of the test values, it will be accepted.

                In this case, it appears that the parties have not met
          either of the foregoing criteria.  First, the price is not
          settled in a manner consistent with the seller's normal pricing
          practice.  The seller admits that it incorporates a 25 percent
          profit margin into the price for sales to non-related parties,
          but excludes the profit margin when it sells to the importer.
          Second, the parties failed to submit any evidence that indicated
          that the price is consistent with industry practice or that the
          alleged transaction value closely approximated a test value.
          Therefore, transaction value cannot be used to appraise the
          merchandise.

















                                        - 3 -

                Further, because there is no evidence of sales of identical
          or similar merchandise to unrelated purchasers in the U.S., there
          is no value that can serve as a basis of appraisement under
          transaction value of identical or similar merchandise.  Thus,
          transaction value pursuant to sections 402(b) and (c) were
          properly eliminated as means of appraisement.

                However, prior to resorting to a section 402(f)
          appraisement, it is necessary to proceed sequentially through the
          remaining bases of appraisement.  If it becomes necessary to
          appraise pursuant to section 402(f) of the TAA, the value should
          be based, to the greatest extent possible, on previously
          determined value.  See, 19 CFR 152.107(a).

                In this case, deductive value is not an available method of
          appraisement.  Deductive value requires a value at which the
          merchandise is resold in the U.S.  In this case, there is no
          evidence to indicate when or at what price the valves were sold
          in the U.S.

                Likewise, computed value cannot be used to appraise the
          merchandise.  Under computed value the following items are added
          together: (1) the cost or value of the materials and the
          fabrication employed in the product;  (2) the profit and general
          expenses equal to that usually reflected in sales of merchandise
          of the same class as the imported merchandise;  (3) the value of
          any assists and (4) the packing costs.  In the present case,
          there is no evidence that establishes any of these amounts.

                Therefore, the only method left for appraising the
          merchandise is section 402(f), the method used to liquidate the
          entry.  We find that a reasonable approach was used in
          determining this value.  Specifically, the appraisement was based
          on the seller's latest cost sheet which stated the price the
          seller had paid for the merchandise.  Brokerage and Canadian
          inland freight to the seller's plant were then added to arrive at
          the final value of the merchandise.


          HOLDING:

                In light of the foregoing, it is our conclusion that
          transaction value pursuant to section 402(b) of the TAA was
          properly rejected as a means of appraisement.  Moreover, the
          method established by Customs under section 402(f) in liquidating
          the subject entry was proper under the circumstances presented.
















                                        - 4 -

                The protest should be denied.  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




















































          cc: CLA-2 CO:R:C:V:VLB:MM: FNL 11/16/88