HQ 544292: Decision on Application for Further Review of Protest No. 3801-6-001165

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 544292


                                  February 21, 1989


          CLA-2  CO:R:CV:V  544292 VLB


          CATEGORY:  Valuation


          District Director of Customs
          Detroit, Michigan  48226-2568


          RE: Decision on Application for Further Review of Protest
              No. 3801-6-001165


          Dear Sir:

                This protest was filed against your decision in the
          liquidation of various entries made by -----------------------, a
          lumber distributor (hereinafter referred to as the
          "distributor").  The merchandise was appraised pursuant to
          sections 402(b) and (c) of the Tariff Act of 1930, as amended by
          the Trade Agreements Act of 1979 (19 U.S.C. 1401a(b) and
          (c);TAA).


          FACTS:

                The merchandise in question is waferboard (particle board)
          that is manufactured in Canadian mills.  The valuation of
          Canadian waferboard is the subject of numerous protests arising
          out of the various importers' manner of doing business.  In this
          case the distributor sold the merchandise to Carter Stores
          (hereinafter referred to as the "U.S. purchaser"), a party
          related to the distributor under section 402(g) of the TAA.

                  The import specialist has provided an explanation of the
          method of appraisement.  He states that he considered the sale
          between the distributor and the related U.S. purchaser to be the
          sale that most directly caused the merchandise to be exported to
          the U.S.  Then, due to the fact that the distributor/U.S.
          purchaser sale was a related party transaction, the import
          specialist examined whether the relationship between the parties
          influenced the price of the merchandise.  Specifically, he
          compared the distributor/U.S. purchaser sales to other
          distributor's sales to unrelated U.S. purchasers.  If the price













                                        - 2 -

          of the related sale approximated the price in the unrelated
          sales, the distributor's price was accepted.

                On the other hand, if there was not a close approximation
          between the prices, the imported specialist concluded that the
          relationship had influenced the price of the merchandise.  As a
          result, these entries were appraised under section 402(c) of the
          TAA, transaction value of identical or similar merchandise.  The
          appraisements were based on sales of similar merchandise by
          unrelated distributors, less nondutiable charges.

                The distributor contends that the merchandise should be
          appraised under section 402(b) of the TAA.  The distributor
          further alleges that the transaction value for the merchandise is
          the price the distributor paid the Canadian manufacturer for the
          goods.  The distributor states that the terms of sale between it
          and the manufacturer are "F.O.B. Mill".  The merchandise is then
          shipped to a reload center in Windsor, Canada "for redistribution
          and export into the United States".

                In addition, according to the distributor, the pro forma
          invoices submitted to Customs contain prices that represent the
          cost of the merchandise delivered to the reload center plus a
          handling charge for the reload center.  That is, when the
          distributor receives the waferboard at the reload center, the
          actual invoice price of the material (F.O.B. mill), the actual
          freight in U.S. funds paid to the Canadian railway companies, and
          the handling charge paid to the reload center are entered.  The
          distributor's computer then computes a daily average cost of
          material at that point.

                Subsequently, the distributor shows this average amount on
          the pro forma invoices.  Then, the rail freight is deducted to
          arrive at an average mill price for the merchandise.  The
          distributor notes that the average mill price is slightly higher
          than it originally pays the manufacturer because the freight
          charges from the nearest mill are deducted on all pro forma
          transactions.


          ISSUE:

                Whether transaction value is the proper method of
          appraisement for the merchandise.


















                                        - 3 -

          LAW AND ANALYSIS:

                The first issue involves what appraisement method should be
          used to determine the value of the merchandise for duty purposes.
          Transaction value, the preferred method of appraisement, is
          defined in section 402(b) of the TAA as the "price actually paid
          or paid or payable for the merchandise when sold for exportation
          to the United States. . ." (emphasis added).  In Headquarters
          Ruling 554998 dated January 24, 1989, we held that if the
          documentation shows that the distributor invoiced its customer at
          the time the merchandise is exported from the reload center, or
          shortly thereafter, transaction value is the proper method of
          appraisement.  Moreover, the transaction value is the price that
          the U.S. customer paid to the distributor for the merchandise.

                In the present case, the import specialist initially
          determined that the price that the U.S. customer paid for the
          merchandise was the proper transaction value.  The distributor
          has failed to present any evidence, e.g. commercial invoices,
          that indicates that the import specialist was incorrect.

                The import specialist then examined the acceptability of
          the transaction value because the distributor and the U.S.
          customer were related parties.  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
          influenced the price of the goods, the buyer and the 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
          ascertaining 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.


















                                        - 4 -

                In this case, the import specialist used the second method
          to determine whether the transaction value was acceptable.  As
          discussed previously, in some entries the transaction value
          closely approximated the test values and was accepted.  However,
          in many entries the transaction value was unacceptable.

                The distributor has not provided any evidence that shows
          that Customs incorrectly eliminated transaction value as the
          proper appraisement method.  In addition, the distributor has
          failed to proffer any evidence that the transactions used to
          appraise the merchandise did not meet the requirements of section
          402(c) of the TAA, e.g. different quantities.  Therefore, we hold
          that Customs appraisement of the merchandise was proper.



          HOLDING:

                Transaction value is the proper method of appraisement in
          the entries where the price actually paid or payable closely
          approximates the test values.  In those cases, the transaction
          value is the price that the U.S. customer paid the distributor
          for the merchandise.

                Transaction value is an unacceptable method of appraisement
          in the entries where the price actually paid or payable did not
          closely approximate the test values.  In those entries, the
          proper method of appraisement is under section 402(c).  The
          appraisements should be based on previously accepted transaction
          values for sales between another U.S. purchaser and an unrelated
          distributor for identical or similar merchandise.

                You are directed to deny the protest.  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