HQ 544325: Application for Further Review of Protest No. 2704-86-003164; C.I.E. 13/85, T.D. 86-56

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 544325

                       September 26, 1991


VAL CO:R:C:V  544325 DPS

CATEGORY:  Valuation


District Director
Los Angeles
300 South Ferry Street
Terminal Island
San Pedro, California  90731

RE:  Application for Further Review of Protest No. 
     2704-86-003164; C.I.E. 13/85, T.D. 86-56

Dear Sir:

     The subject protest and application for further review
concerns the appraisement of merchandise described as "dress
shirts" imported from Taiwan by The Arrow Company, Division
Cluett, Peabody & Co., Inc. ("Arrow").

FACTS:

     The merchandise at issue was imported on July 1, 1985, and
entered July 12, 1985, at the invoice values, which the supplier,
General Garment (Taiwan) Ltd. ("General Garment"), through its
branch office in Hong Kong, General Garment (H.K.) Ltd., adjusted
in order to secure quota allocations to comply with the Arrow
Co.'s ("Arrow") purchase orders.  According to statements and
documents submitted by the protestant's counsel, General Garment
and Arrow had agreed, prior to exportation, that Arrow would pay
the higher invoice prices and that General Garment would refund
the difference between the agreed-upon prices and the invoice
prices.  

     The protestant's counsel argues that as a result of clerical
errors, mistakes of fact, or other inadvertence, the
documentation evidencing the actual contract prices and the
reimbursements from General Garment, although submitted to
Customs 8 days after entry and subsequently after a protest had
been filed, was not matched up with the entry.  Accordingly,
Arrow's counsel filed a request for reliquidation pursuant to
Section 520(c)(1) of the Tariff Act of 1930, as amended, 19
U.S.C.  1520(c)(1).  Customs at the port of Los Angeles denied
this request on May 7, 1986, stating:


     
     The copies of the checks supplied with the Protest/Sec.
     520 claim do not constitute acceptable proof of a
     rebate from the seller to the importer.  
     The merchandise is of Taiwan origin and the checks are
     drawn on the account of a Hong Kong company, most
     likely the selling or buying agent.

 Los Angeles Customs based its position on Headquarters Ruling
Letter (HRL) 543311 BNS, subsequently issued as C.I.E. 13/85,
which was not disseminated to the public until September 16,
1985, after the subject entry had been liquidated.  

     The protestant asserts that the request for reliquidation
should have been approved, because evidence of direct
reimbursement from the seller to the importer was not required by
Customs to establish that the transaction value was the actual
contract price rather than the adjusted invoice price, at the
time of entry or liquidation of the subject merchandise.  

     
ISSUE:

     Whether evidence of direct reimbursement from the seller to
the importer was required at the time of liquidation to establish
that the transaction value was the actual contract price rather
than the adjusted invoice price.


LAW & ANALYSIS:

     Transaction value, the preferred method of appraisement is
defined in section 402(b)(1) of the Tariff Act of 1930, as
amended by the Trade Agreements Act of 1979 (19 U.S.C. 1401a(b);
TAA) as the "price actually paid or payable for the merchandise
when sold for exportation to the United States," plus five
enumerated statutory additions.   402(b)(4)(A) of the Tariff Act
of 1930 as amended by the TAA provides the following definition: 

     The term "price actually paid or payable" means the
     total payment (whether direct or indirect, and
     exclusive of any costs, charges, or expenses incurred
     for transportation, insurance, and related services
     incident to the international shipment of the
     merchandise from the country of exportation to the
     place of importation in the United States) made, or to
     be made, for imported merchandise by the buyer to, or
     for the benefit of, the seller.




     Prior to Customs September 16, 1985 issuance of Headquarters
Ruling Letter 543311 in the form of C.I.E. 13/85, the Customs
Service allowed an importer to reduce appraised value through
pre-importation rebates, whether paid directly or indirectly by
the seller.  Only upon the dissemination of 13/85 was the policy
in place that the type of evidence acceptable as proof of so-
called rebate transactions be limited to direct payments from
seller to importer.   Subsequently, T.D. 86-56 (effective May 5,
1986) further addressed situations involving price manipulations
to obtain quota from exporting countries, and the use of false
invoices by exporters to obtain export approval of the
appropriate government authority in the country of origin.  
T.D. 86-56, in effect, overruled C.I.E. 13/85, rendering its
directives moot, and effectively preventing Arrow from continuing
the practice utilized in the transaction which is the subject of
this protest.

     Until September 16, 1985, when C.I.E. 13/85 was issued
modifying C.S.D. 85-15, the actual contract price was the
dutiable transaction value in free quota overbill and rebate
situations, regardless of whether the rebates were made directly
or indirectly.  In accordance with Customs treatment of such
transactions, in the instant case, Arrow provided Customs with
copies of checks in the exact amounts of its overpayments.  While
Arrow acknowledges that the checks it received were drawn on a
bank account of a subsidiary or affiliate of the Taiwanese
manufacturer, Arrow claims it took the necessary and required
actions to document the true value of the entry and that their
method of documenting the rebates was in complete compliance with
the Customs requirements as they existed at the time that the
transaction occurred.  With regard to the subject transaction, we
agree.

     It was not until issuance of the September 16, 1985 ruling
that checks drawn on accounts of subsidiaries of the seller, or
affiliated entities, were deemed insufficient proof of the price
paid for imported merchandise.   Had supporting documentation
submitted by Arrow only eight days after the date of entry on
July 19, 1985, been matched up with the entry at that time, there
would have been no question that the proof of rebates was
sufficient to establish the contract price as the transaction
value of the entry at issue.  Accordingly, we are satisfied that
the submitted proof of rebates was sufficient to establish the
contract price as the transaction value of the subject entry.  











HOLDING:

     In accordance with the foregoing, you are hereby directed to
grant the subject protest.  The entry at issue should be
reliquidated for a refund on the grounds that the actual contract
price represents the transaction value of the imported
merchandise.  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