HQ 544635: Decision on Application for Further Review of Protest No. 3001-6-000149

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 544635
                                   May 24, 1991

VAL CO:R:C:V  544635 ML

Category: Valuation

District Director
Seattle, Washington

RE:  Decision on Application for Further Review of Protest
     No. 3001-6-000149

Dear Sir:

     This is in further response to a protest filed against your
decision in the liquidation of various entries made by ---------
------------ U.S.A., Inc., a machine tool importer.  In response
to a previous decision on Application for Further Review of
Protest N0. 3001-6-000149, HRL# 544469, dated August 16, 1990,
both counsel for ------------------------- U.S.A. and Import
Specialist Kent Barnes submitted additional information, dated
February 28, 1991, and file APP-1 SE:C:D KB, dated January 8,
1991, respectfully.  Based on the additional information
received, this office is satisfied that a bona fide sale of the
imported merchandise was made to the distributor and that this
sale was to an unrelated party, at the first commercial level
after importation.  The merchandise was manufactured in Japan by
---------------------., Ltd.  The merchandise was appraised
pursuant to section 402(d) of the Tariff Act of 1930, as amended
by the Trade Agreements Act of 1979 (19 U.S.C. 1401a(d); TAA).

FACTS:

     The imports in question are machining centers and other
machine tools.  These machine tools were manufactured in Japan by
---------------------., Ltd. (hereinafter referred to as the
"manufacturer") and consigned to --------------------- U.S.A.,
Inc. (hereinafter referred to as the "importer").  The
manufacturer shipped the merchandise either to the importer who
warehoused, serviced, and set a final price for the goods to be
charged to the ultimate purchaser in the United States, or to an
unrelated distributor.

     The protestant asserts that the distributor purchased the
machinery from the importer at an "adjusted price" then sold the
goods to the ultimate purchaser at a "final price".  The
protestant states that after the merchandise was sold to the
ultimate U.S. purchaser, the distributor deducted an 18%
commission from the final price paid, and remitted the remainder
to either the importer or to the manufacturer.  When the
manufacturer was given the entire remainder, it later remitted 3%
to the importer.

     In contrast to the importer's assertions, your office states
that the merchandise was sold to the distributor at the "final"
price.  The distributor's stated terms were FOB Chicago.  The
FOB Chicago price was arrived at by the addition of 22% to the
invoiced price shown on the commercial invoice between the
manufacturer and the importer.  You state that this 22% was said
to contain an 18% dealer's selling commission that was paid by
the manufacturer to the distributor (or deducted from the amount
remitted by the distributor to the manufacturer).  You also state
that you have very little documentation confirming that the final
price invoiced to the distributor was paid, and that you have no
evidence that a 3% remittance was ever paid.

ISSUES:

     (1)  Whether the commissions paid are those which are
usually paid in connection with sales in the United States and
would, therefore, be deductible under deductive value?

     (2)  Whether the actual costs associated with transportation
and insurance are deductible with respect to shipments of
merchandise from the place of importation to the place of
delivery in the United States?

LAW AND ANALYSIS:

          Deductive value, the method of appraisement used in
connection with the imported merchandise, is defined in section
402(d)(2)(A)(i) and (ii) of the TAA, as the price at which the
merchandise concerned is sold in the condition as imported at or
about the date of importation of the merchandise being appraised,
sold in the greatest aggregate quantity at or about such date, or
before the close of the 90th day after the date of such
importation.  The unit price at which merchandise is sold in the
greatest aggregate quantity is the unit price at which such
merchandise is sold to unrelated persons, at the first commercial
level after importation.  The sales price at that level is then
reduced by the following amounts specified under section
402(d)(3)(A) of the TAA:

          (i) any commission usually paid or agreed to be
          paid, or the addition usually made for profit and
          general expenses, in connection with sales in the
          United States of imported merchandise that is of
          the same class or kind, regardless of the country
          of exportation, as the merchandise concerned;

          (ii) the actual costs and associated costs
          of transportation and insurance incurred with
          respect to international shipment of the
          merchandise concerned from the country of
          exportation to the United States;

          (iii) the usual costs and associated costs
          of transportation and insurance incurred with
          respect to shipments of the merchandise
          concerned from the place of importation to
          the place of delivery in the United States,
          if such costs are not included as a general
          expense under clause (i);

          (iv) the customs duties and other Federal
          taxes currently payable on the merchandise
          concerned by reason of its importation, and
          any Federal excise tax on, or measured by the
          value of, such merchandise for which vendors
          in the United State are ordinarily
          liable,...

     Whether the 3% remittance and the 18% distributor commission
are the type usually paid or agreed to be paid in connection with
sales in the United States of imported merchandise that is of the
same class or kind, regardless of the country of exportation, is
a question of fact determined by the appraising officer.

     As mentioned above, your office stated that the merchandise
was sold to the distributor at the "final" price, whereas the
importer alleged that the merchandise was sold to the distributor
at an "adjusted" price, which was then sold to the ultimate
purchaser and a higher, "final" price.  A letter from the
importer to Customs, dated April 26, 1985, stated that the price
to the distributor was arrived at by adding 22% to the
consignee's price, thus setting up an FOB Chicago price.  The
importer stated that the 22% included import duty, charges for
importation, handling charges for the freight forwarder, inland
freight from Seattle to Chicago, warehousing charges, rigging
charges for shipment, and 18% of dealer's commission.  This
statement is consistent with the import specialist's summary of
the facts.

     The import specialist is of the opinion that the 18%
commission is an amount usually paid in connection with sales in
the United States of this kind of merchandise.  As regards the
additional 3%, the import specialist had no documentary evidence
to support whether this 3% was even paid by the manufacturer to
the importer.  In fact, the importer stated in the above cited
letter, that ------------------------- U.S.A., Inc. was only
acting as a go-between and did not obtain a commission of any
kind.  Irrespective of this fact, the importer contended in it's
protest that the "3% consignee's commission" should be deducted
from the dutiable value under section 402(d)(3)(A)(i) of the TAA.

      Given the importer's previous statement that it did "not
take any profit such as a sales commission", and the lack of
documentary evidence in the file to support finding that a
"commission" was paid, we have no evidence or authority to grant
this deduction.

     The second issue to be addressed is the protestant's
contention that no deduction was made for the costs and
associated costs of transportation and insurance incurred with
respect to shipment of the merchandise from the port of Seattle
to the importer's warehouse, or to the distributor's warehouse,
as provided by section 402(d)(3)(A)(iii) of the TAA.

     Section 402(d)(3)(A)(iii) of the TAA provides that the usual
costs associated with U.S. inland freight may be deducted from
the price of the merchandise.  Where the invoices are clear as to
the usual costs associated with U.S. inland freight, the
appropriate statutory deductions will be made.  In contrast,
where the invoices state identical cost figures, regardless of
whether the merchandise is being shipped to the distributor or
directly to the importer's warehouse, it is unclear as to what is
the usual cost and therefore, we do not have sufficient evidence
to make this adjustment or to say that the import specialist
concerned should have made this adjustment.

HOLDING:

     Under the facts provided, we conclude that the 18%
commission contained in the selling price to the distributor was
the only allowable deduction under section 402(d)(3)(A)(i), given
the appraising officer's determination that the commission was of
the kind usually paid in connection with sales of this kind in
the United States.

     Further, since sufficient evidence was not submitted to
Customs in this case demonstrating "usual costs", we have no
basis for making the adjustment set forth in section
402(d)(3)(A)(iii) of the TAA.

     Accordingly, you are directed to grant this protest in part
and to deny this protest in part.  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