Lots of Surplus Mixed Bearings; Transaction Value

HQ 547249 September 7, 1999 RR:IT:VA 547249 DWS CATEGORY: Valuation Mr. Robert L. Eisen Coudert Brothers 1114 Avenue of the Americas New York, NY 10036-7703 RE: Lots of Surplus Mixed Bearings; Transaction Value Dear Mr. Eisen: This is in response to your letter dated December 16, 1998, on behalf of Universal Bearing Company (“Universal”), concerning the proper appraisement of lots of surplus mixed bearings. It is noted that on August 18, 1999, you, a colleague, and a company representative met with myself and two other members of this office to discuss the merits of this case. It is our understanding that the merchandise is currently being entered into the U.S. and entries have been liquidated by Customs. We regret the delay in responding. FACTS: Universal purchases surplus bearings from Consolidated Bearing Co. (“Consolidated”), an unrelated company located in South Africa, and imports these bearings into the U.S. The bearings are purchased from Consolidated on a per lot basis. Each lot may contain a variety of bearings, including ball bearings, plain shaft bearings, radial bearings, and sleeve journal bearings. The bearings contained in each lot may originate from different countries, including Japan, Sweden, United Kingdom, France, Italy, Germany, Austria, and the U.S. The bearings in each lot may also be produced by different manufacturers, such as NSK, FAG, and INA. For each lot purchased, Consolidated provides Universal with a breakdown of the types of bearings contained in the lot, country of origin, and respective manufacturers. Many of the bearings imported by Universal from Consolidated are subject to antidumping duties, depending on their type, country of origin, and manufacturer. Universal and Consolidated negotiate prices on a per lot basis. You state that there is no price negotiated for each type of bearing contained within a given lot; the sales price is per lot, inclusive of all types of bearings contained therein. As an example of a transaction between Universal and Consolidated, you have included Invoice No. CBC002 (“CBC002") from Consolidated to Universal which demonstrates that the two parties have negotiated a price of $87,500 (including commission) for one lot of mixed surplus bearings, the unit being considered one lot. You state that the breakdown sheets provided by Consolidated to Universal indicate that the lot contains 3,110 bearings. Universal derives a per bearing price of $28.13 by dividing $87,500 by 3,110. The $28.13 price applies to all the bearings contained within the lot, regardless of type. Besides stating the unit price for the lot and the names of the parties involved in the transaction, CBC002 also provides the method of payment (money wired to bank), terms of sale (“Ex Works”), and destination of the goods (Detroit, Michigan). You state that, at importation, Universal is aware of the type, country of origin, and manufacturer of the bearings contained within a given lot based on the breakdown provided by Consolidated. The bearings are segregated on the entry summary according to tariff classification and antidumping case number. You claim that, in all cases, the bearings are classified properly and the country of origin of the bearings, for antidumping and other purposes, is known and properly declared, so that the correct duties are paid. ISSUE: Whether transaction value is the proper method of appraisement for the lots of surplus bearings imported into the U.S. by Universal. LAW AND ANALYSIS: Merchandise imported into the U.S. 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 is transaction value, which is defined as the "price actually paid or payable for merchandise when sold for exportation to the United States," plus certain statutorily enumerated additions. Section 402(b)(4)(A) of the TAA provides in relevant part: (A) 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 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. Section 152.103(a)(1), Customs Regulations [19 CFR 152.103(a)(1)] states, in pertinent part: (a) Price actually paid or payable - (1) General. In determining transaction value, the price actually paid or payable will be considered without regard to its method of derivation. It may be the result of discounts, increases, or negotiations, or may be arrived at by the application of a formula, such as the price in effect of the date of export in the London Commodity Market. ***** You claim that the method of apportionment you have proposed is reasonable and transaction value is the only viable method of appraising the subject merchandise. You state that the proposed method of apportionment is not used to result in lower duties paid by Universal. To determine whether, in the instant situation, transaction value is the proper method of appraisement, we must ascertain whether there is a sale of the merchandise for exportation to the U.S. For Customs purposes, a “sale” generally is defined as a transfer of ownership in property from one party to another for a consideration. J.L. Wood v. U.S., 62 CCPA 25, 33; C.A.D. 1139 (1974). Although J.L. Wood was decided under the prior appraisement statute, Customs recognizes this definition under the TAA. Several factors may indicate whether a bona fide sale exists between the potential seller and buyer. In determining whether property or ownership has been transferred, Customs considers whether the alleged buyer has assumed the risk of loss and acquired title to the imported merchandise. In addition, Customs may examine whether the alleged buyer paid for the goods, whether such payments are linked to specific importations of merchandise, and whether, in general, the roles of the parties and circumstances of the transaction indicate that the parties are functioning as buyer and seller. See HQ 545705, dated January 27, 1995. It appears that, in the instant transaction, the parties, Consolidated as the seller and Universal as the buyer, have negotiated a price for the lot of surplus bearings. We find that the manner in which the parties have agreed on a per bearing price is acceptable for appraisement purposes. As previously stated, CBC002 demonstrates that the amount owed to Consolidated is paid through the wire of monies into a bank account. Also, the terms of sale from Consolidated to Universal are “Ex Works.” These terms mean that Consolidated fulfills its obligation to deliver the goods when it has made the goods available at its premises (i.e., works). Once the goods have been made available, Universal acquires title to the goods and bears all costs and risks involved in taking the goods from Consolidated’s premises to the desired destination. Incoterms, International Chamber of Commerce, 44-48 (1990). Thus, these terms and the provided documentation indicate that a sale has occurred between Consolidated and Universal.. With regard to whether there is a sale for exportation to the U.S., CBC002 states that the destination of the merchandise is Detroit, Michigan. As CBC002 is evidence of the parties’ intent to export the merchandise to the U.S., and as we do not possess any evidence to dispute the shipping destination, we find that the merchandise is sold for exportation to the U.S. Therefore, based upon the facts as presented and the provided documentation, as it is our position that the elements of transaction value have been met and the method of apportionment you have proposed is acceptable for appraisement purposes, we find that transaction value is the proper method of appraisement for the lots of surplus bearings imported into the U.S. by Universal. HOLDING: Transaction value is the proper method of appraisement for the lots of surplus bearings imported into the U.S. by Universal. Sincerely, Thomas L. Lobred Chief, Value Branch