Application for Further Review of Protest Number 3501-09-100076 for Publisher’s Clearing House

HQ H074225 January 9, 2012 PUBLIC VERSON LIQ-4-01 OT:RR:CTF:ER H074225 CSO Port Director U.S. Customs and Border Protection 330 Second Avenue South, Suite 560 Minneapolis, Minnesota 55401 Re: Application for Further Review of Protest Number 3501-09-100076 for Publisher’s Clearing House Dear Port Director: On May 21, 2009, Protest 3501-09-100076 was filed with U.S. Customs and Border Protection (“CBP”) on behalf of Publisher’s Clearing House, LLC (“PCH”) and was subsequently forwarded to this office as an Application for Further Review (“AFR”). In the protest, PCH makes two arguments. First, PCH alleges that the appraised value of the subject handtrucks should be based on the price paid to the manufacturer. Second, PCH alleges that double antidumping duties (“ADD”) are not applicable because ADD were not reimbursed and a certificate of non-reimbursement was filed before the liquidation of the entry was final. However, we find that PCH may not use the first sale as a basis of appraisement for the subject merchandise because PCH failed to provide a complete paper trail. We also find that the certificate of non-reimbursement was filed with the protest and hence, rebutted the presumption that the importer was reimbursed for duties. FACTS: This case involves [XXX] imported trolleys that were appraised based on the sale between 37 Elephants Marketing LLC (located in Atlanta, Georgia) and Publisher’s Clearing House (“PCH”) at the price of $[X.XX] each, for a total value of $[X,XXX.XX]. The entries were liquidated as entered. PCH filed a protest claiming that the imported merchandise should have been appraised based on the sale between the Chinese manufacturer, Wright Housewares Co., and the Hong Kong middleman, Extra Trading, at $[X.XX] each for a total price of $[X,XXX.XX]. The Port proposes to deny the protest because the role of the middleman was not clear. In support of its protest, PCH submitted the following documents: Product specification sheet and assembly instructions for a trolley listing 37 Elephants as the vendor; Purchase order (“PO”) 3158884 dated September 5, 2006, from PCH to 37 Elephants showing $[X,XXX.XX] as the price for [XXX] trolleys; PO dated September 7, 2006, from Extra Trading to Wright that references PCH’s SKU and PO number and notes delivery to PCH’s U.S. warehouse and showing $[X,XXX.XX] as the price for [XXX] trolleys. The PO also shows the terms of sale as FOB Shenzhen; Commercial Invoice #WR5249 from Wright to Extra Trading dated October 9, 2006, which references PCH’s SKU and PO number and delivery to PCH’s U.S. warehouse showing $[X,XXX.XX] as the price for [XXX] trolleys; Sales Invoice and Packing List from Extra Trading to 37 Elephants dated October 16, 2006, indicating a price for [XXX] trolleys as $[X,XXX.XX], showing 37 Elephants as the vendor, and that the goods would be shipped on the Vessel OOCL Rotterdam to Long Beach; Sales Invoice and Packing List from 37 Elephants to PCH dated October 16, 2006, showing that $[X,XXX.XX] is due for [XXX] trolleys; Proof of payment of monies from PCH’s commercial checking account to 37 Elephants in the amount of $[XX,XXX.XX]; Proof of payment dated October 26, 2006, from Extra Trading to Wright in the amount of $[X,XXX.XX] with a reference to several invoices including invoice WR5249; Bill of lading showing shipment from Yantian, China to Long Beach of [XXX] trolleys citing the PO number dated October 16, 2006; and A letter dated May 5, 2009, from Vincent P. Li, Manager Director, Extra Trading Company to PCH stating that Wright and Extra Trading are not related parties. On June 13, 2007, a CBP Form 29 that was provided to PCH stated that with respect to entry [XXX-XXXX]514-5 (514-5), “[a]n antidumping reimbursement statement is required before liquidation otherwise the antidumping duties will be doubled.” CBP issued the bulletin notice of liquidation (CBP Form 4333) on March 3, 2009, indicating the deemed liquidation date of entry 514-5 was January 28, 2009. No certificate of non-reimbursement was provided for this entry. Therefore, the entry 514-5 was reliquidated on April 10, 2009, with an assessment of double the ADD that were otherwise owed. PCH provided the certificate of non-reimbursement to CBP along with its protest on May 21, 2009. PCH argues that double ADD should not be assessed because the certificate of non-reimbursement was filed before the liquidation of the entry was final. The Port argues that in order for a certificate of non-reimbursement to be timely, it must be filed prior to liquidation of the entry. ISSUES: Whether the imported merchandise may be appraised based on the first sale between the foreign manufacturer, Wright Housewares, and the foreign middleman, Extra Trading. Whether PCH’s certificate of non-reimbursement was timely filed. LAW AND ANALYSIS: On May 22, 2009, PCH submitted Protest 3501-09-100076 and requested further review pursuant to 19 C.F.R. §§ 174.24 and 174.26. PCH stated that further review was warranted because this matter involves a question of law or fact that had not been ruled upon and a decision to deny the protest would be contrary to a CBP Headquarters ruling, specifically HQ H017956 (February 23, 2009). Your office properly granted the AFR because the protest involves questions of law or fact that have not previously been ruled upon; accordingly, the criteria for further review by this office are satisfied per 19 C.F.R. §§ 174.24(a), 174.24(b) and 174.26(b)(1). Timeliness First we address whether the protest was timely filed by PCH. The appraised value of merchandise and the amount of ADD charged are subject to protest pursuant to 19 U.S.C. §§ 1514(a). Section 1514(c)(3)(A) of Title 19 of the United States Code allows for protests to be filed within 180 days of the date of liquidation or reliquidation. Here, entry 514-5 was reliquidated on April 10, 2009, with an assessment of double ADD. The Protest was filed on May 22, 2009, well within the 180-day time period. Whether the imported merchandise may be appraised based on the first sale between the foreign manufacturer, Wright Housewares, and the foreign middleman, Extra Trading The preferred method of appraising merchandise imported into the United States is the transaction value method as set forth in section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (“TAA”), codified at 19 U.S.C. § 1401a. Transaction value of imported merchandise is the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus amounts for five enumerated statutory additions. 19 U.S.C. § 1401a(b). In order for imported merchandise to be appraised under the transaction value method, it must be the subject of a bona fide sale between a buyer and seller, and it must be a sale for exportation to the United States. We will assume for the purposes of this ruling that transaction value is the appropriate basis of appraisement. In Nissho Iwai American Corp. v. United States, 982 F.2d 505 (Fed. Cir. 1992), the U.S. Court of Appeals for the Federal Circuit reviewed the standard for transaction value when there is more than one sale that may be considered as being a sale for exportation to the United States. The court ruled that for merchandise imported pursuant to a three-tiered transaction to be appraised on the basis of the manufacturer-middleman sale, the transaction must be conducted at arm’s length and the merchandise must be clearly destined for export to the United States at the time of the sale. The court reaffirmed the principle established in E.C. McAfee Co. v. United States, 842 F.2d 314 (Fed. Cir. 1988), that the manufacturer’s price, rather than the middleman’s price, is valid so long as the transaction between the manufacturer and the middleman falls within the statutory provision for valuation. In upholding the McAfee standard the court stated that in a three-tiered distribution system, “the manufacturer’s price constitutes a viable transaction value when the goods are clearly destined for export to the United States and when the manufacturer and the middleman deal with each other at arm’s length, in the absence of any non-market influences that affect the legitimacy of the sales price.” As a general rule, CBP presumes that the price paid by the importer is the appropriate basis for determining transaction value, and the burden is on the importer to rebut this presumption. See Treasury Decision (“T.D.”) 96-87, 30 Cust. Bull. 52/1 (January 2, 1997). To rebut this presumption, the importer must, in accordance with the court’s standard in Nissho Iwai, provide evidence that at the time the middleman purchased, or contracted to purchase, the imported merchandise, the goods were clearly destined for exportation to the United States and that the manufacturer and middleman dealt with each other at arm’s length. This documentary evidence must satisfy the requirements set forth in Nissho Iwai. CBP also advised in T.D. 96-87 that the importer must provide a description of the roles of the parties involved in the exportation of the merchandise to the United States. The documents may include, but are not limited to purchase orders, invoices, proof of payment, contracts, and any additional documents (e.g., correspondence) that establishes how the parties deal with one another. The objective is to provide CBP with “a complete paper trail of the imported merchandise showing the structure of the entire transaction.” In addition, to establish whether the transaction is “at arm’s length,” the ruling request must state the relationship, if any, of the parties. Based on our review of the file, we find that PCH has not submitted a complete paper trail that shows the structure of the entire transaction in this case. Although the product specification sheet, two PO’s, commercial invoices and bill of lading were submitted, we are unable to fully understand the role of Extra Trading and 37 Elephants in this case. PCH did not submit a PO between 37 Elephants and Extra Trading, but an invoice between these parties was submitted for $[X,XXX.XX]. PCH also did not show how payment transferred from 37 Elephants to Extra Trading. Also, we note that PCH did not submit a proof of payment from 37 Elephants to Extra Trading. On the sales invoice between Extra Trading and 37 Elephants, there is no address provided for 37 Elephants. Further, we note that the invoices prepared by Extra Trading and 37 Elephants have the same format and font. The bill of lading lists 37 Elephants as the exporter and provides a Hong Kong address for 37 Elephants. It appears that there may be a relationship between Extra Trading and 37 Elephants and that one may be the selling agent for the other. This is significant because a selling commission must be added to the “price actually paid or payable.” In view of the fact that PCH has not explained the relationship of these two companies to the satisfaction of CBP, we find that PCH has failed to provide a complete paper trail as required. Accordingly, we find that the first sale may not be used in this case as a basis of appraisement. The protest should be denied with respect to the “first sale” issue. Whether PCH’s certificate of non-reimbursement was timely filed PCH failed to file the certificate of non-reimbursement prior to liquidation of its entry, instead filing it along with its protest on May 21, 2009.  Commerce’s regulations state that, “[t]he importer must file prior to liquidation a certificate in the following form with the appropriate District Director of Customs . . . .”   19 C.F.R. § 351.402(f)(2) (emphasis added).   Further, the regulations provide that the Secretary of Commerce may presume from the importer’s failure to file the certificate of non-reimbursement, that payment or reimbursement of the antidumping duties occurred.  19 C.F.R. § 351.402(f)(3).  In this case, Commerce’s instructions tell us to double the duties.  See Message No. 9034205 (February 3, 2009) (providing that “CBP should require that the importer provide a reimbursement statement . . . [i]f the importer does not provide the reimbursement statement prior to liquidation, CBP should presume reimbursement and double the antidumping duties due.”)  While both CBP and Commerce play a part in the enforcement of the antidumping laws, their roles are separate and distinct.  It is well settled that when assessing and collecting antidumping duties, CBP merely follows Commerce instructions. See Mitsubishi Electronics America, Inc. v. United States, 44 F.3d 973, 977 (Fed. Cir. 1994) (holding that “CBP has a merely ministerial role in liquidating antidumping duties”).  Therefore, CBP followed Commerce’s instructions and doubled the ADD because the certificate of non-reimbursement was not filed prior to liquidation.             On November 23, 2011, Commerce issued instructions to CBP explaining that CBP may accept a non-reimbursement certificate with a timely filed protest to rebut the presumption that the importer was reimbursed for duties.  Commerce’s interpretation of its regulation is also found in recent public instructions.  See Message No. 1329307 (November 25, 2011). In light of the new instructions from Commerce directing CBP that the presumption of reimbursement may be rebutted if the certificate is filed with a timely filed protest, we find that PCH has successfully rebutted the presumption of reimbursement. HOLDING: Under the facts described, and in response to the application for further review, you are directed to ALLOW in part and DENY in part the protest as stated above. In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Sixty days from the date of the decision, the Office International Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.CBP.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Myles B. Harmon Director Commercial and Trade Facilitation Division