Application for Further Review of Protest 0712-12-100061; 19 U.S.C. § 1401a - Method of Appraisement; Sale for Exportation to the U.S.; Subheading 9801.00.20, HTSUS - Lease or Similar Use Agreement; Ladies’ Apparel

HQ H219346 June 18, 2014 VAL-2 OT:RR:CTF:VS H219346 HkP CATEGORY: Valuation Classification Port Director Port of Champlain U.S. Customs and Border Protection 237 West Service Road Champlain, NY 12929 RE: Application for Further Review of Protest 0712-12-100061; 19 U.S.C. § 1401a - Method of Appraisement; Sale for Exportation to the U.S.; Subheading 9801.00.20, HTSUS - Lease or Similar Use Agreement; Ladies’ Apparel Dear Port Director: This is in response to the Application for Further Review (“AFR”) of Protest 0712-12-100061, timely filed on behalf of Manhattan International Trade Inc. (“MIT”), on April 24, 2012. The protest concerns the proper method of appraisement of apparel from China, pursuant to 19 U.S.C. § 1401a, as well as the applicability of subheading 9801.00.20, Harmonized Tariff Schedule of the United States (“HTSUS”), to the goods when they are re-entered into the United States after first being exported to Canada for storage. In reaching our decision we took into consideration additional information submitted to this office after meeting with counsel for the importer. We apologize for our delay in responding to you. FACTS: MIT is a nonresident importer based in Montreal, Canada. According to information submitted to the port, its general practice is to place orders for textiles with factories ahead of an upcoming season and then to sell the garments to various customers in the U.S. and elsewhere at a later date. On September 22, 2010, MIT placed a purchase order for various styles of ladies clothing in varying amounts, including 320 ladies sleeveless tops with draped necklines (style PSC502), with a manufacturer in China. The FOB Shanghai unit price for the ladies’ sleeveless tops was US $8.00, to be paid by letter of credit. According to the purchase order, apparel was to be shipped to MIT in care of A.N. Deringer, Champlain, New York (“U.S. warehouse”). The U.S. warehouse had no financial interest in the goods. The international bill of lading (BOL) issued by the shipping company had an on board date of December 27, 2010. The port of discharge was listed as Los Angeles, California, and the place of delivery as Montreal, QC, Canada. In the box for “temperature control instructions”, which was next to the “place of delivery” box, were the words “furtherance to Champlain, NY”. No mode of transportation was indicated but a “vessel/voyage” was named. There was no other form or type of transportation named. The Chinese manufacturer was listed as the shipper, and the importer, MIT, in care of the U.S. warehouse, was listed as the consignee. The destination agent, which was also the shipping company, was identified as being in Quebec. Counsel states that the goods arrived by ship at the Port of Los Angeles on January 10, 2011. On that same date, the Chinese manufacturer issued an invoice to MIT, in care of the U.S. warehouse, which stated in part that the garments were “From: Shanghai, To: Montreal.” The letter of credit number was listed as “TT”, the symbol used for wire transfers. On January 12, 2011, MIT paid the invoiced amount to the Chinese manufacturer by wire transfer. The BOL was surrendered on January 18, 2011, and stamped “Ocean Freight Collect”. Counsel states that it is standard practice for the BOL to be surrendered upon receipt of payment. This ensures that the supplier is protected by being paid prior to the consignee taking possession of the shipment, as surrendering the BOL proves that the shipper and consignee each fulfilled their obligations. Counsel states that after the goods arrived at the Port of Los Angeles on January 10, 2011, they were transported in-bond by rail to Montreal, Canada, where they arrived on January 19, 2011. The next day, the container was unloaded in a bonded warehouse and goods bound for the U.S. were trucked to the border crossing at Lacolle, Canada. According to the Entry Summary, dated February 1, 2011, the goods were imported from Canada by a non-container truck on January 20, 2011, through the Port of Champlain. The next day they were entered into the United States and customs duties were paid. The declared value was based on the transaction between the Chinese manufacturer and MIT. The trucking company’s Pre-Arrival Processing System (“PAPS”) number and not the BOL number was listed on the Entry Summary. Counsel states that this is because the goods did not enter the U.S. in their original shipping container, which was unloaded in Montreal. A Canadian Customs and Revenue Agency in-bond certificate issued to the trucking company, release stamped January 21, 2011, indicates that 162 cartons of garments, shipped by MIT to the “U.S. warehouse” as consignee, were transported in-bond from Montreal to Lacolle. The Canadian Customs form states that the form is “to be release stamped by customs before goods can be delivered to consignee.” Counsel states that the certificate was issued for goods imported into the U.S. on January 20, 2011. On January 21, 2011, the day that the goods were entered into the U.S, they were exported to Canada to be warehoused. On that same date, U.S. Customs and Border Protection (“CBP”) issued a Certificate of Registration to the importer, MIT, for, “Articles reported for export to Canada for similar use agreement, storage and warehousing to be reexported to the USA.” Also on that date, the goods were entered into Canada and warehoused at 6353878 Canada Inc. (“Canadian warehouse”) under a duty deferral program. A Canadian Customs Coding Form indicates a release date of January 21, 2011, and that the goods were imported into Canada by MIT and sold by FedEx Trade, Champlain, NY. No documents to substantiate the alleged sale were submitted. A copy of the warehouse agreement between MIT and the Canadian warehouse was provided to CBP. It was signed on behalf of the importer, MIT, by the Vice President of MIT, and on behalf of the Canadian warehouse by its President, who is also the President of MIT. It provides, in part, that the Canadian warehouse is to hold merchandise pending instructions of the importer, MIT, provide labor and services such as the creation and maintenance of inventory records, and assist with transportation to and from the warehouse. According to Canadian Government records, the President of the Canadian warehouse also holds the only other Board positions of Secretary and Treasurer and is its primary shareholder. In addition, the Canadian warehouse has no employees. An A/P Invoice Report and A/P Payment Transaction Report were submitted by MIT as proof of payment of warehouse charges. Warehouse receiving reports, a signed copy of the delivery form from the trucking company, and MIT’s 9801 inventory sheets were also submitted. According to counsel, warehouse receiving is done using the supplier’s (Chinese manufacturer’s) packing list and MIT’s receiving sheets, which the Canadian warehouse fills out to confirm receipt. This is described as standard industry practice. It was also explained that, in this case, the Canadian warehouse tracked MIT’s 9801 inventory using a 9801 database maintained by MIT. Each time MIT ships goods, it generates 9801 inventory sheets to show the depletion of inventory from the warehouse. The document from the trucking company that delivered the goods from Champlain to Canada indicates that the goods were “from” Manhattan Canada (MIT) “to” Manhattan Canada of the same address. Counsel notes that the Canadian warehouse and MIT buildings are physically attached to each other and that the goods were, in fact, delivered to the Canadian warehouse. Counsel states that the merchandise was delivered to the Canadian warehouse because it was imported under a Canadian duty deferral program and merchandise intended for the U.S. market is always stored in the Canadian warehouse, whereas merchandise intended for the Canadian market is stored in a different warehouse. On April 27, 2011, some of the style PSC502 ladies tops stored in the Canadian warehouse were sold to an unrelated U.S. customer. On May 2, 2011, MIT re-imported the goods sold in the April 27 sale under subheading 9801.00.20, HTSUS, which allows goods previously imported into the U.S. and subsequently exported pursuant to a lease or similar use agreement to be re-imported into the U.S. free of duty. Copies of sales orders, pick-and-pack lists, and the 9801 shipping inventory records were provided. The “9801 Shipment Inventory Report” shows a series of prior 9801 entries of style PSC502 “ladies sleeveless tops with draped neckline” as well as of the other styles of ladies clothing entered by MIT on January 21, 2011. Not all of the apparel included in the report was a part of the January 2011 entry currently at issue, as different entry numbers are cited and show that the particular style was imported into the U.S. at different times, including dates in March and April 2011, for various U.S. customers. On May 13, 2011, CBP issued to the importer, MIT, a Request for Information on the initial importation of 320 style PSC502 ladies tops, and their subsequent exportation and re-importation into the U.S. MIT responded on May 25, 2011, by providing transactional documents and explaining the typical structure of its transactions, which generally reflects the transaction described herein. On July 25, 2011, CBP issued a Proposed Notice of Action by which MIT was advised that the merchandise first entered in January 2011 would not be appraised based on the value of the transaction between the Chinese manufacturer and MIT because the evidence did not support a finding that the initial entry of January 21, 2011, was clearly destined to the U.S. and because a contingency of diversion existed. Therefore, no sale for exportation to the U.S. was found. Instead, according to the port, the merchandise was to be appraised based on the value of identical or similar merchandise, which the port stated was the value paid by the U.S. buyer for the goods. MIT’s response, dated August 8, 2011, alleged that all the documents clearly showed that the goods were clearly destined for the U.S. at the time of sale from the Chinese manufacturer to MIT, and that the transaction to be relied on for appraisement purposes was the one between the Chinese manufacturer and MIT. In additional comments, dated August 30, 2011, MIT questioned the port’s proposed method of appraisement. On October 14, 2011, the port issued a Notice of Action informing MIT of, among other things, CBP’s finding that the merchandise subject to the initial entry was not sold for exportation to the United States. The Notice advised MIT that CBP would be reappraising the January 2011 entry based on the value of identical or similar merchandise, which would be determined based on the U.S. sales price of the goods when sold for exportation to the U.S. On April 24, 2012, MIT timely protested the port’s actions. ISSUES: Whether the sale between the importer, MIT, and the Chinese manufacturer was a sale for exportation to the United States. The proper method of appraisement for the entry made on January 21, 2011. Whether the merchandise is eligible for the duty exemption provided by subheading 9801.00.20, HTSUS, when returned to the United States. LAW AND ANALYSIS: 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. The 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 a seller, and it must be a sale for exportation to the United States. In VWP of America, Inc. v. United States, 175 F.3d 1327 (Fed. Cir. 1999), the Court of Appeals for the Federal Circuit (“CAFC”) found that the term “sold” for purposes of 19 U.S.C. § 1401a(b)(1) means a transfer of title from one party to another for consideration (citing J. L. Wood v. United States, 62 C.C.P.A. 25, 33; C.A.D. 1139; 505 F.2d 1400, 1406 (1974)). In Nissho Iwai American Corp. v. United States, 16 Ct. Int’l Trade 86, 786 F. Supp. 1002, reversed in part, 982 F. 2d 505 (Fed. Cir. 1992), the CAFC reviewed the standard for determining transaction value when there is more than one sale which may be considered as being for exportation to the United States. The case involved a foreign manufacturer, a middleman, and a United States purchaser. The court held that the price paid by the middleman/importer to the manufacturer was the proper basis for transaction value. The court further stated that in order for a transaction to be viable under the valuation statute, it must be a sale negotiated at arm’s length, free from any non-market influences, and involving goods clearly destined for the United States. See also, Synergy Sport International, Ltd. v. United States (Ct. Int’l Trade 1993). In Generra Sportswear Co. v. United States, 905 F.2d 377 (Fed. Cir. 1990), the court explained that Congress did not intend for Customs to engage in extensive fact-finding to determine whether separate charges, all resulting in payments to the seller in connection with the purchase of imported merchandise, were for the merchandise or something else. Id. at 379. Sale for Exportation to the U.S. The goods were purchased from the manufacturer in China, transported to the port in China, then by ship to the Port of Los Angeles, then in-bond by rail to Montreal, Canada, and then by truck to the Port of Champlain. It is the port’s position that although a sale took place between the Chinese manufacturer and MIT, the importer, the initial importation of merchandise cannot be appraised on the basis of transaction value because at the time MIT purchased the merchandise, it was not clearly destined for exportation to the U.S. Rather, the sale was for exportation to Canada. To support its position, the port relies on the BOL which stated that the place of delivery was Montreal. The port also took into consideration the bill from the trucking company, which the port states showed that MIT contracted a carrier to truck the goods from Montreal to Champlain and back to Montreal. In addition, the port states that there is nothing unique about the markings or clothing in question that indicates that the goods were to be sold exclusively in the U.S., and notes MIT’s statement that the merchandise it ordered was sold to various customers in the U.S., Canada and elsewhere. Further, the port notes that MIT’s purchase order for goods to the Chinese manufacturer predates purchase orders from MIT’s U.S. customers. Based on these facts, the port believes that the imported merchandise was not sold for exportation to the U.S. Counsel argues that the record shows that the merchandise was clearly destined for the U.S. when it was sold to MIT and was, in fact, exported directly from China to the U.S. In particular, Counsel relies on: (1) the Purchase Order with its “ship to” address of Champlain, NY, in care of A.N. Deringer; (2) the invoice issued by the Chinese manufacturer to MIT at a Champlain, NY, address; (3) the BOL, which (a) listed MIT in care of the “Champlain warehouse” as the consignee, (b) indicated that the notify party was in NY, and (c) included the language “furtherance to Champlain, NY” in the Temperature Control Instructions box, which was next to the Place of Delivery box (listed as Montreal); and, (4) the in-bond authorization issued by Canadian Customs to the trucking company, which counsel states indicates that the goods were to be trucked in-bond from Montreal to Lacolle and that the goods never entered the commerce of Canada before being entered into the U.S. While it is true that the purchase order listed the destination country as the United States and the U.S. warehouse as its “ship to” address, it is also true that the invoice issued by the Chinese manufacturer to MIT at the U.S. address stated that the goods were “to Montreal”. Indeed, the U.S. warehouse (A.N. Deringer) had no financial interest in the goods and MIT paid the Chinese manufacturer via wire transfer once the goods were surrendered on January 18, 2011, in Canada. The purchase order issued by MIT was for articles of apparel for MIT in Canada, in care of A.N. Deringer in New York. One of the sales orders from MIT to a company in California, dated April 27, 2011, shows a sale of style PSC502. Other sales orders for the same style indicate sales to other U.S. companies, but those occur before January 2011. Based on the conflicting information in and between the purchase order and the invoice regarding the destination of the goods, we find that these documents do not support MIT’s argument that the goods were clearly destined for the U.S. at the time they were sold to MIT. The BOL listed the place of delivery as Montreal (“furtherance to Champlain, NY”) and the destination agent as a company in Montreal. Counsel argued in an earlier submission to the port (Aug. 8, 2011) that the language “furtherance to Champlain, NY” which was typed into the Temperature Control Instructions box next to the place of delivery box on the BOL must be read in its entirety, based upon the cardinal rule of contract interpretation that where inconsistencies exist between preprinted and written clauses, the latter will prevail since the written words are immediate and the terms selected by the parties themselves express their meaning, whereas the printed form is intended for general use without particular reference to particular objects and aims. See NY Jur 2d, Contracts, § 257 at 316; see also Integrated Inc. v. Alec Fergusson Elec. Contractors, 250 Cal. App. 2d 287 (1967). The preprinted BOL form has boxes labeled “place of delivery” and “temperature control instructions” among others. The information written into these two boxes is “Montreal, QC”, and “furtherance to Champlain, NY”, respectively. We find the information written into the place of delivery box is merely the information required by the form, and the information in the temperature control box is likely a continuation of that information. Consequently, there is no basis for us to disregard the reference to delivery in Montreal as suggested by counsel. Moreover, we note that the BOL only covered transportation of the goods by sea, as evidenced by the fact that a freight ship was the only transportation listed and that the BOL was stamped “Ocean Freight Collect” when surrendered. A BOL stays with the goods until they have been delivered to the ultimate consignee and, in this case, it was surrendered before the merchandise arrived at Champlain. In fact, it was surrendered on January 18, 2011, the day before the goods arrived in Montreal, which indicates to us that the BOL did not control transportation from Los Angeles to Montreal, much less to Champlain. As a result, the goods were entered at the Port of Champlain using the trucking company’s PAPS number and not the BOL number. Accordingly, although the BOL may have had the words “furtherance to Champlain NY” written in its temperature control instructions box, we find that the BOL did not in fact control the transportation of the goods from China to Champlain because it was surrendered prior to the goods arriving in Champlain. The goods would have to have been shipped on a through bill of lading for that to have been the case. As noted in Headquarters Ruling Letter (“HQ”) 547382 (Feb. 14, 2002), CBP’s prior rulings indicate that CBP hesitates to find a sale for export where merchandise is not shipped directly to the United States. See also HQ 542318 (May 22, 1981) (drill bits manufactured in Italy and stored in France for an indefinite period are not sold for exportation to the United States because when sold they could end up either with a U.S. or European customer); and HQ 542962, (Dec. 29, 1982) (no sale for exportation when a motorcycle was purchased in Japan for the purpose of being used for an extended period overseas before being imported into the United States). Thus, as further indicated in HQ 547382, the presumption is that merchandise shipped to a foreign party and location is not sold for exportation to the United States. In order to rebut this presumption, the importer must present sufficient evidence to show that the merchandise is clearly destined for exportation to the United States at the time of sale to the middleman. Id. In HQ 547825 (July 16, 2001), CBP considered a case in which a company operated a chain of retail outlets in the United States. The company forwarded merchandise forecast orders each season to a related company in Canada that, in turn, placed a single consolidated purchase order with a buying agent or directly to foreign suppliers. The shipments from the foreign suppliers, which contained merchandise intended both for the Canadian and U.S. markets, were consigned to a central warehouse in Canada for storage and deconsolidation and were entered into Canada under a duty deferral program. Under the terms of the duty deferral program, duty was imposed only when merchandise was subsequently sold in Canada. In considering whether the merchandise was clearly destined for export to the United States when sold to the middleman, CBP noted that there was nothing in the commercial documents pertaining to the sale from the manufacturer that referenced the U.S. destination of the commingled merchandise. Moreover, there was nothing unique about the purportedly U.S.-destined merchandise that would prevent diversion into the Canadian market. Therefore, CBP held that the goods were not clearly destined for export to the United States when sold to the middleman because no evidence was offered to refute the possibility that a contingency of diversion existed. However, in HQ 563420 (April 14, 2006), ABC Canada, a non-resident importer, imported sweaters and t-shirts into Canada from an unrelated foreign manufacturer for storage prior to shipping them to unrelated retail customers in the United States. The merchandise entered Canada either under a “duty relief license” or into a bonded warehouse and was shipped to the United States retailers on an as-needed basis or according to an agreed upon schedule. Transactions were initiated when the various U.S. retailers provided ABC Canada with confirmed purchase orders as well as with “forecast” orders for additional amounts of merchandise that may have been required. Based upon these confirmed and forecast orders, ABC Canada issued a “tentative” purchase request to the foreign manufacturer. Prior to actual shipment of the merchandise by the foreign manufacturer, ABC Canada confirmed orders from the U.S. retailers and confirmed its own purchase orders from the foreign manufacturer; the orders corresponded to each other in terms of articles and quantities ordered. The purchase order confirmation between ABC Canada and the foreign manufacturer constituted the contract of sale, and stated that the goods were to be sold only in the United States and that they would be ultimately delivered to U.S. addresses. The shipping documents, i.e., the bill of lading and packing list, also indicated that the ultimate delivery addresses were in the U.S. The importer submitted various documents such as bills of lading, packing lists, purchase orders, pro forma invoices, shipping and distribution manifests, and invoices for CBP review. CBP ruled that the specific facts set forth in the case and the paper trail established by the commercial documentation indicated that there would be no contingency of diversion as the merchandise was clearly destined for exportation to the U.S. at the time ABC Canada purchased or contracted to purchase the goods. In this case, unlike in HQ 563240, there is no known U.S. customer when the goods are sold by the manufacturer in China, and a U.S. customer is identified only after the goods have been stored in Canada. Although some of the transactional and shipping documents list A.N. Deringer, the U.S. warehouse, as a point of contact or use the U.S. warehouse’s address, nothing in the record indicates that a sale to A.N. Deringer caused the goods to be shipped to the U.S. from China, such that a Nissho Iwai first sale situation exists. Rather, the U.S. warehouse was merely a nominal consignee. Finally, MIT has stated that it sells the same goods to customers worldwide, including in the United States, and we note that there is nothing that designates any of the goods for only the U.S. market. Given these facts, we find that the “clearly destined” standard in Nissho Iwai has not been satisfied and, accordingly, that transaction value is not available as a method of appraisement. Counsel has expressed concern about the port’s interpretation of the method of appraisement based on the value of identical or similar merchandise. In its proposed Notice of Action, the port advised the importer that the value of identical or similar merchandise would be based on the U.S. sale for exportation price of the merchandise. Counsel points out that for the goods to be valued based on the value of identical or similar merchandise, the reference goods would have to be imported at or about the same time as the goods being appraised, at the same commercial level and of similar quantities (adjusted as appropriate), and from the same country and manufacturer, if possible. Counsel argues that the goods reimported on May 2, 2011, fail the proximity and quantity test because the shipments were several months apart and not at the same commercial level. When appraising merchandise on the basis of identical or similar goods, the port must use the previously accepted customs value of an entry of identical or similar merchandise, entered at or about the same time as the initial entry, adjusted as appropriate to account for commercial level and quantity. In this case, the port stated in the final Notice of Action that selected lines of the original entry would be appraised based on the value of identical or similar merchandise, but did not state that those values would be from the May 2011 entry. We note that, based on the 9801 Shipping Reports provided by the importer, between February and April 2011 there were multiple shipments of style PSC502 ladies tops and other styles of ladies apparel identical or similar to those entered in January 2011 that were sold to various U.S. customers. Accordingly, we find that the shipments that are proximate in time to the January 2011 entry can be used to appraise the January 2011 entry, provided that the values of those entries sold to various U.S. customers were accepted by CBP and are adjusted as appropriate to account for differences in quantity. Heading 9801.00.20, HTSUS, Eligibility Section 141.2, U.S. Customs and Border Protection Regulations (19 C.F.R. § 141.2), provides, in pertinent part, that dutiable merchandise imported into the United States and afterwards exported, even though duty may have been paid on the first importation, is liable to duty on every subsequent importation into the customs territory of the United States unless an exception, set forth at 19 C.F.R. § 141.2(a)-(i), exists. One such exception is set forth under subheading 9801.00.20, HTSUS, which provides duty-free treatment for: [a]rticles, previously imported, with respect to which the duty was paid upon such previous importation or which were previously free of duty pursuant to the Caribbean Basin Economic Recovery Act (CBERA) or Title V of the Trade Act of 1974 (Generalized System of Preferences) (GSP), if (1) reimported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, after having been exported under lease or similar use agreements, and (2) reimported by or for the account of the person who imported it into, and exported it from, the United States. Section 10.108, CBP Regulations (19 C.F.R. § 10.108), provides, in relevant part, that free entry shall be accorded under subheading 9801.00.20, HTSUS, whenever it is established to the satisfaction of the port director that the article for which free entry is claimed was duty paid on a previous importation, is being reimported without having been advanced in value or improved in condition by any process of manufacture or other means, was exported from the United States under a lease or similar use agreement, and is being imported by or for the account of the person who previously imported it into, and exported it from the United States. It should be noted that CBP has denied treatment under subheading 9801.00.20, HTSUS, in situations where such evidence was not provided. See, for example, HQ 556538 dated May 27, 1992 (duty-free status under subheading 9801.00.20, HTSUS, denied because documentary requirements were not satisfied and no evidence was provided to indicate that the labeling applicator machine under consideration was exported under a lease or similar use agreement). CBP has previously issued a ruling to this importer on its eligibility to enter apparel free of duty under subheading 9801.00.20, HTSUS. See New York Ruling Letter (“NY”) N006857, dated February 14, 2007. The issue addressed in that ruling was whether pick-and-pack services provided by a related party in Canada constituted “an advancement in value or improvement in condition” for purposes of the subheading. CBP found that the repacking operations performed in Canada did not advance the value of the goods or improve their condition within the meaning of the subheading. Based on the importer’s assertions that warehousing agreements would be executed by the parties to reflect a bailor/bailee relationship, CBP stated that the apparel would be eligible for duty-free treatment when returned to the United States, provided the Port Director was satisfied that the importer previously imported the apparel and paid duty on them, the goods were exported pursuant to a lease or similar use agreement, the goods were reimported by or for the account of the original importer, and the documentary requirements of 19 C.F.R. § 10.108 were satisfied. The issue addressed in this ruling is whether the apparel was actually exported pursuant to a lease or similar use agreement. The Port is of the opinion that the warehouse agreement between the Canadian warehouse and MIT is not a lease or similar agreement because the same person is president of both companies, and according to Canadian Government records, the Canadian warehouse has no employees. In other words, MIT and the Canadian warehouse are essentially one and the same. A lease or use agreement similar to a lease of subheading 9801.00.20, HTSUS, requires a temporary transfer of rights to property or a delivery of property from one party to another for a specified reason for the benefit of one or both parties. See generally HQ 546561 (Mar. 16, 1998), concerning a bailment agreement considered to be a use agreement similar to a lease for purposes of subheading 9801.00.20, HTSUS; and, HQ W563474 (Dec. 13, 2007), in which CBP found that, because the same entity both imported merchandise into the U.S. and stored and repackaged the merchandise in Canada, the merchandise was never transferred to another party; therefore, the merchandise had not been exported pursuant to a lease or similar use agreement. Consequently, the merchandise did not qualify for duty-free entry under subheading 9801.00.20, HTSUS, when reimported into the U.S. In this case, a warehouse agreement was executed between the Canadian warehouse and the importer, MIT. However, when the goods were imported into Canada to be stored, they were delivered to MIT and not to the Canadian warehouse. Despite counsel’s explanation that the MIT and Canadian warehouse buildings are physically attached to each other and that the goods were, in fact, delivered to the Canadian warehouse, we rely on the records of the trucking company, which state that the goods were delivered to MIT. In addition, according to the warehousing agreement, the Canadian warehouse was to store the goods, pending the instructions of MIT, manage inventory and transport the goods. We asked counsel to provide us with an example of instructions from MIT to the Canadian warehouse concerning the April 2011 order, as well as any other documents that would support the warehousing agreement. We received no such evidence. Further, although the warehousing agreement specified that the Canadian warehouse was to create and maintain inventory of all merchandise delivered to the warehouse, we were informed by counsel that the Canadian warehouse tracks inventory using MIT’s database and that it is MIT, each time goods are shipped, that generates the 9801 inventory sheets showing the depletion of warehouse inventory. Finally, all the documents pertaining to the warehouse agreement and the 9801 shipment are on MIT’s letterhead or were generated by MIT. Based on these factors, there is no evidence that MIT temporarily delivered its property (the goods) or transferred its rights to the property to another party as is required of a lease or similar agreement. See HQ 546561 and HQ W563474 supra. Given these circumstances, we find no evidence that the merchandise was exported pursuant to a lease or similar use agreement such that when it is reimported it is entitled to duty-free entry under subheading 9801.00.20, HTSUS. Appraisal of Reimported Goods The goods were warehoused in Canada subject to a Canadian duty deferral program and were shipped to U.S. customers on an as-needed basis. Under the Canadian duty deferral program, imported goods intended for ultimate export from Canada can qualify for duty relief (meaning the duties are deferred until exportation) for up to four years. However, the guidelines state that “the amount of relief becomes payable once the goods no longer qualify for this program, i.e., are no longer intended for exportation.” It does not appear that any penalties result from selling the goods in Canada. Thus, in the instant case, the fact that the goods qualify for the duty deferral program at the time they enter Canada does not mean that the goods cannot ultimately be sold in Canada. The importer would only be required to pay the duties it owes at such time. In short, qualification for the Canadian duty deferral program does not guarantee that the goods will be exported to the United States. See HQ H547825, dated July 16, 2001. The port appraised the reimported goods on the basis of the sale between MIT, the importer, and the U.S. customer. Counsel argues that CBP cannot appraise the goods based upon MIT’s sales to U.S. customers unless the actual sale for exportation to the U.S. occurred between the Chinese manufacturer and the ultimate U.S. consignee. We disagree that in order to use transaction value as a method of appraisement the Chinese manufacturer has to be involved in the sale for exportation to the U.S. CBP may look at any transaction in order to determine transaction value, as long the transaction is a bona fide sale for exportation to the U.S. In this case, that transaction is the one between MIT and the U.S. customer. In the case of the April 2011 sale, an order was placed with MIT by a U.S. customer. Based on this order, merchandise was selected from the warehouse and shipped to the U.S. customer who paid MIT, which acted as importer for the goods. We find, therefore, that the goods sold by MIT in April 2011 were sold for exportation to the U.S. in April 2011. Based on these facts, we find that the port was correct in appraising the goods based on the sales price to the U.S. customer when they were entered for the second time. HOLDING: The transaction between the Chinese manufacturer and MIT, the non-resident importer, does not satisfy the requirement that the goods be clearly destined for exportation to the U.S. when sold. Consequently, the goods cannot be appraised on the basis of transaction value. The multiple entries of identical merchandise sold to various U.S. customers made between February and April 2011 may be used to appraise the merchandise entered on January 21, 2011, adjusted as appropriate to account for commercial level and quantity. The merchandise stored in Canada was not exported pursuant to a lease or similar use agreement and is not entitled to duty-free entry under subheading 9801.00.20, HTSUS, when re-entered into the United States. The re-entered merchandise should be appraised on the basis of the sale between the non-resident importer and its U.S. customer. The protest should be denied. In accordance with the Protest/Petition Processing Handbook (CIS HB, December 2007), you are to mail this decision together with the Customs Form 19 to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to the mailing of the decision. Sixty days from the date of the decision the Office of International Trade, Regulations and Rulings, will make the decision available to CBP personnel and to the public 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