Valuation; First Sale

HQ H273543 May 12, 2016 OT:RR:CTF:VS H273543 EE CATEGORY: Valuation Adrienne Braumiller Braumiller Law Group, PLLC 5220 Spring Valley Road, Suite 200 Dallas, TX 75254 RE: Valuation; First Sale Dear Ms. Braumiller: This is in response to your letter, dated February 18, 2016, on behalf of your client Nokia USA Inc. (“Nokia US”), in which you request a prospective ruling concerning the valuation of certain cameras and components imported into the U.S. via a multi-tiered transaction. FACTS: You state that Nokia US is incorporated in the U.S. with its headquarters in Sunnyvale, CA. Nokia US will be importing and distributing Ozo virtual reality cinematography cameras, and components (accessories and parts) for these cameras. It is a related affiliate to Nokia Technologies Oy (“Nokia Oy”), incorporated in Finland. Nokia Oy will place orders with Sanmina Corporation affiliate Sanmina-SCI EMS Haukipudas Oy (“Sanmina Oy”) in Finland for the production of the cameras and components. The completed cameras and components will be imported into the U.S. and delivered to Sanmina Corporation in San Jose, CA for the account of Nokia US. As the purchaser and the party that will be taking title and ultimate possession of the goods, Nokia US is the importer of record. You state that neither Nokia Oy nor Nokia US is related to Sanmina Corporation or Sanmina Oy. You submitted the following documents from a sample prospective transaction: A purchase order from Nokia US to Nokia Oy in Finland for the Ozo camera showing shipment to San Jose, CA and a corresponding order confirmation from Nokia Oy to Nokia US showing shipment to San Jose, CA. A proforma invoice from Nokia Oy to Nokia US showing shipment to San Jose, CA. The proforma invoice indicates Delivered at Place (“DAP”) San Jose terms of delivery. A delivery note from Nokia Oy to Nokia US showing shipment to San Jose, CA. A purchase order from Nokia Oy in Finland to Sanmina Oy in Finland for the Ozo camera showing shipment to San Jose, CA. An invoice from Sanmina Oy in Finland to Nokia Oy in Finland which corresponds to the purchase order from Nokia Oy to Sanmina Oy showing shipment to San Jose, CA. Airway bills from Sanmina Oy to Nokia US c/o Sanmina US indicating shipment from Finland to San Jose, CA. The distributorship agreement between Nokia Oy and Nokia US dated November 1, 2015. The agreement states that DAP terms of sale applies to the Nokia Oy-Nokia US transactions. The Ozo Product Agreement between Nokia Technologies Ltd., Finland, and Sanmina Corporation of San Jose, CA. The agreement states that the agreed delivery terms are Free Carrier (“FCA”) Manufacturing Site. A chart and written description of the transaction flow. You also submitted the following documents: Sanmina Oy Finnish business registration, Nokia Oy Finnish business registration, and documentation from another sample transaction. ISSUE: Whether the sale between Sanmina Oy and Nokia Oy is a sale for exportation to the U.S. upon which the goods may be appraised at entry. LAW AND ANALYSIS: Merchandise imported into the United States 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 the merchandise when sold for exportation to the United States” plus certain statutory additions. 19 U.S.C. § 1401a(b)(1). You believe the goods exported to the U.S. under the transactions you describe should be appraised at entry based on the price between Sanmina Oy and Nokia Oy in Finland pursuant to Nissho Iwai American Corp. v United States, 16 C.I.T. 86, 786 F. Supp. 1002, reversed in part, 982 F. 2d 505 (Fed. Cir. 1992). In that case, the Court of Appeals for the Federal Circuit reviewed the standard for determining transaction value when there is more than one sale which may be considered as being a sale 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, 17 C.I.T. 18 (1993). In accordance with the Nissho Iwai decision and our own precedent, we presume that transaction value is based on the price paid by the importer. In further keeping with the court’s holding, we note that an importer may request appraisement based on the price paid by the middleman to the foreign manufacturer in situations where the middleman is not the importer. However, it is the importer’s responsibility to show that the “first sale” price is acceptable under the standard set forth in Nissho Iwai. That is, the importer must present sufficient evidence that the alleged sale was a bona fide “arm’s length sale,” and that it was “a sale for export to the United States” within the meaning of 19 U.S.C. § 1401a. In Treasury Decision (T.D.) 96-87, dated January 2, 1997, U.S. Customs and Border Protection (“CBP”) stated that: In order for an importer to rebut the presumption “[that the price paid by the importer is the basis of transaction value]”, certain information and documentation must be provided. Specifically, the requestor must describe in detail the roles of all the various parties and furnish relevant documents pertaining to each transaction that was involved in the exportation of the merchandise to the United States. If there is more than one possible sale for exportation, information and documentation about each of them should be provided. Relevant documents include, purchase orders, invoices, proof of payment, contracts and any additional documents (e.g. correspondence), which demonstrate how the parties dealt with one another and which support the claim that the merchandise was clearly destined to the United States. If any of these documents do not exist, or exist but are not available, the ruling request should so provide. What we are looking for is a complete paper trail of the imported merchandise showing the structure of the entire transaction. T.D. 96-87 further provides that the importer must also inform CBP of any statutory additions and their amounts. If unable to do so, the sale between the middleman and the manufacturer cannot form the basis of transaction value. Bona Fide Sale First, we must determine if indeed a “sale” will occur. In order for transaction value to be used as a method of appraisement, there must exist a bona fide sale between the buyer and the seller. In VWP of America, Inc. v. United States, 175 F.3d 1327 (Fed. Cir. 1999), the Court of Appeals for the Federal Circuit 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)). No single factor is decisive in determining whether a bona fide sale has occurred. See Headquarters Ruling Letter (“HQ”) 548239, dated June 5, 2003. CBP will consider such factors as to whether the purported buyer assumed the risk of loss for, and acquired title to, the imported merchandise. Evidence to establish that consideration has passed includes payment by check, bank transfer, or payment by any other commercially acceptable means. Payment must be made for the imported merchandise at issue; a general transfer of money from one corporate entity to another, which cannot be linked to a specific import transaction, does not demonstrate passage of consideration. See HQ 545705, dated January 27, 1995. In addition, CBP may examine whether the purported buyer paid for the goods, and whether, in general, the roles of the parties and the circumstances of the transaction indicate that the parties are functioning as buyer and seller. See HQ 547197, dated August 22, 2000; and HQ 546602, dated January 29, 1997. Finally, pursuant to the CBP’s Informed Compliance Publication, entitled “Bona Fide Sales and Sales for Exportation,” CBP will consider whether the buyer provided or could provide instructions to the seller, was free to sell the transferred item at any price he or she desired, selected or could select its own downstream customers without consulting with the seller, and could order the imported merchandise and have it delivered for its own inventory. The documents submitted support the existence of a bona fide sale. The Ozo Product Agreement, which you state applies to the transaction between Sanmina Oy and Nokia Oy, states in paragraph 15.1 that the agreed delivery terms are FCA Manufacturing Site. The term Free Carrier (“FCA”) means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. See Incoterms 2010, International Chamber of Commerce, 23 (2010). FCA also indicates that if the named place is the seller’s premises, delivery is completed when the goods have been loaded on the means of transport provided by the buyer. Accordingly, Nokia Oy will assume title and bear risk of loss at the Sanmina Oy manufacturing site in Finland. Further, as previously noted, you submitted a purchase order from Nokia Oy in Finland to Sanmina Oy in Finland for the Ozo camera and an invoice from Sanmina Oy in Finland to Nokia Oy in Finland which corresponds to the purchase order from Nokia Oy to Sanmina Oy. You also submitted airway bills from Sanmina Oy to Nokia US c/o Sanmina US indicating shipment from Finland to San Jose, CA. Accordingly, based on the documents submitted for the sample transaction, we find that there is a bona fide sale between the Sanmina Oy and Nokia Oy. Clearly Destined for Export to the United States The next issue we must determine is whether the evidence presented demonstrates that the merchandise is clearly destined for export to the United States at the time it is sold to the middleman. As noted in HQ 547382, dated February 14, 2002, our prior rulings indicate that CBP hesitates to find a sale for export where merchandise is not shipped directly to the United States without any diversion. In the instant case, the sample purchase order from Nokia Oy to Sanmina Oy shows that the merchandise is to be shipped to San Jose, CA. The commercial invoice, from Sanmina Oy to Nokia Oy, which refers to the purchase order, also indicates that the merchandise is to be shipped to San Jose, CA. The airway bills further confirm direct shipment of the merchandise from Finland to San Jose, CA. Additionally, the purchase orders and invoices indicate that the products have been manufactured and packed for export to USA. You also state that Nokia US has applied for U.S. Federal Communications Commission approval for the Ozo camera and that the cameras will be manufactured to meet those requirements. Further, the power supplies included with the camera are designed for use with the 110 volt requirement in the U.S. You state that the Ozo camera in its package as sold contains 2 power supplies – one for the cartridge charging docking station and one for the camera. The attached plugs are made to a U.S. configuration. The cartons in which the cameras and components will be shipped to the U.S. will be marked in English with “carton made in Finland” and the country of origin of the contents. Based on the information submitted, we find that the Ozo cameras at issue will be clearly destined to the U.S. when they are sold by Sanmina Oy to Nokia Oy. Arm’s Length Transactions According to the decision in Nissho Iwai, in order for a transaction to be viable for transaction value purposes, it must be a sale negotiated at arm’s length, free from any non-market influences. You state that Nokia Oy is not related to Sanmina Oy. There is a presumption that a transaction will meet this standard if the buyer and seller are unrelated. See T.D. 96-87, supra. Since Nokia Oy is unrelated to Sanmina Oy, absent evidence to the contrary, it is presumed that the transaction is at “arm’s length”. See HQ 545474 dated August 25, 1995. Statutory Additions The final element that must be established in order to rebut the presumption that the price actually paid or payable by the importer to the middleman is the transaction value, involves the statutory additions to the price that are set forth in 19 U.S.C. §1401a(b)(1). Section 1401a(b)(1) provides that amounts equal to the following must be added to the price actually paid or payable: (A) the packing costs incurred by the buyer with respect to the imported merchandise; (B) any selling commission incurred by the buyer with respect to the imported merchandise; (C) the value, apportioned as appropriate, of any assist; (D) any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States; and (E) the proceeds of any subsequent resale, disposal, or use of the imported merchandise that accrue, directly or indirectly, to the seller. 19 U.S.C. §1401a (b)(1). CBP must be provided with sufficient information to confirm, as between the middleman and the manufacturer, that there are no statutory additions or, alternatively, must be advised of the nature and amount of the statutory additions that must be added to the price actually paid or payable. See, for example, HQ 548494 dated January 26, 2005. In the instant case, you state that Nokia US has identified certain assists provided to Sanmina Oy. You indicate that the amount of such assists will be quantified and added appropriately to the price actually paid or payable of the merchandise. Provided Nokia US is able to advise CBP of the nature and amount of these assists, we find that, in accordance with Nissho Iwai, the imported merchandise may be appraised using transaction value based on the price that Nokia Oy pays Sanmina Oy. HOLDING: Based on the information presented and the sample documentation provided, the sale between the Sanmina Oy and Nokia Oy is a sale for exportation to the U.S. under 19 U.S.C. § 1401a(b) and may be used for appraisement purposes at entry provided Nokia US is able to advise CBP of the nature and amount of any assists provided to Sanmina Oy. Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” Sincerely, Monika R. Brenner Chief Valuation & Special Programs Branch