Application for Further Review of Protest No. 1601-2015-100229; Request for Refund of Duties to Correct Error in Transfer Pricing Calculations Program

HQ H287403 January 18, 2018 OT:RR:CTF:VS H287403 JMV CATEGORY: Valuation Port Director U.S. Customs and Border Protection Port of New York/Newark 1210 Corbin Street Newark, NJ 07102 Re: Application for Further Review of Protest No. 1601-2015-100229; Request for Refund of Duties to Correct Error in Transfer Pricing Calculations Program Dear Port Director: This is in response to the Application for Further Review (“AFR”) of Protest No. 1601-2016-100229, timely filed by Sandler & Travis Advisory Services, Inc. on behalf of the protestant General Electric Lighting AN (“GE Lighting”). The AFR concerns whether goods may be reliquidated with a refund of duties due to an error in transcribing values in the transfer pricing calculations. FACTS: GE Lighting purchased and imported goods from a related seller, GE Hungary. These goods entered the United States on May 13, 2015 and were liquidated on March 25, 2016. The imported goods consisted of light bulbs and LED lighting systems for various industrial, commercial and residential lighting applications. During a compliance review, GE Lighting discovered that invoices for certain transactions between GE Hungary and GE Lighting were overstated due to a clerical error in transfer pricing calculations. The protestant’s position is that “the clerical error was found to be a result of applying packaging costs as the unit price and not the true unit price (revised prices). The correct unit prices were corrected in GE Hungary[’s] system in late April 2015 (revised price).” Thus, according to the protest, when the entry summaries for these products were completed, values for several of the SKU numbers were overstated. GE Lighting filed a protest with the Port of New York/Newark on September 21, 2016 requesting a refund of $183,740.31 because a clerical error caused the invoices, presented at entry, to reflect an overstated price. After an initial review, CBP determined that the documentation GE Lighting provided was insufficient to validate the new transfer price and to authorize a refund. On March 8, 2017, CBP requested additional supporting documentation in “the form of original and amended invoices, original and revised Entry Summaries, and product information . . . .” GE Lighting requested several extensions on deadlines for producing the requested information, and GE lighting responded on April 28, 2017. Your office decided that the documentation GE Lighting provided in response to the request was insufficient to substantiate the claim for the transfer price and to warrant a refund of duties. The revised invoices and Entry Summaries that GE Lighting provided to CBP were just the original documents marked with handwritten ink annotations. GE Lighting stated that due to “documentation safeguards . . . GE Lighting is unable to reprint invoices with updated information after shipments have left. Therefore, [GE Lighting’s] only course of action is to re-print the original invoices and handwrite the changes.” GE Lighting also produced spreadsheets referencing changes in the transfer price, but provided no explanation as to how the values changed at the unit price level. Your office found this documentation to be insufficient and denied the adjusted transfer price. ISSUE: Whether the protestant has demonstrated that the merchandise was improperly appraised due to an error in transcribing values in a transfer pricing calculation. LAW AND ANALYSIS: As an initial matter, we note that the protest was timely filed on September 21, 2016, within 180 days of liquidation of the entry on March 25, 2016, under the statutory provisions for protests. See 19 U.S.C. §1514(c)(3). Additionally, under 19 U.S.C. § 1514(a) “any clerical error, mistake of fact, or other inadvertence” that occurs in an “entry, liquidation, or reliquidation” is a protestable event. GE Lighting cites H175077, dated November 24, 2014, as justification for their request, where CBP found that a mistake on the entry form that caused an agent to be charged duties that should have been billed to the foreign importer was a clerical error warranting a refund of duties. C.H. Robinson, Inc. (“C.H. Robinson”) contracted with foreign importer Starcorp Furniture (Shanghai) Co. Ltd. (“Starcorp”) to act as the domestic agent for Starcorp. While Starcorp’s name was listed as the importer on record, C.H. Robinson’s IRS number was listed, leading CBP agents to bill C.H. Robinson rather than Starcorp for additional antidumping duties assessed upon liquidation. In supporting their case for a refund of duties, C.H. Robinson supplied CBP with a letter between the parties that outlined the terms of the arrangement and a copy of the Power of Attorney that gave C.H. Robinson the power to conduct customs business on behalf of Starcorp. Based on these documents, CBP granted the protest. However, the mistake at issue here is more than a mere clerical error on entry documents. Although GE Hungary may have made an error in transcribing the value for the unit price, that error led to an adjustment in the transaction value, which created the additional question of whether the adjusted transaction value is acceptable. Therefore, we must examine whether CBP should accept a modified transaction value derived from an adjustment in the transfer pricing calculations. Transaction value, the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus statutory additions, is the preferred basis of appraisement for merchandise imported into the United States when the buyer and seller are not related. 19 U.S.C. §1401a; 19 CFR §152.103(l). However, the port director shall not disregard a transaction value solely because the buyer and seller are related. 19 CFR 152.103(l)(1). If CBP has doubts about the acceptability of the price between related parties and “is unable to accept transaction value without further inquiry, the parties will be given the opportunity to supply such further detailed information as may be necessary to support the use of transaction value.” HQ H008706, dated January 12, 2010. In H008706, EBM Pabst Inc. (“EBM”) asserted that the prices listed on the original invoices presented to CBP were inflated and that CBP should accept lower, adjusted values submitted on a spreadsheet. This spreadsheet illustrated lower values across all applicable line items which EBM claimed to be the result of adjustments made “to comply with income tax transfer pricing review to retroactively account for any differences between actual transactional results and true arm’s length result . . . .” However, EBM did not submit any information related to the transfer pricing study or produce information on how the adjustment was calculated. Therefore, CBP had no legal basis to grant the protest. Similarly, in the instant case, GE Lighting provides no documentation to support their assertion that there was a clerical error, nor that the adjusted transfer pricing values should be accepted over the original. Similar to H008706, all the documents that GE Lighting produced indicate that there was a change in the calculated transfer price, but no explanation is provided as to how the unit price changed, what the original and correct values are, or why the adjusted transfer pricing value is preferable. The CBP Senior Import Specialist provided GE Lighting with the opportunity to provide additional documentation and allowed for a number of extensions on deadlines. Nonetheless, the documentation remains insufficient to validate the transfer price and we have no legal basis to grant this protest. HOLDING: The protest should be denied. Insufficient evidence was presented to substantiate the Protestant’s claim that CBP should accept the adjusted transfer price. 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. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP website 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