Protest and Application for Further Review of 3301-17-100005; Valuation under the Fallback Method

HQ H303450 August 2, 2019 OT:RR:CTF:VS H303450 JMV CATEGORY: Valuation U.S. Customs and Border protection Apparel, Footwear & Textiles CEE 5600 Pearl Street, 3rd Floor Rosemont, IL 60018-5213 RE: Protest and Application for Further Review of 3301-17-100005; Valuation under the Fallback Method Dear Director, This is in response to the Application for Further Review (“AFR”) of Protest No. 3301-17-100005, dated September 6, 2017, filed against Custom and Border Protection’s (“CBP”) decision to liquidate the merchandise at issue based on the value initially declared at entry. The Protestant, Alliance Pulse Processors, Inc. (“Protestant”), seeks the liquidation of the merchandise at the value reflected in amended invoices. FACTS: The entries at issue were made as the result of an intercompany transfer between the Protestant and its wholly-owned U.S. subsidiary, United Pulse Trading, Inc. (“UPT”) (the ultimate consignee). Protestant imported laminated woven bags into Canada from its supplier in China and then exported some of the bags to the United States over three shipments, two of which are the subject of this protest. Protestant sent the bags to the United States to be used in testing of packaging equipment at UPT’s facility in Williston, North Dakota. The Protestant states that because the transactions were internal, there was no sale from Protestant to UPT. Protestant further argues that the Customs documentation for these shipments was completed using only an estimated value for the bags. Entry No. 1, entered on June 20, 2012 Protestant originally filed an Invoice Declaration by Foreign Shipper (“Invoice Delaration”) with a declared a value of $75,920, then submitted an amended Invoice Declaration, wherein hand written changes were made. The amended Invoice Declaration included a declared value of $58,400. 2. Entry No. 2, entered on December 4, 2012 Protestant estimated the value of the bags on this entry, and CBP asked Protestant to provide information to support the declared value. Protestant never provided any of the requested information until the protest was filed. Therefore, CBP liquidated the imported merchandise at $2,860, but the Protestant now claims the merchandise should be valued at $1,375. Protestant provided this office with commercial invoices from the Chinese manufacturers to the Protestant for each of the entries. Protestant also provided a spreadsheet which included calculations to arrive at the Free on Board (“FOB”) unit price of the imported goods at issue. This is the value the Protestant argues should be the accepted customs value. ISSUE: Whether the goods at issue may be valued based on the invoice price between the Protestant and the Chinese manufacturer. LAW AND ANALYSIS: Initially, we note that the matter protested is protestable under 19 U.S.C. § 1514(a)(1) as a decision on the value of merchandise. The protest was timely filed, within 180 days of liquidation for entries made on or after March 17, 2017. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub. L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)). Further Review of Protest No. 3301-17-100005 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(b) because the issues protested involve questions of law or fact which have not been ruled upon. 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 primary method of appraisement is transaction value, defined as “the price actually paid or payable for the merchandise when sold for exportation to the United States” plus the value of certain statutorily enumerated additions. 19 U.S.C. § 1401a(b)(1). Here, the Protestant asserts that there is no transaction value because there was no sale. Instead, there was an intracompany transfer between a parent company and its U.S. subsidiary. When imported merchandise cannot be appraised on the basis of transaction value, it is appraised in accordance with the remaining methods of valuation, applied in sequential order. The alternative bases of appraisement, in order of precedence, are: the transaction value of identical merchandise; the transaction value of similar merchandise; deductive value; and computed value. If the value of imported merchandise cannot be determined under these methods, it is to be determined in accordance with section 402(f) of the TAA. 19 U.S.C. § 1401a(a)(1). The first and second alternative bases of appraisement are the transaction value of identical merchandise and the transaction value of similar merchandise, as determined in accordance with section 402(c) of the TAA. Appraised values of identical and similar merchandise are based on values that are acceptable as appraised values under section 402(b) of the TAA. 19 U.S.C. § 1401a(c)(1). Here, Protestant states that previously accepted customs values of identical or similar merchandise are not available because it had not previously imported these products into the United States. Deductive value pursuant to section 402(d) of the TAA is the next applicable basis of appraisement and is based on the unit price at which the merchandise concerned is sold in the United States in the greatest aggregate quantity, generally in the condition as imported and at or about the time of importation of the merchandise being appraised. Provided the merchandise is not further processed, the unit price at which imported merchandise is sold in the greatest aggregate quantity means the unit price at which it is sold to unrelated persons at the first commercial level after importation. 19 U.S.C. § 1401a(d). Protestant asserts that deductive value is also not an option because the bags were not sold in the United States, but were filled and exported. The next method of appraisement is the computed value method, set forth in section 402(e) of the TAA. Computed value is defined as the sum of, inter alia: the cost or value of the materials and the fabrication and other processing of any kind employed in the production of the imported merchandise; and an amount for profit and general expenses equal to that usually reflected in sales for export to the United States, by producers in the country of exportation, of merchandise of the same class or kind. 19 U.S.C. § 1401a(e)(1). Protestant argues that computed value is not an option because it is not the producer or related to the producer, and therefore does not have the information or access to the information needed to determine a computed value. When the value of imported merchandise cannot be determined under sections 402(b-e) of the TAA, it may be appraised under section 402(f) of the TAA on the basis of a value derived from one of those methods, reasonably adjusted to the extent necessary to arrive at a value. 19 U.S.C. § 1401a(f). This is known as the “fallback” valuation method. Certain limitations exist under this method, however. For example, merchandise may not be appraised on the basis of the price in the domestic market of the country of export, the selling price in the United States of merchandise produced in the United States, minimum values, or arbitrary or fictitious values. 19 U.S.C. § 1401a(f); 19 C.F.R. § 152.108. Under section 500 of the Tariff Act of 1930, as amended, which constitutes CBP’s general appraisement authority, the appraising officer may: fix the final appraisement of merchandise by ascertaining or estimating the value thereof, under section 1401a of this title, by all reasonable ways and means in his power, any statement of cost or costs of production in any invoice, affidavit, declaration, other document to the contrary notwithstanding… 19 U.S.C. § 1500(a). In this regard, the Statement of Administrative Action (SAA), which forms part of the legislative history of the TAA, provides in pertinent part: Section 500 is the general authority for Customs to appraise merchandise. It is not a separate basis of appraisement and cannot be used as such. Section 500 allows Customs to consider the best evidence available in appraising merchandise. It allows Customs to consider the contract between the buyer and seller, if available, when the information contained in the invoice is either deficient or is known to contain inaccurate figures or calculations….Section 500 authorize [sic] the appraising officer to weigh the nature of the evidence before him in appraising the imported merchandise. This could be the invoice, the contract between the parties, or even the recordkeeping of either of the parties to the contract. Statement of Administrative Action, H.R. Doc. No. 153, 96 Cong., 1st Sess., pt 2, reprinted in, Department of the Treasury, Customs Valuation under the Trade Agreements Act of 1979 (October 1981), at 67. Section 152.107 of the CBP regulations (19 C.F.R. § 152.107) provides: (a) Reasonable adjustments. If the value of imported merchandise cannot be determined or otherwise used for the purposes of this subpart, the imported merchandise will be appraised on the basis of a value derived from the methods set forth in §§ 152.103 through 152.106, reasonably adjusted to the extent necessary to arrive at a value. Only information available in the United States will be used. Here, Protestant is asserting that CBP should accept the sale price between it and the manufacturer in China for goods that were initially exported into Canada as a value derived from transaction value reasonably adjusted. However, 19 U.S.C. § 1401a(f)(2)(E) states that “Imported merchandise may not be appraised, for the purposes of this chapter, on the basis of the price of merchandise for export to a country other than the United States.” Therefore, CBP cannot accept the proposed value under the “fallback” method. Although we understand that the Protestant believes it overvalued the goods at the time of entry, Protestant was unable to respond to our request for additional information; therefore, we see no basis upon which to reappraise the merchandise and alter the value claimed at the time of entry, upon which liquidation was based. HOLDING: Based on the above discussion, the protest should be denied. Because the Protestant was not able to provide information that would support a change of the value claimed at entry, we find no basis upon which to grant the Protestant’s request to reliquidate. In accordance with the Protest/Petition Processing Handbook (CIS 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 in accordance with this decision must be accomplished prior to mailing of 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 Customs Rulings Online Search System (CROSS) at https://rulings.cbp.gov/ which can be found on the U.S. Customs and Border Protection website at http://www.cbp.gov and other methods of public distribution. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division