“First sale” appraisement

HQ H309982 April 20, 2020 OT:RR:CTF:VS H309982 AP CATEGORY: Valuation Cecilia Perez, Customs Specialist Premier Beverage Co LLC dba Breakthru Beverage Florida 9801 Premier Parkway Miramar, Florida 33025 RE: “First sale” appraisement Dear Ms. Perez: This is in response to your letter, dated February 27, 2020, on behalf of Premier Beverage Co. LLC dba Breakthru Beverage Florida (“Premier Beverage”), requesting a ruling as to whether the transaction between the supplier/middleman, Vineyard Brands, and the winery, Perrin & Fils, qualifies as an acceptable basis for appraisement of the subject merchandise. FACTS: Premier Beverage, importer of record and consignee, is one of the largest distributors of wine, spirits, and non-alcoholic beverages in Florida. The importer serves customers throughout Florida from its distribution facilities in Pensacola, Jacksonville, Orlando, Miramar, and Tampa. The importer purchases wine from France through Vineyard Brands, supplier and middleman, located in Birmingham, Alabama. The middleman buys the wine from Perrin & Fils, a winery in France, and sells it to the importer. The middleman takes title of the wine when it picks it up at the French winery. The winery, the middleman, and the importer are not related parties. The terms of the sale between the winery and the middleman are Ex works. The terms of the sale between the middleman and the importer are Free on Board (“FOB”) French Port by Ocean. The French ports of shipment are Fos-sur-mer and Le Havre. The U.S. ports of destination are Miami and Port Everglades in Florida. The importer pays the costs of ocean freight, insurance, unloading, and transportation from the arrival port to the final destination. The importer is also responsible for paying the excise tax and duties on the wine. The importer issues a purchase order to the middleman who then contacts the winery in France and provides the specific instructions. The winery issues a customs invoice to the middleman including the delivery address of the U.S. importer of record’s warehouse in Tampa, Florida. The winery’s invoice contains Alcohol and Tobacco Tax and Trade Bureau label of approval numbers for each wine for export to the United States listed on the invoice. You submit that the transaction at issue should be appraised using the transaction value between the French winery and the middleman as a bona fide sale for export to the United States, and would like us to confirm that. ISSUE: Whether the sale between the French winery and the middleman is a sale for export to the U.S. that may be used for appraisement purposes under transaction value. 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, codified at 19 U.S.C. § 1401a. The preferred method of appraisement is transaction value. For purposes of this ruling, we accept that transaction value is the proper method of appraisement for the imported merchandise. Transaction value is the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus certain statutorily enumerated additions. Unless there is a bona fide (good faith) sale of merchandise for exportation to the United States, the transaction value method cannot be used. You seek to utilize the transaction value of the sale between the winery in France and the middleman. In Nissho Iwai American Corp. v United States, 982 F.2d 505 (Fed. Cir. 1992), the court reviewed the standard for determining transaction value in a multi-tiered transaction. The court case involved a foreign manufacturer, a middleman, and a U.S. purchaser. The court held that the price paid by the middleman to the foreign manufacturer was the proper basis for transaction value. The court stated that in order for the foreign manufacturer’s price to be a valid transaction value, the transaction between the foreign manufacturer and the middleman needed to be a sale negotiated at “arm’s length” that was free from any non-market influences, and involved goods clearly destined for exportation to the U.S. In accordance with the Nissho Iwai court decision and our own precedent, we presume that transaction value is based on the price paid by the importer. 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. It is the importer’s responsibility to show that the “first sale” price is acceptable under the standard set forth in Nissho Iwai. The U.S. 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, the Customs Service (now Customs and Border Protection (“CBP”)) advised that the importer must describe in detail the roles of the parties involved and must supply relevant documentation addressing each transaction that was involved in the exportation of the merchandise to the United States (e.g., the alleged sale between the importer and middleman, and the alleged sale between the middleman and the manufacturer). Relevant documents include, but are not limited to purchase orders, invoices, proof of payments, contracts, and any additional documents (i.e. correspondence) that establishes how the parties deal with one another. CBP is looking for “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. In sum, CBP presumes that transaction value is based on the price paid by the importer and in order to rebut this presumption and prove that transaction value should be based on some other price, complete details of all the relevant transactions and documentation (including purchase orders, invoices, evidence of payment, contracts and other relevant documents) must be provided, including the relationship of the parties and sufficient information regarding the statutory additions. To use a “first sale” price as the basis of appraisement under transaction value, the court in Nissho Iwai required the transaction between the foreign manufacturer and the middleman to be a bona fide sale. “Sale” means a transfer of property from one party to another for consideration. See J.L. Wood v. United States, 62 C.C.P.A. 25, 33, 505 F.2d 1400, 1406 (1974). CBP considers whether the potential buyer has assumed the risk of loss and acquired title to the imported merchandise. In addition, CBP may examine whether the purported buyer paid for the goods, and whether, in general, the roles of the parties and circumstances of the transaction indicate that the parties are functioning as buyer and seller. Here, the winery and the middleman are unrelated parties and are functioning as buyer and seller. The invoices and the importer’s April 20, 2020 e-mail reveal that the wine will be transferred from the winery to the middleman for consideration and the middleman will hold title to the wine when it picks it up at the French winery. The French winery is not related to the U.S. importer and the middleman. As the winery and the middlemen are unrelated, the sale between them is presumed to be at “arm’s length.” Finally, Nissho Iwai also required the goods to be “clearly destined for the United States” when sold by the winery to the middleman. In order to satisfy this requirement, the evidence must show that the only possible destination for the imported merchandise is the U.S. at the time the middleman purchased or contracted to purchase the wine from the French winery. The purchase order shows the wine is shipped from France to Premier Beverage in Tampa, Florida. In addition, the importer’s permit number in Florida and tax identification number confirm that the wines are for export to the U.S. Further, the label of approval numbers from the Alcohol and Tobacco Tax and Trade Bureau for each wine for export to the U.S. listed on the invoice also demonstrate that the wines are clearly destined for the U.S. Thus, the submitted documentation demonstrates that the goods are clearly destined for the United States. Based on the above, we find that the transaction between the winery in France and the middleman meets the requirement of being a bona fide arm’s length transaction for goods clearly destined for the U.S. and qualifies as an acceptable basis for appraisement of the subject merchandise. HOLDING: Based on the information this office reviewed, “first sale” transaction value appraisement may be utilized by Premier Beverage for the transaction described herein. Premier Beverage may be asked to present additional information to the ports for specific entries to support its use of “first sale” appraisement and should be prepared to present such information. 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 Customs Service 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.” A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction. Sincerely, Monika R. Brenner, Chief Valuation & Special Programs Branch