First sale appraisement; wine from Spain

May 21, 2020 HQ H310747 OT:RR:CTF:VS H310747 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; wine from Spain Dear Ms. Perez: This is in response to your letter, dated May 5, 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 Inc., and the winery, Marqués de Cáceres in Spain, qualifies as an acceptable basis for appraisement of the imported wine. FACTS: Premier Beverage, U.S. importer of record and consignee, purchases wine from winery Marqués de Cáceres in Spain, through Vineyard Brands, a supplier and the middleman, located in Birmingham, Alabama. The middleman buys the wine from the winery in Spain and sells it to the importer. All the parties to this transaction are unrelated. In your May 7, 2020 e-mail, you inform us that the terms of the sale between the Spanish winery and the middleman are Free on Board (“FOB”) Bilbao, Spain (sometimes the shipping point will be Barcelona, Spain). The purchase order from Premier Beverage to Vineyard Brands indicates that the terms of the sale between the middleman and the importer are FOB Bilbao, Spain by Ocean. The U.S. ports of destination are Miami and Port Everglades in Florida. The importer pays the excise tax and duties on the wine. The importer issues a purchase order to the middleman who then contacts the winery in Spain and provides the specific instructions. The winery issues a customs invoice to the middleman including the delivery address of the U.S. importer 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. The price of the wine indicated on the purchase order between the winery and the middleman matches the price on the invoice between the winery and the middleman. The middleman issues an invoice to the importer. The middleman makes a payment to the winery via an international wire. You have provided copies of the purchase order issued by the importer to the middleman, the purchase order issued by the middleman to the winery, the invoice issued by the winery to the middleman, the invoice issued by the middleman, and proof of payment for the payment of the wine by the middleman to the winery. You submit that the transaction at issue should be appraised using the transaction value between the Spanish winery and the middleman as a bona fide sale for export to the United States. ISSUE: Whether the sale between the Spanish winery and the middleman is a sale for export to the United States 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. See 19 U.S.C. § 1401a(b)(1)(A)-(E). 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 Spain 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 United States. 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. 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. CBP has held that “[f]lash transfer of title and risk of loss by itself does not equate to a failure to show a bona fide sale.” Headquarters Ruling Letter (“HQ”) W563605, dated Nov. 19, 2009. The documentation submitted supports the existence of a bona fide sale of the merchandise between the importer and the middleman and between the middleman and the Spanish winery. The submitted invoices and purchase orders, and your May 7, 2020 e-mail reflect the fact that the wine is transferred from the winery to the middleman and to the importer for consideration. The shipping term FOB Bilbao, Spain or Barcelona, Spain in the transaction between the winery and the middleman means that the winery retains risk of loss and title to the wine until the goods pass the rail of the vessel upon which the goods are loaded in Bilbao or Barcelona, Spain. The shipping term FOB Bilbao, Spain in the transaction between the middleman and the importer indicates that the title and the risk of loss transfer from the middleman to the importer at the ship’s rail in Bilbao. The winery invoices the middleman for the wine, who in turn invoices the importer for the purchase. The provided proof of payment from the middleman shows that the middleman is responsible for payment to the winery for the wine. The Spanish winery is not related to the importer and the middleman. As the winery and the middlemen are unrelated, the sale between them is presumed to be at arm’s length. See HQ H295538, dated May 31, 2018 (stating that when the parties to a transaction 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 Spanish winery. The purchase order shows the wine will be shipped from Spain 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 at the time of the sale between the winery and the middleman, the goods are clearly destined for the United States. Accordingly, we find that the transaction between the winery in Spain and the middleman meets the requirement of being a bona fide arm’s length sale of goods clearly destined for the United States, and thus it qualifies as an acceptable basis for appraisement of the wine. HOLDING: Based on the information this office reviewed, the “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