Application for Further Review of Protest No . 3126-88-000009

HQ W544382 October 9, 1990 CLA-2 CO:R:C:V W544382 OHS CATEGORY; Valuation District Director of Customs Anchorage, Alaska RE: Application for Further Review of Protest No . 3126-88-000009 Dear Sir: The above referenced protest and application for further review concern the appraisement of seamless steel oil well casing appraised under the provisions of section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA: 19 U.S.C. 1401a(b)). FACTS: Seamless steel oil well casing was shipped directly to the ultimate user, ARCO Alaska (hereinafter ARCO), Alaska, from the seller, Algoma Steel Corp., Ltd. (hereinafter ASC), Canada, after further processing in Canada by AMF Toboscope (hereinafter AMF). The importer of record and the protestant is Algoma Tube Corp., Ltd. (herinafter ATC), Houston. According to the facts provided by the protestant, ATC and ASC are related parties pursuant to section 402(g) of the TAA. You have indicated that the merchandise was not appraised according to the invoices presented to Customs at the time of entry but at the price which the importer resold the merchandise to ARCO less brokerage charges and included duty. This value contained the cost of further processing, the transportation charges and a six percent selling commission. The protestant contends that the appropriate basis of appraisement is transaction value. This value would be determined based upon the amount paid by ATC to ASC plus the additional amounts paid to AMF and other unrelated companies by ARCO for materials added to the casing before exportation to the U.S. Protestant further contends that if transaction value is found to be inapplicable as the appropriate basis of appraisement then deductive value consisting of the resale price from ATC to ARCO less all authorized statutory deductions would be the correct basis of appraisement. The protestant states that ATC is the exclusive distributor of tubular steel products in the U.S. Protestant claims that ATC buys and sells for its own account, maintains inventories of tubular products valued at one to two million dollars, and contracts for the processing of its products. The protestant contends that a sales contract exists between ARCO and ATC for the purchase of 270,000 feet of oil well casing to be delivered CIF duty paid to Fairbanks, Alaska. Subsequent to entering into this contract with ARCO, ATC entered into a contract with ASC to produce the casing at a price of $800 CFT FOB seller's plant in Ontario, Canada. Evidence of payment and purchase by ARCO in the forms of a purchase order, dated October 24, 1983, from ARCO to ATC, copies of checks issued by ARCO and invoices from ATC to ARCO have been submitted. As confirmation that work was performed by AMF on ATC's behalf, invoices from AMF to ATC for this work and copies of checks from ATC to AMF were submitted. Additionally, the protestant provided a copy of the power of attorney in the name of ATC and the bond rendered to the Customhouse broker in Anchorage, Alaska for work to be performed by them. Finally, copies of the bills of lading from AMF's Canadian factory to Fairbanks, Alaska have been supplied. Your office determined that the applicable basis of appraisement was the resale price paid by ARCO for the imported merchandise less brokerage charges and included duty after determining that the sale for exportation of the merchandise existed between ASC and ARCO and that ATC was a selling agent for ASC. Your office states that the following factors were considered in arriving at this decision. ASC arranged with the Customhouse Broker in Anchorage to file the Customs entries. They paid the customhouse brokerage fees on all entries. ASC paid for the increased duty, when the bills were sent to ATC. They paid the U.S. Customs duties at the time of entry to Customs. They gave the customhouse broker instructions to prepare a power-of-attorney form and send it to ATC to be signed by a corporate officer so that entry could be made in the name of ATC. Purchase orders, evidence of order confirmation and evidence of payment amount were supplied by ASC in reply to a request for information sent to ATC. All evidence submitted provides that payment for all transportation charges from ASC's mill to the processing plant were paid by ASC. No evidence of reimbursement of these costs by ATC has been provided. Your office has indicated that all information requested from ATC was produced by ASC. ISSUE: Whether a sale for exportation has occurred between ASC and ATC? If a sale for exportation has not occurred between ASC and ATC, was there a sale for exportation between ARCO and ASC with ATC acting as a selling agent? LAW AND ANALYSIS: The preferred method of appraisement is transaction value pursuant to section 402(b) of the TAA. This is defined as "the price actually paid or payable for the merchandise when sold for exportation to the United States", plus amounts for the items specifically enumerated in section 402(b)(1) of the TAA (emphasis added). The term "price actually paid or payable" is defined in section 402(b)(4)(A) as: •••the total payment (whether direct or indirect and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller. The term "sale" generally is defined by the courts as a transfer of ownership in property from one party to another for a price or other consideration. See J.L. Wood v. United States, 62 CCPA 25, C.A.D. 1139 (1974).. The evidence submitted has not substantiated the payment or transfer of any other consideration by ATC to ASC for the merchandise. The presence of the special steel summary invoice and the commercial invoices alone without other evidence of payment is insufficient to establish that a "sale" has occurred between ASC and ATC as defined in J.L. Wood, supra. Hence, we are required to determine whether a sale for exportation exists between ARCO and ASC with ATC acting as a selling agent. As provided under section 402(b) of the TAA, commissions paid to a selling agent are one of the items listed as an addition the “price actually paid or payable.” It is clear from the statutory language that in order to establish transaction value one must know the identity of the seller and the amount actually paid or payable to the seller or for his benefit. Whether or not the purported agent is the seller is to be determined by the documents presented. Based upon the evidence submitted by your office regarding the relationships of the parties, the payment of the transportation charges and duties by ASC, other evidence of communications between ATC and ASC and the claim by ATC that ATC was acting as the exclusive distributor for ASC in the U.S., it is apparent that ATC was acting on behalf of ASC when entering into the contracts with ARCO for the purchase of the imported merchandise. Additionally, the documents presented establish the existence of a selling agency relationship between ATC and ASC. These documents include the purchase orders detailing the contract terms and copies of checks to ATC from ARCO, the work orders and invoices specifying the details of the additional processing to be completed by AMF for ATC as provided in the ARCO contract and copies of checks from ATC to AMF. Furthermore, there has not been any evidence submitted that would indicate that ARCO could purchase directly from ASC since ATC is the exclusive distributor for ASC. Finally, the information submitted indicates that it is within the complete discretion on ASC's behalf to accept the order from ARCO. Under these circumstances, we have found that a sale exportation to the U.S. has occurred between ARCO and ASC with ATC acting as a selling agent on ASC’s behalf. HOLDING: Based upon the foregoing, we conclude that a sale for exportation has occurred between ARCO and ASC with ATC acting as a selling agent. Therefore, the merchandise in question was properly appraised. You are directed to deny the protest. A copy of this decision should be attached to Form 19, Notice of Action, to be sent to the protestant. Sincerely, John Durant, Director Commercial Rulings Division