Protest 4701-04-101045; Bona Fide Sales & Clearly Destined for Exportation to the United States; T.D. 96-87; Nissho Iwai; First-Sale Price

HQ W548683 October 9, 2007 OT:RR:CTF:VS 548683 RFC CATEGORY: Valuation Area Director U.S. Bureau of Customs and Border Protection ATTN: Chief, Liquidation and Protest Branch JFK International Airport Area, Building 77 Jamaica, NY 11430 RE: Protest 4701-04-101045; Bona Fide Sales & Clearly Destined for Exportation to the United States; T.D. 96-87; Nissho Iwai; First-Sale Price Dear Sir or Madam: This letter is in reference to an application for further review of protest number 4701-04-101045 filed by Rena Lange (USA), Inc. on December 15, 2004, contesting the appraised value of certain merchandise by U.S. Customs and Border Protection (CBP). The protest was timely filed. Rena Lange (USA), Inc., by its counsel, made five additional submissions dated as follows: April 15, 2005, June 15, 2006, August 23, 2006, September 8, 2006, and September 12, 2006. FACTS: The instant protest covers one entry. The entry date is November 4, 2003, and the liquidation date is September 17, 2004. The merchandise under consideration in the instant protest is various women’s wearing apparel. The facts as presented are as follows: Rena Lange (USA), Inc. (“Rena Lange”) is the importer of record. It issued a purchase order for certain women’s wearing apparel to M. Lange & Co. GmbH (“M. Lange”) in response to orders from U.S. customers (M. Lange is related to Rena Lange and is located in Germany). In turn, M. Lange issued purchase orders to various foreign manufacturers for the merchandise. The merchandise was appraised as entered based on the price paid by Rena Lange (importer) to M. Lange (middleman). On the other hand, Rena Lange contends that the appraised value of the merchandise should be the price paid by M. Lange to each of the various foreign manufacturers (i.e., the first-sale prices). Based on the information submitted by the protestant, the claimed value based on the first sale is less than half of the appraised value. In the May 30, 2005, Customs Protest and Summons Information Report (CBP 6445a5A), your port states that: The submitted documents [from the importer] do not support the claim that the merchandise is destined for the United States without contingency of diversion. This position is supported by the fact that not all of the manufacturers’ invoices contain the statement that the goods are for the US market only; the quantities on some of the invoices exceed the quantities on the instant shipment; and on the two invoices from [ ], only part of the merchandise is marked “US-marked only.” Therefore, it appears that US destined merchandise and non-US destined merchandise are mixed at the factory level. In addition, the copy of the label submitted clearly shows notations in languages other than English and sizes other than U.S. sizes. Moreover, once shipped from the manufacturers, the merchandise, already commingled at the factories, appears to be further commingled with merchandise destined for other countries. This is evidenced by the fact that M. Lange’s distribution hub in Germany, [ ], receives all merchandise, repackaging and readying the merchandise for final shipping to the U.S. and other countries. In the protest, Rena Lange, by counsel, states, in part, that: The merchandise covered by…[this] entry was ordered by the protestant/importer from M. Lange & Co., GMBH, Germany, which then ordered said merchandise from the various manufacturers for production and sale for exportation to the protestant/importer in the United States. In accordance with various decisions of the U.S. Court of Appeals for the Federal Circuit, including Nissho Iwai American Corp. v. United States, 982 F.2d 505, CAFC 92-1239 (Fed. Cir. 1992), the prices paid or payable to the various manufacturers (copies attached), plus any assists, properly represent the transaction value, 19 U.S.C. § 1401a(b). In page 3 to the April 15, 2005, submission, it states, in part, that: [W]e once again respectfully direct your attention to the following specific points which support Rena Lange’s position herein: (1) Purchase Order(s) issued by M. Lange to the various manufacturers indicating the corresponding season, style, fabric and Rena Lange Purchase Order number for the requested merchandise, as well as the specific item line description “CRUISE/USA-day”; (2) the Invoice(s) issued by the various manufacturers to M. Lange…contain similar identifying information for the subject merchandise in addition to one of several variations of the phrase “Made for U.S. Market Only”; and (3) individual garment care labels indicating among other things, (a) Rena Lange’s style and Purchase Order number, (b) English country of origin description in accordance with 19 U.S.C. § 1304, (c) bar code for Rena Lange’s U.S. customer, and (d) registered identification number of Rena Lange’s U.S. customer. Clearly, the presence of the aforementioned distinctive elements confirms that the subject merchandise is intended solely for sale and shipment to the United States. The entry is said to consist of or involve thirteen orders involving five separate foreign manufacturers (some manufacturers were issued more than one order). Most of the purchase orders submitted by counsel list the name “Rena Lange” at the top of the page (although the name of “M. Lange & Co. GmbH” is listed at the very bottom of the page). At the bottom of the page it states, in part, as follows: Please return all materials, remaining fabrics, templates and sowing samples on completion of the order back to us. On encountering excess consumption and/or faculty fabrics you are required to stop production right away and consult our disposition on how to proceed. The above mentioned deadline is a fixed date. The listed and agreed price stays valid for this order. Changes in delivery date or pricing need to be confirmed in writing by M. Lange & Co. GmbH. The official approval of the ready-to-wear goods will take place at the site of customer M. Lange & Co GmbH, Ammerthalstr. 13-17, 85551 Feldkirchen/Heimstetten. If complaints occur the goods will be returned on the contractor’s place at their cost and will be corrected free of charge. This order has to be produced according to the RENA LANGE General Production Information. Pieces produced for US-PO-No. has [sic] to be labeled in accordance to US law. Vendors invoice will be paid by RENA LANGE in accordance to the payment agreements and written on the invoices. With respect to “item 6)” above, we note there is no indication as to what specific “US law” needs to be followed or what the relevant law requires. We also note that with respect to “item 7)” above, the vendors or manufacturers are paid by “Rena Lange” and not by M. Lange. Several documents were submitted by counsel as part of its April 15, 2005, submission in support of the protest. They include the following: 1). A chart (as found in exhibit B) said to summarize the information in the documents for each of the thirteen transactions. The chart is missing entries for some purchase orders. 2). A document (as found in exhibit C) said to be a purchase order from Rena Lange USA to M. Lange & Co. It has the name “Rena Lange” written at the top with the words “New York” written underneath. The order is designated as number [ ]. It lists approximately 1600 pieces or items. The document is not dated. 3). A document (as found in exhibit D) that is said to be a confirmation from M. Lange to Rena Lange for purchase order number [ ]. It lists approximately 1600 pieces or items. The name “Rena Lange (USA), Inc.” written on the top. The document is not dated. 4). Several documents (as found in exhibit E) dealing with the alleged transactions between M. Lange and the various foreign manufacturers. They are identified in the following order in the chart (as found in exhibit B): (1) Purchase order [ ] (incorrectly listed as [ ] on the chart) from M. Lange to [ ] (this is the name on the order). It deals with three separate orders designated as follows: “[ ]” with a total quantity of 118 pieces; “[ ]” with a total quantity of 89 pieces; and “[ ]” with a total quantity of 23 pieces. It has an order date of “07-10-2003.” It lists the name “Rena Lange” on the top rather than M. Lange; and it also states, in part, that “[v]endors invoice will be paid by RENA LANGE in accordance to the payment agreements and written on the invoices.” On the other hand, the invoice from [ ] (this is the name on the invoice) has the invoice number [ ]. It has a total quantity of 89 pieces. It also has the statement “Made for US Market only (PO No. [ ])” written on it. The invoice is addressed to “Rena Lange” located in Germany. The invoice is dated “23.09.03” (which is an earlier date than the order date found on the above-mentioned purchase order). (2) No purchase order was submitted to this office for the second transaction listed on the chart--although a number is listed on the chart, that number is the number for the purchase order listed immediately above: [ ]. In fact, the apparent corresponding invoice from [ ] (which was submitted as part of the original protest) appears to list a different M. Lange purchase order number: [ ]. That invoice from [ ] has invoice number [ ]. It lists a total quantity of 38 pieces. It also has the statement “Made for US Market only (PO No. [ ])” written on it. The invoice is addressed to “Rena Lange” located in Germany. The invoice is dated “07.10.03.” (3) Purchase order [ ] from M. Lange to [ ]. It deals with three separate orders designated as follows: “[ ]” with a total quantity of 299 pieces; “[ ]” with a total quantity of 34 pieces; and “[ ]” with a total quantity of 62 pieces. It lists the name “Rena Lange” on the top rather than M. Lange; and it also states, in part, that “[v]endors invoice will be paid by RENA LANGE in accordance to the payment agreements and written on the invoices.” It has an order date of “23-09-2003.” On the other hand, the corresponding invoice from [ ] has the invoice number [ ]. It has a total quantity of 34 pieces. It also has the statement “Made for US Market only (PO No. [ ])” written on it (but it appears that on the copy before us a number “[ ]” has been written on the number “[ ]” so that the purchase order number is “[ ].”). The invoice is addressed to “Rena Lange & Co, GMBH” located in Germany. The invoice is dated “23.09.03” (which is the same date as the order date found on the above-mentioned purchase order). (4) Purchase order [ ] from M. Lange to [ ] (this is the name on the order). It deals with five separate orders designated as follows: “[ ]” with a total quantity of 32 pieces; “[ ]” with a total quantity of 57 pieces; “[ ]” with a total quantity of 38 pieces; “[ ]” with a total quantity 63 pieces; and “[ ]” with a total quantity of 109 pieces. It lists the name “Rena Lange” on the top rather than M. Lange; and it also states, in part, that “[v]endors invoice will be paid by RENA LANGE in accordance to the payment agreements and written on the invoices.” It has an order date of “23-09-2003.” On the other hand, the corresponding invoice from [ ] (this is the name on the invoice) has the invoice number [ ]. It has a total quantity of 120 pieces—combining the total quantities for purchase orders [ ] and [ ]. It also has the statements “Made for US Market only (PO No. [ ])” and “Made for US Market only (PO No. [ ])” written on it. The invoice is addressed to “Rena Lange” located in Germany. The invoice is dated “23.09.03” (which is the same date as the order date found on the above-mentioned purchase order). (5) No purchase order was submitted for the fifth transaction listed on the chart found in the April 15, 2005, submission. In the June 15, 2006, submission, however, a purchase order was submitted that apparently relates to the fifth transaction on the chart—this was confirmed by the importer in its September 8, 2006, submission. This purchase order is numbered [ ], and it is from M. Lange to [ ] (this is the name on the order). It deals with two separate orders designated as follows: “[ ]” with a total quantity of 83 pieces and “[ ]” with a total quantity of 13 pieces. The top of the document appears to have been cut off as it does not list the name “Rena Lange,” unlike the other purchase orders—but it does state, in part, that “[v]endors invoice will be paid by RENA LANGE in accordance to the payment agreements and written on the invoices.” It has an order date of “22.08.03.” On the other hand, the corresponding invoice from [ ], as listed on the chart submitted by the importer, has the invoice number [ ]. In its September 8, 2006, submission, the importer, states, in part, that: Please note that the manufacturer’s invoice referenced in, and submitted with our letter of April 15, 2005 (see Exhibits B and C thereof, respectively), identified as [ ] invoice no. [ ], is not the correct invoice for the garments imported under the captioned entry. However, the correct invoice, identified in the listing as [ ] invoice no. [ ], has been located and a copy is annexed to this fax. (The incorrect invoice initially submitted is also annexed hereto for your information). We regret any inconvenience. No explanation was provided by the importer for submitting to CBP a document in support of its Nissho Iwai-type or first-sale claim that was not from the transaction under consideration. Moreover, no explanation was provided as to why it took so long for the importer to discover and inform CBP of this fact. This new “correct” invoice is from [ ] (this is the name on the invoice) and it has the invoice number [ ]. It has a total quantity of 96 pieces. It also has the statements “Made for US Market only (PO No. [ ])” and “Made for US Market only (PO No. [ ])” written on it. The upper right side of the documents is blacked out. The invoice is addressed to “Rena Lange” located in Germany. The invoice is dated “30.09.03.” (6) Purchase order [ ] from M. Lange to [ ] (this is the name on the order). It deals with four separate orders designated as follows: “[ ]” with a total quantity of 18 pieces; “[ ]” with a total quantity of 4 pieces; “[ ]” with a total quantity of 87 pieces; and “[ ]” with a total quantity of 4 pieces. It lists the name “Rena Lange” on the top rather than M. Lange; and it also states, in part, that “[v]endors invoice will be paid by RENA LANGE in accordance to the payment agreements and written on the invoices.” It has an order date of “07.10.2003.” On the other hand, the corresponding invoice from [ ] (this is the name on the invoice) has the invoice number [ ]. It has a total quantity of 87 pieces. It also has the statements “Made for US Market only (PO No. [ ])” written on it. The upper right side of the documents is blacked out. The invoice is dated “07.10.03” (which is the same date as the order date found on the above-mentioned purchase order). (7) No purchase order was submitted for the seventh transaction listed on the chart as found in the April 15, 2005, submission. In the June 15, 2006, submission, however, a purchase order was submitted that apparently relates to the seventh transaction on the chart—this was confirmed by the importer in its September 8, 2006, submission. This purchase order is numbered [ ], and it is from M. Lange to [ ] (this is the name on the order). It deals with three separate orders designated as follows: “[ ]” with a total quantity of 152 pieces; “[ ]” with a total quantity of 37 pieces; and “[ ]” with a total quantity 40 pieces. The top of the document appears to have been cut off as it does not list the name “Rena Lange,” unlike the other purchase orders. There is also no text at the bottom dealing with the terms of sale. It has an order date of “15.10.2003.” On the other hand, the corresponding invoice from [ ] is in a foreign language. It appears to have the invoice number [ ]. It also appears to have a total quantity of 37 pieces. At the bottom of the document and in English is the statement “Production for US customer.” The U.S. customer is not identified. The invoice is addressed to M. Lange & Co. GmbH for delivery in Germany. The invoice date is “07.10.2003” (which is an earlier date than the order date found on the above-mentioned purchase order). (8) No purchase order was submitted for the eighth transaction listed on the chart as found in the April 15, 2005, submission. In the June 15, 2006, submission, however, a purchase order was submitted that apparently relates to the eighth transaction on the chart—this was confirmed by the importer in its September 8, 2006, submission. This purchase order is numbered [ ], and it is from M. Lange to [ ] (this is the name on the order). It deals with one order designated as follows: “[ ]” with a total quantity of 33 pieces. The top of the document appears to have been cut off as it does not list the name “Rena Lange,” unlike the other purchase orders—but it does state, in part, that “[v]endors invoice will be paid by RENA LANGE in accordance to the payment agreements and written on the invoices.” It has an order date of “08.09.03.” On the other hand, the corresponding invoice from [ ] has the invoice number [ ]. It has a total quantity of 33 pieces. There is a statement indicating that the pieces are “[m]ade for the US market only (PO No. [ ]).” The invoice is addressed to “Rena Lange” located in Germany. The invoice is dated “07.10.03.” (9) No purchase order was submitted for the ninth transaction listed on the chart found in the April 15, 2005, submission. In the June 15, 2006, submission, however, a purchase order was submitted that apparently relates to the ninth transaction on the chart—this was confirmed by the importer in its September 8, 2006, submission. This purchase order is numbered [ ], and it is from M. Lange to [ ] (this is the name on the order). It deals with two separate orders designated as follows: “[ ]” with a total quantity of 110 pieces and “[ ]” with a total quantity 10 of pieces. The top of the document appears to have been cut off as it does not list the name “Rena Lange,” unlike the other purchase orders. There is also no text at the bottom dealing with the terms of sale. It has an order date of “17.10.2003.” On the other hand, the corresponding invoice from [ ] has the invoice number [ ]. It has a total quantity of 110 pieces. There is an English statement indicating that the pieces are “Made for US-Market only, PO No. [ ].” The invoice is addressed to “Rena Lange” located in Germany. The invoice date is apparently “30.09.03” (which is an earlier date than the order date found on the above-mentioned purchase order). (10) No purchase order was submitted for the tenth transaction listed on the chart found in the April 15, 2005, submission. In the June 15, 2006, submission, however, a purchase order was submitted that apparently relates to the tenth transaction on the chart—this was confirmed by the importer in its September 8, 2006, submission. This purchase order is numbered [ ], and it is from M. Lange to [ ] (this is the name on the order). It deals with one order designated as follows: “[ ]” with a total quantity of 30 pieces. The top of the document appears to have been cut off as it does not list the name “Rena Lange,” unlike the other purchase orders—but it does state, in part, that “[v]endors invoice will be paid by RENA LANGE in accordance to the payment agreements and written on the invoices.” It has an order date of “07.08.03.” On the other hand, the corresponding invoice from [ ] is in a foreign language. The invoice number appears to be [ ]. It appears to have a total quantity of 30 pieces. There is an English statement indicating that the pieces are “Made for US-Market only, PO No. [ ].” The invoice is addressed to “Rena Lange” rather than to M. Lange. The invoice is apparently dated “09.10.03.” (11) Purchase order [ ] from M. Lange to [ ] (this is the name on the order). It deals with two separate orders designated as follows: “[ ]” with a total quantity of 4 pieces and “[ ]” with a total quantity of 56 pieces. It lists the name “Rena Lange” on the top rather than M. Lange; and it also states, in part, that “[v]endors invoice will be paid by RENA LANGE in accordance to the payment agreements and written on the invoices.” It has an order date of “14-10-2003.” On the other hand, the corresponding invoice from [ ] (this is the name on the invoice) has the invoice number [ ]. It has a total quantity of 56 pieces. It also has the statements “Made for US Market only (PO No. [ ])” written on it. The invoice is addressed to “Rena Lange” located in Germany. The invoice is dated “07.10.03” (which is an earlier date than the order date found on the above-mentioned purchase order). (12) Purchase order [ ] from M. Lange to “[ ]” (this is the name on the order). It deals with three separate orders designated as follows: “[ ]” with a total quantity of 9 pieces; “[ ]” with a total quantity of 41 pieces; and “[ ]” with a total quantity of 59 pieces. It lists the name “Rena Lange” on the top rather than M. Lange; and it also states, in part, that “[v]endors invoice will be paid by RENA LANGE in accordance to the payment agreements and written on the invoices.” No order date is listed on the purchase order. On the other hand, the corresponding invoice from “[ ]” (this is the name on the invoice) is in a foreign language. It appears to have an invoice number [ ]. It lists two different entries: one appears to be for 68 pieces and the other appears to be for 41 pieces. The latter entry has the statement in English “US-market only PO. NO. [ ].” The invoice is dated “15/10/2003.” (13) Purchase order [ ] from M. Lange to “[ ]” (this is the name on the order). It deals with four separate orders designated as follows: “[ ]” with a total quantity of 13 pieces; “[ ]” with a total quantity of 11 pieces; “[ ]” with a total quantity of 69 pieces; and “[ ]” with a total quantity of 15 pieces. There is no order date listed on the document. It lists the name “Rena Lange” on the top rather than M. Lange; and it also states, in part, that “[v]endors invoice will be paid by RENA LANGE in accordance to the payment agreements and written on the invoices.” No order date is listed on the purchase order. On the other hand, the corresponding invoice from “[ ]” (this is the name on the invoice) is in a foreign language. It appears to have an invoice number [ ]. It lists three different entries: one appears to be for 69 pieces, another appears to be for 93 pieces, and the third appears to be for 39 pieces. There is no statement in English on the document indicating that any of the entries are for the U.S. market only. The invoice is dated “10/10/2003.” The total number of pieces for the above-mentioned thirteen orders (or transactions) that reference purchase order number [ ] is 764 pieces. 5). Pro forma invoices (as found in exhibit E): These documents are in a foreign language and no English-language translations were submitted. It appears that no manufacturers’ names are listed on the documents. Moreover, the documents are all dated “18.11.2004” (which is after the date of liquidation for the entry under consideration). 6). Alleged Payment reports by M. Lange to the manufacturers (as found in exhibit E): This document appears to be a photocopy of a document where much of the text has been blocked out or crossed out with a black marker. The document appears to be in a foreign language. On its face, we cannot determine if this document substantiates any actual payments for the merchandise by M. Lange to any of the above-referenced manufacturers. Moreover, no apparent documentation was submitted with the April 15, 2005, submission by the importer Rena Lange wherein the manufacturers acknowledge receipt of payment for the merchandise from M. Lange or from the Rena Lange entity identified in the purchase orders. 7). Alleged sample garment care label (as found in exhibit E). It states in Rena Lange’s submission that: A sample individual garment care label which is normally affixed to such garments which indicates: (a) Rena Lange’s style and purchase order number, (b) country of origin in English in accordance with 19 U.S.C. § 1304, (c) bar code assigned to Rena Lange’s U.S. customer, and (d) registered identification number assigned to Rena Lange’s U.S customer. In a footnote to this text on the care label (footnote number 4), it states that: Please note that the provided care label is submitted for illustrative purposes only and does not cover any of the several styles of merchandise involved in the subject shipment. (Emphasis added.) This “care label” is a photocopy that is difficult to read. It appears, however, to have foreign language text on it. Moreover, no information or documentation was provided on the U.S. customer. Additionally, as stated by your port in the above-mentioned customs protest and summons information report, “the copy of the label submitted clearly shows notations in languages other than English and sizes other than U.S. sizes.” 8). M. Lange invoice number [ ] dated “30.10.2003,” alleged to have been issued to Rena Lange for the sale of the merchandise (as found in exhibit F): We note that the total amount of pieces listed is 218. In a footnote to this text on the invoice (footnote number 5), it states that: M. Lange’s Invoice [ ] and the subject entry only comprise a small portion of the total merchandise ordered by Rena Lange under Purchase Order number [ ]. No specific information was submitted with respect to the other merchandise covered by purchase order number [ ] (i.e., purchase order number [ ] covers approximately 1600 pieces) or with respect to the other merchandise covered by the above-mentioned thirteen orders involving the five manufacturers (i.e., the total amount of pieces covering the thirteen orders relating to purchase order [ ] is 764 whereas invoice number [ ] covers only 218 pieces and the total number of imported pieces on the entry summary for the entry covering this protest is 252). 9). Alleged proofs of payments from Rena Lange to M. Lange (as found in exhibit G): This exhibit is described as follows: Rena Lange January 21, 2004, bill payment stub and [ ] Activity Detail for the period of December 31, 2003 through January 31, 2005, confirming Rena Lange’s payment of M. Lange’s invoice number [ ]. 10). A copy of Rena Lange’s original November 18, 2003, entry summary (as found in exhibit H) and a copy of Rena Lange’s corrected November 18, 2003, entry summary (as found in exhibit I) were submitted with the instant protest. As indicated earlier, each of these documents has a total of 252 pieces listed on them. In footnote 3 on page 2 to the April 15, 2005, submission, it states that: The various manufacturers individually package all purchased merchandise prior to its delivery to [ ], a separate warehouse and logistics service provider which is M. Lange’s distribution hub. [ ] charges M. Lange a per garment fee for its services (see Exhibit B). Once the merchandise is received by [ ], [ ] segregates the U.S.-bound merchandise within its warehouse from merchandise destined for other markets and further packages the U.S.-bound merchandise in larger shipping cartons for dispatch to the United States. (Emphasis added.) No other information or no documentation was submitted with the April 15, 2005, submission relating to the services said to have been performed by [ ]. In footnote 7 on page 3 to the April 15, 2005, submission, it states that: Rena Lange additionally notes that it only claims MMP on purchases of merchandise from M. Lange for which is [sic] filling an order for a U.S. customer. Accordingly, no portion of said merchandise will be (or can be) re-directed to non-U.S. customers. No samples of the merchandise were submitted for inspection by this office. No information or documentation (e.g., contracts or agreements) was submitted to show if or when title to and risk of loss for the merchandise passed from each of the foreign factories to M. Lange for each of the thirteen transactions. Also, no information or documents was submitted to show if or when title to and risk of loss for the merchandise passed from M. Lange to Rena Lange for the merchandise. Although certain amounts were listed as assists on the chart found in exhibit B submitted with the April 15, 2005, submission, no documentation was submitted with respect to how the value of those assists was determined and no information or documentation was submitted with respect to the other statutory additions set forth in 19 U.S.C. § 1401a (b) (1) (i.e., packing costs, selling commissions, assists, royalty or license fees, and proceeds of any subsequent sale). In addition to the documents discussed above, a document identified as “Importer’s Statement” was submitted to this office with the original protest as an attachment (and not as exhibit E to the April 15, 2995, submission as indicated in that submission). It contains the name “Rena Lange (USA), Inc.” at the top. It has no date and it is not signed. It was apparently submitted in support of the importer’s claim for Nissho or first-sale treatment. It has a total piece or item count of 218. The designation “[ ]” is listed under a column for “manufacturer.” In its June 15, 2006, supplemental submission, Rena Lange, through counsel, states, in part, that: [W]e note by way of additional explanation that in some cases, less than the full quantity of garments produced and described on an individual manufacturer’s invoice pursuant to an order filed on behalf of Rena Lange may be included in a single shipment by M. Lange to the United States. (E.g., the captioned entry). [sic] However, the additional garments in question are eventually exported to Rena Lange in the United States in separate shipments made at other times during each season. Moreover, the internal procedures followed by M. Lange provide for all garments destined for shipment to Rena Lange in the United States to be stored separately from any other garments prior to exportation. In its August 23, 2006, submission, Rena Lange states with respect to the services provided by [ ] as follows: The [ ] warehouse is located…[in]…[ ], Germany. All garments shipped from the various factories and to Rena Lange in the United States are received and stored at this warehouse. o o o A copy of the Agreements dated April 1, 2003, by and between [ ] and M. Lange, for the warehousing and shipping services furnished by [ ] to M. Lange is annexed to this letter as Exhibit C. Please note in particular paragraph 7 of the Agreement, which obligates [ ] to guarantee the separate storage and picking of styles shipped to the United States. o o o [ ] handles the receipt, control, picking and shipment of garments on behalf of M. Lange, and separately stores and ships all garments designated for Rena Lange in the United States in accordance with the above-referenced agreement. The garments in question are shipped to and received by [ ] directly from the foreign manufacturers contracted by M. Lange. [ ] then stores the garments designed and labeled for Rena Lange in the United States, and ships them directly to Rena Lange by [ ]. Photographs of the identification and separate storage of garments intended for Rena Lange in the United States at the [ ] warehouse, and the labeling of all such U.S. market garments as “USA-MMP” are annexed to this letter as Exhibit D. o o o As noted above, all merchandise is shipped directly to Rena Lange in the United States from the [ ] warehouse. o o o The merchandise is picked up after Customs clearance by Rena Lange’s freight forwarder…, which then ships the garments to Rena Lange’s resale customers in accordance with the instructions of each customer. For example garments purchased by…are delivered to a consolidator,…, whereas garments for…are shipped via UPS. As indicated above, a copy of an agreement between M. Lange (identified as the “client”) and [ ] (identified as the “contractor”) was submitted with the August 23, 2006, submission from Rena Lange. It states, in pertinent part, as follows: The Contractor should be responsible for the handling of the stock receipt of all finished goods of the Client. The Contractor should overtake by personal responsibility the quantity control upon receipt of goods and should take necessary arrangements as far as eventual discrepancies appear. The Contractor should overtake the quality control of each single style of finished goods by personal responsibility. The Contractor should be responsible for the attaching of the product tags on the products. The Contractor should overtake by personal responsibility as well as after consultation with the Client the handling of returns to manufacturer for the purpose of amendment of styles. The Contractor should be responsible both to properly bag each single style into plastic bags, which are all of German origin, and to ticket them by addressee labels. The Contractor should be responsible for the whole warehousing of the Client and will guarantee the separate storage and picking of styles destined for the shipment to the U.S. (Emphasis added.) The Contractor should overtake by personal responsibility the complete preparation for shipment and handling of all customers’ orders of the client together with all IT and suppliers’ relevant activities as the issue of delivery notes and invoices on behalf of the Client as well as the issue of consignment notes. As indicated above, the goods are not shipped directly to the United States from the various foreign manufacturers but rather first to [ ] facility where they are apparently sorted and packaged (or further packaged). The full name of the facility is “[ ]”, and it is located in Germany. This is a private facility that receives and handles the merchandise under contract from M. Lange. From the terms of the agreement, it appears that after the goods have been shipped to the [ ] facility in Germany by the various manufacturers (located in several foreign countries), it is [ ] that does the selecting or “picking of styles destined for shipment to the U.S.” In response to a request for actual proof of payment by M. Lange to each of the factories or manufacturers (other than the “payment reports” previously submitted), Rena Lange, through counsel, submitted several documents as exhibit B in its August 23, 2006 submission, with the following statement: The documents submitted include excerpts from the payment records of M. Lange, together with copies of the bank transfers to the foreign manufacturers and copies of the manufacturer’s invoices. No chart or matrix was provided that shows the correlation of the information on the documents with the various transactions involved in this protest. On their face, these documents do not appear to involve proofs of payment or other documents for any of the thirteen transactions that are the subject of this protest. All of these documents are in a foreign language. They appear to consist of payment reports (similar to those previously submitted), statements of some nature from [ ] and manufacturer invoices with apparently different invoice numbers, dates and merchandise than that involving the specific thirteen transactions that are the subject of this protest. On their face, we cannot determine if these documents substantiate any actual payments for the merchandise under consideration by M. Lange to any of the above-referenced manufactures. Moreover, no documentation was submitted by the importer wherein the manufacturers acknowledge receipt of payment for the merchandise from M. Lange. Rena Lange submitted other documents with its August 23, 2006, submission. This includes documents said to represent transactions between Rena Lange and each of its U.S. customers. No matrix or chart was provided that shows the correlation of the information on the documents with the various transactions involved in this protest. Upon review of those documents, we are unable to relate or correlate them to the thirteen transactions that are the subject of this protest. Rena Lange also submitted with its September 8 and 12, 2006, submissions documents said to establish proof of payment by M. Lange to the manufacturers. The documents are facsimiles that are difficult to decipher. No matrixes or charts were provided that shows the correlation of the information on the documents with the various transactions involved in this protest. The relevant documents are in a foreign language. They seem to be in the nature of similar documents discussed above. On their face, these documents do not serve to establish payment by M. Lange to the manufacturers for the merchandise that is the subject of this protest. ISSUES: Whether the evidence presented is sufficient to establish that the transaction value of the imported merchandise should be based on the alleged sales between the various above-mentioned foreign manufacturers and the middleman (M. Lange) or whether the evidence presented establishes that the transaction value of the imported merchandise should be based on the sales between the middleman and the importer (Rena Lange). LAW AND ANALYSIS: The preferred method of appraising merchandise imported into the United States is the transaction value of the imported merchandise method as set forth in section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA), codified at 19 U.S.C. § 1401a. Section 402(b)(l) of the TAA provides, in pertinent part, that the transaction value of imported merchandise is the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus amounts for the enumerated statutory additions. In order for imported merchandise to be appraised under the transaction value method, it must be the subject of a bona fide sale between a buyer and seller, and it must be a sale for exportation to the United States. The imported merchandise can be appraised under transaction value only if the buyer and seller are not related, or if related, the transaction value is deemed to be acceptable. 19 U.S.C. § 1401a(b)(2)(A)(iv). The courts have had the opportunity to address the issue of the use of the transaction value method in multi-tiered transactions (involving foreign middlemen and foreign manufactures). In Nissho Iwai American Corp. v. United States, 982 F.2d 505 (Fed. Cir. 1992), the Court of Appeals for the Federal Circuit addressed the method for determining the use of transaction value in a three-tiered distribution system involving a foreign middleman. The court indicated that a manufacturer's price for establishing transaction value is valid so long as the transaction between the foreign manufacturer and the foreign middleman falls within the statutory provision for valuation. In this regard, the court stated that in a three-tiered distribution system: The manufacturer's price constitutes a viable transaction value when the goods are clearly destined for export to the United States and when the manufacturer and the middleman deal with each other at arm's length, in the absence of any non-market influence that affect the legitimacy of the sale price. Id. at 509. See also, Synergy Sport International, Ltd. v. United States, 17 C.I.T. 18 (1993). In response to the decision in Nissho Iwai American Corp. v. United States, the CBP (then known as the U.S. Customs Service) issued its official position on the application of that decision in the form of a Treasury Decision (T.D.). In T.D. 96-87, Determining Transaction Value in Multi-Tiered Transactions, Vol. 30/31, Customs Bulletin No. 52/1, (January 2, 1997), the CBP clarified some of the issues that arise in multi-tiered transactions in determining which sale is the sale for exportation to the United States for the purposes of determining transaction value. Specifically, T.D. 96-87 states, in part, that: [I]n fixing the appraisement of imported merchandise, Customs presumes that the price paid by the importer is the basis of transaction value and the burden is on the importer to rebut this presumption. In order to rebut this presumption, in accordance with the Nissho Iwai standard, the importer must prove that at the time the middleman purchased, or contracted to purchase, the goods were “clearly destined for export to the United States” and the manufacturer (or other seller) and middleman dealt with each other at “arm's length.” In reaching a decision, Customs must ascertain whether the transaction in question falls within the statutory provision for valuation, i.e., that it is a sale, that it is a sale for exportation to the United States in accordance with the standard set forth above, and that the parties dealt with each other at “arm's length.” As stated in Nissho Iwai, these questions are determined case-by-case on the evidence presented. (Emphasis added.) T.D. 96-87. See also, CBP informed compliance publication entitled, “What Every Member of the Trade Community Should Know About: Bona Fide Sales and Sales for Exportation to the United States,” (August 2005). T.D. 96-87 also identifies the documentation and information needed to support a determination that transaction value should be based on a sale involving a middleman and the manufacturer or other seller rather than on the sale to which the importer is a party. First, a complete paper trail of the imported merchandise showing the structure of the entire transaction must be provided. Second, if the parties to the requested transaction are related, the importer must provide CBP with information that demonstrates that transaction value may be based on the related party sale as provided in 19 U.S.C. § 1401a(b)(2)(B) (i.e., that the circumstances of sale indicate that the relationship did not influence the price or that the transaction value closely approximates certain test values). Finally, sufficient information must be provided with regard to the statutory additions set forth in 19 U.S.C. § 1401a(b)(1) (i.e., packing costs, selling commissions, assists, royalty or license fees, and proceeds of any subsequent sale), for the alleged sale between the manufacturer and the middleman. With respect to the documentation required for the importer to rebut the presumption that the price paid by the importer is the basis of transaction value, T.D. 96-87 states that: In order for an importer to rebut the presumption…[that the price paid by the importer is the basis of transaction value]…, certain information and documentation must be provided. Specifically, the requestor must describe in detail the roles of all the various parties and furnish relevant documents pertaining to each transaction that was involved in the exportation of the merchandise to the United States. If there is more than one possible sale for exportation, information and documentation about each of them should be provided. Relevant documents include, purchase orders, invoices, proof of payment, contracts and any additional documents (e.g. correspondence) which demonstrate how the parties dealt with one another and which support the claim that the merchandise was clearly destined to the United States. If any of these documents do not exist, or exist but are not available, the ruling request should so provide. What we are looking for is a complete paper trail of the imported merchandise showing the structure of the entire transaction. o o o Finally, Customs decisions will be based on the evidence presented when the ruling request is submitted. Although we would not be precluded from asking for additional information, this will not be done routinely. If insufficient evidence is provided, the claim will be denied. In summary, the public should be aware that Customs 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. Customs rulings will be based on the evidence submitted with the request. T.D. 96-87. See also, CBP informed compliance publication entitled, “What Every Member of the Trade Community Should Know About: Bona Fide Sales and Sales for Exportation to the United States” (August 2005). In the instant cases, the presumption is that transaction value is based on the price the importer (Rena Lange) pays to the related foreign middleman (M. Lange). In order to rebut this presumption and to base the transaction value on the prices M. Lange allegedly paid to the various above-mentioned manufacturers, there must be sufficient evidence presented by Rena Lange that shows: (1) that the alleged purchases by M. Lange from the various manufacturers constitute bona fide sales for all thirteen transactions; (2) if so, that all the imported goods were clearly destined for exportation to the United States at the time M. Lange purchased or contracted to purchase the goods from each of the various manufacturers for all thirteen transactions; (3) if so, that the sales between M. Lange and all the various manufacturers were arm's length sales; and (4) where necessary, the amounts to be added to the price actually paid or payable for assists, royalties, etc, and how those amounts were arrived at or determined. Bona Fide Sale In the instant protest, Rena Lange contends that the alleged prices between M. Lange and each of the various manufacturers constitute acceptable transaction values for the merchandise under consideration. In determining whether that contention is correct, the first question to be considered is whether there were, in fact, bona fide sales between M. Lange and each of the various manufacturers for all thirteen transactions. For customs purposes, a “sale” generally is defined as a transfer of ownership in property from one party to another for consideration. See J.L. Wood v. U.S., 62 CCPA 25, 33; 505 F.2d 1400, 1406; C.A.D. 1139 (1974); J.H. Cottman & Co. v. United States, 20 CCPA 344, 356 T.D. 46114 (1932), cert. denied, 289 U.S. 750 (1933). With respect to identifying the buyer and seller to a sale, whether a buyer-seller relationship exists between two parties is to be determined by the substance of the transaction and not by the labels that the parties attach to it. No single factor is determinative. Rather, the relationship is to be ascertained by an overall view of the entire situation, with the result in each case governed by the facts and circumstances of the case itself. See Dorf International, Inc. v. U.S., 61 Cust. Ct. 604, 610; 291 F. Supp. 690, 694; A.R.D. 245 (1968). Several factors may indicate whether a bona fide sale occurred between a potential or alleged seller and buyer. In determining whether property or ownership in property has been transferred, CBP considers whether the alleged buyer has assumed the risk of loss and acquired title to the imported merchandise. In addition, CBP may examine whether the alleged buyer paid for the goods, whether such payments are linked to specific importations of merchandise, and whether, in general, the roles of the parties and circumstances of the transaction indicate that the parties are functioning as buyer and seller. See HQ 545705 (January 27, 1995). Evidence or documentation that substantiates whether a bona fide sale has occurred includes contracts, distribution and other similar agreements, invoices, purchase orders, bills of lading, proof of payment, correspondence between the parties, and company reports or brochures. This documentation must establish that a party possesses title in and assumed the risk of loss for the imported merchandise and functions as a buyer or a seller, thus indicating that a bona fide sale has occurred with respect to the transaction under consideration. Such documentation should be consistent in its entirety and with the transaction in general (i.e., consistent prices, dates, parties and merchandise). Further, the documentation and language included therein should reveal the substance of the transaction, including the obligations and roles of each of the parties. While formal sales contracts and other types of memorialized agreements (such as distribution or production agreements) generally are most revealing in this regard, other documentation (such as purchase orders, invoices, and proof of payment) evincing or establishing the structure of the entire transaction are crucial, especially in the absence of any written agreements. The terminology used in such agreements and documentation (i.e., “buyer,” “seller,” “principal,” or “agent”), although indicative, is not dispositive of the role played by each of the parties in the transactions under consideration. See CBP informed compliance publication entitled, “What Every Member of the Trade Community Should Know About: Bona Fide Sales and Sales for Exportation to the United States” (August 2005). Upon a review of the record, we conclude that the alleged transactions between M. Lange and each of the various above-mentioned foreign manufacturers in the instant protest do not constitute bona fide sales for any of the thirteen transactions under consideration. First, as indicated above, no information or documentation (e.g., contracts or agreements) was submitted to show if or when title to and risk of loss for the merchandise passed from each of the foreign manufacturers or factories to M. Lange for each of the thirteen transactions. Also, no information or documentation was submitted to show if or when title to and risk of loss for the merchandise passed from M. Lange to Rena Lange for the merchandise. Such information is essential when determining whether bona fide sales actually occurred. See e.g., HQ 545705, supra. Second, neither M. Lange nor Rena Lange apparently ever takes possession of the merchandise. The merchandise is shipped from the various foreign manufacturers to [ ], and then from [ ] to the United States (where it is shipped immediately after importation to the ultimate U.S. consignees or customers of Rena Lange). Although not dispositive, this is an important fact to consider when determining whether bona fide sales actually occurred. Third, as evident from above, there are inconsistent numbers with respect to the garment pieces found throughout the various documents: The original purchase order from Rena Lange to M. Lange lists approximately 1600 pieces; the total amount of pieces covering the thirteen orders relating to purchase order [ ] is 764; the total number of pieces for invoice number [ ] is 218; and the total number of imported pieces on the entry summary for the entry under consideration is 252. Fourth, as indicated above, there are inconsistencies and anomalies with respect to the dates for many of the purchase orders and manufacturers’ invoices. Some of the manufacturers’ invoices are dated before the order dates on the corresponding purchase orders from M. Lange. Curiously, on the other hand, several of the manufacturers’ invoices have the exact same date as the order date on the corresponding purchase orders from M. Lange. Fifth, as indicated above, inconclusive documentation was submitted to establish actual payment by M. Lange to each of the foreign manufacturers for the merchandise that is the subject of each of the thirteen transactions. Moreover, also as indicated above, most of the purchase orders indicate that “Rena Lange,” rather than M. Lange, will pay the manufacturers or vendors. Sixth, an incorrect invoice (together with the listing of the number for that incorrect invoice on the chart found in above-mentioned exhibit B)—by the importer’s own admission—was submitted to CBP with respect to at least one of the transactions under consideration (see item (5) on pages 5-6), and CBP was only recently informed of this fact by the importer. This draws into question the accuracy and correctness of the other information and documents submitted in support of the claim for the first-sale price for the other transactions. Seventh, as indicated above, no purchase order from M. Lange was submitted to this office for one of the transactions under consideration. Therefore, we are unable to review and verify that order for pertinent information. Eighth, some of the manufacturers’ invoices were submitted in a foreign language. Therefore, we are unable to review and verify those invoices for pertinent information. Ninth, two of the purchase orders from M. Lange to the manufacturers do not have order dates. Therefore, we cannot verify the actual time sequence of the transactions for these two orders. Finally, the purchase order from Rena Lange to M. Lange and the corresponding confirmation for that order from M. Lange to Rena Lange have no dates on them. Therefore, we (1) cannot verify that this purchase order actually relates or corresponds to any of the thirteen transactions involved in this protest and (2) cannot verify the actual time sequence of all the transactions alleged to be involved in this protest. In light of the above and contrary to the statements by the importer in its protest and submissions, we cannot conclude that based on the record that the totality of the circumstances supports the validity of the first sale between the various foreign manufacturers and the middleman (M. Lange) for any of the thirteen transactions. Rather, we conclude that no bona fide sales occurred between the foreign manufacturers and the middleman in any of the thirteen transactions under consideration. Clearly Destined for Export to the United States The next requirement is that at the time the middleman and the various foreign manufacturers concluded their purchase agreements, the merchandise was clearly destined for export to the United States. In the instant protest, upon review of the evidence in the record, we have concluded that none of the merchandise under consideration was clearly destined for export to the United States at the time M. Lange and the various foreign manufacturers entered into their respective agreements to purchase the merchandise under consideration. First, it must be evident throughout the entire transaction that the merchandise is clearly destined for the United States. See HQ 546658 (January 30, 1998). As discussed above, in view of the various inconsistencies and anomalies with respect to the various purchase orders and various invoices from the foreign manufacturers or factories, one cannot conclude that it was evident throughout the entire transaction that the merchandise in each case was clearly destined for the United States. Second, Nissho Iwai American Corp. v. United States involved merchandise that was clearly destined for export to the United States. Nissho Iwai American Corp. v. United States involved rapid transit passenger cars or vehicles that were manufactured using components from the United States and Japan for the Metropolitan Transportation Authority of New York City (MTA). The vehicles were specifically intended for sale to the MTA and could not be used for any other purpose. In this case, the merchandise was made to the specifications of the U.S. purchaser such that the merchandise was clearly destined for the United States and the manufacturer was aware that the merchandise was intended for sale to the United States for a particular U.S. purchaser. Clearly, the court was willing to accept the manufacturer’s price to the foreign middlemen because of the indisputable destination of the merchandise at the time the two parties entered into their sale’s contracts. In the instant protest, unlike in Nissho Iwai American Corp. v. United States, there is nothing unique about the merchandise (i.e., women’s apparel), its production or designation to indicate that it was clearly destined for export to the United States or for sale to a particular consumer. Indeed, as evident from the purchase orders, in several instances the same merchandise is produced for markets other than the United States. Moreover, women’s apparel can easily be sold for export to numerous other countries and for use by numerous consumers outside of the United States. There is nothing in the record to establish that the merchandise under consideration could only be sold in the United States or for a particular ultimate consumer. For example, no actual labels, logos or other unique marks or designations are placed on the goods showing or evidencing the United States as the only destination for the goods. Moreover, there is no actual evidence that the goods were packaged for the United States (i.e., no samples of the actual packaging were submitted for review by this office) or that the goods met special U.S. labeling requirements that indicates their destination to the United States or use by a particular consumer in the United States. See, e.g., HQ 547035 (August 18, 1999). Finally, the possibility of diversion occurring in all thirteen transactions in the instant protest looms large and cannot be ignored. As discussed above, the merchandise is not shipped directly to the United States from the foreign factories. Rather, it is first shipped from the foreign countries in which the factories are located to the [ ] warehouse facility in Germany (four of the five factories are located outside of Germany) where it is commingled with merchandise destined for markets other than the United States (after having been previously commingled at the various factories with the same styles or types of merchandise that is made for shipment to countries other than the United States). The merchandise is then sorted and packaged (or further packaged) at the [ ] warehouse facility. While these facts do not preclude a finding that the merchandise was clearly destined for exportation to the United States, they are important factors that must be considered along with the other evidence in Nissho Iwai-type or first-sale claims involving foreign middlemen and foreign manufacturers. See HQ 547035 (August 18, 1999); HQ 547349 (May 5, 2000); HQ 547197 (August 22, 2000). In light of the above-discussed contrary and inconclusive evidence, we cannot conclude that any of the merchandise was “clearly” destined for the United States throughout the entire transaction in any instance. The entire record and totality of circumstances does not support such a conclusion. Arm's Length The next requirement is that the alleged sales between the middlemen and the manufacturers be arm's length sales that can serve as the basis for transaction value. Rena Lange contends in its submission that M. Lange and the foreign manufacturers are not related parties. CBP will generally presume that transactions between unrelated parties are conducted at arm’s length. Without evidence to the contrary, we do not find that M. Lange and the foreign factories or manufacturers are related within the meaning of the U.S. value law. Statutory Additions The final requirement that must be established in order to rebut the presumption that the price actually paid or payable by the importer to the middleman is the proper basis for the transaction value method of appraisement involves the statutory additions to the price that are set forth in 19 U.S.C. § 1401a(b)(1). With respect to those statutory additions, T.D. 96-87 states that: [I]n order for a particular transaction to be a viable transaction value there must be sufficient information available with respect to the amounts, if any, of the statutory additions set forth in 19 U.S.C. 1401a(b)(1) (i.e., packing costs, selling commissions, assists, royalty or license fees, and proceeds of any subsequent sale). The statute provides that if sufficient information is not available, for any reason, with respect to any of these amounts, the transaction value of the imported merchandise concerned shall be treated as one that cannot be determined. Therefore, in order to determine whether a particular transaction may be the basis for transaction value, the requestor must provide Customs with sufficient information regarding the amounts, if any, of the statutory additions set forth in 19 U.S.C. 1401a(b)(1). For example, if the importer claims that transaction value should be based on the sale between the middleman and the manufacturer, the importer must inform Customs whether the middleman provided any assists to the manufacturer and if so, the value of the assists and how the value was determined. If the importer does not have this information, transaction value cannot be based on this sale. In the instant protest, information was submitted on the alleged amount of the assists concerning the transactions between the middleman and the various foreign manufacturers. No information or documentation, however, was submitted that establishes or shows how the values of the assists were determined. Additionally, no information was submitted with respect to whether other statutory additions were involved in any of the thirteen transactions covered by the instant protest. Therefore, this requirement was not satisfied with respect to any of the thirteen transactions. This is another reason why the alleged sales between the middleman and the various foreign manufacturers cannot be used as the basis for application of the transaction value of the imported merchandise method of appraisement with respect to these thirteen transactions. See HQ 547672 (May 21, 2002). In conclusion, as indicated in T.D. 96-87, it is presumed that the price paid or payable by the importer is the basis of transaction value and the burden is on the importer to rebut this presumption. In light of the above, in each of the thirteen transactions covered by the instant protest, the importer has not rebutted this presumption. HOLDING: The protest should be denied. In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision, Regulations and Rulings of the Office of International Trade will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Myles Harmon, Director Commercial and Trade Facilitation Division