Request for Internal Advice; Sale for Exportation to the United States

HQ W563468 March 24, 2008 OT:RR:CTF:VS W563468 EAC CATEGORY: Valuation Service Port Director U.S. Customs and Border Protection 9901 Pacific Highway Blaine, WA 98230 RE: Request for Internal Advice; Sale for Exportation to the United States Dear Port Director: This is in response to a request for internal advice submitted by your port in a memorandum dated February 27, 2006. The issue presented for consideration in the request for internal advice concerns the proper method of appraisement of certain merchandise. FACTS: Your office has provided sample documents from one entry package and states that the documents are representative of many other similar entries. The documents show that on April 29, 2005, Pimlico Apparel Ltd. (“Pimlico”) of British Columbia (BC), Canada, placed a purchase order with Indus Apparel USA Inc. (“Indus”) of New York, New York, for various garments. The purchase order number was “3883”. The terms of sale on the purchase order are “CIF Vancouver,” with “ship to” instruction to a warehouse in Burnaby, BC. In addition, the shipping instructions on the order state “ETD BANGLADESH 8/15; ETA VANCOUVER 9/15; THIS PO FOR U.S. CLEAR AT BLAINE, WA, USA PORT OF DISCHARGE VANCOUVER, B.C., CANADA.” The purchase order also indicates that certain materials such as fabric and thread will be supplied by the importer. Indus issued a commercial invoice to Pimlico Apparel Ltd. on August 30, 2005. The commercial invoice makes reference to purchase order number 3883. Pimlico Apparel Ltd. is listed as the consignee with an address in Blaine, Washington. That particular address is that of Pimlico Apparel Ltd.’s U.S. customs broker, FedEx Trade Networks. Formal entry was made at Blaine, Washington, on October 25, 2005. The entry documentation indicates that the importer of record was “Pimlico Apparel Ltd,” of Burnaby, BC, and that the ultimate consignee was “Pimlico Apparel Ltd. c/o FedEx Trade Networks” of Blaine, Washington. The entered value was the amount appearing on the invoice issued by Indus to Pimlico Apparel Ltd. The documentation indicates that the country of origin of the merchandise is Bangladesh. A bill of lading issued by Sage Container Lines dated September 6, 2005, indicates that the port of loading was Chittagong, Bangladesh, and that the place of discharge and delivery was Vancouver, Canada. There is a second bill of lading issued by Orient Overseas Container Line that is also dated September 6, 2005, and similarly indicates that the port of loading was Chittagong and that the place of discharge and delivery was Vancouver. No documentation showing the movement of the goods from Vancouver to the port in Blaine has been provided, but your offices states that it entered the United States by truck. We are informed that the goods are not unloaded after entry into the United States. Rather they are immediately exported to Canada where they are warehoused. As orders are received from U.S. customers, the merchandise is “picked and packed” and returned to the United States under subheading 9801.00.20, HTSUS. However, your office states that not all of the merchandise that is originally imported into the United States is, in fact, returned to the United States because some of it is sold to customers in Canada or other countries. This information was obtained during a meeting CST 796 had with Pimlico, an attorney with the law firm of Sandler, Travis, and Rosenberg, and a representative of another company involved with customs matters. Counsel for the importer asserts that the merchandise should be appraised based on the transaction value of the sale between Indus and Pimlico. Your office submits, however, that this would be improper because this transaction does not constitute a bona fide sale for exportation to the United States. Instead, your office proposes to use the information provided on the second importation in order to appraise the merchandise under the transaction value of identical merchandise. In this regard, it is noted that a particular garment style was initially entered into the United States with a value of approximately $5.77. The same garment style was subsequently returned to the United States under subheading 9801.00.20, HTSUS, after having been sold to a U.S. customer for approximately $13.16. ISSUE: What is the correct basis of appraisement of the imported merchandise when it initially enters the United States? LAW AND ANALYSIS: The preferred method of appraising merchandise imported into the United States is the transaction value 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. Bona Fide Sale In this case, counsel contends that the values for the imported merchandise should be based on the transaction value of the alleged sale between Indus and Pimlico. In VWP of America, Inc. v. United States, 175 F.3d 1327 (Fed. Cir. 1999), the Court of Appeals for the Federal Circuit found that the term "sold" for purposes of 19 U.S.C. § 1401a(b)(1) means a transfer of title from one party to another for consideration, (citing J.L. Wood v. United States, 62 C.C.P.A. 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406 (1974)). However, several factors may indicate whether a bona fide sale occurs between a potential buyer and seller of imported merchandise. In determining whether property or ownership has been transferred, 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 potential 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. See HRL 547197, dated August 22, 2000; and HRL 546602, dated January 29, 1997. In this case, purchase orders have been provided to show that Pimlico ordered certain merchandise from the supplier, Indus, and that the terms of sale were “CIF Vancouver.” In addition, the invoice issued by Indus to Pimlico for the merchandise has been provided. However, no other evidence has been submitted describing the roles of the parties and the nature of the transactions in general. Moreover, although the statement “TT payment thru wire” appears on the invoice, no evidence of payment by Pimlico was provided. We would need to see proof of payment before we could conclude that the parties were actually functioning as buyer and seller and that a bona fide sale occurred. Sale for Export Assuming, arguendo, a bona fide sale was concluded between Pimlico and Indus, to qualify as the basis for transaction value upon entry into the United States such sale must be a sale for exportation to the United States (emphasis supplied). As noted earlier, however, the transaction documentation indicates that Canada, and not the United States, was the intended destination. Specifically, the purchase order has a “ship to” address in Burnaby, B.C., as well as shipping instructions ordering discharge in Vancouver. The “CIF Vancouver” terms of sale also support a conclusion that the goods were going to Canada. The two bills of lading show Vancouver as the port of discharge and delivery. This is, in fact, what occurred. The merchandise was shipped from Bangladesh to Vancouver, and from there apparently it was trucked down to Blaine, where it was entered and then immediately returned to Canada for delivery. The commercial invoice lists Pimlico Apparel Ltd. as the consignee, and ascribes to it a Blaine address, but the reality is that the address is that of Pimlico’s customs broker, and not of Pimlico itself. The evidence does not support a finding that the merchandise was sold for exportation to the United States. Accordingly, upon first entry into the United States the goods may not be appraised under transaction value. When imported merchandise cannot be appraised on the basis of transaction value, it is appraised in accordance with the remaining methods of valuation, applied in sequential order. 19 U.S.C. §1401a(a)(1). The alternative bases of appraisement, in order of precedence, are: the transaction value of identical or similar merchandise (19 U.S.C. §1401a(c)); deductive value (19 U.S.C. §1401a(d)); computed value (19 U.S.C. §1401a(e)); and the “fallback” method (19 U.S.C. §1401a(f)). The transaction value of identical or similar merchandise is based on sales, at the same commercial level and in substantially the same quantity, of merchandise exported to the United States at or about the same time as that being appraised. 19 U.S.C. §1401a(c). We concur with the port’s proposal to appraise the merchandise under this method, using sales of identical merchandise sold to the United States from Canada. HOLDING: Based upon the information provided, we find that the imported merchandise under consideration in this case may not be appraised on the basis of transaction value and should instead be appraised under the transaction value of identical or similar merchandise method. You are to mail this decision to the internal advice applicant no later than 60 days from the date of the decision. At that time, the Office of Regulations and Rulings 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, Monika R. Brenner, Chief Valuation & Special Programs Branch