HQ 546640 - Application for Further Review (AFR) of Protest 1001-96-106121; Sale for Exportation. - United States International Trade Commision Rulings

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HQ 546640

November 7, 1997

RR:IT:VA 546640 er
CATEGORY: VALUATION

Port Director
U.S. Customs Service
JFK International Airport
Building #77
Jamaica, New York 11430

RE: Application for Further Review (AFR) of Protest 1001-96-106121; Sale for Exportation.

Dear Port Director:

This is in response to your memorandum dated January 27, 1997, forwarding the AFR of the above-noted protest filed by counsel on behalf of their client, European American Deli (“EAD”), regarding the appraisement of caviar. We regret the delay in responding.

FACTS:

The importer, EAD, is a privately owned delicatessen in New York. EAD has recently begun importing various fish products for resale from a supplier, Torus Ltd. (“Torus”), located in Latvia. Western Star is also a privately owned business located in New York. Although Western Star does sell imported merchandise it does not act as the importer of record. EAD, Western Star and Torus are not related parties within the meaning of section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401a).

The merchandise at issue is caviar which was entered on June 7, 1993, and the entry was liquidated on May 10, 1996. EAD claims the merchandise should be appraised under transaction value at $22,224, or $2.68 a tin. The imported merchandise was appraised under transaction value of similar merchandise at $166,000, or $20 a tin.

According to counsel, EAD and Western Star entered into an informal partnership with respect to the imported merchandise, which is not memorialized in writing. EAD purportedly provided the contacts with the seller of the merchandise, Torus, in Latvia, and assisted in placing the order for the merchandise. Western Star’s role was purportedly to provide the financing for the purchase of the merchandise. Counsel claims that the purpose of the informal partnership was for the parties to share in the proceeds of the resale of the imported merchandise in the U.S.

According to counsel, the first sale of the merchandise in Latvia was from Betta Audio, Ltd. (“Betta”) to Torus at $2.50 a tin. Because this sale was not accompanied by a Russian export license, it is believed that the caviar was exported from Russia in violation of Russian export restrictions. The absence of an export license destining the caviar to the U.S., however, meant that the sale from Betta to Torus at $2.50 a tin could not be considered a sale for exportation to the U.S. Consequently, counsel claims the transaction upon which the merchandise should be appraised is that between Torus and Western Star, at $2.68 a tin, as reflected on the invoice from Torus to Western Star.

Copies of various documents including invoices, Air Waybills, FDA documents; contracts, letters, and money transfer documents, described below, were provided to us with the submission. (1) An invoice issued by Torus to Western Star, dated May 12, 1993, identifies Western Star as the buyer, but is for the attention of Michael Davidson who is the Vice-President of EAD. The address for delivery by air is that of Western Star. The price is identified as $2.68 per tin for 8300 tins, totaling $22,244. (2) The Air Waybill identifies Western Star at the consignee, but like the invoice, is also made out for the attention of Michael Davidson. (3) Unlike the invoice and Air Waybill, FDA form 703 identifies the consignee as EAD and the destination as EAD’s address. (4) A contract dated April 30, 1993, between “Western Star”, as the buyer, and “Torus” as the seller, is signed by Michael Davidson, who, as described above, is the Vice President of EAD. (5) An undated document on Western Star letterhead, signed by M. Davidson as “principal”, was mailed to Customs at the port stating that the subject merchandise was “sold in transit to European American Deli Inc. All charges related to this transactions are for their account.”. (6) Two money transfers from the account of Western Star to the account of Torus, reflect a total of $22,244 transferred, which equals the amount on the invoice from Torus to Western Star, described above. (7) Several invoices from Western Star to customers in the U.S. describe resales of the subject imported merchandise.

On May 20, 1993, Customs conducted two separate interviews: the first at the premises of EAD and the second at the premises of Western Star. A report of those interviews was provided to this office. During the first interview, Michael Davidson, Vice President of EAD, informed Customs officials that “he did not own the merchandise, he purchased the caviar for Western Star because he had (connections) with Torus Ltd. In Riga, Latvia.” At that time, he provided Customs with a copy of the above-described contract between Torus and Western Star, which bears his signature.

During the second interview at Western Star’s premises, Chief Executive officers, Mr. and Mrs. Gorelik, informed Customs that “Michael Davidson was not employed by Western Star in any capacity, he was able to purchase the caviar at a low price from Mr. J. Mankow, President of Torus Ltd. Because of his (connections)”. When asked why Michael Davidson had signed the contract for Western Star, Customs officials were told that without Davidson’s signature, there would be no contract.

ISSUE:

Whether the information submitted by Protestant in support of their application for further review supports appraisement under transaction value.

LAW AND ANALYSIS:

Merchandise imported into the U.S. is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements act of 1979 (TAA; 19 U.S.C. 1401a). The preferred method of appraisement under the TAA is transaction value, defined as “the price actually paid or payable for the merchandise when sold for exportation to the United States,” plus certain enumerated additions. 19 U.S.C. 1401a(b)(1).

The “price actually paid or payable” is defined in section 402(b)(4)(A) of the TAA 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...) made, or to be made, for the imported merchandise by the buyer to, or for the benefit of, the seller. Under section 402(b)(2)(A)(ii), the use of transaction value is proscribed if the sale of, or the price actually paid or payable for, the imported merchandise is subject to any condition or consideration for which a value cannot be determined with respect to the imported merchandise.

Section 484(a) of the TAA requires importers to file with Customs such documentation as is necessary to enable Customs “to assess properly the duties on the merchandise...” It is well settled that the importer has the burden of proving the validity of information on entry documents and the veracity of a transaction in question in order to properly appraise the merchandise. See, HRL 546053 dated November 7, 1995 and C.S.D. 90-37 (HRL 544432, dated January 17, 1990).

At the time of entry, you requested evidence to demonstrate that the stated price could form the basis for transaction value. Accordingly, Protestant submitted copies of money transfer documents, described above, which indicate that Western Star remitted amounts to Torus that matched the invoiced price. Nonetheless, you were still not satisfied that the invoiced amounts represented a valid transaction value, and so you appraised the merchandise under section 402(c) of the TAA, transaction value of similar merchandise.

In the instant matter, while the proof of payment documents submitted support the invoiced amounts claimed to represent transaction value, there are other discrepancies in the transaction which have not been explained by the documents submitted by Protestant. For instance, it is unclear how a contract between Western Star and Torus which is signed by Michael Davidson (Vice -President of EAD) who is not employed by Western Star can constitute a legally binding contract. Nor is it clear who actually owns the imported merchandise. The merchandise is purportedly purchased by Western Star, but according to a letter on Western Star letterhead, again signed by Michael Davidson (of EAD), the merchandise is sold in transit to EAD. Nonetheless, the copies of invoices provided for the resale of the merchandise in the U.S. are Western Star invoices, and not EAD invoices which they should have been had the merchandise actually been sold in transit from Western Star to EAD. Also, while the invoice and the Air Waybill designate Western Star’s as the consignee for delivery, both documents are for the attention of Michael Davidson, who, as stated above, does not work for Western Star. And, contrary to the invoice and Air Waybill, the FDA document designates the consignee for delivery as EAD. In sum, other than knowing that EAD acted as the importer of record in the subject transactions, the roles of the parties involved are unresolved.

In an Informed Compliance publication, entitled “Bona Fide Sales and Sales for Exportation”, Vol 30/31 Cust. Bull. No. 52/1 (January 1997), Customs stated that in order to prove that a sale is bona fide the documentation presented
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 the parties. (Emphasis added.)

Since the documentation presented here is not consistent in its entirety and does not reveal the substance of the transaction, including the obligations and roles of the parties, it is insufficient to establish that a bona fide sale has occurred. Further, even if there is a bona fide sale, without knowing more about the substance of the transaction and the roles of the parties involved, we cannot determine whether the sale of, or the price actually paid or payable for, the imported merchandise is subject to any condition or consideration for which a value cannot be determined. (19 U.S.C. 1401a(b)(2)(A)(ii)). Also see, Treasury Decision (T.D.) 86-56, dated March 6, 1986 (differences or discrepancies contained in entry documentation raise the presumption that documents contain false or erroneous information) and HRL 546318, dated December 31, 1996 (appraisement can not be based on the alleged sale between the manufacturer and middleman because of various discrepancies on the documents).

Under these circumstances, Protestant has not satisfied its burden of proof to establish that the merchandise should have been appraised under transaction value.

HOLDING:

Based on the information submitted, Protestant has not met its burden of proof to establish that the merchandise should have been appraised under transaction value. Accordingly, you are directed to deny this protest.

A copy of this decision with the Form 19 should be sent to Protestant. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised

Protest Directive, this decision should be mailed by your office to 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 the decision. Sixty days from the date of the decision, the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS, and to the public via the Diskette Subscription Service, the Freedom of Information Act and other public access channels.

Sincerely,

Acting Director
International Trade Compliance Division

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