HQ 545144

January 19, 1994

VAL CO:R:C:V 545144 ph

CATEGORY: Valuation

District Director

101 East Main Street

Norfolk, VA 23510

RE: Application for Further Review of Protest No. 1401-92-100064;

Proper Transaction Value of Imported Merchandise; Sale for

Exportation

Dear Sir:

The above-referenced protest and application for further

review is against your decision regarding the proper transaction

value of certain dolls imported by QVC Network (a television

homeshopping company; hereinafter referred to as \"QVC\").

FACTS:

According to a November 10, 1992 Customs Protest and Summons

Information Report, and an August 12, 1992 submission from QVC,

QVC was the importer of the merchandise. The imported

merchandise consists of Marie Osmond dolls. QVC ordered 5041

dolls from Knickerbocker Creations Ltd. (hereinafter referred to

as \"Knickerbocker\"). As indicated by the respective invoices,

Knickerbocker purchased the dolls from Jui Shan Co., Ltd.

(hereinafter referred to as \"Jui Shan\") in Taiwan, at a total

price of \$185,279.00. Knickerbocker, in turn, sold the dolls to

QVC at a total price of \$246,537.50, FOB Taiwan. QVC paid for

the merchandise by means of a transferrable open letter of credit

to Knickerbocker. Further, according to a July 22, 1991 letter

from Knickerbocker to QVC, Knickerbocker has a contractual

agreement with Marie Osmond, according to which Knickerbocker

holds the licensing and distribution rights for developing and

marketing a Marie Osmond doll. In response to an inquiry from

the concerned import specialist, QVC stated that they had not

utilized any sales contracts in the transaction with

Knickerbocker. Neither the purchase order from QVC to

Knickerbocker nor the invoice from Knickerbocker to QVC indicates

the sale or transfer of the right to use the \"Marie Osmond\" name

on the dolls.

ISSUE:

Whether the transaction between Jui Shan and Knickerbocker

or the transaction between Knickerbocker and QVC determines the

\"price actually paid or payable\" for the merchandise when sold

for exportation.

LAW AND ANALYSIS:

The method of appraisement is transaction value pursuant to

section 402(b) of the Tariff Act of 1930, as amended by the Trade

Agreements Act of 1979 (TAA; 19 U.S.C. 1401a). Section 402(b)(1)

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 enumerated additions.

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.\"

In Nissho Iwai American Corp. v. United States, No. 92-

1239, slip op. (Fed. Cir. Dec. 28, 1992) and Synergy Sport

International, Ltd. v. United States, No. 93-5, slip op. (Ct.

Int\'l. Trade Jan. 12, 1993), the U.S. Court of Appeals for the

Federal Circuit and the Court of International Trade,

respectively, addressed the proper dutiable value of merchandise

imported pursuant to a three-tiered distribution arrangement

involving a foreign manufacturer, a middleman and a U.S.

purchaser. In both cases the middleman was the importer of

record. In each case the court held that the price paid by the

middleman/importer was the proper basis for transaction value.

Each court further stated that in order for a transaction to be

viable under the valuation statute, it must be a sale negotiated

at arm\'s length, free from any nonmarket influences and involving

goods clearly destined for the United States.

Likewise, we note that in the context of filing an entry,

Customs Form 7501, an importer is required to make a value

declaration. As indicated by the language of CF 7501 and the

language of the valuation statute, there is a presumption that

such transaction value is based on the price paid by the

importer.

In keeping with the the courts\' respective holdings and our

own precedent, we will continue to presume that an importer\'s

declared transaction value is based on the price the importer

paid. In further keeping with the courts\' holdings, we note that

in those situations where an importer requests appraisement based

on the price paid by the middleman to the foreign manufacturer

(and the importer is not the middleman), the importer may do so.

However, it will be the importer\'s responsibility to show that

such price is acceptable under the standard set forth in Nissho

Iwai and Synergy. That is, the importer must present sufficient

evidence that the sale was an \"arm\'s length sale,\" and that it

was \"a sale for export to the United States,\" within the meaning

of 19 U.S.C. 1401a(b).

In this case, QVC is the importer and, therefore, based on

the above-noted presumption, the appraising officer correctly

based the transaction value of the imported merchandise on the

price that QVC paid to Knickerbocker. With regards to whether or

not transaction value may be based on the transaction between

Knickerbocker and the foreign manufacturer, we note that it is

not clear from the evidence that such transaction was \"a sale for

export to the United States,\" within the standard set forth by

the court. That is, in accordance with the court\'s standard, the

evidence must establish that at the time Knickerbocker purchased,

or contracted to purchase, the imported goods, they were \"clearly

destined for the United States.\" No such evidence has been

submitted here. In addition, no evidence has been submitted that

goes toward the courts\' second requirement, i.e. that the sale

was \"at arm\'s length.\" That is, the file contains no evidence on

the relationship between Knickerbocker and Jui Shan.

Consequently, we cannot make a determination here that the

transaction of the imported merchandise should be based on the

sale between Jui Shan and Knickerbocker.

Lastly, we note that while it appears from the materials

submitted that the transfer of a royalty (for use of the name

\"Marie Osmond\") was involved in the transaction between

Knickerbocker and QVC, QVC has stated that a royalty fee was

neither discussed nor contracted for. Therefore, we cannot make

a determination with regard to that issue other than to assume

that any such fee was included in the invoiced price of the

merchandise, from Knickerbocker to QVC.

HOLDING:

Based on the evidence submitted, and for the reasons cited

above, the appraising officer correctly based the transaction

value of the imported merchandise on the price paid by the

importer, QVC, to Knickerbocker. 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 the protestant no later than sixty 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 the public via the Diskette Subscription

Service, Lexis, Freedom of Information Act and other public

access channels.

Sincerely,

John Durant, Director

Commercial Rulings Division