HQ 545705

January 27, 1995

VAL CO:R:C:V 545705 LPF

CATEGORY: Valuation

District Director

U.S. Customs Service

101 East Main Street

Norfolk, VA 23510

RE: Application for Further Review of Protest No. 1401-94- 100129;
Proper

Transaction Value; Sale for Exportation

Dear Sir:

This is a decision on an application for further review of a protest
filed May 19, 1994,

against your decision concerning the valuation of imported beer. The
entries at issue were

liquidated on April 8, 1994.

FACTS:

Van Munching & Company (VMC) of New York is a wholly owned subsidiary of
its

parent the Heineken Brewery B.V. (Heineken) of Holland. The protestant,
VMC, provides that it

is the sole distributor for Heineken products in the U.S. and,
accordingly, selects

customers/distributors who sell the products throughout the U.S. VMC
further provides that it

has sole discretion in the selection and confirmation of the
distributors and negotiates prices with

them on an individual basis in a manner which ensures a reasonable
profit to VMC. Likewise,

VMC states that it negotiates prices with Heineken with the intent of
minimizing its costs and

ensuring a reasonable profit in exchange for its activities.

It is our understanding that VMC pays Heineken for the goods, forty-five
days after the

end of the month in which the goods were shipped. VMC invoices the
distributors when the bill

of lading is sent to permit them to take possession of the goods.
Furthermore, as a seller to the

distributors, the protestant states that it also bears the
responsibility for invoicing as well as for

collections and bad debts. The appropriate Field National Import
Specialist (FNIS) visited VMC

and confirms that it conducts the accounting and advertising for the
products and employs sales

managers, traffic managers, and other staff to help conduct their
business.

Finally, the protestant submits that it pays for freight and marine
insurance and usually

purchases the goods FOB Rotterdam. In case of damage or loss in transit,
VMC is the

responsible party and is covered by the insurer.

With regard to the shipment at issue, the Entry Summary (Customs Form
7501) indicates

that VMC was the importer of record. Our office also has copies of an
invoice dated December

16, 1993, from Heineken to VMC and an invoice dated December 31, 1993,
from VMC to Grant

Imp. & Dist. Co., Inc. (Grant) of Illinois. The Heineken-VMC invoice
indicates that the shipment

is to be marked \"Van Munching & Co. Inc.\" and that Grant is to be
notified concerning the

importation. Attached to the referenced commercial invoice, a
certificate executed December 30,

1993 by VMC (on their letterhead) certifies that the beer discharged at
the port of Richmond was

sold to Grant.

It appears you considered VMC to be a selling agent and therefore
appraised the

merchandise based on the price paid to VMC by its U.S.
customers/distributors. It is the

protestant\'s position that VMC functions as a buyer/seller and that the
transaction value of the

merchandise should be based on the price paid by VMC to Heineken.

ISSUE:

Based on the facts presented, whether a sale for exportation occurred
between Heineken

and VMC or whether a sale for exportation occurred between Heineken and
the U.S. consumers/

distributors with VMC serving as a selling agent.

LAW AND ANALYSIS:

As you are aware, the preferred 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), codified at 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
amounts for the enumerated

statutory additions (emphasis added). Accordingly, a bona fide sale must
exist between

Heineken and VMC for appraisal of the imported merchandise to be based
on the transaction

value represented by that price.

In J.L. Wood v. U.S., 62 CCPA 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406
(1974), the

U.S. Court of Customs and Patent Appeals defined the term \"sale\" as
the transfer of property

from one party to another for consideration. Although J.L. Wood was

decided under the prior appraisement statute, Customs recognizes this
definition under the TAA.

Several factors may indicate whether a bona fide sale exists between a
potential seller and

buyer. In determining whether property or ownership has been
transferred, Customs considers

whether the alleged buyer has assumed the risk of loss and

acquired title to the imported merchandise. In addition, Customs 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.

The information and facts presented to our office indicate that, insofar
as the transaction at

issue is concerned, a bona fide sale occurred between Heineken and VMC.
We note that the

protestant submits that it pays for freight and marine insurance and in
case of damage or loss in

transit, it is the responsible party. The submitted invoices indicate
that Heineken sells the goods

to VMC who in turn sells them to its distributors. We recognize that the
certificate executed by

VMC certifying that VMC sold the beer to Grant, who was then able to
take possession of the

goods, serves as some evidence that VMC\'s role was that of a
buyer/seller and that they possessed

title at the time of importation.

We reiterate that it is our understanding that VMC has sole discretion
in the selection and

confirmation of its distributors and negotiates prices with them as well
as with Heineken in order

to ensure a reasonable profit. It is not apparent that the U.S.
distributors are able to negotiate or

deal directly with Heineken in such a manner. In fact, VMC explains that
it pays Heineken for the

goods and then invoices the distributors when the bill of lading is
sent, giving them possession of

the goods. These facts coupled with the comprehensive daily operations
of VMC as evidenced by

the appropriate FNIS (for instance its management of its own accounting,
advertising, and debt

collection as well as its employment of sales managers, traffic
managers, and other staff to help

conduct business) indicates that VMC functioned as a buyer/seller of the
goods as opposed to a

selling agent. Finally, we note that although it appears that VMC and
Heineken may be related

parties pursuant to section 402(g) of the TAA, discussions with the
appropriate FNIS indicate

that the circumstances of the sale demonstrate that the relationship
between the parties did not

influence the price actually paid or payable.

HOLDING:

Based on the evidence submitted, a sale for exportation occurred between
Heineken and

VMC and, consequently, the transaction value of the merchandise is
correctly based on the price

actually paid or payable by VMC to Heineken.

You are directed to grant the protest. A copy of this decision with the
Form 19 should be

sent to the 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 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,

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,

John Durant, Director

Commercial Rulings Division