**serko SIMON GLUCK & KANE llp**

[customs & international trade law]{.smallcaps}

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[new york, n. y. 10019]{.smallcaps}

[tel]{.smallcaps}. 212-775-0055 [e-mail]{.smallcaps}:
<serko-simon@customs-law.com>

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[www.customs-law.com]{.underline}

April 17, 2008

Monika Brenner, Esq.

Trade & Commercial Regulations Branch

U.S. Customs & Border Protection

1300 Pennsylvania Avenue N.W.

Washington, D.C. 20229

Regarding: Proposed Reinterpretation of the Value Law

USCBP-2007-0083

Dear Ms. Brenner:

These comments are submitted on behalf of our client Waterford Wedgwood
USA, Inc.(WWUSA), 1330 Campus Parkway, Wall, New Jersey 07719. WWUSA is
an importer which has utilized Headquarters Ruling 545709 since its
issuance on May 12, 1995 which was issued to WWUSA based on the specific
facts of its multi-tiered transactions.

For more than twenty years, use of the price (plus the mandatory
statutory additions) for the sale for export to the United States has
been a permitted Value for duty purposes upon importation into the U.S.,
*provided* that the sale is at arm's length, that the goods were clearly
destined for the U.S. and can be supported by a complete document trail
compiled by the time of entry and available for review by U.S. Customs.

There is no compelling reason to change the status quo. Customs is
neither a legislative agency nor a judicial agency, yet by the proposed
reinterpretation, it would attempt to write new law and overrule the
courts.

The use of the sale for export to the United States as the dutiable
value is based on the plain meaning of the statute 19 U.S.C. 1401a and
the decisions of the courts in *E.C. McAfee Company et al v. United
States,* 842 F.2d 314 (Fed.Cir. 1988); [*Generra Sportswear Co. v.
United States,* 905 F.2d 377, 380 (Fed. Cir.
1990)](https://www.lexis.com/research/buttonTFLink?_m=d776375a852d6ffad3557000f425b6b5&_xfercite=<cite cc%3D"USA"><!%5BCDATA%5B175 F.3d 1327%5D%5D><%2Fcite>&_butType=3&_butStat=2&_butNum=133&_butInline=1&_butinfo=<cite cc%3D"USA"><!%5BCDATA%5B905 F.2d 377%2C 380%5D%5D><%2Fcite>&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVlz-zSkAV&_md5=b7b9b3d44401c8224f97361badc77256);
*Nissho Iwai American Corp. v. United States,* 982 F.2d. 505 (Fed. Cir.
1992); *VWP of America, Inc. v. United States,* 175 F.3d 1327 (Fed.Cir.
1999); and *Target Corp v. United States,* Slip. Op. 07-14 (CIT January
26, 2007). Treasury Decision (T.D.) 96-87 clarified the issues that
arise in multi-tiered transactions in determining which is the Sale for
Exportation to the United States for the purpose of determining
transaction value and the documentation and information needed to
support a ruling request that transaction value should be based on a
sale involving a middleman and the manufacturer or other seller rather
than on the sale in which the importer is a party. And Customs issued is
own Informed Compliance Publication entitled *Bona Fide Sales for Export
to the United States* which was first issued in November 1996, and
revised in January 2000 and July 2006.

The present interpretation of the Value law based on the statute 19
U.S.C. 1401a, the decisions of the courts and Customs rulings
effectuating the statute and the decisions of the courts allow for the
use of the sale for export to the United States to be the value upon
which ad valorem duties will be assessed.

Under the Value law as it existed prior to 1979, the value for duty
purposes was the foreign value or the export value in the foreign
country prior to export to the United States, whichever was higher. In
1979, Congress passed the Trade Agreements Act, which was intended to
implement the General Agreement on Tariffs and Trade ("GATT")
requirements that value be fair, non-discriminatory and calculated
according to rules which reflected commercial practices.

In [G*enerra Sportswear Co. v. United State*s, 905 F.2d 377, 380 (Fed.
Cir.
1990)](https://www.lexis.com/research/buttonTFLink?_m=d776375a852d6ffad3557000f425b6b5&_xfercite=<cite cc%3D"USA"><!%5BCDATA%5B175 F.3d 1327%5D%5D><%2Fcite>&_butType=3&_butStat=2&_butNum=133&_butInline=1&_butinfo=<cite cc%3D"USA"><!%5BCDATA%5B905 F.2d 377%2C 380%5D%5D><%2Fcite>&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVlz-zSkAV&_md5=b7b9b3d44401c8224f97361badc77256),
The Court of Appeals referred to \"the critical difference\" between
\"export value\" under pre-1979 law and \"transaction value\" under the
present statute. In that context, the court quoted with approval
material from the legislative history of the Trade Agreements Act:

*The use of transaction value as the primary basis for customs valuation
will allow use of the price which the buyer and seller agreed to in
their transaction as the basis for valuation, rather than having to
resort to the more difficult concepts of \"freely offered,\" \"ordinary
course of trade,\" \"principal markets of the country of exportation,\"
and \"usual wholesale quantities\" contained in existing U.S. law.*

S. Rep. No. 96-249, at 119 (1979), reprinted in 1979 U.S.C.C.A.N. 381,
505.

As a result, 19 U.S.C. 1401a established Transaction Value, i.e., the
price paid or payable in an arm's length sales transaction for export to
the United States plus certain statutory additions, as the standard
method of valuation for duty purposes.

In *E.C. McAfee Company et al v. United States,* 842 F.2d 314 (Fed.Cir.
1988), the Court of Appeals held that certain custom-made suits were
sold for export to the United States when the tailor who manufactured
them sold the finished articles to distributors in Hong Kong, who in
turn sold the suits to customers in the U.S. The value for duty purposes
was the sale price from the tailors to the middleman *plus* the
statutory additions for any dutiable commissions, royalties, assists,
packing or proceeds of a subsequent sale which would accrue to the
manufacturer. In holding in favor of the importers, the court pointed to
[*United States v. Getz Bros. & Co*., 55 CCPA 11
(1967)](https://www.lexis.com/research/buttonTFLink?_m=849c018a3f965079375e9875e57bb6a4&_xfercite=<cite cc%3D"USA"><!%5BCDATA%5B842 F.2d 314%5D%5D><%2Fcite>&_butType=3&_butStat=2&_butNum=44&_butInline=1&_butinfo=<cite cc%3D"USA"><!%5BCDATA%5B55 C.C.P.A. 11%5D%5D><%2Fcite>&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVlz-zSkAV&_md5=8982733d2b7dc6ada0abc3f819e90329),
a precedential decision of the Court of Customs and Patent Appeals.
There, a similar, three-tiered, distribution situation was considered.
While the *Getz* case was decided under 1[9 U.S.C. §
1401a(1b)](https://www.lexis.com/research/buttonTFLink?_m=849c018a3f965079375e9875e57bb6a4&_xfercite=<cite cc%3D"USA"><!%5BCDATA%5B842 F.2d 314%5D%5D><%2Fcite>&_butType=4&_butStat=0&_butNum=45&_butInline=1&_butinfo=19 U.S.C. 1401A&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVlz-zSkAV&_md5=bd0456f96df6b9524f77948a03a9bff7)
as it appeared before amendment by the Trade Agreements Act of 1979, the
language of the earlier statute is not significantly different from the
quoted provision in the statute after the amendment. The issue in *Getz*
was whether valuation of certain plywood should be at the
manufacturer\'s price to a foreign middleman or that middleman\'s price
to the United States customer. U.S. Customs sought to have the decision
in *McAfee* limited to its particular facts.

In *Nissho Iwai American Corp. v. United States,* 982 F.2d. 505 (Fed.
Cir. 1992), the Court of Appeals again heard an appeal from a middleman
who sought to have the price paid by the middleman to the manufacturer,
rather than the price paid to the middleman by the customer in the U.S.,
be used as the dutiable value. The entries at issue in *Nissho Iwai*
were liquidated in 1985, i.e., well after the 1979 amendment of the
Value law. The court held that while both the price paid by the importer
and the price paid by the middleman might serve as the basis of
Transaction Value, Customs' own ruling CLA-2 CO:R:CV:V, 542928 BLS, TAA
#57, C.S.D. 83-46, 17 Cust. B. 811 (January 21, 1983) stated that \"it
was possible to use as the sale for exportation to the United States for
purposes of determining statutory export value a sale from a foreign
seller to a foreign buyer, who in turn sold the merchandise to a United
States importer.\"

Further, 19 U.S.C. 1401a (f)(2)(B) **prohibits** valuation on the basis
of:

> *a system that provides for the appraisement of imported merchandise
> at the higher of two alternative values...*

In *Nissho Iwai* the court found *McAfee* controlling, meaning that the
price from the manufacturer to the middleman was the correct value,
finding that the sale to the middleman was "for export to the United
States" within the meaning of the statute. ("The transaction value of
imported merchandise is the price actually paid or payable for the
merchandise when sold for exportation to the United States").

Later, in *VWP of America, Inc. v. United States,* 175 F.3d 1327
(Fed.Cir. 1999), the Court of Appeals again found that the price paid by
a middleman could be the dutiable value, even where the importer and the
middleman were related parties, so long as the relationship did not
influence the price. In other words, the sale was at arm's length.

Most recently, in *Target Corp v. United States,* Slip. Op. 07-14 (CIT
January 26, 2007), the court of International Trade found that even
though not claimed at time of entry, the price to the middleman could be
used as the dutiable value, if raised as an issue in a timely protest.
In *Target,* the importer to all appearances did not have a ruling
issued by U.S. Customs which addressed the particular circumstances of
its importation of shoes through a middleman. On February 4, 2008, a
joint stipulated judgment on agreed facts was filed with the court,
following the government's concession in the case.

Treasury Decision (T.D.) 96-87, in its summary statement of its purpose
indicated that it was intended to clarify the issues that arise in
multi-tiered transactions in determining which is the Sale for
exportation to the United States for the purpose of determining
transaction value and the documentation and information needed to
support a ruling request that transaction value should be based on a
sale involving a middleman and the manufacturer or other seller rather
than on the sale in which the importer is a party. T.D. 96-87 has been
enforced by Customs for eleven years.

As stated in T.D. 96-87, Customs presumes that the price paid by the
importer (or buyer in the U.S., in the proposed reinterpretation) 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 at \"arm\'s length.\" Under the decision in
*Nissho Iwai,* these questions are determined case-by-case based on the
evidence presented.

WWUSA and many other importers have requested and received rulings to
achieve certainty with regard to the expected duty treatment by U.S.
Customs of their import transactions, as well as satisfying the
"reasonable care" responsibilities imposed on importers under the
Customs Modernization provisions signed into law in 1993. At the same
time, it is our understanding that numerous importers have availed
themselves of the sale to a middleman exception without rulings issued
by Customs, but with Customs' blessings, provided the information and
documentation which would have supported a ruling are available for
Customs' review. The use of the value derived from the sale for export
to the United States without a particular ruling is implied in the
Informed Compliance Publication ("ICP") *Bona Fide Sales for Export to
the United States* which was first issued in November 1996, and revised
in January 2000 and July 2006. The ICP recounts the documentation and
information necessary to support not only a ruling request, but also
requests for internal advice [and]{.underline} protests.

The premise on which the long-standing treatment of qualified
transactions would be reversed is a purely advisory commentary of the
Technical Committee on Customs Valuation of the World Customs
Organization ("the WCO committee") issued in 2007. The Committee stated
that "normally the buyer would be located in the country of importation
and that the price paid or payable would be based on the price paid by
this buyer."

There is no difference between the statement of the WCO committee in
that regard and existing U.S. practice. The use of the sale to a
non-U.S. middleman as the basis for value may not be typical, but it is
not an "exception" from the usual determination of the value of imported
goods. For the past twenty years the courts have interpreted the
language of the statute and Customs has accepted the decisions of the
courts, albeit reluctantly at times, to allow for the use of the sale to
a middleman as the basis for dutiable value, where it can be
unequivocally demonstrated that it was a sale for export to the United
States.

It is a far cry from the observation by the WCO committee relative to
the typical import transaction to making mandatory the use of the price
paid by a buyer in the U.S. for dutiable value.

What are the implications of the proposed reinterpretation of the Value
law? Besides marking a serious disruption of established commercial
practice in the United States, and abandonment of principles defined by
U.S. courts, it is a surrender of sovereignty to a non-U.S. body with at
most an advisory role as a committee of the WCO. Customs is neither a
legislative agency nor a judicial agency, yet by the proposed
reinterpretation, it would attempt to write new law and overrule the
courts.

One of the premises cited in the proposed reinterpretation is a supposed
consistency with the valuation methodology of other nations. Would the
proposed reinterpretation result in a Value determination scheme like
that in Canada, enforced under the *Purchaser in Canada Regulations*
pursuant to the Customs Act of Canada, Section 48? Even there, there is
provision for the use of a sale for export to Canada for dutiable value,
and not the price paid by the customer in Canada. The price paid by a
non-resident importer is an allowable value for duty purposes in Canada.

While adoption of the proposed reinterpretation would very likely
increase the duties paid on many items imported into the U.S., it would
also result in the increase in the costs to consumers, as the increased
duties would of necessity be passed on to them, at a time when the U.S.
economy is in a state of flux.

U.S. importers such as WWUSA have been pummeled over the last
several years as the value of the dollar in relation to the currencies
they purchase their goods in continues its steep decline. Adoption of
the proposed reinterpretation would increase the duties paid on many
items imported into the U.S., most specifically to WWUSA and serve to
add to the mounting losses it and other importers of luxury goods have
incurred since the attacks on September 11, 2001.  Make no mistake,
passing the increased duties onto consumers at a time when the U.S.
economy is in the midst of a credit,  housing and consumer confidence
crisis would be no simple thing.

 

Each year 350,000 American tourists travel to Waterford, Ireland to
visit the factory that formed the basis of the Irish heritage for
the designs of crystal that have come to our country for over 200 years.
If enacted, the proposed reinterpretation would add to the myriad of
unduly harsh business factors which could force WWUSA and its parent
company to rethink its investment in the US which may ultimately result
in the loss of thousands of jobs and an end to decades of fruitful
tourism.

 

For all the reasons set forth herein, Waterford Wedgwood USA, Inc.
respectfully requests that the proposed reinterpretation be withdrawn.

Sincerely,

![](media/image1.wmf){width="2.0in" height="0.86875in"} SERKO SIMON
GLUCK & KANE LLP

Christopher M. Kane

CMK/ps