HQ 545447

May 12, 1994

VAL CO:R:C:V 545447 er

CATEGORY: Valuation

District Director Seattle (Area/Port of Blaine)

9901 Pacific Highway

Blaine, WA 98230

Attn: Protest Reviewer

RE: Application for Further Review of Protest No. 3004-93-

100116 Concerning Imported Silk Clothing; Sale for

Exportation; Price Actually Paid or Payable; Transaction

Value; Other Methods of Appraisement.

Dear Sir:

This is in response to your undated memorandum in which you

request further review of protest no. 3004-93-100116, dated August

13, 1993, concerning transactions involving Shekou Enterprises

Canada, Inc. and Shekou Enterprises USA, Inc. We regret the delay

in responding.

FACTS:

The relevant parties to the subject transactions include

Shekou Enterprises Canada, Inc. (\"Shekou Canada\"), Shekou

Enterprises USA, Inc. (\"Shekou USA\") and the ultimate United States

buyers. Shekou Canada is the importer of record for merchandise

shipped from Shekou Canada to the United States. While Shekou USA

is incorporated in New York, it apparently has no facilities or

employees. Generally, the merchandise is shipped from Canada

directly to the ultimate United States buyers, although in the

past, merchandise was sometimes first shipped to a sales agent\'s

showroom in the United States. Invoices to the ultimate United

States buyers designate \"FOB Vancouver\" shipping terms.

Numerous requests for information (CF 28\'s) were issued to the

Shekou Canada requesting (1) information regarding the nature of

Shekou USA\'s operations; (2) purchase orders and invoices to

ultimate United States buyers evidencing whether the goods had been

sold to these buyers before the merchandise was shipped to the

United States; and (3) disclosure of any imported merchandise not

sold for exportation. None of the information or documentation

requested was provided to Customs.

Protestant claims that the merchandise was sold for

exportation from Shekou Canada to Shekou USA at arm\'s length and

that appraisement should proceed under transaction value on the

basis the entered values.

You believe that the sale for exportation occurred between

Shekou Canada and the ultimate United States buyer and that there

was no intervening sale of the merchandise between Shekou Canada

and Shekou USA. You appraised the merchandise under transaction

value on the basis of invoice price to the United States buyer in

those instances where you were able to obtain the invoices. Where

you were unable to obtain the invoices to the United States buyer

you appraised the merchandise under section 402(f) of the Trade

Agreements Act of 1930, as amended (\"TAA\").

ISSUE:

Whether the transactions between Shekou Canada and Shekou USA

and/or Shekou Canada and the ultimate United States buyer, are bona

fide sales such that the price actually paid or payable constitutes

a valid transaction value.

LAW AND ANALYSIS:

As you know, transaction value, the preferred method of

appraisement, is defined in section 402(b) of the TAA as \"the price

actually paid or payable for the merchandise when sold for

exportation to the United States\...\" Thus, there must be a bona

fide sale of the imported merchandise for it to be appraised under

transaction value.

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 from the country of

exportation to the place of importation in the United States) made,

or to be made, for the imported merchandise by the buyer to, or for

the benefit of, the seller.\"

In J.L. Wood v. U.S., 62 CCPA 25, 33, C.A.D. 1139 (1974), the

court defined the term \"sale\" as the \"transfer of property from one

party to another for consideration.\" Similarly, section 2-106(1)

of the Uniform Commercial Code (\"UCC\") defines a \"sale\" as \"the

passing of title from the seller to the buyer for a price\".

Although the J.L. Wood case was decided under the appraisement

statute prior to the TAA, Customs has applied this basic concept of

what constitutes a sale under the TAA. See, HRL 544658 (March 26,

1991\)

In the instant case, there is no evidence that Shekou USA

exists, except as a paper corporation, and has the capacity to act

as a buyer of the merchandise. All attempts by you to obtain

information concerning Shekou USA\'s alleged operations went

unanswered. Under the circumstances there is no proof whatsoever

that the merchandise was ever sold from Shekou Canada to Shekou

USA. Accordingly, the only possible sale for exportation would be

that between Shekou Canada and the ultimate United States buyer.

We are satisfied that a bona fide sale for exportation occured

between Shekou Canada and the ultimate United States buyer in those

instances where Shekou shipped the merchandise directly to the

buyer, FOB Vancouver, with title and risk of loss passing to the

buyer at the time the merchandise was placed on the carrier for

shipment to the United States. Under these circumstances, so long

as you were able to determine the price actually paid or payable,

we find that it was proper for you to appraise the merchandise

under transaction value. Thus, where you were provided with the

invoices to the buyer identifying the amount of payment due,

transaction value was appropriate. However, transaction value may

not be used unless there is sufficient information available to

determine the price actually paid or payable; consequently, in

those instances where you were unable to obtain the invoices or

other documentation identifying the price actually paid or payable,

appraisement under transaction value is precluded. In these

instances, you state that you appraised the merchandise under

section 402(f) of the TAA. For the reasons later discussed in this

response, we are unable to determine whether appraisement under

this method was appropriate.

There is no evidence that a sale for exportation existed

between Shekou Canada and the ultimate United States buyer on those

occasions where the merchandise was first shipped to an agent in

the United States. Under these circumstances it is possible that

the sale of the merchandise was not contemplated until some time

after the goods were imported. As a result, merchandise imported

under these conditions must be appraised using a method other than

transaction value.

Where invoices to the buyer identifying the price actually

paid or payable were unavailable and where it could not be

established that a sale for exportation took place prior to the

exportation of the goods, transaction value of the merchandise

cannot be determined. In instances where transaction value cannot

be determined, or cannot be used, sections 402(a)(B) and (C)

provide for appraisement under section 402(c) \-- transaction value

of identical or of similar merchandise. (The terms \"identical

merchandise\" and \"similar merchandise\" are defined in sections

402(h)(2) and 402(h)(4), respectively.) This means of appraisement

is acceptable provided sufficient information is available in order

for Customs to make any adjustment that may be necessary under

section 402(c)(2). No specific information pertaining to section

402(c) has been submitted to Headquarters. If in fact a section

402(c) appraisement is possible, this means of appraisement may not

be disregarded by either Customs or the importer. (HRL 543912 dated

April 19, 1988)

So long as transaction value of identical or similar

merchandise is not available, then appraisement under deductive

value is appropriate provided the statutory requirements of section

402(d) are met and that the necessary documentation and information

is obtainable. In the event a section 402(d) appraisement is not

possible, then appraisement should proceed under computed value as

defined by section 402(e) provided the statutory requirements of

this section are satisfied. Only if none of the above methods of

appraisement is possible, may you appraise the merchandise in

accordance with section 402(f).

HOLDING:

You are instructed to deny this protest. Under the facts

presented, we find that no bona fide sale occurred between Shekou

Canada and Shekou USA. Where is can be established that a sale for

exportation occurred between Shekou Canada and the ultimate United

States buyer and the price actually paid or payable for the

merchandise is ascertainable, appraisement of the merchandise under

transaction value is proper.

In those instances where a sale for exportation between Shekou

Canada and the ultimate United States buyer cannot be established

or where the price actually paid or payable cannot be ascertained,

transaction value under section 402(b) does not exist. Under these

circumstances the merchandise must be appraised in accordance with

the hierarchal means of appraisement set forth under section 402,

as discussed above.

In accordance with section 3A(11) 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 the public via the Diskette

Subscription Service, Lexis, Freedom of Information Act and other

public access channels.

Sincerely,

John Durant, Director

Commercial Rulings Division