HQ 545542

December 9, 1994

VAL CO:R:C:V 545542 LPF

CATEGORY: Valuation

District Director

U.S. Customs Service

1000 2nd Avenue - Room 2200

Seattle, WA 98104

RE: Application for Further Review of Protest No. 3004-93-100193;

Proper Transaction Value of Imported Merchandise; Sale for Exportation

Dear Sir:

This is a decision on an application for further review of a

protest filed November 10, 1993, against your decision concerning

the valuation of footwear. The entry was liquidated on August

13, 1993. We regret the delay in responding.

FACTS:

Genfoot Inc. (\"GFI\"), a Canadian corporation, purchases

goods from the Far East and ships these goods to the United

States. The protestant explains that Genfoot America Inc.

(\"GFA\") is a wholly owned subsidiary of GFI and is the exclusive

wholesaler and distributor of all merchandise manufactured by GFI

for sale in the U.S. The protestant adds that GFA employs sales

agents and full time manufacturing and warehousing employees at

its manufacturing facility. It also is stated that once orders

are received from customers and approved by the company, GFA

places a corresponding order for the merchandise with one of its

three principal supply sources: (i) its manufacturing facility in

New Hampshire, (ii) its parent company in Canada, or (iii) its

various foreign suppliers off shore. GFA then sends an order

confirmation to its American customer.

The protestant claims that if GFA\'s order is sourced from

Canada, GFI transfers title of the required merchandise to GFA

and invoices the company for the goods sold and then GFA arranges

either to have the goods shipped directly from Canada to the

American customer or to have the goods shipped to one of its

warehousing facilities in the U.S. for final distribution to its

American customers. Once the merchandise is shipped, GFA

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supposedly invoices its customer on net payment terms and

subsequently deposits its accounts receivable balances in its

bank account maintained in Boston.

However, with regard to the shipment at issue, the Entry

Summary (Customs Form 7501) indicates that the importer of record

for the shipment was GFI of Montreal, Canada. In response to a

Request for Information (Customs Form 28), dated April 1, 1993,

from the Seattle District, the protestant tendered a purchase

order and invoice for the shipment. The purchase order, dated

September 8, 1992, from G.I. Joe\'s, the American customer, is to

GFA with a Montreal address. Moreover, the invoice dated March

10, 1993, indicates that GFI invoiced G.I. Joe\'s directly for the

footwear. Although these documents refer to GFA but contain a

Montreal, Canada address, it is our understanding, according to

GFA, that only GFI and not GFA exists in Canada. Additional

invoices included in the file indicate that the merchandise was

invoiced and shipped from GFI to G.I. Joe\'s. Finally, a bill of

lading shows that the footwear was shipped directly from GFI in

Montreal to G.I. Joe\'s.

You appraised the merchandise based on the price paid by

G.I. Joe\'s to GFI. The protestant submits that the transaction

value should be based on the price paid by GFA to GFI.

ISSUE:

Based on the facts presented, whether a bona fide sale

exists between GFI and GFA or between GFI and G.I. Joe\'s.

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). A bona fide sale must exist between GFA and GFI 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

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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 submitted in this regard appears to indicate

that, insofar as the transaction at issue is concerned, a bona

fide sale did not exist between GFA and GFI, but rather between

GFI and G.I. Joe\'s. The evidence does not indicate that GFA

assumed the risk of loss and acquired title to the merchandise.

On the contrary, the bill of lading from GFI to G.I. Joe\'s

appears to indicate that risk of loss and title to the goods were

transferred from the former to the latter without an assumption

of risk or title on the part of GFA. The purchase order from

G.I. Joe\'s to GFA with a Montreal address corroborates this

finding. In addition, the direct invoice from GFI to G.I. Joe\'s

further illustrates that a bona fide sale does not exist between

GFA and GFI. We reiterate that although these documents may

refer to GFA, they contain a Montreal, Canada address and it is

our understanding that only GFI and not GFA exists in Canada.

Insofar as payments for the merchandise are concerned, it appears

that they are linked to the transaction between GFI and G.I.

Joe\'s.

The protestant has not provided purchase orders or proof of

payment from GFA to GFI which, on the other hand, could indicate

that a bona fide sale occurred. This is distinguishable from

prior Customs decisions wherein the importer had produced sales

contracts or proof of agreed upon consideration between the

parties which allowed Customs to deduce that the parties were

functioning as a buyer and seller. See Headquarters Ruling

Letters 543511, issued May 29, 1986, and 543633, issued July 7,

1987\.

Because the protestant has not controverted these findings

factually or through documentation indicating otherwise, we

conclude that the appraising officer correctly based the

transaction value of the imported merchandise on the price

actually paid or payable by G.I. Joe\'s to GFI.

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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 actually paid or

payable by G.I. Joe\'s to GFI.

You are directed to deny 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