H309839

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H309839 September 9, 2020 OT:RR:CTF:VS H309839 CMR CATEGORY: Valuation Center Director Industrial and Manufacturing Materials CEE 726 Exchange Street Suite 400 Buffalo, NY 14210 Attn: Ann Marie Paul RE: Internal Advice on Application for Further Review and Protest No. 2704-19-106358; Multi-tiered transaction; Two sales for export to the United States Dear Center Director: This is in response to the referral to this office of the Application for Further Review (AFR) and Protest 2704-19-106358, timely filed by Mayer Brown LLP, on behalf of their client, World Wide Packaging, LLC (hereinafter, “WWP US”). The protest is against your decision to appraise merchandise in one entry based upon the price paid by the importer’s customers, rather than the price paid by the importer, WWP US, to a related party factory in China, i.e., World Wide Packaging (Suzhou) Co., Ltd. (“WWP Suzhou”). The importer has requested confidential treatment be accorded to certain information submitted in connection with this matter. In consideration of the request and sufficient justification presented pursuant to 19 CFR 177.2(b)(7), the request for confidential treatment is approved. Information for which confidentiality is being accorded is not referenced in this ruling. FACTS: The entry at issue consisting of two line items pertains to plastic tubes used for personal care products, which were the subject of purchase orders from two unrelated U.S. customers of WWP US. The two customers each placed three purchase orders for goods. The goods are custom-made for each customer. Line item 1 of the entry refers to the goods ordered by customer #1 and line item 2 of the entry refers to the goods ordered by customer #2. After receipt of the purchase orders, WWP US placed six purchase orders with its related factory, WWP Suzhou. Each purchase order WWP US places with WWP Suzhou includes the name of WWP US’ customer; the U.S. customer’s purchase order number, along with a WWP reference number; and the name of the WWP US order taker, sales administrator, and sales person. The purchase orders indicate that the goods are shipped via ocean freight and the applicable Incoterm is ex-works. The WWP US purchase orders for goods intended for customer #2 include a tooling services charge from the factory. The commercial invoices from WWP Suzhou to WWP US indicate the goods are shipped via ocean from China, but are void of any Incoterms or terms of sale. The invoices identify the goods by description, quantity, unit price and total price, which in the case of goods intended for customer #2 includes the tooling charge. Separate commercial invoices and packing lists are issued by WWP Suzhou to WWP US for the goods destined for customer #1 and customer #2. The bill of lading for the international freight indicates WWP Suzhou is the shipper and WWP US is the consignee. The invoice from the freight forwarder for the international freight charges indicates the same information and, like the purchase orders from WWP US to WWP Suzhou, indicates the applicable Incoterm is ex-works. The invoice also references the WWP US purchase order numbers for the goods intended for customers #1 and #2. An invoice for domestic freight from the port of unlading to the WWP US warehouse was submitted to show that WWP US is responsible for the domestic freight from the port of importation to the warehouse based on the Incoterm FOB (Free on Board). Evidence of payment by WWP US to WWP Suzhou was submitted, along with evidence of payment by WWP US to the freight forwarder for both the international freight and the domestic freight from the port of entry to WWP US’ warehouse. In addition, evidence that WWP US maintains and pays for marine insurance on goods shipped internationally was submitted. With regard to the transactions between WWP US and its customers, customer #1 and customer #2, the submitted documentation differs somewhat. For customer #1, a quotation, or bid, was submitted which shows the delivery terms to be FOB NJ/LA WWP Warehouse via Ocean. The Terms and Conditions which accompanied the quotation, provide in relevant part as follows: General Terms: Prices are FOB NJ or LA WWP Warehouse via ocean (unless otherwise specified). Customer is responsible for local freight charges to the final destination (unless otherwise specified). * * * c. There is an additional cost for orders shipped by air freight. * * * 2. Lead Time: * * * c. Transit time via ocean is approximately 5 weeks to NJ or 2.5 weeks to LA plus 1 week for customs clearance and delivery (other destinations may extend transit time). * * * 4. Technical: * * * f. Country of origin is China (unless otherwise specified). Purchase orders from customer #1 and customer #2 to WWP US were submitted. The purchase orders are void of terms of sale, but do provide the ship date, the delivery date, the time in which to pay, and the amount owed. There is no indication on the purchase orders of when risk of loss or title pass from WWP US to customer #1 or customer #2. Likewise, the invoices from WWP US to its U.S. customers do not contain any terms of sale, but do provide the payment terms, indicate that the ship method was ocean, identify the vessel by name on which the goods were shipped, and identify the WWP US sales person and WWP US customer service representative involved with that transaction. In addition, the invoices show an additional charge described as “10% Duty Incremental Tariff Increase” and referenced as WWP Item “USTR 301 Inc Tariff.” We note, however, that the goods destined to customer #1 were Korean goods and not Chinese goods and as such, were not subject to Section 301 tariffs. One “Order Acknowledgment” issued by WWP US to customer #2 was also submitted. The document contains the order date, customer purchase order number, WWP US purchase order number, the customer’s billing address, a “ship to” address, target date and customer availability date, availability notes which indicate “WWP LA WHSE,” and indicates that the goods are shipped via ocean freight. The consignee is identified as WWP US. The packing lists for the sales from WWP US to its U.S. customers indicate the “sold to” party as the U.S. customer, the “ship to” as a location selected by the U.S. customer, and the consignee/importer of record as WWP US. In addition to the information regarding the goods, such as description, quantity and price, the packing lists contain the name of the vessel in which the goods were shipped from China, the container number, the bill of lading number and the booking number. Evidence of payment from customers #1 and #2 to WWP US for the goods in accordance with the invoice prices was submitted. In addition, emails were submitted to show that WWP US deals directly with the U.S. customers. The email correspondence was submitted to show that WWP US interacted with U.S. customers and was responsible for the development of those relationships without any interaction between the U.S. customers and WWP Suzhou. However, we note that in correspondence dated February 12, 2016, from a regional sales manager of WWP US to customer #2, the U.S. sales manager states: “If you would like to see a little more of what we do prior to meeting you can click on the “WWP Tube Video” link in my signature below.” The WWP Tube Video is about the production facility in Suzhou. Further, the correspondence noted the shutdown of the factory for Chinese New Year and how it would affect orders for tubes. Customs and Border Protection (CBP) has been informed that there are no sales contracts between any of the parties involved in these transactions, simply purchase orders and invoices. Counsel for the importer submits that a bona fide sale for export to the United States occurred between WWP Suzhou and WWP US and that sale should be the transaction upon which appraisement of the goods should be ba

Merchandise imported into the United States is appraised in accordance with Section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. § 1401a). The preferred method of appraisement is transaction value, which is defined as the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus certain statutory additions. 19 U.S.C. § 1401a(b)(1). In Nissho Iwai American Corp. v United States, 16 C.I.T. 86, 786 F. Supp. 1002, reversed in part, 982 F. 2d 505 (Fed. Cir. 1992), the Nissho Iwai American Corporation (NIAC), a U.S. subsidiary of Nissho Iwai Corporation (NIC), a Japanese company, contracted to sell subway cars to the New York City Metropolitan Transportation Authority. In that case, the importer of record was a U.S. company, NIAC, selling subway cars to a U.S. buyer, i.e., the New York City Metropolitan Transportation Authority. The contract for sale indicated the name of the producer in Japan of the subway cars, Kawasaki Heavy Industries Ltd. NIAC assigned its rights and responsibilities under the contract to its parent company, NIC. NIC ordered the subway cars from the producer named in the contract between NIAC and the New York City Metropolitan Transportation Authority. Thus, two separate transactions were at issue in appraising the merchandise – the transaction between the two U.S. entities, i.e., NIAC and the New York City Metropolitan Transportation Authority, and, the transaction between NIC and Kawasaki Heavy Industries Ltd. The Court of International Trade upheld the U.S. Customs Service (now, CBP) decision to appraise the merchandise based upon the transaction value of the sale between NIAC and the New York City Metropolitan Transportation Authority. See Nissho Iwai American Corp. v. United States, 16 CIT 86, 786 F. Supp. 1002 (1992). The Court of Appeals for the Federal Circuit reversed the lower court on this issue, and held that the sale from Kawasaki Heavy Indust