CBP Says Valuation Based on Sale to Importer's Customers, Not Price Paid to Related Factory
CBP was correct when it found against an importer's use of price paid to a related factory in China, rather than the price paid by the importer's customers, the agency found in a Sept. 9 ruling. The director of the Industrial and Manufacturing Materials Center of Excellence and Expertise (CEE) requested an internal advice ruling after Mayer Brown asked for a further review of protest on behalf of the importer, World Wide Packaging. The import entry involved two line items of “plastic tubes used for personal care products, which were the subject of purchase orders from two unrelated U.S. customers of WWP.”
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
After WWP's U.S. entity received the purchase orders from U.S. customers, it placed an order with its related Chinese factory, WWP Suzhou. The U.S. customer purchase orders don't include information on delivery date, the time in which to pay or when risk of loss or title passes to the customer, CBP said. One invoice includes an “additional charge described as '10% Duty Incremental Tariff Increase' and referenced as WWP Item 'USTR 301 Inc Tariff,'” even though the merchandise “were Korean goods and not Chinese goods and as such, were not subject to Section 301 tariffs.”
While “there are no sales contracts between any of the parties involved in these transactions, simply purchase orders and invoices,” the company argued that there is a bona fide sale between WWP Suzhou and WWP in the U.S. that should be used for appraisement, CBP said. The company conceded that the transaction doesn't meet the “arm's length” requirement for the use of transaction value, but it asked CBP to instead use the deductive value method.
The CEE previously ruled that “the importer, as the middleman in the transactions, was a selling agent for WWP Suzhou and that the customers in the U.S.” were the buyers, CBP said. WWP US objected to CBP using the transaction value between the importer and the importer's U.S. customer. Because “manufacturer’s price fails to meet the requirements of transaction value under the statute as the relationship of the parties influenced the price,” CBP “is left with one price, one sale for export that meets the statutory requirements of transaction value, i.e., the middleman’s price,” the agency said.
The sales between WWP US and the U.S. companies should be considered domestic sales, WWP said. Unlike in other litigation on the subject, “we know a great deal with regard to the information on the invoices and the terms and conditions of sale to the U.S. customers,” CBP said. “We believe the documentation between WWP US and its U.S. customers support CBP’s view that the sales transactions between these parties are not 'domestic' sales, but sales of merchandise for export to the United States.” With “only one bona fide sale in the multi-tiered transaction at issue, and that sale is the sale between WWP US and its U.S. customers,” the goods should be appraised based on that transaction value, CBP said.