Decision on Application for Further Review of Protest No. 3801-6-001163

HQ 544284 January 26, 1989 CLA-2 CO:R:CV:V 544284 VLB CATEGORY: Valuation District Director of Customs Detroit, Michigan 48226-2568 RE: Decision on Application for Further Review of Protest No. 3801-6-001163 Dear Sir: This protest was filed against your decision in the liquidation of various entries made by -------------------------- ---------------, a lumber distributor (hereinafter referred to as the "distributor"). The merchandise was appraised pursuant to section 402(f) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (19 U.S.C. 1401a(b); TAA). FACTS: The merchandise in question is waferboard (particle board) that is manufactured in Canadian mills. The valuation of Canadian waferboard is the subject of hundreds of protests arising out of the various importers' manner of doing business. In correspondence dated March 28, 1988, forwarding the protests, the National Import Specialist lists the following three general methods used to sell the merchandise in question: (1) A Canadian manufacturer sells to a distributor (a Canadian or a U.S. company) for export to the United States, e.g. F.O.B. mill. All documents, including a through bill of lading, show that the merchandise is to be shipped from point of manufacture or origin to the United States port of importation or beyond. (2) A Canadian manufacturer sells F.O.B. mill to a distributor (a Canadian or a U.S. company) for shipment to a "storage-reload center" located near the border but on - 2 - the Canadian side. In turn, the distributor sells the merchandise from the "storage-reload center" to U.S. buyers for export to the United States (F.O.B. "storage-reload center" or duty paid delivered). (3) A Canadian manufacturer sells to a distributor (a Canadian or a U.S. company) for export to the United States, e.g. F.O.B. mill. All documents, including a through bill of lading, show that the merchandise is to be shipped from point of manufacture or origin to the United States port of importation or beyond. However, the shipment is routed through a "storage-reload center" in Canada. The only thing that happens at the reload center is either a change in the transportation conveyance or a stop over (sic) on the way to the United States. There is no change in quantities or destination. Each of the three methods described may have variations and the details of each transaction may differ slightly. Therefore, we will examine the documentation submitted by each protestant. In this case, the distributor has submitted documentation for two transactions. There are two documents in each transaction: (1) An Entry Summary Form indicating that the distributor is the ultimate consignee and F.W. Myers & Co. (Broker) is the importer of record; (2) An F.W. Myers Invoice stating that Nu Way Distributors (Reload Center) is the exporter and that the consignee is the distributor's U.S. customer. The distributor failed to provide any invoices that indicated the amount that it charged its U.S. customer for the merchandise. Documents 1 and 2, presented to Customs at the time of entry, appear to contain the price that the distributor paid to the Canadian manufacturer. You appraised the entries under section 402(f) of the TAA using the price paid by other U.S. customers to U.S. distributors for identical or similar merchandise as the starting point for the appraisement. The distributor argues that the merchandise should be appraised pursuant to section 402(b) of the TAA, and that the transaction value is the price it paid to the Canadian manufacturer. - 3 - ISSUE: Whether transaction value is the proper method for the appraisement of the merchandise. LAW AND ANALYSIS: 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. . ." (emphasis added). Section 101.1(k) of the Customs Regulations (19 CFR 101.1(k)), defines "exportation" as a severance of goods from the mass of things belonging to this country with the intention of uniting them to the mass of things belonging to some foreign country. In C.S.D. 84-54 and Headquarters ruling 542928 cited as TAA #57, we held: . . . the transaction to which the phrase "when sold for exportation to the United States" refers, when there are two or more transactions which might give rise to a transaction value, is the transaction which most directly causes the merchandise to be exported to the United States. Headquarters also issued ruling 543687 dated May 6, 1986, in response to hypothetical questions posed by a lumber industry trade journal. In that ruling we stated the following: . . . if sales for exportation to the United States actually occur from the border reload point (in Canada), and these sales are the sales that directly cause the merchandise to be exported from Canada, the transaction value would be based upon those sales. (emphasis added) Finally, on May 22, 1986, Headquarters issued ruling 543746 involving specific waferboard entries. In that case, a U.S. company purchased and imported waferboard products from various unrelated sources in Canada. The terms of sale were "F.O.B. mill". Therefore, the company took title to the merchandise at the mill. However, the product was shipped to reload centers in Canada where it was stored and consolidated. The company frequently obtained orders for resale of the product to unrelated U.S. purchasers prior to the consolidation at the staging yards. - 4 - Relying on ruling 543687, we held that the sale from the company (distributor) to its U.S. customer most directly caused the merchandise to be exported to the U.S. The documents submitted by the distributor in this protest do not contain enough information to determine when the distributor received an order from its U.S. purchaser or when the distributor ordered the merchandise from the manufacturer. Therefore, it is impossible to determine which sale severed the goods from the mass of things belonging to Canada with the intent of uniting them with the mass of goods belonging to the U.S. for purposes of transaction value. If information containing the price that the distributor charged its U.S. customer for the lumber is unavailable, it is necessary to proceed sequentially through the remaining bases of appraisement prior to resorting to a section 402(f) appraisement. In this case, the distributor has failed to provide any evidence that supports its contention that it the merchandise was improperly appraised under section 402(f) of the TAA. HOLDING: The importer has failed to submit any documentation or explanation supporting its claim that the merchandise was improperly appraised under section 402(f) of the TAA. Therefore, you are directed to deny the protest. A copy of this decision should be attached to Form 19, Notice of Action, to be sent to the protestant. Sincerely, John Durant, Director, Commercial Rulings Division