Vwp of America, Inc. v. U.S.

Decision Date29 August 2001
Docket NumberNo. 93-12-00803.,SLIP OP. 01-111.,93-12-00803.
Citation163 F.Supp.2d 645
PartiesVWP OF AMERICA, INC., Plaintiff, v. The UNITED STATES, Defendant.
CourtU.S. Court of International Trade

Barnes, Richardson & Colburn (James S. O'Kelly and Alan Goggins), New York City, for the plaintiff.

Stuart E. Schiffer, Acting Assistant Attorney General; Joseph I. Liebman, Attorney-in-Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice, (Saul Davis), for the defendant.

OPINION

MUSGRAVE, Judge.

Familiarity with prior decisions is presumed. Briefly, the matter concerns the proper valuation of 34 shipments of woolen "melton,"1 stripes, plaids, and tweeds entered for consumption between November 17, 1992 and February 1, 1993 by plaintiff Victor Woollen Products of America, Inc. ("VWPA") from its parent and the manufacturer of the fabrics, Les Lainages Victor Ltée (a/k/a Victor Woollen Products, Ltd.), of St. Victor de Beauce, Quebec, Canada ("VWPC").2 The fabrics were classified by the United States Customs Service ("Customs") under Item 5111.30.9000 of the Harmonized Tariff Schedules of the United States, and dutied at 38 percent ad valorem plus 22 cents per pound. VWP of America, Inc. v. United States, 21 CIT 1109, 980 F.Supp. 1280 (1997) found VWPC and VWPA, as a matter of fact, to be one and the same for customs duty purposes and ruled in favor of the defendant. The Court of Appeals for the Federal Circuit ("CAFC") disagreed, finding that the VWPC-VWPA transactions were sales "for exportation" to the United States which "may serve as the basis for transaction value" if such sales "satisfy the requirements of 19 U.S.C. § 1401a(b)(1)" and provided that "the acceptability of the transaction value arising from such sales is established under 19 U.S.C. § 1401a(b)(2)(B)." VWP of America, Inc. v. United States, 175 F.3d 1327, 1338 (Fed.Cir.1999). Toward that end, the matter has been remanded for: (i) consideration of whether certain costs and expenses must be included in the declared transaction values pursuant to § (b)(1) or § (b)(4)(A) of 19 U.S.C. § 1401a, (ii) comparing the VWPC-VWPA transactions against the Cookshiretex sales in accordance with 19 U.S.C. § 1401a(b)(2)(B)(i) (the transaction values established by the Customs with regard to the Cookshiretex sales being presumed correct by virtue of 28 U.S.C. § 2639(a)(1)), and (iii) as necessary, de novo review of the plaintiff's deductive and computed values under 19 U.S.C. § 1401a (d) and (e), respectively. Id. at 1343. The matter will be remanded to Customs for further proceedings in accordance with this opinion.

Discussion

Under the Trade Agreements Act of 1979, Pub.L. 96-39, Title II, § 201(a), 93 Stat. 194 (July 26, 1979), as amended by Pub.L. 96-490 § 2, 94 Stat. 2556 (Dec. 2 1980) ("TAA"), Customs is required to value imported merchandise in order of: (1) the transaction value of the imported merchandise, (2) the transaction value of identical merchandise, (3) the transaction value of similar merchandise, (4) the deductive or, if timely requested, computed value of the imported merchandise, or (5) upon the basis of a method derived from one of the foregoing, "reasonably adjusted to the extent necessary to arrive at a value," subject to certain exceptions. 19 U.S.C. §§ 1401a(a) and 1401a(g). 19 U.S.C. § 1401a(b)(1) defines "transaction value of imported merchandise" as "the price actually paid or payable for the merchandise when sold for exportation to the United States" plus

(A) the packing costs incurred by the buyer with respect to the imported merchandise;

(B) any selling commission incurred by the buyer with respect to the imported merchandise;

(C) the value, apportioned as appropriate, of any assist;

(D) any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States; and

(E) the proceeds of any subsequent resale, disposal, or use of the imported merchandise that accrue, directly or indirectly, to the seller.

19 U.S.C. § 1401a(b)(1). The "price actually paid or payable" for imported merchandise

shall be increased by the amounts attributable to the items (and no others) described in subparagraphs (A) through (E) only to the extent that each such amount (i) is not otherwise included within the price actually paid or payable; and (ii) is based on sufficient information. If sufficient information is not available, for any reason, with respect to any amount referred to in the preceding sentence, the transaction value of the imported merchandise concerned shall be treated, for purposes of this section, as one that cannot be determined.

Id. "Sufficient information" is such information that "establishes the accuracy" of, inter alia, the above amounts. 19 U.S.C. § 1401a(h)(2). The "price actually paid or payable" is defined 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 imported merchandise by the buyer to, or for the benefit of, the seller.

19 U.S.C. § 1401a(b)(4)(A).

In addition, under 19 U.S.C. § 1401a(b)(2)(A)(iv) transaction value is to be used "only if" the buyer and seller are unrelated or, if they are related, their transaction value is considered "acceptable." A related party transaction is "acceptable" as transaction value

if an examination of the circumstances of the sale of the imported merchandise indicates that the relationship between such buyer and seller did not influence the price actually paid or payable; or if the transaction value of the imported merchandise closely approximates —

(i) the transaction value of identical merchandise, or of similar merchandise, in sales to unrelated buyers in the United States; or

(ii) the deductive value or computed value for identical merchandise or similar merchandise but only if each value referred to in clause (i) or (ii) that is used for comparison relates to merchandise that was exported to the United States at or about the same time as the imported merchandise.

19 U.S.C. § 1401a(b)(2)(B). Values used for comparison must take into account, "based on sufficient information whether supplied by the buyer or otherwise available to the customs officer concerned," differences in commercial levels, quantity levels, the "costs, commissions, values, fees, and proceeds" described in 19 U.S.C. § 1401a(b)(1)(A)-(E), and any cost differences in unrelated sales by the seller (if such are used as a basis for comparison). 19 U.S.C. § 1401a(b)(2)(C).

"Deductive" value is defined as the resale price of imported merchandise in the United States less amounts associated with general expenses and profits, transportation, customs clearance, and customs duties and certain fees. 19 U.S.C. § 1401a(d). Deductive value requires consideration of "the unit price at which the merchandise is sold in the greatest aggregate quantity at or about" the date of importation. 19 U.S.C. § 1401a(d)(2)(A). The "greatest aggregate quantity" unit price is "the unit price at which such merchandise is sold to unrelated persons, at the first commercial level after importation ... in a total volume that is (i) greater than the total volume sold at any other unit price, and (ii) sufficient to establish the unit price." 19 U.S.C. § 1401a(d)(2)(B). This price is then reduced by (i) "any commission usually paid or agreed to be paid, or the addition usually made for profit and general expenses" in connection with U.S. sales of imported merchandise "of the same class or kind ... as the merchandise concerned"; (ii) the costs of transporting and insuring the international shipment of the merchandise; (iii) the costs of transporting and insuring from the U.S. border to the place of delivery (if not already excluded by (i)); and (iv) customs duties and Federal taxes payable on the merchandise by reason of its importation. 19 U.S.C. § 1401a(d)(3)(A)(i)-(iv). In addition,

profits and general expenses shall be based upon the importer's profits and general expenses, unless such profits and general expenses are inconsistent with those reflected in sales in the United States of imported merchandise of the same class or kind, in which case the deduction shall be based on the usual profit and general expenses reflected in such sales, as determined from sufficient information.

19 U.S.C. § 1401a(d)(3)(B). Finally, if not already included, any packing costs incurred by the importer or U.S. buyer must be added to such figure. 19 U.S.C. § 1401a(d)(3)(C).

By contrast, "computed" value is defined as the sum of

(A) the cost or value of the materials and the fabrication and other processing of any kind employed in the production of the imported merchandise;

(B) an amount for profit and expenses equal to that usually reflected in sales of merchandise of the same class or kind as the imported merchandise that are made by the producers in the country of exportation for export to the United States;

(C) any assist, if its value is not included under subparagraph (A) or (B); and

(D) the packing costs.

19 U.S.C. § 1401a(e)(1). Furthermore, as with deductive value,

the amount for profit and general expenses ... shall be based upon the producer's profits and expenses, unless the producer's profits and expenses are inconsistent with those usually reflected in sales of merchandise of the same class or kind as the imported merchandise that are made by producers in the country of exportation for export to the United States, in which case the amount ... shall be based on the usual profit and general expenses of such producers in such sales, as determined...

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