Valley Knitting Co., Inc. v. United States

• Decision Date: 08 March 1960
• Docket Number: Reap. Dec. 9627.
• Citation: 44 Cust. Ct. 599
• Parties: VALLEY KNITTING CO., INC., ET AL. <I>v.</I> UNITED STATES.
• Court: U.S. Court of Customs and Patent Appeals (CCPA)

44 Cust. Ct. 599

VALLEY KNITTING CO., INC., ET AL.v.

UNITED STATES.

Reap. Dec. 9627.

United States Customs Court.

Decided March 8, 1960.

Sharretts, Paley & Carter (Howard Clare Carter of counsel) for the plaintiffs.

George Cochran Doub, Assistant Attorney General (Samuel D. Spector, trial attorney), for the defendant.

RAO, Judge:

The four appeals for reappraisement here involved, which have been consolidated for purposes of trial, raise the question of whether certain inland charges included in the f.o.b. price of men's, boys', and infants' cotton wear, exported from Japan, are properly to be considered part of the value of such merchandise.

The articles covered by each of these appeals were appraised at their respective invoice unit values net packed. Although the fact is not formally so stated in the official papers, which are in evidence in this case, or in the record, it may be assumed that the appraiser adopted as the basis of his return, export value, as defined in section 402(d) of the Tariff Act of 1930. Said provision reads as follows:

(d) EXPORT VALUE. — The export value of imported merchandise shall be the market value or the price, at the time of exportation of such merchandise to the United States, at which such or similar merchandise is freely offered for sale to all purchasers in the principal markets of the country from which exported, in the usual wholesale quantities and in the ordinary course of trade, for exportation to the United States, plus, when not included in such price, the cost of all containers and coverings of whatever nature, and all other costs, charges, and expenses incident to placing the merchandise in condition, packed ready for shipment to the United States.

Plaintiffs here contend that a so-called buying commission of 5 per centum and various charges for inland freight from factory to seaport, storage, insurance, and hauling and lighterage, included in the invoice unit values, are not part of the export value of the involved merchandise. It is asserted that export value is the proper basis of appraisement but that such values with respect to the instant merchandise are the ex-factory prices, exclusive of the above-mentioned charges.

The statement of the opposing positions in this case brings into focus a recent series of decisions both by this court and by the Court of Customs and Patent Appeals on the general subject of whether or not inland freight and related charges are to be considered as part of the export value of imported merchandise.

In the case of United States v. Paul A. Straub & Co., Inc., 41 C.C.P.A. (Customs) 209, C.A.D. 553, it was held that where all sales were made in the principal market (factory site) on an f.o.b. port of exportation basis, and no sales were ever made ex-factory, the f.o.b. price, including freight costs, represented the export value of the merchandise. Of interest to the present dispute are the following excerpts from the court's decision:

It is entirely clear from the terms of the stipulation that all sales or offers for sale were made at Selb-Stadt, the factory and principal market, on an f.o.b. Bremen basis. It is equally clear that no sales or offers for sale were ever made on an ex factory basis so that the freely offered price for such or similar merchandise in the principal market was the f.o.b. Bremen price and that price only. In other words, all sales or offers for sale were made for delivery at the port of exportation and no sales or offers for sale were made for delivery in Selb-Stadt. Availability of the merchandise to all purchasers was thus predicated on a single price and that price included freight costs between Selb-Stadt and the port of exportation, Bremen.

* * * * * * *

The official invoice papers disclose that the charge for freight was included in the unit prices, and as the appellant aptly observes, "there is no showing of record of separate unit prices for the goods and separate unit freight charges per unit of merchandise." The appellant continues by referring to section 500(a) (1) of the Tariff Act of 1930 [19 U.S.C. sec. 1500(a) (1)] wherein it is stated that merchandise is subject to appraisement "in the unit of quantity in which the merchandise is usually bought and sold ***." Repeatedly emphasizing that "the goods were only freely offered for sale to all purchasers in Selb-Stadt in the usual wholesale quantities and in the ordinary course of trade at the f.o.b. Bremen prices appearing upon the invoice, which included an item of freight," the appellant feels that the appraiser's finding of value was correct and should not have been disturbed.

* * * * * * *

In the case before us it is a fact that the freely offered price to all purchasers for the merchandise was on an f.o.b. Bremen basis. There is no showing that the goods could be purchased at the invoice price less freight. The unit prices for the merchandise in the instant case included the inland freight charges at the time of purchase in Selb-Stadt, and as the appellant states, "Such inland freight is incorporated in and bound up with the cost to the seller of material and labor, and forms an integral part of the unit value and purchase price of each item. It is inseparable therefrom and is a charge in the principal market at or prior to the time of shipment, and does not accrue subsequent to the time of shipment to the United States." [Italics quoted.]

The principle of the Straub decision was reaffirmed in the case of Albert Mottola, etc. v. United States, 46 C.C.P.A. (Customs) 17, C.A.D. 689, in respect to merchandise offered for sale in Tokyo, Japan, at an f.o.b. Yokohama price, where it appeared that there were no offers for sale for delivery in Tokyo, the principal market, at prices which did not include the contested charges. It is to be noted, however, that the rulings in both cases hinged upon the peculiar fact that purchases could not be made ex-factory, and all sales were made f.o.b. port of exportation, all charges included. As observed by the court in said Mottola case:

While the language of the Tariff Act of 1930 differs from that of the Act of 1883 [involved in the case of Robertson v. Bradbury, 132 U.S. 491] we are of the opinion, as was the Customs Court, that the 1930 Act does not contemplate that inland freight charges in the country in which the merchandise originates are ordinarily to be included in the export value. As was clearly indicated in the Straub decision, such changes are not to be included if the merchandise can be purchased in the principal market at a price which does not include the charges.

In the case of United States v. Dan Brechner et al., 38 Cust. Ct. 719, A.R.D. 71, it was held that the general rule thus stated, rather than the particular exception involved in the Straub and Mottola cases, applied in connection with certain export charges, where it was shown that ex-factory offerings were freely made to all purchasers at prices which did not include such charges. In view of the contention in the present action that the facts here are the same in all material respects as those which were involved in the Brechner case, a somewhat detailed analysis of that decision seems warranted.

It there appeared that it was the custom of the importer to make rather frequent trips to Japan for the purpose of purchasing an assortment of goods. It was his practice to call upon the various manufacturers at their places of business, in the company of a Japanese agent who acted as interpreter, or to have the manufacturers call at the office of the Japanese agent. Negotiations were conducted to arrive at a satisfactory price, after comparison with other manufacturer's prices for similar wares. The price eventually agreed upon was the manufacturer's ex-factory price, which included only the manufacturer's profit, and was quoted in yen. The agent converted the yen price into United States currency, added an estimate of shipping charges, and his commission of 5 per centum, and then gave the importer a so-called f.o.b. price. Prior to shipping, the agent checked the quality of the merchandise, consolidated shipments from various manufacturers, prepared consolidated invoices, and arranged for the exportation of the...