HQ 546132: Protest and Application for Further Review (0712-95-100473); Cigarettes; Discounts; Indirect Payments.

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 546132
                          April 10, 1996
RR:IT:VA  546132 er
CATEGORY: Valuation

Port Director
Champlain, NY

RE:  Protest and Application for Further Review (0712-95-100473); Cigarettes; Discounts; Indirect Payments.

Dear Sir:

     This is in response to your memorandum dated September 5,
1995, forwarding the above-referenced protest dated May 17, 1995,
and amendment thereto dated May 22, 1995, submitted by a
brokerage on behalf of their client, Leslie F. & Rosalie Matthews
D.B.A. Git-N-Go ("Protestant").  We regret the delay in
responding.

FACTS:

     This protest concerns the appraisement of imported
cigarettes.  Customs appraised the merchandise under transaction
value at $320.00 per case. 

     Protestant asserts that the cigarettes were purchased at a
price of $1.00 per case from a non-related seller as a result of
negotiations which occurred prior to the exportation to the
United States of the merchandise.  All orders are verbal as is
alleged by Protestant to be the usual method of business in such
transactions.   A representative copy of an invoice reflecting
the order date and the shipping date was submitted to this
office.  The invoice reflects a $320.00 per case price and a
$319.00 per case discount.  

     You inform us that the $319.00 per case reduction in price
was intended to compensate the importer for a previous shipment
involving slow-moving goods.  As a credit for the previous
shipment, you assert that the credit was, in effect, a prepayment
for the instant shipment.  Without this credit, the $319.00 per
case discount would not have been granted.  

ISSUE:

     Whether the merchandise was properly appraised?

LAW AND ANALYSIS:
     
     Transaction value, the preferred method of appraisement, is
defined in section 402(b) of the Trade Agreements Act of 1930, as
amended ("TAA"), 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))

     The term "price actually paid or payable" is defined in
section 402(b)(4)(A) of the TAA as "the total payment (whether
direct or indirect ...) 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))  Section 152.103(a)(1) of the Customs
Regulations (19 CFR 152.103(a)(1)) provides that the price
actually paid or payable "... will be considered without regard
to its method of derivation.  It may be the result of discounts,
or negotiations, or may be arrived at by the application of a
formula ..."  A discounted price must be agreed to and  effected
prior to importation for it to constitute the price actually paid
or payable.  See, Allied International v. United States, 16 Ct.
Int'l Trade 545, 795 F.Supp. 449 (1992); HRL 544907, dated April
13, 1992; HRL 543302, dated November 1, 1984; HRL 543537, dated
February 14, 1986; HRL 543662, dated January 7, 1986.

     Protestant asserts that the $1.00 per case price is the
result of a "discount" negotiated between the parties prior to
the importation of the cigarettes.  In support of its position,
Protestant cites to HRL 544911 dated April 6, 1993, and has
presented a copy of an invoice reflecting a $320.00 per case
price, less a $319.00 per case discount, for a total payment of
$1.00 per case.  

     It is your position that the $319.00 reduction in price does
not represent a discount, but rather a credit for a previous
shipment.  It is further your position that Protestant's reliance
on HRL 544911 is misplaced as that decision involved the
acceptability of price renegotiations concerning single shipments
of imported goods.  The instant matter, you assert, concerns the
acceptability of applying a credit to the subject entry  because
of circumstances involving prior shipments.  Specifically, you
describe the $319.00 per case credit as compensation to the
importer for a previous shipment of slow-moving goods.  You cite
to HRL 543766 dated September 30, 1986, as support for your
position that the credited amount is properly  included in the
transaction value of the imported merchandise.  

     For the reasons you describe, we agree that HRL 544911 is
not applicable to the instant circumstances.  Instead, HRL 543766
is more analogous as that decision involved merchandise sold to
the importer for a price significantly lower than prior
shipments.  There the adjustment was made by the seller due to a
previous shipment which was subsequently found to be defective. 
Rather than give the importer a refund on the prior shipment, the
parties to the transactions agreed to a price reduction on the
shipment in question.  Customs concluded that the credit granted
to the importer represented an indirect payment within the
meaning of section 402(b)(4)(A), and therefore, was found to be
part of the price actually paid or payable for the merchandise. 
As stated in HRL 543776:

     Although is was not intended at the time the initial
     shipment was imported that a part of its purchase price
     would be applied to other goods, the facts demonstrate
     that the importer was owed a credit as a result of the
     defects in these goods, and that this credit was
     applied against a later shipment.  Under these
     circumstances, the credit or "overpayment" on the
     initial shipment is regarded a prepayment for the part
     of the later shipment, which, but for the credit, would
     not have been sold at a reduced price.

     This claimed reduction in price represents satisfaction of a
debt owed the buyer by the seller resulting from the previous
shipment of slow-moving goods and constitutes an indirect payment
which is part of the price actually paid or payable.  See, 19 CFR
152.103(a)(2) and HRL 543776.  As previously quoted above, the "
 price actually paid or payable' means the total payment (whether
direct or indirect, ...) made ... for imported merchandise by the
buyer to or for the benefit of, the seller."  19 U.S.C.
1401a(b)(4)(A). The total payment for the imported merchandise
was $320.00; accordingly, the merchandise was properly appraised.

HOLDING:

     The merchandise was properly appraised.  You are directed to
deny this protest.

     In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065, dated August 4, 1993, Subject:  Revised Protest
Directive, this decision should be mailed by your office to
Protestant no later than 60 days from the date of this letter. 
Any reliquidation of the entry in accordance with the decision
must be accomplished prior to mailing of the decision.  Sixty
days from the date of the decision the Office of Regulations and
Rulings will take steps to make the decision available to Customs
personnel via the Customs Rulings Module in ACS and the public
via the Diskette Subscription Service, Lexis, Freedom of
Information Act and other public access channels. 

     
                                   Sincerely,



                                   Acting Director, 
                                   International Trade
                                   Compliance Division