HQ 546078: Application for Further Review of Protest Number 2729-95-1000115

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 546078
                                                                 
     January 30, 1996
RR:IT:VA 546078 RSD

CATEGORY: Valuation 

Port Director
United States Customs Service
300 S. Ferry Street
Terminal Island, California 90731

RE:  Application for Further Review of Protest Number 2729-95-1000115

Dear Director:

     This is in response to the memorandum dated July 25, 1995,
forwarding the application for further review of Protest number
2729-95-1000115 filed by Nik and Associates on behalf DZ Trading
Ltd., (hereinafter DZ) regarding a shipment of sweaters imported
from China.  On December 2, 1995, a meeting was held at the
Office of Regulations and Rulings with a representative from DZ
to discuss this matter.  Subsequently, DZ has made several
additional submissions in support of the protest.   The most
recent submission was dated January 17, 1996. 

FACTS:

     The importer, DZ, entered a shipment of women's sweaters
made in China on 
October 7, 1994.   The seller's invoice dated September 26, 1994,
shows that 872 dozen sweaters were purchased at a price $95 per
dollars per dozen.  The visaed invoice also shows that the price
of the sweaters was $95 a dozen.  The record also contains a
sales confirmation dated May 20, 1994, prepared by the seller,
China Inner Mongolia, for 1667 dozen at a price of $95 per dozen. 
Apparently, DZ also made a second entry of sweaters purchased
with the same sales confirmation order.   

     DZ claims that its broker erroneously added a handwritten
adjustment of $90,882.56 to account for the payment of the yarn
used in making the sweaters.  DZ further contends that although
it had purchased and paid for the yarn used to produce the
sweaters, the amount was already included in the price of the
sweaters.  While the commercial invoice shows a yarn payment of
$90,862.56, DZ claims that this figure was on the commercial
invoice in order to comply to a clause in the letter of credit
used to pay the seller.  In support of its position, DZ points
out that in computing the net amount that the seller received for
the sweaters, the yarn payment was deducted.  This is shown on
the letter of credit used to pay the seller.

     The letter of credit used to pay the seller for the imported
merchandise contains the clause "AS PER PO. 941395, STYLE 5210MA,
17000 PCS AT USD 95.00/DZ .  L/C AMOUNT REFLECTS YARN PAYMENT OF
2,161 LBS AT USD 4.10/LB TOTAL OF YARN PAYMENT USD 90,862.56." 
In addition, the same letter of credit specifies that a "SIGNED
COMMERCIAL INVOICE IN TRIPLICATE INDICATING TOTAL CFR VALUE AND
SHOWING YARN PAYMENT OF USD 90,862.56."

     DZ has presented also two letters from the seller, China
Inner Mongolia, dated April 28, 1995, and May 17, 1995.  The
first letter states that invoice No. CB2494-129 dated 09/26/1994
for USD 82,840 showing a C&F price of USD 95.00/Doz already
includes the yarn amount previously prepaid to Loyal Light by DZ
Trading, LTD.  The letter continues that the relevant shipments
invoiced at USD 95.00/Doz for the same style 5210 MA includes the
yarn cost.  In the May 17, 1995, letter, China Inner Mongolia
certifies, that its invoices for all shipments of style 5210 M in
1994, includes the yarn cost.  It further states that DZ's L/C
instructions clearly state that the yarn amount of $90,882.56
must be deducted from the invoice price of $95/dozen, and that
this yarn amount was advanced for them by DZ to the yarn
supplier.

ISSUE:

     Whether the evidence in the protest file establishes that
the yarn payment should not have been added to the price actually
paid or payable of the imported sweaters because the yarn payment
was already included in the price?

LAW AND ANALYSIS:

     As you know merchandise imported into the United States is
appraised in accordance with section 402 of the Tariff Act of
1930, as amended by the Trade Agreements Act of 1979 (TAA: 19
U.S.C.  1401a).  The preferred method of appraisement is
transaction value, which is defined as the "price actually paid
or payable for merchandise when sold for exportation for the
United States," plus certain enumerated additions including the
value of any assist.  However, the TAA provides that an addition
is proper only to the extent that the amount in question is not
otherwise included in the price actually paid or payable of the
imported merchandise.  The term "price actually paid or payable"
is defined in TAA  402(b)(4)(A) 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
     international shipment of the merchandise from the country
     of exportation to 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. 

     In this instance, the importer, DZ, purchased yarn and
furnished it to manufacturer in order to produce the sweaters. 
In determining the transaction value of the sweaters, if the
value of the yarn was not already included in the seller's price,
the value of yarn would be an addition to the price actually paid
or payable, as an assist under the definition found at 19 U.S.C.
1401a(h)(1)(A)(i). However, DZ maintains that the seller already
included the yarn payment in the price of the sweaters, and thus,
the value of the yarn should not have been added to the price of
the sweaters.  DZ further claims that their broker misunderstood
that the yarn costs were included in the price of the sweaters
and mistakenly added the cost of the yarn to the price of the
sweaters when the merchandise was entered.  Accordingly, the
question that must be resolved in this case is whether the broker
erred in adding the yarn costs to the price of the sweaters
because those costs were already included in the price of the
sweaters. 
 
     After carefully reviewing the documents and the other
evidence submitted with the protest, we conclude that the yarn
payment was included in the price of the sweaters.  DZ has
provided two letters from the seller of the sweaters, which state
that the yarn payments were included in the price of the
sweaters.  Furthermore, the letter of credit states that the
letter of credit amount reflects a total yarn payment of
$90,862.56.  The payment in favor of the beneficiary, shown on
the letter of credit is $43,720.76.  This amount equals the
difference between the price of the merchandise at $95 per dozen
multiplied by the quantity of goods, 17,000 pieces (1416.66
dozen) shown on the letter of credit minus the $90,862.56 yarn
payment.  The letter of credit thus shows that the yarn payment
was already included in the $95 per dozen price of the sweaters. 
Accordingly, we find that the imported merchandise should be
appraised  based on a price of $95 per dozen and that the broker
erred by adding the yarn payment to the price of the sweaters. 
Thus the $90,862.56 yarn payment should not have been an addition
to the price actually paid or payable of the sweaters. 

HOLDING:

     The evidence in the protest file establishes that the yarn
payment of $90,862.56 was already included in the $95 per dozen
price that DZ paid the seller for the imported sweaters. 
Therefore, in determining the transaction value the yarn payment
should not have been added to the price actually paid or payable
of the imported sweaters.

     You are directed to grant the protest.  A copy of this
decision with the Form 19 should be sent to the protestant.  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 the 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 to the
public via the Diskette Subscription Service, the Freedom of
Information Act and other public access channels.

                         Sincerely,



                         Acting Director
                               International Trade Compliance
Division