HQ 545613: Application for Further Review of Protest No. 1301-91-100181; transaction value; defective merchandise

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 545613
                          May 31, 1994

VAL CO:R:C:V 545613 ILK

CATEGORY: Valuation

District Director
Baltimore, Maryland

RE:  Application for Further Review of Protest No. 1301-91-100181;
     transaction value; defective merchandise

Dear Sir:

     The subject protest and application for further review
concerns the appraisement of gloves imported by Bayside Glove Co.
(hereinafter referred to as ~the protestant~) which were
manufactured in Pakistan by Shezad Gloves Manufacturing Co.
(hereinafter referred to as ~the manufacturer~).

FACTS:

     The gloves were entered on December 2, 1990 and the entry was
liquidated on April 5, 1991.  The gloves were appraised at the
invoiced price less ocean freight charges.  The protestant timely
protested the liquidation, claiming that the gloves were defective,
and that therefore an allowance in their value should be made.

     According to the protest, the gloves received by the
protestant from the manufacturer were not of the quality ordered,
and the manufacturer agreed to reduce the selling price by issuing
a refund of $910.40 to the protestant due to the quality of the
gloves.  Attached to the protest is a purchase order and invoice
for the gloves, and correspondence between the protestant and the
manufacturer which describes the defective nature of the gloves and
the refund agreed to by the manufacturer. 

     The purchase order from the protestant is for nine ounce
jersey gloves.  The manufacturer~s invoice indicates the gloves
are nine ounce jersey gloves with 570 grams per dozen pair.  A
facsimile from the manufacturer dated December 9, 1990 which
acknowledges the glove standards in the United States: 

     Our quoted and shipped gloves have 570 grams weight per dozen
     on the average which can fall in exact 8 oz quality.  But they
     told us that normal two weights can sell in the market I.E.
     525 grams 7 oz and 600-625 grams 9 oz.  We agree with your
     position that you cannot sell our gloves as 9 oz quality but
     we did not have the idea for the market standards.

The manufacturer offered a discount of U.S.$0.20 per dozen for the
shipped quantity (total of U.S. $910.40).  By facsimile dated
December 10, 1990, the protestant accepted the settlement offered
by the manufacturer, and also clarified its standards as follows:

     For your information, our specifications for 7 oz. per square
     yard fabric is 540 grams per dozen pairs.  Our specifications
     for 9 oz. per square yard is 680 grams per dozen pairs.  Some
     people call an 8 oz. per square yard fabric glove a ~9 oz.~
     glove.  I know that it is confusing that some competitors sell
     a product that they call 9 oz. which is made of 8 oz. fabric
     but that is truly what happens frequently here in the United
     States.

     A facsimile dated December 12, 1990, from the manufacturer,
states that a pay order for $910.40 would be sent to the protestant
in the next 2-3 days.

     The protestant requests a reliquidation of the entry to take
into account the $910.40 discount.  As an alternate means of
refund, it also seeks relief under  520(c)(1), Tariff Act of 1930,
as amended (19 U.S.C.  1520(c)(1)).

ISSUE:

     Whether the protestant is entitled to an allowance for the
importation of defective merchandise. 

LAW AND ANALYSIS:

     The protestant asks for a reliquidation of the entry of gloves
based on a claim that the gloves were defective.  The defect was
allegedly due to the manufacturer~s lack of knowledge of the
standards for gloves to be sold in the U.S.  This resulted in
gloves of too light a weight.

     The Statement of Administrative Action, which was specifically
adopted by Congress, states that ~where it is discovered subsequent
to importation that the merchandise being appraised is defective,
allowances will be made.  (Regulation.)~  Section 158.12(a) of the
Customs Regulations (19 CFR 158.12(a)) provides that merchandise
which is subject to an ad valorem or compound rate of duty and
found by the district director to be partially damaged at the time
of importation shall be appraised in its condition as imported,
with an allowance made in the value to the extent of the damage.

     Customs has previously taken the position that imported
merchandise which is of a lesser quality than that ordered and paid
for should be granted a defective merchandise allowance and be
appraised at a lower value.  See Headquarters Ruling Letter (HRL)
543061 dated May 4, 1983; HRL 543106 dated June 29, 1983.  The
importer, however, must provide Customs with clear and convincing
evidence to support a claim that merchandise purchased and
appraised as one quality was in fact of a lesser quality, thus
warranting an allowance in duties.  See HRL 543106, supra.  In
addition, Customs will only make allowances for defects found after
liquidation in cases where the price actually paid or payable is
changed.

     HRL 545231 dated November 5, 1993 addressed a nearly identical
situation, between the same parties as that presented in this case. 
However, in 545231, gloves which were supposed to weigh 570 grams
per dozen actually weighed 530 grams per dozen due to the
manufacturer having unknowingly purchased a thinner yarn from a
different textile mill.  In that case, both parties expected the
gloves to weigh 570 grams per dozen.  Whereas in this case,
although the protestant may have intended to purchase gloves that
had 600 or more grams per dozen, that figure was not specified in
the purchase order or elsewhere.  Further, the manufacturer
intended to sell the 570 grams per dozen gloves to the protestant. 
In this case, there is no evidence that the imported gloves were
of a lesser quality than what was ordered.

     We find that the miscommunication between the protestant and
the manufacturer regarding the protestant~s quality standards does
not amount to ~a clerical error, mistake of fact, or other
inadvertence~ as contemplated in 19 U.S.C.  1520(c)(1).

HOLDING:

     The importer has failed to provide sufficient evidence that
the imported merchandise was of a lesser quality than that ordered,
and is not entitled to an allowance in the appraised value of the
imported merchandise.

     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 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 the public 







via the Diskette Subscription Service, Lexis, Freedom of
Information Act and other public access channels.


                              Sincerely,


                              John Durant, Director