VWP of America, Inc. v. United States

Slip Op. 01 - 111

UNITED STATES COURT OF INTERNATIONAL TRADE

:
VWP OF AMERICA, INC., :
:
Plaintiff, :
:
v. : Before: MUSGRAVE, JUDGE
:
THE UNITED STATES, : Court No. 93-12-00803
:
Defendant. :
:

[Matter remanded to the U.S. Customs Service for consideration of transaction, deductive, and
computed values, as appropriate, of certain fabrics imported from Canada.]

Dated: August 29, 2001

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

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

1
“Melton” is “fabric with all[ ]wool or cotton warp and woolen weft; the face is napped
carefully to raise the nap straight up, showing the weave clearly. Also known as beaver cloth;
kersey.” McGraw-Hill Dictionary of Scientific and Technical Terms 1171 (4th ed. 1989). The
melton at issue is primarily of wool and nylon with a smooth finish and was intended for use mainly
as wool bodies in high school varsity jackets.
Court No. 93-12-00803 Page 2

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.

2
VWPA and VWPC herein collectively “Victor Woollen Products.”
Court No. 93-12-00803 Page 3

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. § 1401(a)(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. § 1401(a)(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;
Court No. 93-12-00803 Page 4

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. § 1401(a)(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.
Court No. 93-12-00803 Page 5

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
Court No. 93-12-00803 Page 6

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 from sufficient information.

19 U.S.C. § 1401a(e)(2)(B).

I

Before comparing the transfer prices between VWPC and VWPA against test values to

determine their acceptability as transaction values, it is necessary to consider whether the expense

of operating VWPA and the selling commissions paid to Concept III (“Concept”) for U.S.
Court No. 93-12-00803 Page 7

representation are to be considered additions to or a part of the price paid for the VWPC-VWPA

transactions. That necessitates, once again, examination of the commercial relationship involved.

The “charge back” expenses and the commissions paid to Concept are addressed separately.

A

The “charge back” expenses included customer and clerical services (communication and

telephone expenses, office rent, stationary, and accounts receivable insurance), management fees,

and data processing. The plaintiff asserts that VWPA’s financial statements, audited by an

internationally recognized accounting firm, establish that these expenses were billed monthly3 by

VWPC to VWPA and paid separately from the invoices for the imported fabrics. The plaintiff

argues that there should be no legitimate dispute as to the “nature” of the charges which it alleges

were recorded on the companies’ books separately from transfer payments for the imported

merchandise. Plaintiff’s Memorandum Addressing the Issues on Remand (“Pl.’s Br.”) at 1, 5-7,

referencing Pl.’s Exs. 58, 60 and Trial Transcription (“Tr.”) at 174, 272.

The five different categories of payments in 19 U.S.C. § 1401a(b)(1)(A)-(E) which must be

added to the “price actually paid or payable” to arrive at transaction value are packing costs, selling

ommissions, assists, royalties and license fees, and the “proceeds of any subsequent resale.” The

plaintiff argues this was written in such a way as to exclude all other expenses: “[t]he price actually

paid or payable . . . shall be increased by the amounts attributable to the items (and no others)

described in subparagraphs (A) through (B).” Pl.’s Br. at 9 (Plaintiff’s highlighting). The plaintiff

3
There was no documentation submitted into evidence of payments from VWPA to VWPC
except for Pl.’s Ex. 60, which provides a yearly total of such payments.
Court No. 93-12-00803 Page 8

contends that none of the “charge backs” in issue fit within the categories delineated and that the

“official” published position of Customs is that a

separate fee paid to a related party seller for the following services is not part
of the price actually paid or payable since the fee is unrelated to the
manufacture of the imported merchandise: management services, accounting,
finance, planning, and clerical activities.

Pl.’s Br. at 10, quoting Encyclopedia of Customs Valuation Terminology 101 (1996) summarizing

HQ 543512 (Apr. 9, 1985). The plaintiff asserts that Customs has been “consistent” in this position

from enactment of the transaction value statute in 1979 to the present. Pl.’s Br. at 10, referencing

HQ 542122 (Sep. 1, 1980), C.S.D. 81-64, 15 Cust. B. & Dec. 862 (1981), and HQ 545420 (May 31,

1995).

The government disagrees, arguing that the expenses in issue are part of “the total payment

. . . made . . . for imported merchandise by the buyer to, or for the benefit of, the seller,” 19 U.S.C.

§ 1401a(b)(4)(A), and/or must be added to transaction value in accordance with one or more

provisions of 19 U.S.C. § 1401a(b)(1)(A)-(E). Def.’s Br. at 21-25. For support, the government

refers to Nissho Iwai American Corp. v. United States, 16 CIT 86, 94, 786 F. Supp. 1002, 1010

(1992), rev’d on other grounds, 982 F.2d 505, 512 (1992), Generra Sportswear Co. v. United States,

905 F.3d 377, 380-381 (Fed. Cir. 1990), and Moss Manufacturing Co. v. United States, 896 F.2d

535, 539 (Fed. Cir. 1990).4 The government emphasizes that the common thread of these cases is

4
In Nissho Iwai, a claimed deduction from transaction value for accounts receivable
insurance, paid by the U.S. subsidiary-importer, was disallowed on the ground that it protected the
importer from breach of contract by the U.S. buyer, not from loss of goods in international transit.
16 CIT at 94, 786 F. Supp. at 1010 (1992). See 19 U.S.C. § 1401a(b)(4). In Generra, Customs’
regard of export quota charges as payment “for imported merchandise” was considered “permissible
construction” of 19 U.S.C. § 1401a(b). 905 F.3d at 379-380. In Moss, an amount paid to an
(continued...)
Court No. 93-12-00803 Page 9

that payments were included in transaction value because they accrued directly or indirectly to the

seller by reason of the manufacture or sale of imported merchandise. Def.’s Br. at 21-22.

Nissho Iwai mandated customs duty on accounts receivable insurance paid by the U.S.

importer which had not been included as a part of the “first tier” transaction with the related-party

seller. 16 CIT at 94. The government contends that Nissho Iwai is in accordance with the statutory

definition of “price actually paid or payable,” 19 U.S.C. § 1401a(b)(4), because the insurance

payments therein were part of the “total payment” paid by the buyer for the merchandise and accrued

directly or indirectly to the seller, and it argues that the situation here is analogous. Def.’s Br. at 21.

Similarly, the government characterizes Generra as requiring additions to transaction value of

payments which were made by the buyer to the seller independently of the invoiced price of the

goods where such payments are not specifically excluded from transaction value by statute. Id. at

22, referencing 905 F.2d at 380.5

4
(...continued)
importer’s overseas buying agent, who “assisted in bringing about the sale,” was considered part of
the payment “for goods.” 896 F.2d at 538-539.
5
The government contends that Generra necessarily distinguished McAfee v. United States,
842 F.2d 314 (Fed. Cir. 1988) because McAfee had relied on United States v. Getz Bros. & Co., 55
CCPA 11 (1967), which in turn had been decided under “export value,” the statutory predecessor
of “transaction value.” According to the government, “export value” had not permitted the addition
of quota charges “because they were not part of the objective standard of export value,” however it
argues that Congress intended “transaction value” to encompass quota charges as part of “the price
actually paid or payable.” The government also states that “Generra was careful to note that this
holding did not effect Getz’s requirement of the use of a valid first level sale rather than a second
level sale. Rather, even if one uses a first level sale under McAfee and Nissho, there are certain
mandatory additions to the price that must be made in order to arrive at a proper [transaction value
(“tv”)], whether it is the tv for the merchandise in issue or the tv that must be used for comparison
purposes in related party transactions.” Def.’s Br. at 22.
Court No. 93-12-00803 Page 10

The plaintiff asserted on appeal that the charges here at issue had “nothing to do with the

import transactions, but were simply general overhead expenses arising from services provided by

VWPC and properly charged to VWPA.”6 It responds here that the government’s brief

“mischaracterizes administrative services subcontracted to VWP[C] by VWPA as having been for

the benefit of VWP[C]” when “it is clear from the record these services were for the benefit of

VWPA and their cost was properly recorded on VWPA’s books as part of the cost of doing

business.” Pl.’s Rep. at 6-7. See Tr. at 378, 388. The plaintiff points out that Chrysler Corp. v.

United States, 17 CIT 1049 (1993), relying on Generra, found that certain “shortfall” and “special

application” fees paid by the buyer to the seller were determined not to constitute part of the price

actually paid or payable under 19 U.S.C. § 1401a(b)(4)(A). The plaintiff contends that the Chrysler

fees were independent and “unrelated to any specific merchandise” and that therefore they are similar

to the expenses here in issue, whereas the “payments for quota fees in Generra were necessary

preconditions to the exportation of the merchandise because without the requisite quota the

merchandise could not be exported to the United States.” Id. at 2. (italics added).

Whether a particular transaction provokes liability for customs duties depends upon its

relevance to importation. Generra instructs that so “long as the . . . payment was made to the seller

in exchange for merchandise sold for export to the United States, the payment properly may be

included in transaction value, even if the payment represents something other than the per se value

of the goods. The focus of transaction value is the actual transaction between the buyer and seller.”

905 F.2d at 380. But, to state that a payment is dutiable if it is “in exchange for” imported

6
See 175 F.3d at 1340 (citation omitted).
Court No. 93-12-00803 Page 11

merchandise is to cut a wide swath. Consequently, Customs presumes that all payments made by

a buyer to a seller are part of the price actually paid or payable for the imported merchandise, a

presumption which may be rebutted by evidence which establishes that the payments are “completely

unrelated” to the imported merchandise. E.g., HQ 546638 (Oct. 4, 1999); HQ 545998 (Nov. 13,

1996), 1996 WL 910814 (1996). Nevertheless, the private ruling letters of Customs display varied

and sometimes inconstant analyses on the dutiability of managerial and other “general” business

expenses (e.g. arranging financing, accounting, administration, clerical activities, et cetera).

On the one hand, Customs has considered that managerial and/or general expenditures by a

U.S. importer to its own agents acting on its behalf abroad7, or for assistance with operations on

United States soil by agents dispatched for the purpose by foreign related manufacturers or sellers,8

are no longer dutiable “assists” under 19 U.S.C. § 1401a(b)(1)(C),9 whereas charges for managerial

7
See, e.g., HQ 545420 (May 31, 1995); HQ 544421 (Apr. 3, 1990); HQ 544396 (May 14,
1990), C.S.D. 90-77, 24 Cust. B. & Dec. 495 (1990); HQ 543992 (Sep. 10, 1987); HQ 543820 (Dec.
26, 1986); HQ 542122 (Sep. 1, 1980), C.S.D. 81-64, 15 Cust. B. & Dec. 862 (1981). As generally
articulated, “activities undertaken by a buyer on his own account, other than those for which an
adjustment is provided [under 19 U.S.C. § 1401a(b)(1)], are not considered to be part of the price
actually paid or payable, and payments for such services would not be added to the price actually
paid or payable.” HQ 544338 (Sep. 13, 1989).
8
See, e.g., HQ 543512, supra; HQ 054864 (Jan. 24, 1979), C.S.D. 79-280, 13 Cust. B. &
Dec. 1405 (1979).
9
An importer’s assistance provided to the foreign manufacturer or seller was considered
dutiable under prior law. See, e.g. HQ 651920 (Dec. 11, 1973). Under current law an “assist”
includes any of the following if supplied free of charge or at reduced cost by the buyer, directly or
indirectly, for use in connection with the production or the sale for export to the United States of the
imported merchandise:

(i) materials, components, parts, and similar items incorporated in the imported
merchandise;
(continued...)
Court No. 93-12-00803 Page 12

and/or general expenses which are included in a price actually paid or payable for imported

merchandise will not be deducted therefrom.10 It has furthermore opined that in the absence of

evidence of management fee payments between a U.S. importer and its related oversees exporter,

there is no basis for including such payments in the appraised value of the imported merchandise.11

On the other hand, Customs has apparently considered managerial or general payments to a related-

party seller or exporter when commingled with purported payments for imported merchandise to

implicate whether consideration passes from one entity to another, i.e., whether the sale is bona

fide.12 And it has also considered that in the absence of evidence of a buying agency relationship

between the importer and its offshore, related-party management-services contractor (unrelated to

the overseas manufacturers from whom fabrics were procured), the procurement of “assists” and

9
(...continued)
(ii) tools, dies, molds, and similar items used in the production of the imported
merchandise;

(iii) merchandise consumed in the production of the imported merchandise; and

(iv) engineering, development, artwork, design work, and plans and sketches
that are undertaken elsewhere than in the United States and are necessary for the
production of the imported merchandise.

19 U.S.C. § 1401a(h)(1). The value of an assist is to be apportioned in a “reasonable manner
appropriate to the circumstances and in accordance with generally accepted accounting principles”
and depending on documentation submitted by the importer. 19 C.F.R. § 152.103(e)(1) (1992).
10
E.g. HQ 542122, 15 Cust. B. & Dec. at 864; HQ 545953 (Aug. 3, 1995).
11
HQ 545522 (Apr. 26, 1995).
12
E.g. HQ 545800 (June 28, 1996); HQ 543446 (Apr. 2, 1986); HQ 545571 (Apr. 28, 1995);
HQ 543352 (June 11, 1984); HQ 542673 (June 10, 1982), C.S.D. 82-137, 16 Cust. B. & Dec. 946
(1982). Cf. J.L. Wood v. United States, 62 C.C.P.A. 25, 505 F.2d 1400 (1974).
Court No. 93-12-00803 Page 13

inspection services, a function of managerial duties, would be dutiable.13 At a minimum, it would

appear that the general interpretation of Customs is that characterization of an expense does not

determine its dutiability, a position with which this Court would agree: the inquiry should focus on

whether the expenditure proximately results in or is connected in some way to importation. If

importation is the proximate result of an expense, however characterized, the expense is dutiable.

See Generra, supra, 905 F.2d at 380. Conceptually, the economic “value” of merchandise in its state

as imported would include all matters which accrue in advance and are incidental to placing it into

the international stream of commerce.14 Thus, for example, in Chrysler the “shortfall”and “special

application” payments were triggered by non-performance on a contract, not importation. See 17

CIT at 1054. In the absence of importation, such payments appear akin to penalties or liquidated

damages, and are not analogous to the circumstances here, where the value of the fabrics in their

state as imported would have included all matters which proceeded receipt by VWPC on behalf of

VWPA of purchase orders from customers in the United States via Concept. By contrast, subsection

(E) of 19 U.S.C. § 1401a(b)(1) requires inclusion in transaction value of “the proceeds of any

subsequent resale, disposal, or use of the imported merchandise that accrue, directly or indirectly,

13
HQ 545420 (May 31, 1995). Cf. HQ 544423 (June 3, 1991); HQ 544976 (Mar. 17, 1993).
14
“[T]he sale price of a product is the total of all value added by each step of the production
process to that point. ‘The value added of a loaf of bread is the sum of the value contributed at each
stage of the production and distribution process. Among others, it includes the contribution of the
farmer, miller, baker, wholesaler and retailer.’” Trinova Corp. v. Michigan Dep’t of Treasury, 498
U.S. 358, 362 (1990) quoting Haughey, The Economic Logic of the Single Business Tax, 22 Wayne
L. Rev. 1017, 1019 (1976). See generally id. at 362-365.
Court No. 93-12-00803 Page 14

to the seller.”15 Obviously, all of VWPA’s revenues were “proceeds” of the “subsequent resale,

disposal, or use of the imported merchandise”, some of which were remitted to VWPC for services

rendered and fees expended in fulfilling VWPA’s obligations to U.S. purchasers of Victor Woollen

Product fabrics in advance of importation. The Court considers such payments to fall within the

ambit of “proceeds”16 in accordance with the plain meaning of 19 U.S.C. § 1401(a)(b)(1)(E).

Customs requires proceeds to be “directly related” to importation to be dutiable. 19 C.F.R. §

152.103(g) (1992). It will therefore be instructed to include such proceeds as are appropriate for

inclusion in the price actually paid or payable for the imported merchandise.

B

The government also contends that the dutiable transaction values of the merchandise in issue

must also include the commissions which were paid to Concept. As a general principle, fees paid

to a true buying agent, who represents and is controlled by the importer, are not dutiable, while

payments which assist the seller are dutiable. United States v. Bauer, 3 Cust. Ct. Appl. 343, T.D.

32626 (1912). Compare, e.g., HQ 545465 (Apr. 6, 1994) with HQ 545362 (May 31. 1994). There

is no statutory exclusion for “buying commissions” in the TAA, however “transaction value”

15
Subsection (E) is sweeping, however Customs does not impute to a seller the proceeds of
resale, disposal or use accruing through stock ownership but requires a direct relationship of such
proceeds to the imported merchandise. See 19 C.F.R. § 152.103(g) (1992) (“[d]ividends or other
payments from the buyer to the seller which do not relate directly to the imported merchandise will
not be added to the price actually paid or payable”).
16
“Proceeds” are not merely “profits,” they are “that which proceeds or results, as from a
transaction; especially, the sum derived from a sale, venture,” et cetera. Webster's New Universal
Unabridged Dictionary 1434 (2d ed. 1983). Examples include “issues; income; yield; receipts;
produce; money or articles or other thing of value arising or obtained by the sale of property; the
sum, amount, or value of property sold or converted into money or into other property.” Black’s Law
Dictionary 1204 (6th ed. 1990).
Court No. 93-12-00803 Page 15

specifically includes (if not otherwise included) “any selling commission incurred by the buyer with

respect to the imported merchandise.” 19 U.S.C. § 1401a(b)(1)(B). “Selling commission” is not

defined in the TAA. Since there is no legislative history discussing the term either, Customs has

relied on the common law of agency to determine whether an agency relationship exists, and whether

commissions paid to an agent are “selling commissions.” See Dutiability of “Royalty” Payments,

1993 WL 500065 (Jan 21, 1993).

By regulation, “selling commission” is defined as “any commission paid to the seller’s agent,

who is related to or controlled by, or works for or on behalf of, the manufacturer or the seller.” 19

C.F.R. § 152.102(b) (1992). Commissions paid to Concept for assistance with VWPC’s direct sales

to the U.S. apparently would have been dutiable prior to November 1989 under transaction valuation.

After November 1989, Concept continued to earn commissions on U.S. sales, and these were

purportedly paid monthly from the account of VWPA. No documentary evidence of such payments

was offered into evidence, however the total amount of the commissions appear as selling expenses

on VWPA’s 1992 and 1993 financial statements. See Pl.’s Ex. 58 at 7. The central question is

whether the payments were for statutory “selling commissions” which were incurred “with respect

to the imported merchandise.” That depends upon whether Concept worked “for or on behalf” of

VWPC during the time in issue, a matter of contract.17

17
19 U.S.C. § 1401a(b)(1)(B) implicates “any selling commission,” of course, not agency,
and a commissioned “selling agency” may in fact be an independent contractor, i.e., “a person who
contracts with another to do something for him but who is not controlled by the other nor subject to
the other’s right to control with respect to his physical conduct in the performance of the
undertaking[, who] may or may not be an agent.” Restatement (Second) of Agency § 2(3). See
Harold G. Rauschlein and William A. Gregory, Agency and Partnership 4 (1979). Concept was
described during trial as a sales “agent” or as a “representative,” but with full authority to accept
(continued...)
Court No. 93-12-00803 Page 16

The reorganization of the affairs of Concept, VWPC and VWPA, around November 1989,

apparently occurred on a “gentlemen’s agreement.” It is their intention in the undertaking which

controls interpretation and must be discerned. See, e.g., Beta Systems v. United States, 838 F.2d

1179, 1185 (Fed. Cir.1988); Firestone Tire & Rubber Co. v. United States, 444 F.2d 547, 551 (Ct.

Cl. 1971); Dorf International Inc. et al. v. United States, 61 Cust. Ct. 604, 611, 291 F. Supp. 690,

695 (1968). The entry documents submitted for review show formality in maintaining corporate

separateness between VWPC and VWPA, and neither the commissions nor the charges the

government advocates for dutiability were invoiced or otherwise specified as part of the VWPC-

VWPA transfer price. However, an expressed price is only one indicia of the relevant import

agreement. See Chrysler Corp. v. United States, 17 CIT 1049 (1993). Actions speak louder than

words,18 and where the parameters of agreement are unclear, conduct may manifest intention. See,

e.g., Prudential Insurance Company of America v. United States, 801 F.2d 1295, 1297 (Fed. Cir

1986); Blackhawk Heating & Plumbing Co. v. United States, 622 F.2d 539, 551 (Ct. Cl. 1980);

Consumers Ice Company v. United States, 475 F.2d 1161, 1165-1167 (Ct. Cl. 1973). In the case of

inconsistency, conduct controls. Wagner Electric Corporation v. United States, 36 A.F.T.R.2d

75-5898, 1975 WL 3594 (Ct. Cl. Trial Div. 1975).

17
(...continued)
orders from U.S. purchasers. Since Concept’s selling efforts were apparently self-guided and
without VWPC’s or VWPA’s supervision, the evidence supports finding that it operated as an
independent contractor. The distinction matters little here, however.
18
See, e.g., Forest of Dean Iron Ore Co. v. United States, 106 Ct. Cl. 250, 65 F. Supp. 585,
587 (1946).
Court No. 93-12-00803 Page 17

The Court’s impression of the evidence adduced at trial is that activation of VWPA in 1989

did not appreciably alter Concept’s perception of the entity it was assisting. At that point, Concept

proceeded to write purchase orders on VWPA letterhead and was paid from VWPA’s account, but

as a general matter its day-to-day functions remained the same as it continued promoting and selling

VWPC-made fabric, transmitting purchase orders to Canada, and trusting, apparently, that its

monthly commission checks correctly reflected commissions earned. See. Tr. at 139. In general, the

impression offered during trial by Mr. Paul Scher, a vice president of and partner in Concept, was

that Concept dealt with “Victor,” a company comprised of geographically dispersed business units.19

The selling material used by Concept tends, if it tends, towards the impression left by Mr. Scher.20

It is also of some significance that VWPC, through its personnel, directly promoted sales to U.S.

19
See, e.g., Tr. at 196-197, 203-205, 207-209, 211-212, 214, 219-220 (Testimony of Paul
Scher).
20
Pl.’s Ex. 41, a pictorial brochure, was testified as showing the products of the various
“mills” Concept represents, in particular, as the question was posed by counsel, “Victor Woollen
Products.” Tr. at 199. Plaintiff’s Exhibit 42, described as the business card Concept uses in the
representation of “various mills,” lists “Victor Woollens (USA).” See Tr. at 200, 209-210.
Plaintiff’s Exhibits 40 and 43 through 48 are three-panel folders of bound swatches each containing
as many as 30 or more colors of a particular fabric weight or type. Each folder displays an identical
four-color face and back cover and similar layout. The fronts of four folders show “VICTOR” in
bold type across a picture of a mechanical loom surrounded by rolls of fabric; the other two folders
display “CLUB JACKET” across a drawing of a figure wearing a varsity jacket. In bold print
towards the bottom of the front of these two folders appears “Victor.” On the reverse of all the
folders is printed in smaller type “VWP of America Inc.” along with its Jackman, Maine post office
box. All folders have written vertically along the right edge (in small pitch) “Printed in Canada”.
The two “CLUB JACKET” folders also display “Imprimé au Canada,” and one of these folders also
displays the name and address for Concept below Plaintiff’s name and address. At the bottom are
phone and fax numbers. This juxtaposition of “VWP of America” and Concept also appears on
Plaintiff’s Exhibit 49, a plaid swatch bound on a plastic hanger by a four-color display similar to
those of the folders. Mr. Scher referred to the advertisements on direct examination as representing
“Victor” or “VWP of America.” Tr. at 200-203.
Court No. 93-12-00803 Page 18

customers by assisting Concept with client meetings as needed.21 An overall impression is that

VWPC intended to be, and was, benefitted to the extent its personnel were successful in stimulating

U.S. sales. See Young & Rubicam, Inc. v. United States, 410 F.2d 1233, 1239 (Ct. Cl. 1969).

Given the apparent conduct of VWPC and/or Concept’s perceptions of the bargain, the Court

is unable to distinguish commissions paid to Concept as relating “solely” to VWPA’s U.S. sales.22

Concept exercised the power and, apparently, the authority to bind the sales which resulted between

VWPC and VWPA as a consequence of its U.S. selling efforts. Cf. HQ 544949 (Mar. 17, 1993).

Accordingly, the Court finds that Concept worked “for or on behalf of” VWPC as well as VWPA

during the time in issue and that the commissions paid to Concept were incurred “with respect to the

imported merchandise.” The amounts are to be added to the claimed transaction values in

accordance with 19 U.S.C. § 1401a(b)(1)(B).

21
See Tr. at 210-213, 216-218.
22
See Prudential Insurance Co. v. United States, 801 F.2d 1295, 1297 (Fed. Cir. 1986) (a
contract implied in fact is “inferred as a matter of reason or justice from the acts or conduct of the
parties.” Cf. Copperweld Corporation v. Independence Tube Corporation, 467 U.S. 752, 771
(1984); Clougherty Packing Co. v. Commissioner, 811 F.2d 1297, 1301 (9th Cir. 1987). It may be
noted that in HQ 545998, supra, Customs considered the dutiability of payments from an importer
to a related-party promoter pursuant to a “co-promotion” agreement. The imported merchandise was
an active medicinal ingredient which was combined in the United States with other ingredients to
form a finished product which was marketed by the importer with the assistance of the related party.
The “co-promotion fee” of the related party was a complex formula determined in accordance with
a written co-promotion agreement provided to Customs. The appraiser took the position, with which
Headquarters agreed, that the fees were not associated with the sale for exportation of the imported
merchandise but were “based upon” the specific undertakings of the related party in promoting the
sale of a brand name product finished in the United States. Headquarters also concluded that the
“price actually paid or payable” to the exporter/seller was kept “entirely separate” from the co-
promotion fee paid to the related party. 1996 WL 910814 at *11-*13. Suffice it to state that unlike
HQ 545998, the apparent arrangement between Concept and Victor Woollen Products supports the
conclusion here.
Court No. 93-12-00803 Page 19

C

Lastly on the issue of charge-backs and commissions, the government contends the VWPC-

VWPA transaction values cannot be determined because the expenses borne by VWPC and charged

back to VWPA and the commissions paid to Concept were allocated over the entire fiscal period,

not “per sale,” and that because inconsistencies between the summary data and the back up data

which were submitted were never resolved to Customs’ satisfaction. Def.’s Br. at 22-23. Because

the government raises the argument primarily with respect to the plaintiff’s deductive and computed

values, this issue will be considered in that context.

II

Assuming arguendo that the VWPC-VWPA transaction values can be accurately determined,

they are to be compared with the values indicated on certain entry documents relating to transactions

between Cookshiretex and Lou Levy & Sons. The appellate decision requires determination of (1)

whether Cookshiretex and Lou Levy & Sons are unrelated parties,23 (2) whether the Cookshiretex-

Levy merchandise was “identical” or “similar” to the VWPC-VWPA merchandise,24 and (3) whether

the VWPC-VWPA transaction value “closely approximated” the Cookshiretex-Levy transactions.

23
Entities may “qualify” as “related parties” under the appellate decision. 175 F.3d at 1335-
1338. Related parties have traditionally borne a higher burden, e.g. in relation to claimed export
value. See, e.g., New York Credit Men's Adjustment Bureau, Inc. v. United States, 64 Cust. Ct. 770,
314 F. Supp. 1246 (1970), aff’d 68 Cust. Ct. 319, 342 F. Supp. 745 (1972).
24
“Identical merchandise” for purposes of this related-party matter means “merchandise that
is identical in all respects to, and was produced in the same country as, but not produced by the same
person as, the merchandise being appraised.” 19 U.S.C. § 1401a(h)(2)(B). “Similar merchandise”
for purposes of this related-party matter means merchandise that “is like the merchandise being
appraised in characteristics and component material,” “is commercially interchangeable with the
merchandise being appraised,” and “ was produced in the same country as, but not produced by the
same person as, the merchandise being appraised.” 19 U.S.C. § 1401a(h)(4)(B).
Court No. 93-12-00803 Page 20

Column 33 of the Cookshiretex entry summaries answers the first question in the affirmative. See

Pl.’s Br. at 13 n.3. Direct testimony was only to the point that VWPC and Cookshiretex are

“competitors,” but since nothing of record overcomes the presumption of correctness on the

Cookshiretex entries, the matter resolves in favor of the plaintiff.

The difference between the entry dates of the plaintiff’s plaids and the Cookshiretex plaids

was approximately two months. The difference between the entry dates of the compared meltons

was approximately four months. The government therefore challenges whether these differences

constituted U.S.-bound export “at or about the same time as the imported merchandise” being

appraised, arguing that the 90-day limitation in 19 U.S.C. § 1401a(d)(2)(ii) defines the extent of “at

or about” in the context of 19 U.S.C. § 1401a(b)(2)(B). Def.’s Br. at 7-8. See 19 U.S.C. §§ 1401a

(b)(2)(B) and (c)(1)(B). The Court disagrees. “At or about” requires only proximity in time, and

for purposes of this matter the concern is only as to the time value of money. The entry summary

and manufacturer’s single country declaration25 on Cookshiretex exhibit E-2 indicate only that the

currency of settlement is “$” which obfuscates without clarification,26 however the other

Cookshiretex exhibits indicate the currency of settlement as US Dollars, and it therefore appears

reasonable to assume that Cookshiretex exhibit E-2 follows this pattern. Rates of inflation over the

period(s) under consideration in the U.S. market for the merchandise concerned are also relevant,

25
See 19 C.F.R. § 12.130(f)(1) (1992).
26
Exchange rate examination is obviated where comparative transactions are stated in US
Dollars. See, e.g., AIMCOR et al. v. United States, 141 F.3d 1098, 1110-1111 (Fed. Cir. 1998)
Court No. 93-12-00803 Page 21

however evidence of such has not been provided by either party.27 To support any determination

here, the Court takes judicial notice of the producer price index for “woolen” products in the U.S.

published by the Bureau of Labor Statistics, U.S. Department of Labor.28 Cf. Van Gelder-Fanto

Corp. v. United States, 41 C.C.P.A. 90, C.A.D. 534 (1953). Woolen product price differences

between July 1992 and February 1993 in the U.S. (i.e. the period covered by this test case and

including the relevant months for entry of the fabrics described in Defendant’s Exhibits E-2 and E-7)

were not significant and somewhat deflationary. On this basis, the Court concludes that the

Cookshiretex entries offered for comparison were exported to the United States “about the time” that

the fabrics described by the subject entries were exported to the United States. See United States v.

Reiner, Inc., C.D.C. 370, 35 CCPA 50, 50-57 (1947).

The Cookshiretex entries do not describe fabrics “identical” to the VWPC fabrics, since they

vary by weight and wool content among other factors. See 19 C.F.R. § 152.102(d) (1992). To show

that the Cookshiretex-Levy entries are “similar” to the VWPC-VWPA entries, the plaintiff compared

a 17-ounce, 65% wool plaid from Cookshiretex exhibit E-2 against a VWPC 18/20-ounce, 60% wool

plaid from Plaintiff’s Exhibit 9 at page 25, and it compared 22-ounce, 80% wool navy and purple

meltons from Cookshiretex exhibit E-7 against VWPC 23/25-ounce 75% wool navy and purple

27
The government argues “there is clear evidence there were significant price fluctuations
in the United States market during this period,” apparently in reference to the fact, mentioned later
in its brief, that certain of the plaintiff’s U.S. sales were “higher than those used by VWPA” in the
calculation of deductive values. See Def.’s Br. at 10, 13, referencing Pl.’s Exs. 9, 17 and 34. The
argument, however, does not establish that circumstance as an appropriate comparative benchmark.
28
The producer price indices for woolen products published by the Bureau of Labor
Statistics, U.S. Department of Labor for July 1992, December 1992, and January 1993, were 104.9,
104.4, and 104.4, respectively (base year 1985 = 100) . See BLS Series ID PCU2231#316.
Court No. 93-12-00803 Page 22

meltons from Plaintiff’s Exhibit 9 at pages 13 and 19.29 On the subject of commercial

interchangeability, Mr. Duval’s responses were somewhat contradictory, however in the end he

stated:

[M]ost [U.S.] customers won’t . . . see very much difference for a three, four,
five percent difference in the blends. Unless you are talking about
[comparing] 100 percent wool and then 95, because then at 95 you cannot use
a Woolmark and at 100 percent wool you can use a Woolmark. So that
makes a difference there, but not 80 percent or 75 percent, even most of the
time at 70 percent. Because we see that very often in the market [for] melton
fabrics, 70 percent, 75, 80 percent sold at about the same prices at [sic] the
customers.

29
Noting that the Cookshiretex fabric was “less heavy so there [are] less fibers in it, less
processing,” Tr. at 80, the plaintiff’s witness, Mr. Duval, assumed the VWPC plaid chosen for
comparison weighed an average of 19 ounces, or 89% of the Cookshiretex plaid. See Pl.’s Ex. 9 at
25. Multiplying the price of the VWPC plaid by this factor, a “comparable” VWPC fabric was
derived which Mr. Duval stated was 27 cents higher than the price of the “similar” Cookshiretex
merchandise sold to Lou Levy & Sons. He then performed a similar comparison with respect to a
navy melton in Cookshiretex exhibit E-7. This exhibit pertained to 42 “pieces” (i.e. rolls) of a 58/59
inch-width, 22-ounce weight (“per linear yard”), 80% wool, 15% nylon, 5% other fibers, which
entered on July 30, 1992. Of those pieces, 34 rolls, “2,100.90 mts” in length, were sold at a
particular cost-insurance-freight (“CIF”) price per square length. Mr. Duval testified that the CIF
price was “per meter” and that a “comparable” VWPC fabric is listed on Plaintiff’s Exhibit 9 at page
13 as a 23/25-ounce navy melton, 75% wool, 20% nylon, 5% other fibers. The invoice in
Cookshiretex exhibit E-7 is illegible as to the per-length price, however the customs broker of the
Cookshiretex fabric invoiced the CIF price as “per linear yard.” Compare Cookshiretex exhibit E-7,
p. 3, with p. 4. At any rate, Mr. Duval adjusted the Cookshiretex fabric into a “per-yard” CIF price
by dividing by 1.0936 (the claimed ratio of meters to yards), which reduced the Cookshiretex navy
melton CIF price by 37 cents. Tr. at 86. Next, Mr. Duval stated the difference in the weights of the
fabrics was a factor of 0.9167 (22 ounces versus 24 ounces, average weight). Multiplying the
VWPC-VWPA navy melton price by this factor, Mr. Duval stated the VWPC-VWPA price of a
“comparable” fabric, so derived, was 41 cents higher per yard than the Cookshiretex price to Lou
Levy & Sons of “similar” merchandise, as adjusted. The Court calculates that the VWPC-VWPA
price would have been 4 cents higher if the Cookshiretex navy melton price had been unadjusted.
Mr. Duval conducted a similar analysis with respect to the Cookshiretex purple melton listed on
Cookshiretex exhibit E-7 versus the VWPC purple melton listed on page 19 of Plaintiff’s Exhibit
9 and concluded identical price difference(s). Tr. at 88.
Court No. 93-12-00803 Page 23

Tr. at 72-73. Suffice it to state that the two VWPC-to-Cookshiretex comparisons fell within the five

percent range of wool content adduced by Mr. Duval.

The government challenges the usefulness of the Cookshiretex exhibits for comparative

purposes. The Cookshiretex plaid chosen from exhibit E-2 for comparison was a blend of 65% wool,

30% acrylic and 5% nylon, whereas the VWPC plaid chosen from Plaintiff’s Exhibit 9 consisted of

60% wool, 25% polyester, and 10% acrylic. The government argues there was no evidence put forth

that the 20% difference in acrylic content or the 25% polyester (in place of acrylic and nylon) content

was acceptable or commercially interchangeable or that garments manufactured from the VWPC

fabric were comparable or commercially interchangeable with garments manufactured from the

fabric imported by Lou Levy & Sons. Def.’s Br. at 8-9. The government claims the “variety and

breadth of outerwear (e.g. male versus female, formal versus athletic) is so great that simply stating

that the wool content was similar does not constitute proof that the merchandise is at all similar or

commercially interchangeable.” Id. at 9.

The inquiry here, of course, is the fabric in its state as imported, not the fabric as further

processed. See 19 U.S.C. § 1401a(c)(2). The government’s point may well be true, and the

testimony of the plaintiff’s witness might be regarded as merely self-serving, however at trial the

government’s inquiry into commercial interchangeability focused solely on the wool content of

apparel fabric in the United States market. It did not test the plaintiff’s witness with inquiry into

other factors which might impact commercial interchangeability, nor did it bring forth import

specialist or other rebuttal to challenge the plaintiff’s assertion that the deciding factor for

commercial interchangeability was wool content, nor did it challenge the plaintiff’s method of
Court No. 93-12-00803 Page 24

comparing the Victor Woollen Product fabrics to the Cookshiretex fabrics. Accordingly, the Court

regards the government’s contention at this stage of the proceedings as speculation, and the

plaintiff’s proof on commercial interchangeability stands.

The government additionally asserts that Cookshiretex exhibit E-2 was likely for samples,

and that a transaction for samples

does not properly reflect upon the alleged arm’s length nature of the[ ] style
to which it is being compared, because there may be considerations that
dictate a significantly lower price, outside the normal price structure for
merchandise, in order to induce future large quantity sales of that fabric. This
is best evidenced by VWPA’s own invoices . . . which disclose[ ] that VWPA
shipped sample merchandise at no cost.

Id. at 9-10, referencing Pl.’s Ex. 14 at 3, Pl.’s Ex. 21 at 3, and Pl.’s Ex. 22 at 3.30 At the other

extreme, the government contends that Cookshiretex exhibit E-7 involved a sale of over 2000 yards

of material, whereas Plaintiff’s Exhibit 9 describes only 152.50 yards of navy melton and 71.625

yards of purple melton. It argues that 19 U.S.C. § 1401a(b)(2)(C)(ii) mandates that differences in

quantities must be taken into account based on “sufficient information,” that if sufficient information

is unavailable then the comparison cannot be made, that the plaintiff admitted discounts are provided

for large-quantity sales, and that one cannot compare the two different volume transactions here

because the price for the Cookshiretex transaction is, arguably, significantly less than that for

transactions in smaller quantities such as the VWPC-VWPA transactions for the navy and purple

30
The government additionally notes that Mr. Duval’s statement to the effect that sample
fabric is not sold at lower prices than sales of regular quantities but in many instances is sold at
higher prices is undermined by these exhibits. Def.’s Br. at 10 n.1. The VWPA-U.S-purchaser sale
price of the particular plaid being compared, at any rate, was greater than twice the price of the
Cookshiretex plaid purchased by Lou Levy & Sons. Compare Pl.’s Ex. 9 at 21 with Cookshiretex
exhibit E-2; see Def.’s Br. at 6, Tr. at 100-101.
Court No. 93-12-00803 Page 25

meltons. See Def.’s Br. at 10, referencing Tr. at 103, 147, and 167. “For all we know,” according

to the government, “the unusually favorable price to Levy may have occurred because Levy

purchased a close out of old stock.” Id. at 11. See generally Tr. at 90-98, 100-103, 178.

The plaintiff argues that VWPA is a distributor which purchased about 1 million yards of

apparel fabric over the year, whereas Lou Levy & Sons is an apparel manufacturer which purchased

an estimated 5,000 to 10,000 yards of fabric per year. It argues that the differences in quantity and

the commercial level of the respective transactions would only result in downward adjustment of the

Cookshiretex-Levy prices, thus rendering the VWPC-VWPA prices even more favorable. Pl.’s Rep.

at 7 n.3.

The statute requires consideration of and, as necessary, adjustment to the price of the

Cookshiretex-Levy transaction to compensate for any volume effect on price, not the VWPC-VWPA

transaction. See 19 U.S.C. § 1401a(b)(2)(C); 19 C.F.R. § 152.104 (1992). To approximate the

quantity of the VWPC-VWPA sale, adjustment to the Cookshiretex-Lou Levy transaction to

compensate for any volume discount would have been upward, not downward. The only testimony

on the matter, however, concerns VWPA’s volume discounts to end users,31 and it would be

speculative to consider whether the 2000-yard Cookshiretex transaction entailed an actual volume

discount or what such an adjustment would have involved. See Tr. at 91. The Court considers that

once the plaintiff’s witness asserted that comparison of the transactions was appropriate, the burden

shifted to the government to rebut. See 19 U.S.C. § 1401a(b)(2)(C) (commercial and quantity

differences effecting the sale price are to be taken into account “whether supplied by the buyer or

31
See Tr. at 103, 147, and 167.
Court No. 93-12-00803 Page 26

otherwise available to the customs officer concerned”). See also S. Stern, Henry & Co. v. United

States, C.D. 3951, 64 Cust. Ct. 1, 308 F. Supp. 712, 716 (1970); M.B.I. Merchandise Industries Inc.

v. United States, 16 CIT 495, 502 (1992). But cf. Border Brokerage Company v. United States, R.D.

10759, 52 Cust. Ct. 567 (1964) (evidentiary standard for proving for usual commercial quantities).

The government did not cross examine as to commercial or quantity differences or bring forth an

import specialist who might have clarified the issue. Thus, there is no reason to conclude that the

quantity differences implies the Victor Woollen Product fabrics and the Cookshiretex fabrics are not

“similar,” and the fabric comparisons are not invalidated on the basis of the government’s arguments.

On the other hand, the plaintiff contends that a “proper analysis would compare the total

quantities of each of the Cookshiretex-Levy fabrics with the total quantities of the comparable

VWPC-VWPA fabrics demonstrated by the record.” Pl.’s Rep. at 7, referencing Pl.’s Conf. App.

I. The Court agrees, although such a statement might be construed as an admission that Mr. Duval’s

comparisons were insufficient, however the Court is unable to compare the total quantities of “each”

of the Cookshiretex-Levy with the total quantities of “the comparable” VWPC-VWPA fabrics. Mr.

Duval himself stated that except for Cookshiretex exhibits E-2 and E-7, the exhibits were lacking

too many terms in order to make useful comparisons with the Victor Woollen Product fabrics at

issue here. See Tr. at 75-77, 81-83. See, e.g., Cookshiretex exhibit E-1 at 3. There was furthermore

insufficient information put forth from which the Court might make meaningful comparisons on its

own.32 From the evidence presented, thus, the plaintiff has demonstrated that the Cookshiretex

32
The plaintiff submitted two price lists showing transfer prices from VWPC to VWPA for
the 1991-1992 fiscal year and the 1992-1993 fiscal year (fiscal year beginning December 1st) . Pl.’s
Exs. 4, 5. See Pl.’s Ex. 58. The price list for the 1991-1992 fiscal year lists only prices of melton,
(continued...)
Court No. 93-12-00803 Page 27

32
(...continued)
and these are apparently grouped into seven price categories (“P591,” “0812 Natural,” “0812 Color,”
“0912 Natural,” “0912 Color & 189,” “159 & 1959,” and “90 Melton Dark”). The price list for the
1992-1993 fiscal year also lists these categories (although the sixth is listed as “159 & 1159”) and
also adds “Others” which includes “Baron & 1000,” “Duffle 14,” “WN008,” “WN012 Light,”
“F8963 (20/22),” “F9018 (22/24),” “C9108 (18/20[)],” “WP090,” “C9209 (14/16),” and “C9209
(16/18).” Pl.’s Ex. 5. It is unclear what “Others” are, but the documents show melton prices as
having increased in each category by the same amount as compared with fiscal year 1991-1992
prices. The Court does not doubt the accuracy of the 1992-1993 price list, however a comparison
with Plaintiff’s Exhibits 6 through 40 shows that it is apparently incomplete and not always a reliable
indicator of actual pricing. For example, the navy and purple meltons which were compared with
Cookshiretex exhibit E-7 are in the “0912 Color” category. Two representative samples of 0912
transfer prices (for “Natural” and “Color”) that occurred on May 21th and 25th, 1993 at the 1992-
1993 price-list prices were submitted attached to the 1992-1993 price list, however entry of “0912
Color” and “0912 Natural” meltons also occurred on those dates at the 1991-1992 sale prices. See
Pl.’s Exs. 6, 8, 11, 15, 16-17, 19, 22, 25, 27, 33-36, 38-40; Def.’s Ex. 5. VWPC also priced at least
three fabrics to VWPA at the retail price to the U.S. purchaser. See Pl.’s Exs. 6 at 11-12, 34 at 16-
17. The VWPC plaid compared with Cookshiretex exhibit E-2 was an 18/20-ounce “C9217” which
appears nowhere on the 1992-1993 price list. The 1992-1993 price list shows plaids increasing in
price as weight increases and the nearest comparable item may be the 18/20-ounce “C9108”,
however the entry documents show that VWPC and VWPA transacted both 18/20-ounce/yard plaids
and 14/16-ounce/yard plaids at the same per-yard price which, for that matter, was 25 cents higher
than the indicated price for “C9108.” Compare Pl.’s Ex. 5, Cookshiretex exhibit E-2, and Pl.’s Ex.
9 at 25. Mr. Duval testified that the absence of certain terms in Cookshiretex exhibits E-1 and E-3
through E-6, for example color, rendered them useless for purposes of comparison. Tr. at 74, 76.
The exhibits, deemed admissible, yield information nevertheless. Cookshiretex exhibit E-1 indicates
entry of 165.29 yards 21-ounce/yard 80% wool melton for samples on December 21, 1992. The per-
yard price of this fabric, by weight slightly lighter than VWPC 0912 meltons but containing 5% more
wool, is almost identical to the transfer price between VWPC and VWPA of the “0912 Color”
category. Cookshiretex exhibits E-3 through E-5 entered between July 30, 1992 and November 27,
1992 and describe 21-ounce/yard 80% wool melton which sold in volume far in excess of that of the
plaintiff’s transactions at an identical declared price per yard, nearly midway between inter-company
listed prices for “0912 Color” and “0912 Natural.” Also, the difference in price between “0912
Color” and “0912 Natural” meltons, based on either the 1991-1992 price list or the 1992-1993 price
list, is substantial, as are the differences in volume and pricing of these Cookshiretex entries, whose
entry documents, at any rate, indicate no color terms. Cookshiretex exhibit E-6 entered October 16,
1992 and describes 9 rolls, apparently 2,438.78 yards, of 21-ounce/yard 65% wool “plaid” and 32
rolls, apparently 679.99 yards, of 22-ounce/yard 45% wool “Navajo.” On the other hand, the per-
unit (yard) price of the entered Cookshiretex “plaid” was approximately 29% higher (adjusted for
the difference in fabric weights) than the list price of VWPC’s “C9108,” the apparently nearest
(continued...)
Court No. 93-12-00803 Page 28

exhibit E-7 melton is “similar” to and therefore comparable with 0912 Color meltons but not 0912

Natural fabrics or other VWPC meltons, and it has also demonstrated that the Cookshiretex exhibit

E-2 plaid is “similar” to and therefore comparable with the C9217/1 plaid in Plaintiff’s Exhibit 9,

but it would be for Customs to determine, in the first instance, whether the transfer prices of the

VWPC-VWPA transactions, adjusted in accordance with the foregoing, “closely approximate” these

two Cookshiretex-Levy transactions in accordance with 19 U.S.C. § 1401a(b)(2)(B). If remand is

necessary, Customs is not precluded from making additional comparisons, as appropriate, provided

it does not restrict the applicability of the foregoing.

III

The plaintiff also offered deductive and computed value statements for comparison with the

VWPC-VWPA transfer prices to prove the appropriateness of transaction valuation or as alternate

32
(...continued)
comparable fabric on the 1992-1993 price list (again, it being unclear whether and to what extent
such constitutes a category of fabric). There was no evidence of similar merchandise for entries of
tweeds, stripes and other fabrics not included on the 1992-1993 price list. The VWPC tweeds were
entered between 50% and 60% wool, mostly 55%, and weighed between 20 and 22/24 ounces per
yard. The stripes entered were all 75% wool and weighed between 18/20 and 22/24 ounces per yard.
The plaintiff adduced at trial that the weight of a fabric was a significant indication of the amount
of processing involved, Tr. at 80, however Plaintiff’s Exhibits 6 through 40 indicate that price does
not necessarily correspond therewith: striped fabrics with 75% wool may be priced higher than a
heavier (ounce-per-yard) stripe with the same wool content; the “0912 Color” meltons apparently
have the same weight and wool content as the “159” meltons, but the latter are priced substantially
lower; and like the “0912 Color” meltons, the “0812 Color” meltons consist of 75% wool but weigh
19/20 ounces per square yard, are therefore 81.25% of the weight of the “0912 Color” meltons, but
are list-priced at significantly less than 81.25% of the price of “0912 Color” meltons. Similarly,
while many VWPC plaids of the same wool content were transferred to VWPA at the same price as
the compared Cookshiretex exhibit E-2 plaid, a substantial number were transferred to VWPA at
higher or lower prices, and not always due to apparent differences in wool content or weight.
Compare, e.g., Pl.’s Exs. 9, 22, 23, 27-29, 35, 37. In short, it is impossible to extrapolate from Mr.
Duval’s comparisons to the record universe of Victor Woollen Product fabrics entered.
Court No. 93-12-00803 Page 29

bases of valuation. It contends that each statement accounts for all statutory profit and expense

elements and were prepared in accordance with generally accepted accounting principles from the

companies’ actual accounting records.33 The government raises several points with respect to the

deductive and computed value statements. First, it argues that the evidence submitted in support of

the deductive value statement did not relate the “greatest aggregate quantity” sales to “at or about

the same time as the imported merchandise” in accordance with 19 U.S.C. § 1401a(b)(2)(B), which

could have occurred as late as 10 months after the importations in issue, and it argues the computed

value statement is similarly deficient because it “is not tied into the particular period of importations.

Def.’s Br. at 13, 20; Tr. at 289, 292-295, 360-361. See 19 U.S.C. § 1401a(d)(2)(A)(i) and (ii); 19

U.S.C. § 1401a(d).

Second, the government argues that the exhibits supporting the deductive and computed

value calculations are themselves summary information and that the plaintiff failed to provide the

source documents either in response to discovery or at trial, a violation of Rule 1006 of the Federal

33
The Statement of Administrative Action to the Trade Agreements Act of 1979 (“SAA”)
which accompanied the URAA states that “the determination of usual profit and general expenses
under the provisions of deductive value would be carried out utilizing information prepared in a
manner consistent with generally accepted accounting principles in the United States.” SAA at 460,
reprinted in 1979 U.S.C.C.A.N. 665, 721. Regarding the computed value statement, the plaintiff
contends it was prepared in accordance with Canadian GAAP and cannot be rejected merely because
different allocation methods might have been used. See 19 U.S.C. § 1401a(g)(3) (“information that
is submitted by an importer, buyer, or producer in regard to the appraisement of merchandise may
not be rejected by the customs officer concerned on the basis of the accounting method by which the
information was prepared, if the information was in accordance with generally accepted accounting
principles”). The plaintiff draws upon the legislative history of 19 U.S.C. § 1401a(g)(3) “to allow
the importer, buyer, or producer to prepare his figures in any one of a variety of acceptable methods”
and “aid not only the Customs Service, but the importer as well, since he would be able to rely more
on his own records than under existing law.” Pl.’s Br. at 18, quoting S. Rep. 249, 96th Cong., 1st
Sess. 118 (1979), reprinted in 1979 U.S.C.C.A.N. 381, 504, 508. See also id at 23 referencing
Merck, Sharp & Dohme, Int’l v.United States, 20 CIT 137, 139, 915 F. Supp. 405, 408 (1996).
Court No. 93-12-00803 Page 30

Rules of Evidence34 and necessitating disregard of the deductive and computed value statements in

accordance with Conoco Inc. v. Department of Energy, 99 F.3d 387, 393-394 (Fed. Cir. 1996)

(opposing counsel must be afforded an opportunity to review and object to the underlying

documents, in order to guard against the risk of error or distortion). Def.’s Br. at 13-15. Cf. Tr. at

235-239, 243-245, 248, 276-277, 321-326, 442-444.35

34
Federal Rule of Evidence 1006 provides: “The contents of voluminous writings,
recordings, or photographs which cannot conveniently be examined in court may be presented in the
form of a chart, summary, or calculation. The originals, or duplicates, shall be made available for
examination or copying, or both, by other parties at reasonable time and place. The court may order
that they be produced in court.”
35
Regarding arguable inconsistencies and unsupported figures appearing in Plaintiff’s
Exhibits 50 to 61, the government points to the testimony of its auditor, who “just wasn’t able to find
where some of the numbers were coming from.” Def.’s Br. at 14. See Tr. at 442-443. Specifically,
the government points out that: (1) the cost per fabric for the 90 melton does not match the figures
in the blend sheets that were part of the computed value statement, Tr. at 445 (see Exhibit 50 at
“02”); (2) there was no factual basis for the fringe benefit rate asserted thereon, id. (see Exhibits 50,
53); (3) the numbers contained on some of the blend sheets for total quantities blended and for dyed
yards were considerably lower than some of the numbers used in the calculations, id. at 445-447 (see
Exhibit 50 at 2-4, Exhibit 52 at 24); (4) the division of research and development between fabric and
upholstery differed from what was allocated onto Exhibit 50, Tr. at 448 (see Exhibit 52 at 9); (5) the
costs used in the computed value calculations did not appear in the trial balance and ought to have
appeared therein if they had been in fact incurred, Tr. at 448-449 (see Exhibit 52 at 25, Exhibit 53);
(6) there was no back-up data for the production figure which appeared in Exhibit 52 at page 26, Tr.
at 449; (7) there were expense accounts included in the trial balance which were not included in Pl.’s
Ex. 52 at pages 4-13, Tr. at 449-450 (see Exhibit 53); and (8) the trial balance indicated that VWPC
allocated more than it paid for at least one account, Tr. at 450-451 (see Exhibit 52 and Exhibit 53
at 7-8). Def.’s Br. at 18. See also Tr. at 451-452. Compare Exhibit 53 with Exhibit 61.
Furthermore, the government points out that the fact that Mr. Fournier himself could not verify many
figures, including a large figure for salaries and administration, because he did not have “enough
details to reconstruct” the figures. Def.’s Br. at 14; Tr. at 321-326. That, and the fact that various
“drafts” of deductive values (with differing unit prices, general expenses, and/or profits) were
created, the government contends, emphasizes the need for background data without which, the
government further argues, the allocations or elements of deductive values and computed values
proposed by VWPA are per se unreliable. Def.’s Br. at 14.
Court No. 93-12-00803 Page 31

Third, the government takes issue with Victor Woollen Product’s cost allocation

methodology. Def.’s Br. at 18. The “costing” of fabrics for the U.S. market included material, direct

labor, and indirect manufacturing or overhead costs the largest of which were management fees and

administrative salaries allocated to VWPA. See Tr. at 233, 301-302, Pl.’s Ex. 60. The expenses

allocated to VWPA were based upon the companies’ total consolidated sales, which eliminated the

effect of inter-company transfers and furthermore included VWPC’s upholstery sales in Canada. The

government argues that this is incorrect, that a proper ratio would have been based on total apparel

fabric expenses to total apparel fabric sales, or total expenses including upholstery to total sales

including upholstery, in either case on a non-consolidated basis because expenses were actually

incurred upon inter-company transfer (according to testimony from Victor Woollen Products’

accountant elicited during cross-examination). Def.’s Br. at 18-20. See Tr. at 313-315, 331-333,

420. Compare Tr. at 398-399 with Tr. at 416. The government points out that the witness for

plaintiff’s independent accountants could not specify the particular generally accepted accounting

principles underlying the expense allocations and that he conceded, and that the effect of the

methodology is to treat VWPA’s sales and profits on the United States sales as part of VWPC’s own

sales and profit. Def.’s Br. at 20. See Tr. at 361-364, 419-420. Thus, that government argues,

Victor Woollen Products’ allocations are not in accordance with 19 U.S.C. § 1401a(d)(3)(i) and

(f)(2)(C).. Def.’s Br. at 18-20. See Tr. at 316, 361.

Fourth, the government argues that Customs has “uniformly” required that any test values

used to validate related-party transaction-value claims be “previously accepted.” Def.’s Br. at 15,

referencing HQ 543568 (May 30, 1986), HQ 546166 (Apr. 5, 1996), and HQ 546511 (Apr. 15,
Court No. 93-12-00803 Page 32

1999). See 19 U.S.C. § 1401a(b)(2)(B). See also HQ 545481 (Sep. 14, 1994).36 The government

contends this comports with a primary purpose of the valuation code: to eliminate the need for

Customs to conduct detailed investigations outside the United States. Def.’s Br. at 16, citing

Generra, supra, 905 F.2d at 380; Moss Mfg., supra, 896 F.2d at 539. Unless a test value has been

accepted by Customs in advance, the government contends, the claims of related party, multi-tiered

transactions become problematic, since most of the information relating to the first tier is outside the

United States. According to the government, all of the information needed to verify a computed

value claim, and “a great deal” of the information needed to verify a deductive value claim, is outside

the United States. Since the plaintiff’s deductive and computed valuations were not submitted for

prior acceptance by Customs, the government therefore argues that “as a matter of law” they cannot

be used to test the plaintiff’s transaction value claim. Def.’s Br. at 15.

The plaintiff raises several points in argument and in response. First, it contends that the

government’s witness conceded the possibility that the deductive value statement may be accurate,

and that the trial record shows the transfer prices reflected in the computed value statement cover

all of VWPC’s manufacturing costs, including general expenses, plus a percentage for profit.

Second, it argues that the earlier audit report, Defendant’s Exhibit C, has no bearing on the deductive

36
The government also contends that the interpretation is reasonable and entitled to
deference under Generra, 905 F.2d at 379 (a point which appears to derive from Chevron U.S.A.,
Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 (1984)). The government further
argues the interpretation amounts to a long-standing and contemporaneous construction of the statute
by the agency charged with its administration, which agency actually drafted the provision being
interpreted, and as such is entitled to great deference in accordance with United States v. Zenith
Radio Corp., 562 F.2d 1209, 1219-1220, 64 CCPA 130, 142-143 (1977), aff’d, 437 U.S. 443, 450
(1978). Since the holding here is on other grounds, the Court need not delve into constitutional
notions of deference.
Court No. 93-12-00803 Page 33

values since it was limited to a review of the records of VWPC and production costs in Canada, and

it has no bearing on the computed value statement because the audited production figures preceded

the data relevant to this matter by two years. See Pl.’s Br. at 17-19 and 22; Pl.’s Ex 55, Ex. 58 at 2,

Ex. 61 at 5; Tr. at 266-267, 289-290, 353-354, 427, 453, 487-489. See also 19 U.S.C. § 1401a(g)(3).

Third, it contends that an administrative policy requiring pre-approval of deductive and/or

computed test values neither exists in the statute nor may be reasonably inferred therefrom, and that

pre-approval of deductive and computed test values usurps this Court’s jurisdiction to review

Customs’ appraisements and inhibits a party’s right to trial de novo, an impermissible result. Pl.’s

Rep. at 10-11, citing American Grape Growers Alliance for Fair Trade, et al. v. United States, et

al., 9 CIT 568, 622 F. Supp. 295 (1985) (rejecting an interpretation of 28 U.S.C. § 2645(c) which

would render meaningless certain statutory grants of power to the court).

Fourth, it argues that it has presented evidence of deductive and computed test values which

comport with the statutory scheme for substantiating related-party transaction values and which were

prepared based on how the companies’ records were actually kept in order to establish the principle

of deductive and computed valuation. The plaintiff submits that the Court need not perform the

actual calculations for each entry and fabric style in the test case but may remand to Customs

pursuant to 28 U.S.C. § 2643 with instructions for calculation thereof. On the deductive values

specifically, it argues that although this test case covers a limited number of entries, the cases on the

suspension disposition calendar cover entries of fabrics for every month of the fiscal year, and it was

therefore reasonable to submit deductive test values covering the entire year. See Tr. at 352-353.

Using only the sales transactions before the Court as the basis for determining the greatest aggregate
Court No. 93-12-00803 Page 34

quantity, the plaintiff argues that the transfer prices would still closely approximate its evidence of

deductive value (as adjusted).37 It argues that the government does not contest that the deductive

values were prepared in accordance with the statute based upon audited financial statements and that

all of the government’s other points pertain only to the proposed computed test values. Pl.’s Rep.

at 11, referencing Pl.’s Exs. 55-61; Tr. at 267-268. See 19 U.S.C. § 1401a(d)(2)(A)(ii).

Regarding the computed test values, the plaintiff contends that the government’s primary

criticism is that the government’s auditor could not verify them at trial. The plaintiff asserts that

computed value information on the VWPC-VWPA transactions was submitted to Customs’ auditor

who had ample opportunity to verify the data but chose not to do so because of time limitations. Tr.

at 487, 489. The plaintiff contends that the proper place for verification is during such an audit, not

during trial, and that the lack of verification reduces defendant’s criticism of VWPC’s cost data to

mere speculation. Pl.’s Br. at 22 n.3. See Government Auditing Standards 7.55 (1994).

Furthermore, VWPA contends, even if the higher overhead rates the government asserts should have

been used were in fact used, the computed values would still show a “reasonable overall profit.”

Deductive valuation constructs values for “merchandise concerned,” which is defined as “the

merchandise being appraised,” “identical,” or “similar” merchandise. 19 U.S.C. § 1401a(d)(1).

“Merchandise concerned” must also be in accordance with one of three situations described in 19

U.S.C. § 1401a(d)(2)(A). Pertinent to this related-party action are where “merchandise concerned”

37
In other words, the entries in this test case all occurred within 90 days of each other, the
earliest occurring on November 18, 1992 and the latest on February 2, 1993, and using the VWPA
resale prices of such entries to establish the prices at which the greatest aggregate quantities of each
of the imported fabrics were resold within 90 days, VWPA argues that the VWPC-VWPA import
prices still “closely approximate” (and in all but one instance exceeded) the deductive test values,
as adjusted. See Pl.’s Rep. at 12.
Court No. 93-12-00803 Page 35

is either (i) “sold in the condition as imported at or about the date of importation of the merchandise

being appraised” or (ii) “sold in the condition as imported but not sold at or about the date of

importation of the merchandise being appraised” but is sold within 90 days after the date of “such

importation.” 19 U.S.C. § 1401a(d)(2)(A)(i) and (ii).38 See 19 U.S.C. §1401a(b)(2)(B). The

plaintiff’s deductive value statement does not comply with such requirement to the extent that its

original deductive value methodology utilized importations which were not sold within 90 days of

the date of importation of “merchandise being appraised,”39 however it has submitted an alternate

version utilizing a 90-day period, which results in some of the greatest aggregate quantity resale

prices being slightly higher than those used in Plaintiff’s Exhibit 55 while others are slightly lower

or unchanged. See Pl.’s Conf. App. II to Pl.’s Br. The plaintiff argues that such “closely

approximates,” and thereby proves, the VWPC-VWPA import prices.

The government’s objections to the plaintiff’s deductive value statement were mainly

directed at the utilization of total consolidated sales for determining pro rata allocation of some

expenses but not others. Tr. at 310-314. See Pl.’s Ex. 51 at 2; Pl.’s Ex. 58; Pl.’s Ex. 60 at 29. The

Court does not find such method objectionable per se, in light of the fact that the plaintiff’s entire

operation consisted of the importation and distribution of one line of merchandise. Cf. See National

Carloading Corp. v. United States, 60 CCPA 54, 469 F.2d 1398 (1972); Hill Brown Corp v. United

States, 54 CCPA 99 (1967); United States v. Mitsui & Co.,Ltd., 70 Cust. Ct. 301, 359 F. Supp. 1398

38
“Such importation” refers to the date of importation of “merchandise being appraised,”
not the date of importation of “merchandise concerned.” See S. Rep. 96-249, 96th Cong., 1st Sess.
122; H. Rep. 96-317, 96th Cong., 1st Sess 94-95.
39
See, e.g., HQ 546120 (Mar. 26, 1996).
Court No. 93-12-00803 Page 36

(1973). The Court accepts the plaintiff’s representations that the allocations were straightforward

and in accordance with generally accepted accounting principles and reasonably reflect the impact

of time and material invested by VWPC in the operation of VWPA. Cf. Coats & Clark, Inc. v.

United States, C.S.D. 4581, 74 Cust. Ct. 13, 16 (1975) (“When plaintiff has proved a profit which

is normal by reasonable standards and which is, on its face, realistic, the burden must shift to

defendant to disprove the legitimacy and correctness of this profit”). On the other hand, at trial at

various points the government asked for the sources for figures to support selling and administrative

expenses (Tr. at 296; Pl.’s Exs. 58, 60), proration of rent (Tr. at 301), and the amount of time to

process Canadian versus U.S. orders (Tr. at 306-308). The Court agrees with the plaintiff that

Customs’s admitted failure to verify cost data during audit undermines rejecting the computed values

(due to discrepancies which might have been resolved at the time through examination of source

documentation) on the basis of the audit, however the plaintiff at trial still bears a burden of proof

on its claims to assist the Court in making a determination consistent with Jarvis Clark Co. v. United

States, 733 F.2d 873, 878 (1984) (“the [C]ourt’s duty is to find the correct result, by whatever

procedure is best suited to the case at hand”). Notwithstanding the excellent reputation of Victor

Woollen Products’ accountants, their examination of the books and accounts, and their certification

of the financial statements, the evidentiary record lacks the source documentation necessary for

accurate factual determination, which the defendant had a right to examine. Cf. Camel

Manufacturing Company v. United States, 215 Ct.Cl. 460, 572 F.2d 280 (1978); Lykes Bros.

Steamship Co. v. United States; 198 Ct.Cl. 312, 459 F.2d 1393 (1972); Equipment, Inc. v. United
Court No. 93-12-00803 Page 37

States, 1 Cl.Ct. 513 (1982). That circumstance implicates the actual expenses pro rated to the

account of VWPA and used to construct deductive value, in the eyes of the government.

Moreover, notwithstanding the wording of the deductive and computed valuation

provisions,40 at the judicial level a claimant bears the burden of overcoming the presumption of

correctness attaching to an administrative valuation decision. See 28 U.S.C. § 2639(a)(1). The

government challenged the sources which would support the profit and general expenses deduction

on Plaintiff’s Exhibit 55 and the allocations claimed on Plaintiff’s Exhibit 50, and the record shows

that the government did not fully contest the veracity of the expenses allocated to VWPA nor did it

40
Deductive values of the “merchandise concerned” must be reduced by “an amount” equal
to “any commission usually paid or agreed to be paid, or the addition usually made for profit and
general expenses, in connection with sales in the United States of imported merchandise that is of
the same class or kind, regardless of the country of exportation, as the merchandise concerned,” and
such “deduction made for 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 . . . of imported merchandise of the same class or kind . . . .” 19 U.S.C. §§ 1401a(d)(3)(A)(i)
and 1401a(d)(3)(B). The computed value statute is simpler:

the amount for profits and general expenses . . . shall be based upon the
producer’s profits and general expenses, unless the producer’s profits and
general 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 profits and
expenses of such producers in such sales, as determined from sufficient
information.

19 U.S.C. § 1401a(e)(2)(B). Since transaction valuation requires “sufficient information whether
supplied by the buyer or otherwise available to the customs officer concerned,” there is a question
as to the claimant’s burden of proof. See 19 U.S.C. § 1401a(b)(2)(C). Customs on its own has
considered salaries and wages, rent, taxes, travel, advertising, automotive expense, and contract
services (all of which were designated as “general expenses” on the claimant’s income statement)
as not atypical of merchandise of the same class or kind and allowed deduction of such expenses
from unit prices. See HQ 545187 (Feb. 14, 1995, a/k/a “Valentines’ Day”) (“wedding gowns”).
Court No. 93-12-00803 Page 38

challenge whether the profits and expenses were “typical” of other importers or producers,

nevertheless this Court considers it incumbent upon a claimant not only to produce the sources which

will substantiate the profit and expense amounts claimed but to assert that the amounts claimed were

typical of imported or produced (as the case may be) merchandise “of the same class or kind.” Cf.

New York Credit Men's Adjustment Bureau, Inc., supra, 64 Cust. Ct. 770, 314 F. Supp. 1246; Border

Brokerage Company, supra, R.D. 10759, 52 Cust. Ct. 567. The record is deficient in such respects,

but there is a more fundamental reason why the methodology here is insufficient to the task of

proving the acceptability of the claimed transaction values of the entered fabrics.

“The key to the resolution of valuation issues . . . is establishing an objective market-based

price of the subject merchandise.” La Perla Fashions, Inc. v. United States, 23 CIT __, __, 9 F.

Supp.2d 698, 702 (1998), aff’d 185 F.3d 885 (1999). A central issue on remand is the acceptability

for customs duty purposes of the transfer prices between VWPC and VWPA, and the statutory

objectivity for related-party transaction valuation value is the requirement that the “merchandise

concerned” in test deductive values or computed values consist of “identical” or “similar”

merchandise.41 19 U.S.C. § 1401a(b)(2(B)(ii). See 19 U.S.C. §§ 1401a(h)(2), (h)(4). The deductive

value and computed value methodologies proffered by the plaintiff are in essence, however,

restatements of the challenged transfer prices: “the greatest aggregate quantity” sales used to

determine the deductive values and the costs asserted in the computed values pertain to entries which

41
Customs has determined that in order to analyze whether a particular test value closely
approximates the transaction value of identical or similar merchandise, the test value must reflect
a “previously accepted” customs valuation. See HQ 544455 (Mar. 14, 1995). See also HQ 545506
(Nov. 30, 1995); HQ 543568 (May 30, 1986). Since the result here is on other grounds, the Court
need not consider whether this interpretation deprives a plaintiff of the right to de novo trial of such
issue or whether the requisite objectivity might be satisfied through other means.
Court No. 93-12-00803 Page 39

are themselves unliquidated and therefore unresolved, being the subject of this action or one

suspended hereunder. Thus, the plaintiff's proffered deductive and computed values pertain not to

“identical” or “similar” merchandise but rather to “the merchandise being appraised.” Transaction

valuation is not proven through such bootstrapping. See Blue Bell, Inc. v. United States, 213 Ct. Cl.

442, 449, 556 F.2d 1118, 1124 (1977).

Conclusion

The deductive or computed values were also proffered in the alternative, in the event that the

transaction value of the imported fabrics was determined unacceptable. See 19 U.S.C. § 1401a(a).

The record lacks objective reference from which to infer that VWPA’s and/or VWPC’s claimed

profits and expenses are typical of importers and/or producers of fabrics of the same class or kind,

and it also lacks the source documentation which would resolve apparent discrepancies and reconcile

certain amounts claimed. However, Jarvis Clark, supra, instructs that the correct result must be

obtained “by whatever procedure is best suited to the case at hand.” 733 F.2d at 878. In light of the

appellate decision, remand to Customs is necessary, and the Court therefore compels the parties to

work together diligently to resolve Customs’ alleged concerns regarding inconsistencies and source

documentation. If the plaintiff produces sufficient information within a reasonable time, Customs

shall: (1) make the necessary adjustments to transaction value required by section I, supra, (2)

determine whether the transacted values of fabrics which can be compared in accordance with

section II, supra, are “closely approximate,” and (3) value the remaining fabrics on the basis of

deductive or, at plaintiff’s option, computed value. Otherwise, Customs shall value the entries in

accordance with 19 U.S.C. § 1401a(f).
Court No. 93-12-00803 Page 40

___________________________________________
Dated: August 29, 2001 R. KENTON MUSGRAVE, JUDGE
New York, New York