United States v. Barr Shipping Co. , 344 F. Supp. 524 ( 1972 )

LaNdis, Judge:

The issue in this application for review is whether the trial judge erred in holding the appraised value at first cost, plus 10 percent, plus packing and other costs, was separable and in holding that the only disputed element, namely the 10 percent, was not part of dutiable export value.

The decision before us for review was rendered by Judge Ford in an appeal for reappraisement of a Convair CY-990 Flight Simulator manufactured and exported by Redifon, Ltd., London, England, and appraised at New York as having a dutiable statutory export value¹ of £218,005, plus 10 percent, plus cost of packing and other costs of £2,000. The trial judge held that export value was the proper basis for appraisement and adjudged that, on that basis, the correct value of the flight simulator was £218,005, plus £2,000 for packing and other costs. Barr/Shipping Company, Inc. v. United States, 64 Cust. Ct. 680, R.D. 11701 (1970).

For the purposes of this review, export value is conceded to be the correct statutory basis for valuation of the flight simulator.² Eeview here is, therefore, narrowly confined to the errors raised by appellant apropos of the amount of export value found by tire trial judge. The substance of appellant’s claimed errors boils down to its contention, as 'heretofore mentioned, that the trial judge erred in holding that the form of the appraisement at first cost, plus 10 percent, plus packing and other costs was separable and in holding that the only disputed element, namely, the 10 percent, was not part of dutiable export value.

The record, upon which we consider those errors, consists of the oral testimony of two witnesses and five documentary exhibits. The parties identified with the import transaction are Redifon, Ltd., London, England; Curtiss-Wright Corporation, Electronics Division, East Paterson, New Jersey; and American Airlines, New York, N. Y.

The separability principle, which appellant concedes is a viable principle, but asserts is inapplicable to the appraisement in hand, has been described as a “framework of convenience for the analysis of disputed appraisements.” United States v. Bud Berman Sportswear, Inc., 55 CCPA 28, 31, C.A.D. 929 (1967). Recently, the rule has had most frequent application to appraisements which, as expressed in Haddad & Sons, Inc. v. United States, 54 Cust. Ct. 600, 602, R.D. 10942 (1965), affirmed, Id. v. Id. 56 Cust. Ct. 792, A.R.D. 205 (1966), cited 'by appellant, are “in terms of a first cost or ex-factory price, plus the disputed charges.” Appellant postures that the rule is limited to appraisements at “first cost, ex-factory or per se price,” and argues that the record is void of any evidence that the flight simulator was appraised at a first cost £218,005, ex-factory.

Notwithstanding that the separability rule, as appellee cites, is not necessarily limited to appraisements ex-factory, of. United States v. Fritzsche Bros., Inc., 35 CCPA 60, C.A.D. 371 (1947); United States v. Freedman & Slater, Inc., 39 Cust. Ct. 717, A.R.D. 77 (1957) ; The A. W. Fenton Co., Inc. v. United States, 52 Cust. Ct. 405, R.D. 10660 (1964) ; Cleveland Twist Drill Co. et al. v. United States, 60 Cust. Ct. 893, R.D. 11542 (1968); Shalom Baby Wear, Inc. v. United States, 62 Cust. Ct. 856, R.D. 11641 (1969); Castle & Cooke, Inc., et al. v. United States, 64 Cust. Ct. 628, R.D. 11693 (1970), decided onrehearing, Id. v. Id., 67 Cust. Ct. 536, R.D. 11757 (1971); H. M. Young Associates, Inc. v. United States, 64 Cust. Ct. 642, R.D. 11695 (1970), we find substantial evidence that the appraisement at £218,005, plus 10 percent, plus cost of packing and other necessary costs of £2,000, is of the form and substance intended to reflect that £218,005 represented a first cost, or ex-

factory price. The intention is clearly evident from the appraiser’s notice of action and increased duties to the importer (C.F. 5555, attached to the official papers) explaining that the appraised figure of £218,005, in essence, represented the invoice value, ex-factory. Castle & Cooke, Inc., et al. v. United States, 67 Cust. Ct. 536, K.D. 11757 (1971); of. Dominick Butti v. United States, 44 Cust. Ct. 773, 777, 778, A.R.D. 119 (1960), affirmed, Id. v. Id., 49 CCPA 1, C.A.D. 778 (1961). Additionally, on trial, the import specialist, who advisorily valued the flight simulator at the amount accepted by the appraiser, testified that the 10 percent which he added to £218,005 was intended to reflect a share of the proceeds paid to Curtiss-Wright Corporation in connection with the purchase of the flight simulator, after deducting expenses and duties. Since the 10 percent was the one element of the ap-praisement controverted and briefed below relevant to the issue of the export value of the flight simulator, of. F. W. Myers & Co., Inc. v. United States, 52 Cust. Ct. 550, 552, R.D. 10750 (1964), the court below did not, in our opinion err when, for the purpose of decision, it concluded that the appraisement was separable, and presumptively correct as to all elements save only the disputed 10 percent added by the appraiser.

Appellant’s remaining errors are summed up in appellant’s argument that the trial judge erred when he found that the 10 percent paid to Curtiss-Wright Corporation, after deducting expenses and duty (which the appraiser added to the value of the flight simulator), represented an expense incurred at the option of American Airlines, subsequent to the time the flight simulator was packed by Kedifon, Ltd. and readied for shipment to the United States. Appellant contends that upon a record “laden with evidence which conclusively establishes that Curtiss-Wright was a co-seller of the * * * [flight simulator], even though it might not have been involved in the manufacture of said * * * [flight simulator]”, the 10 percent is profit and, therefore, part of dutiable export value.

The contract of purchase (exhibit 1), on which appellant relies, is relevant but, in our opinion, it does not necessarily establish all the facts bearing npon the dutiable value of the merchandise manufactured and exported pursuant to the contract. Of. United States v. Enrique Vidal Sanches, 15 Ct. Cust. Appls. 443, T.D. 42642 (1928). All merchandise, on export value basis, must be valued as defined in section 402 (b). The record in this case substantially establishes that the relationship of the parties to the purchase was determined by factual circumstances, as appears from the following quotation from the trial judge’s decision:

Curtiss-Wright became involved in this importation as it had been approached by American [Airlines] to produce this flight simulator. American was referred to Redifon by Curtiss-Wright. American however was reluctant to deal directly with a foreign supplier and requested Curtiss-Wright to act as liaison. An agreement, plaintiff’s exhibit 2, between Curtiss-Wright and Redifon was entered into for the purpose of defining responsibilities. The agreement made Curtiss-Wright responsible to American for the importation of the simulator and the recipient of payments which in turn were paid to Redifon after deducting import duties, a royalty of 7i/2 percent, where applicable, and a markup not exceeding 10 percent of Redifon’s unpacked ex-works price.

A change order such as exhibit 3 which was the 35th change request is a method enabling the purchaser to modify the simulator to bring it up to date or for other reasons. Curtiss-Wright did not participate in the price negotiations relative to change orders although it was advised of them in order to keep it fully knowledgeable of the changes. No engineers or technical advisers were sent to Redifon by Curtiss-Wright during the construction of the simulator.

Mr. Balbach testified on cross-examination that the difference in price paid by American to 'Curtiss-Wright and the amount submitted to Redifon represented approximately $70,000 paid in import duties and approximately 17 percent for overhead and. general administrative expenses incurred by Curtiss-Wright, approximately $16,000 profit and a 7% percent royalty. The royalty is known as the Dehmel royalty which Curtiss-Wright pays on all simulators sold 'by it even though not manufactured by it. This is based on an agreement with Mr. Dehmel who was the inventor of certain electrical systems used by Curtiss-Wright in the manufacture of its own simulators. [There is no evidence in the record in this case, however, that the Dehmel invention was indispensable to or used in any manner by Redifon in the manufacture of the imported flight simulator.]

‡ $ $ $ $ $ ‡

* * * [Plaintiff’s exhibit 5, an affidavit of Eric William Warren, a director of Redifon since 1957] states that Curtiss-Wright [while denominated as seller in the agreement of June 1, 1961] had no part [whatsoever] in the design and construction of the involved simulator. The function of Curtiss-Wright was to handle details of importation into the United States, delivery to American and billing of American and payment of Redifon as well, as general administrative liaison between American and Redifon. The affiant further stated that American insisted upon having Curtiss-Wright as a party to the contract as one it could hold accountable for contract performance. Such service, it was understood, would entitle Curtiss-Wright to a fee over and above the agreed price, unpacked ex-works from Redifon. [64 Oust. Ct., pages 683-684,685.]

Upon the facts above stated, it is reasonable to infer, United States v. Hub Floral Manufacturing Co., 57 CCPA 134, 139, C.A.D. 993 (1970), that American Airlines could have, as Curtiss-Wright when approached suggested, purchased the flight simulator directly from Redifon, Ltd., without the services of Curtiss-Wright.³ To paraphrase what the court of appeals said in a somewhat similar factual situation, United States v. Enrique Vidal Sanchez, supra, at page 451, accepting the above facts as conclusively established by the record, it appears that there was no reason, except its own convenience, why American Airlines insisted upon transacting its business through Curtiss-Wright. Had American Airlines transacted its business otherwise, its contract price would have been 10 percent less and Redifon, Ltd. would have been saved the expenditure.

To sum up, the disputed 10 percent in the case is not such a charge as, “in the ordinary course of trade”, constitutes a part of the export price of the flight simulator in question. The charge was occasioned by the unusual and extraordinary requirements of the purchaser. If American Airlines had been content to buy the flight simulator directly from Redifon, Ltd., it is established that in the ordinary course of trade for export such additional charge would not have been made (end of paraphrase).

The appraisement substantiates the ex-works or ex-factory price. The following cases support and point up that the trial judge correctly held that the 10 percent which Curtiss-Wright retained in remitting to Redifon, Ltd., the amounts paid by American Airlines under the principal agreement, is not part of dutiable export value:

United States v. Case & Co., Inc.,

13 Ct. Cust. Appls. 122, T.D. 40958 (1925) ;

American Express Co. v. United States,

14 Ct. Cust. Appls. 53, T.D. 41553 (1926);

United States v. Enrique Vidal Sanchez,

15 Ct. Cust. Appls. 443, T.H. 42642 (1928);

United States v. Alfred Kohlberg, Inc.,

27 CCPA 223, C.A.D. 88 (1940) ;

United States v. Tapetes Luxor S.A., et al.,

54 CCPA 116, C.A.D. 921 (1967);

Rohner Gehrig & Co., Inc. v. United States.

3 Cust. Ct. 547, R.D. 4629 (1939), affirmed on review, United States v. Bohner Gehrig & Co., Inc., 4 Cust. Ct. 864, R.D. 4923 (1940); Bohner Gehrig & Co., Inc. v. United States, 7 Cust. Ct. 551, E.D. 5467 (1941), affirmed on review, United States v. Bohner Gehrig & Co., Inc., 9 Cust. Ct. 591, E.D. 5724 (1942);

William Krocker v. United States, 25 Oust. Ct. 351,E.D. 7847 (1950);

Kobe Import Co. v. United States, 28 Cust. Ct. 586, E.D. 8102 (1952) ;

United States v. International Commerical Co., Inc., et al., 28 Cust. Ct. 629, R.D. 8112 (1952) ;

Brauner & Co.v. United States, 44 Cust Ct. 661, E.D. 9673 (1960);

The Merthyr Company, Inc. v. United States, 47 Cast. Ct. 550, R.D. 10125 (1961) ;

United States v. Henry A. Wess, Inc., 48 Cust. Ct. 700, A.R.D. 142 (1962).

Tbe findings and conclusions of tbe trial judge are, accordingly, incorporated herein, and tbe decision below is affirmed.⁴

Judgment will so enter.

1 Section 402(b) of the Tariff Act of 1030, as amended by the Customs Simplification Act of 1956, 91 Treas. Dec. 295, T.D. 54165, defines export value as follows:

(b) Export Value. — Dor the purposes of this section, the export value of imported merchandise shall be the price, at the time of exportation to the United States of the merchandise undergoing appraisement, at which such or similar merchandise is freely sold or, in the absence of sales, offered for sale in the principal markets of the country of exportation, in the usual wholesale quantities and in the ordinary course of trade, for exportation to the United States, plus, when not included in such price, the cost of all containers and coverings of whatever nature and all other expenses incidental to placing the merchandise in condition, packed ready for shipment to the United States.

2 The trial judge found it unnecessary to consider an alternative claim, asserted by both parties herein, for appraisement on constructed value basis, section 402(d), as amended.

3 Appellant concedes that If appellee showed, “through the introduction of substantial evidence, that he had the option of not incurring the disputed cost or expense, whether it accrued prior to or after the time the merchandise was packed, ready for shipment to the United States, then he has proved that that disputed sum is not a part of the export value of the merchandise.”

4 Barr Shipping Company, Ine., a customhouse broker, filed this appeal for reappraisement on behalf of its principal Curtiss-Wright Corporation, importer of record, on Customs Form 4305 which it signed, as follows :

Notify : “Barr Shipping Company, Inc.

Curtiss Wright Corp. [signed] Peter Hachman

Electronics Div. (Consignee or Agent)

35 Market Street 52 Broadway, New York, New York

East Paterson, New Jersey” (Address)

The dissent would sua sponte dismiss the appeal to reappraisement raising issue for the first time as to the authority of the broker to act as agent for importer in appealing to reappraisement, neither side having argued or briefed the question. No case has been cited holding that a showing of authority to act as agent is a condition precedent to filing an appeal to reappraisement. Contrary to the dissent, see L. & JW. Stvm v. United, States, 34 Treas. Dee. 474, T.D. 37658 (1918) :

“Where an agent or attorney in fact employed by an importing firm to do its general customhouse work calls for re-reappraisement in the name of his principals, and there is failure to prove that such agent or attorney exceeded his authority, held that such agent or attorney in calling for such reappraisements acted within the scope of his authority, and motions to dismiss such appeals as being unauthorized must be denied.”

“* * * y¡fe may take judicial notice of the fact that in a majority of the cases which reach this court it is the practice for both protests and appeals to reappraisement to be prosecuted in the names of the customs brokers. * * *” [United States v. O. J. Tower cG Sons, 24 CCPA 456, 459, T.D. 48912 (1937).]

The court of appeals has also recognized that statutes giving the right of appeal are liberally construed. Wilmington Shipping Company v. United States, 52 CCPA 76, 79, C.A.D. 861 (1965), Lewis’ Sutherland Statutory Construction, Section 7It. In fact the court of appeals has indicated that not only could the consignee, as the one liable for payment of duties appeal for reappraisement, but that the consignee could appoint an agent to appeal for reappraisement, if there was action informing the Government of the agency. Wilmington Shipping Company v. United States, supra, at page 80; Hersey of Canada, Ltd. v. United States, 56 CCPAl 64, 66, C.A.D. 955 (11969).