J.C. Penny Case

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J.C. Penny (a U.S. retailer) provided Synergy (a Hong Kong corporation with offices in the United States) with specifications for pants that J.C. Penny wished to buy. Synergy arranged to have the China National Textiles Import and Export corporation (Chinatex) manufacture a sample production pant. After seeing the sample, J.C. Penny ordered pants from Synergy at a price of $123.48 per dozen. Synergy contracted with Chinatex to fill the J.C. Penny order and then attempted to enter the merchandise into the United States at $58.00 per dozen, the price Synergy had paid to Chinatex in their arm's length contract. Customs rejected this attempted entry and valued the pants at $123.48 per dozen. (A) In general, what is transaction value and why is…show more content…
Purchase price is one of the major component of the transaction value. Transaction value is very important because - Transaction value times the tariff rate determines the amount of tariff the buyer has to pay. Therefore the higher the transaction value the higher the tariff that will need to be paid. Valuation of goods by the CBP is a critical component of the cost of the goods and errors (or misapplication of rules) can prove to have high economic impact (margins, revenue, availability, competitiveness, etc.) for the buyers and sellers. (B) Did Customs correctly assess the transaction value of the imported merchandise? Explain. We believe that Customs did not correctly assess the transaction value. We believe that the transaction price should be $58.00 per dozen i.e. the manufacturer’s price and mark-up of $ 65.48 per dozen added by Synergy should not be added in transaction value for duty payment. We form this opinion based on two facts; a. Synergy is not working exclusively under the buyer’s or seller’s control (in this case J.C. Penny and Chinatex respectively) and it is an independent middleman in this transaction. It does not qualify as a buyer or seller’s agent (under the control of and working for the benefit of buyer/seller). The contract between Synergy and Chinatex is documented as an arm’s length contract as they are independent of each of each other ie. Synergy is truly independent of Chinatex. b. The goods were built per the
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