Apollo Overseas International, Inc. - Page 10

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          parties have agreed that the following rules apply:  (1) Customs            
          duties and freight charges must be computed at the rates actually           
          in effect for the year involved, and (2) because customs duties             
          and freight charges are to be included in cost of purchases and             
          of goods in inventory, petitioner shall not be entitled to claim            
          these items as deductions.                                                  
               For petitioner's fiscal year 1989, respondent and petitioner           
          disagree as to how customs duties should be calculated with                 
          respect to documented sales.  Petitioner contends that these                
          amounts should be determined by multiplying the amount of the               
          sales invoices provided in the record by the customs duty rate as           
          determined by petitioner's application on brief of the Harmonized           
          Tariff Schedule.  Petitioner argues that these amounts result               
          from the method used by Mr. Lee, petitioner's customs agent,                
          during the years at issue, and the only witness who testified in            
          this case as to hypothetical examples.  Respondent argues that              
          for those sales that are documented, the appropriate customs duty           
          rate should be determined by examining the customs rate as                  
          calculated by Mr. Lee at the time the customs duties were paid by           
          matching documented sales with corresponding customs invoices.              
          Petitioner essentially ignores the customs invoices.                        
               After examining both petitioner's and respondent's                     
          calculations, we conclude that respondent's method is a more                
          appropriate approximation of applicable customs duties with                 
          respect to documented sales.  We recognize possible                         

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