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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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