Customs valuation of defective imported coils cannot rest on prime-market prices and an arbitrary deduction without evidence of actual price difference.

Valuation of defective imported stainless steel coils could not be based on prime-coil prices from the London Metal Exchange with an arbitrary 25% deduction, because no material showed that the deduction reflected the actual price difference between prime and defective goods. The supplier had certified the coils as second or third grade, and treating them as comparable to prime material was found unsound. On that basis, the departmental valuation was not sustainable and the appeal failed.

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Issues: Whether the value of defective imported stainless steel coils could be determined by comparing them with prime coils on the London Metal Exchange and applying an arbitrary deduction of 25%.

Analysis: The declared price of the defective coils was sought to be enhanced on the basis of prime goods prices reflected in the London Metal Exchange. The valuation adopted below proceeded on a flat deduction from the prime-goods price, but there was no material to show that such a deduction represented the price differential between prime and defective coils. The goods were certified by the supplier as second or third grade, and the comparison with prime material was found to be unsound.

Conclusion: The valuation adopted by the department was not able, and the appeal failed.

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