CLA-2 CO:R:CV:V 544143 EK
Robert L. Eisen, Esquire
Coudert Brothers
200 Park Avenue
New York, New York 10166
RE: Ruling Request Regarding Dutiability of Payments
Made for Consultation Services
Dear Mr. Eisen:
This is in response to your letter of January 29, 1988,
requesting a ruling as to the dutiability of certain payments
made by your client (importer), to an unrelated Hong Kong company
for consultation services in locating quota holding companies.
You state that this request relates to prospective transactions.
FACTS:
You state that due to the importer's import volume and
restrictions of articles of apparel from Taiwan, a substantial
amount of quota allocations is necessary in order to import
Taiwanese merchandise. In order to facilitate this endeavor, the
importer has commissioned the services of an unrelated Hong Kong
company (hereinafter referred to as HT) to consult with the
importer as to which manufacturers have available quota.
Subsequent to locating a manufacturer to produce the
imported merchandise, HT will contact another Taiwanese company
(hereinafter referred to as company A) and instruct it to
transfer the necessary quota sufficient to cover the importer's
purchase order. You indicate that HT and company A are related
parties. Company A will transfer the quota to the manufacturer
designated by HT, and the manufacturer will pay the costs
incurred in connection with the quota transfer.
- 2 -
The importer and the manufacturer then agree upon a price
for the merchandise and the purchase order is placed. Payment
for the imported merchandise will be made by the importer
directly to the manufacturer once the goods are shipped.
In exchange for HT's services, the importer will pay a
fixed consultation fee equal to $10 per dozen garments shipped.
The payments are to be made once per season and are made directly
to HT. You state that the payments are not required as a
condition to exportation of the merchandise and that the payments
made by the importer to the manufacturers are entirely separate
from the payments made to HT. You indicate that HT is not
related to any of the companies that will manufacture the
imported merchandise.
ISSUE:
Whether the payments made by the importer to the unrelated
Hong Kong company (HT) are to be included in the transaction
value of the imported merchandise pursuant to section 402(b) of
the Tariff Act of 1930, as amended by the Trade Agreements Act of
1979 (TAA; 19 U.S.C. 1401a(b)).
LAW AND ANALYSIS:
For purposes of this ruling request, we are assuming that
transaction value, the preferred method of appraisement, is
applicable in appraising the imported merchandise. Transaction
value is defined in section 402(b) of the TAA as "the price
actually paid or payable" for the merchandise when sold for
exportation to the United States. The phrase "the price actually
paid or payable" is further defined in section 402(b)(4)(A) as:
. . . the total payment (whether direct or
indirect . . . ) made, or to be made, for
imported merchandise by the buyer to, or for
the benefit of, the seller.
Section 402(b)(1), in defining transaction value, enumerates
certain additions to be made to the "price actually paid or
payable." However, none of these are relevant for purposes of
this request, other than to indicate that the fees indicated by
the importer are not one of the additions to transaction value.
- 3 -
The payments in question are not made to the seller of the
imported merchandise. The payments are made pursuant to an
arrangement which is separate and apart from the transactions
vis-a-vis the manufacturers of the imported goods. As indicated
above, the payments are not tied to particular shipments of
merchandise but rather, are made once every season.
HOLDING:
In view of the foregoing, the payments made by the importer
to HT in connection with services rendered in locating sources of
quota are not to be added to the "price actually paid or
payable," assuming the applicability of transaction value.
Sincerely,
John Durant
Acting Director, Commercial
Rulings Division