CLA-2 CO:R:CV:V 544264 VLB
Francis W. Foote, Esquire
Siegel, Mandell & Davidson, P.C.
655 Fifteenth Street, N.W.
Suite 300
Washington, D.C. 20005
RE: Request for Prospective Ruling on Dutiability of Amounts
Paid to a Foreign Quasi-Governmental Organization
Dear Mr. Foote:
This is in response to your letter dated November 8, 1988,
requesting a ruling on the dutiability of payments made by ------
-------------------- (hereinafter referred to as the "importer")
to a foreign quasi-governmental organization (hereinafter
referred to as the "organization").
FACTS:
The importer is proposing to use the services of a foreign
quasi-governmental organization, located in New York, that
advises American importers on the sourcing of products in the
People's Republic of China (PRC). The organization provides the
following services:
(1) Economic analyses of market conditions in the PRC;
(2) Assistance in locating supply sources; and
(3) Advice on the availability of merchandise for shipment
to the U.S.
You explain that in consideration for these services, the
importer will agree to make monthly payments to defray a portion
of the organization's operating expenses. You emphasize that
although the importer will make payments on a regular basis, the
organization will render services on an intermittent, as-needed
basis and the services may never result in the importation of
merchandise into the U.S.
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In addition, you state that the importer will choose the
factories that it will deal with, and will order merchandise
directly from the factories. The importer and the factory
personnel will negotiate directly the price, the delivery terms
and other relevant details.
Finally, you allege that under this scenario the
importer's payments to the organization should not be included in
the transaction value of the merchandise. You base your
conclusion on the argument that the payments are not selling
commissions or assists. Rather, you contend that the payments
"are in the nature of a retainer, intended to facilitate access
to information as needed, and thus cannot be directly attributed
either to the production or purchase of specific merchandise in
the PRC or to the importation of specific merchandise into the
U.S."
ISSUE:
Whether the payments to the foreign quasi-governmental
organization are dutiable under transaction value.
LAW AND ANALYSIS:
Transaction value, the preferred method of appraisement, is
defined in section 402(b) of the Tariff Act of 1930, as amended
by the Trade Agreements Act of 1979 (TAA) as "the price actually
paid or payable for the merchandise when sold for exportation to
the United States," plus amounts for items enumerated in section
402(b)(1) of the TAA. The enumerated amounts include the value
of packing costs, selling commissions, assists, royalty or
license fees and proceeds of any subsequent resale.
The "price actually paid or payable" is defined in section
402(b)(4)(A) of the TAA as:
. . . the total payment (whether direct of indirect. . .)
made, or to be made for imported merchandise by the buyer
to, or for the benefit of, the seller.
For purposes of this ruling, we will assume that
transaction value is the proper method of appraisement.
You contend that the importer's payments to the
organization are not selling commissions or assists. You
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cite Headquarters ruling 542605, dated January 5, 1982, to
support your position. In that case, the importer, a wholly-
owned U.S. subsidiary of a foreign manufacturer paid outside
consulting firms to conduct consumer market surveys in the U.S.
We held that the costs were general expenses incurred by the
importer that were not required for the perfection of the
imported merchandise. Therefore, the amounts were not dutiable
assists.
In the same case, the importer was monitering governmental
regulatory activities that might affect the production,
distribution or sale or the product that it imported. In
addition, the importer's personnel attended meetings of a non-
profit professional organization that intended to play a role in
influencing the direction of governmental regulation. We again
held that these activities were general expenses incurred by the
importer and were not involved with the perfection of the
merchandise. Thus, the costs were not dutiable.
Similarly, in the present case, the services performed by
the organization are not required for the perfection of the
imported merchandise. Moreover, the payments to the organization
are not for specific imported merchandise or for the benefit of
the seller. Rather, the payments appear to be general expenses
incurred by the importer. Therefore, based on the evidence
provided, we hold that the payments are not dutiable under
transaction value.
HOLDING:
The importer's payments to the foreign quasi-governmental
organization are not dutiable under transaction value.
Sincerely,
John Durant, Director,
Commercial Rulings Division