RR:IT:VA 546343 EK
Port Director
Chicago, Illinois 60607
RE: Application for Further Review of Protest No. 3901-96-100343;
Dutiability of Quota Charges
Dear Sir:
This is in response to the application for further review of
the above-referenced protest. The protest was filed on behalf of
I.K.L. International, Inc., the importer of record, against your
decision in the liquidation of an entry of ladies sweaters.
FACTS:
I.K.L. International purchased sweaters from COVO Knitters
and imported them into the United States. The importer utilizes
the services of a buying agent in reference to the purchase of
the sweaters. The importer indicates that with respect to the
purchase of quota, the charges were paid to Gerencia Co., Ltd.,
the buying agent. The importer claims that the quota charges
were added to the invoice by mistake and the charges should not
be added to the price actually paid or payable in the
determination of transaction value.
ISSUE:
Whether the quota charges in this case are included in the
price actually paid or payable as part of the transaction value
of the imported merchandise.
LAW AND ANALYSIS:
The preferred method of appraisement is transaction value
which is defined by section 402(b)(1) of the Tariff Act of 1930,
as amended by the Trade Agreements Act of 1979 (TAA, 19 U.S.C.
1401a(b)), as "the price actually paid or payable for the
merchandise when sold for exportation to the United States . . .
", plus certain additions specified in section 402(b)(1)(A)
through (E). The term "price actually paid or payable"
- 2 -
is defined 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."
Customs has consistently held that quota payments made to
the seller, or a party related to the seller, are part of the
price actually paid or payable. If the quota payments are made
to a third party, unrelated to the seller, the quota payments are
not part of the value of the merchandise.
In a letter dated January 23, 1990, written to U.S. Customs
on behalf of I.K.L. International, with regard the bona fides of
the agency relationship between IKL and Gerencia, IKL states the
following: "Please also be advised that there is also an
overlapping of familial interest between Gerencia and Covo
Knitters Ltd. (which means that the importer and seller (Covo)
are also related)." While, there is no mention of this
relationship in the protest application, the file does contain an
invoice from the seller to the buying agent with an amount for
quota included. The importer has not provided any documentation
supporting its position that the quota payments are made to a
third party, unrelated to the seller. The quota charges are
either paid directly to the seller of the imported merchandise,
through the buying agent, or the quota charges are remitted to a
party related to the seller (the buying agent). Either way, the
quota charges are part of the price actually paid or payable for
the imported sweaters. Thus, it is our conclusion that
insufficient evidence has been provided to indicate that Customs
incorrectly appraised the merchandise.
HOLDING:
You are directed to DENY the protest in full. In accordance
with Section 3A(11)(b) of Customs Directive 099 3550-065, dated
August 4, 1993, Subject: Revised protest Directive, this
decision should be mailed by your office to the Protestant no
later than 60 days from the date of this letter. Any
reliquidation of the entry in accordance with this decision must
be accomplished prior to mailing of this decision. Sixty days
from the date of the decision, the Office of Regulations and
Rulings will take steps to make the decision available to Customs
personnel via the Customs Rulings Module in ACS and the public
via the Diskette Subscription Service, Freedom of Information Act
and other public access channels.
Sincerely,
Acting Director,
International Compliance Division
Tom:
The documents that have the rubber band around them were
sent to me by the import specialist subsequent to my receiving
the protest. Apparently, this company was involved in a penalty
case regarding failing to declare quota payments. However, this
was back in 1991.
As I was looking through those documents, I noticed that
Grunfeld, Desiderio, (who was representing them at the time, but
not in the protest that I have), indicates that "there is also an
overlapping of familial interest" between the buying agent and
seller. Same buying agent and seller in the case that I have.
Therefore, the importer has not really provided any evidence
that the quota payment did not go to the seller. But also,
although not addressed in the protest, it seems as if the buying
agent is related to the seller. So either way, they are
dutiable. Especially in light of the fact that there was this
prior disclosure regarding the quota payments going to the
seller.
EK