OT:RR:CTF:VS H256223 GaK
Brian Kim
ViewSonic Corp.
14035 Pipeline Avenue
Chino, CA 91710
RE: Assist; dutiability of payments made for product compliance tests
Dear Mr. Kim:
This is in response to your letter, dated July 22, 2014, requesting a binding ruling on behalf of ViewSonic Corp. (“ViewSonic”) with respect to the dutiability of various payments made by ViewSonic for product compliance tests conducted outside of the U.S.
FACTS:
ViewSonic purchases computing products from foreign sellers and imports them into the U.S. Some of its products undergo various product compliance tests outside of the U.S. The compliance tests are conducted to verify whether the products conform to the U.S. import requirements as well as to the import requirements of other countries such as Chile and Canada.
ViewSonic states that its compliance team in Taiwan determines whether to hire test vendors directly or request the sellers to hire test vendors. When ViewSonic hires the test vendors, ViewSonic makes direct payments to the test vendors. However, when the seller hires the test vendors, the seller will either invoice related fees to ViewSonic or incorporate the costs into the imported products.
ISSUE:
Whether payments made by ViewSonic for the product compliance tests conducted by the foreign seller or ViewSonic, prior to import, are dutiable.
LAW AND ANALYSIS:
For purposes of this ruling request, we are assuming that transaction value pursuant to section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (“TAA”) codified at 19 U.S.C. § 1401a is applicable in appraising the merchandise.
Transaction value is the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus amounts for five enumerated statutory additions, including the value apportioned as appropriate, of any assist. 19 U.S.C. § 1401a(b)(l)(c). The term “price actually paid or payable” is defined as the “total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller.” 19 U.S.C. § 1401a(b)(4)(A).
CBP has considered this question regarding testing before and has held that where the buyer makes payments to the seller for tests performed by the seller on the merchandise before it is exported, such payments are part of the price actually paid or payable even if they are post production tests. See Headquarters Ruling Letter (“HRL”) 544884, April 15, 1992.
This determination follows from the analysis articulated in Generra Sportswear Co. v. United States, 905 F.2d 377, (Fed. Cir. 1990) in which the court held that Customs’ construction of section 1401a(b) that transaction value may include payments by the importer for quota charges was permissible. The court determined that it was reasonable for Customs to conclude that the entire payment for “imported merchandise” was within subsection 1401a(b)(4)(A), and noted that Congress did not intend for the Custom Service to engage in extensive fact-finding to determine whether separate charges, all resulting in payments to the seller in connection with the purchase of imported merchandise, are for the merchandise or for something else. The Federal Circuit further explained:
As long as the quota payment was made to the seller in exchange for merchandise sold for export to the United States, the payment properly may be included in transaction value, even if the payment represents something other than the per se value of the goods. The focus of transaction value is the actual transaction between the buyer and the seller, if quota payments were transferred by the buyer to the seller, they are part of transaction value. The transaction value may encompass items other than the pure cost of the imported merchandise is reflected in section 1401a(b)(3), governing exclusions from transaction value.
Likewise, under the first scenario, when the seller arranges the compliance tests and bills ViewSonic, the payments are made by ViewSonic, the buyer, to the seller in connection with the imported merchandise. Accordingly, these payments are part of the price actually paid or payable for the imported merchandise. The importer’s argument that the compliance test payments should not be considered as assists need not be addressed because these payments are dutiable as part of the price actually paid or payable. See HRL 545724, November 30, 1994.
In the second scenario, ViewSonic hires the third party test vendors to conduct the product compliance tests and pays them directly. CBP has previously ruled that, in situations where independent testers have performed the testing, the associated testing costs are not included in the price paid or payable for the imported merchandise. See HRL 542946, January 27, 1983; HRL 542774, June 14, 1982. In HRL 563480, dated June 9, 2006, CBP considered the dutiability of the importer’s payment to an unrelated, third-party testing company for quality assurance purposes. In that case, the importer paid the fees directly to the testing company to review fabrics prior to production. CBP found that this case was distinguishable from cases where the payments were being made to, or for the benefit of, the seller and concluded that payments made to an independent third-party tester is not part of the price actually paid or payable for the imported goods. Accordingly, we determine that payments made by ViewSonic to a third party test vendor are not part of the price actually paid or payable for the imported goods.
HOLDING:
We find that the product compliance payments made by the importer to the seller are dutiable as part of the price actually paid or payable for the imported merchandise. On the other hand, the product compliance payments made to the test vendors by the importer are not part of the price actually paid or payable for the imported merchandise.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch