RR:CTF:VS 563469 GG
Mr. Robert Gardenier
Attorney-in-Fact
M.E. Dey & Co.
P.O. Box 370080
Milwaukee, Wisconsin 53237-0080
RE: Valuation of Inspection Services
Dear Mr. Gardenier:
This is in response to your ruling request dated February 14, 2006, made on behalf of your client, American Down and Textile (“ADT”). You ask whether certain inspection fees are included in transaction value.
FACTS:
ADT is in the process of purchasing down/feathers from various new suppliers in China. ADT has arranged for a company called AQA Corporation to inspect the product prior to each shipment leaving China for the United States. The purpose of the inspections is to validate that the down/feathers meet ADT’s requirements. The inspections will continue as the new suppliers are evaluated. AQA Corporation will bill ADT directly for its inspection services. ADT and AQA are not related. Similarly, AQA is unrelated to the various suppliers of down/feathers.
ISSUE:
Whether the payments made for the inspection services are part of the price actually paid or payable for the imported down/feathers.
LAW AND ANALYSIS:
We are assuming, for the purposes of this ruling, that transaction value is the appropriate basis of appraisement for the imported merchandise. In accordance with the provisions of 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)), the transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to the United States”, plus certain enumerated statutory additions. The “price actually paid or payable” is defined in section 402(b)(4)(A) of the TAA 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 …) made, or to be made, for the imported merchandise by the buyer to, or for the benefit of, the seller.”
U.S. Customs and Border Protection (“CBP”) has previously examined the question of whether payments made for inspection services are part of the price actually paid or payable. For example, in Headquarters Ruling Letter (“HQ”) 543365, dated November 1, 1984, CBP determined that inspection fees paid by the buyer of imported garments to an on-site inspection agent in Haiti were not part of the price actually paid or payable. In that case the inspection agent was neither related to, nor an employee of, the foreign assembler. A different result attained, however, in HQ 546439, dated September 30, 1996. In that case, the inspections were performed by, and the fees paid to, employees of the seller. Using an analysis based on the court case of Generra Sportswear Company vs. United States, 8 Fed. Cir. 132, 905 F.2d 377 (1990), CBP found that the inspection payments were part of the price actually paid or payable for the imported merchandise. This is because based on Generra, CBP presumes that all payments made by the buyer to the seller, or to a party related to the seller, are part of the price actually paid or payable for the imported merchandise. Employers and employees are considered to be related parties under the valuation law.
ADT’s situation is analogous to that in HQ 543365. The inspection fees that ADT will pay to AQA Corporation will not inure to the benefit of the sellers or parties related to the sellers. Consequently, the payments made for inspection services are not part of the price actually paid or payable.
HOLDING:
The payments for inspection services performed following production are not part of the price actually paid or payable for the imported down/feathers.
Sincerely,
Monika R. Brenner
Chief
Valuation and Special Programs Branch