CLA-2 CO:F:C:V W544353 TLL

Leonard Rosenberg, Esq. Sandler, Travis & Rosenberg, P.A. Attorneys At Law Rivergate Plaza 444 Brickell ·Avenue Miami, Florida 33131 Dear Mr .Rosenberg:

This is in reply to your letter dated June 19, 1989, requesting a ruling on behalf of your client, Fashion Towel Import Corp. (the importer).

FACTS:

The importer purchases towels of various sizes, colors, and design from both of its related mills (also referred to as manufacturer s). You state that the importer is owned in substantial part by Manufacturer A who is located in Country A. The manufacturer in Country B is also owned in substantial part by Manufacturer A. The mill in Country A has been in existence for more than 40 years and has been exporting to the United States for more than ten years. The mill in Country B has been exporting to the United States for approximately seven years. In addition to sales to the United States, the mills also sell within their respective countries and to third countries .

The prices charged to the importer fully compensate the mills for all direct and indirect labor, general and administrative costs, and profit. At the present time, the members of the Boards of Directors are not being compensated for their services on the Boards. Accordingly, any computed value analysis would not include payments contemplated under this ruling request. It is assumed for purposes of this ruling request that the price charged the importer complies with the requirements of 19 U.S.C.S 140la (b). It should be noted that we are making no conclusions whether the price actually paid or payable for the imported merchandise has been influenced by the relationship between the parties.

The members of the Boards of Directors, who are also share-holders in the mills as well as in the importer, are very active in determining the policy and direction that the mills will take.

... .. .... . - This includes production goals for the United States, domestic production, and third country production, as well as management directives and expansion activities. None of the directors are on the payrolls of the foreign mills.

ISSUE:

Whether annual compensation to be paid by an importer to the member of the Boards of Directors of its related foreign mills is dutiable under transaction value . · _.

LAW AND ANALYSIS: Transaction value is defined in 19 U.S.C. 1401a(b)(l) as “the price actually-paid or payable for the merchandise when sold for exportation to the United States,” plus certain enumerated additions . The “price actually paid or payable” 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 .” 19 U.S..c S 140l (b)(4)(A).·. ·Included in the statutory additions to the price actually paid or payable are, inter alia, (1) the value of any assists, and (2) the proceeds of any subsequent resale accruing directly or indirectly to the seller. 19 U.S.C> §§ 140la (b)(l)(C} and (E ).

As _defined in section 1401a(h)(1)(A),the term· “assist” means any of the following if supplied directly or indirectly, and free of charge or at reduced cost, by the buyer of imported 'merchandise for use in connection with the production or the sale for export to the United States of the merchandise.

Materials, components, parts, and similar items incorporated in the imported merchandise.

(ii) Tools, dies, molds, and similar items used in the production of the imported merchandise.

(iii ) Merchandise consumed in the production of the imported_ merchandise .

(iv) Engineering, development, artwork, design work, and plans and sketches that are undertaken elsewhere than in the United States _ and are necessary for .the production of the imported merchand ise. ... - . .. ....... . .

In response to your inquiry, this letter w ill confirm that Customs has consistently held that payments made to individuals which do not fall within an enumerated assist category are not includable -·in transaction value as additions to the price actually paid or payable . In this regard, .Customs .has held that general administrative services, including but not limited to management services, accounting services, legal services, and other services indirectly related to imported merchandise, which are rendered abroad or in the United States by individuals who are paid by the U.S. importer, are not added to the price actually paid or payable in determining transaction value. See TAA No . 4, HRL 542122 TLL, September 4, 1980. In the importer's situation, the proposed compensation does not relate to the imported merchandise at all, but, rather, is being paid to individuals who set policy and direction for the mills .

The payments proposed do not constitute proceeds of a subsequent resale accruing directly or indirectly to the seller. As stated in the Statement of Administrative Action, specifically approved by Congress when it approved the Trade Agreements Act of 1979, “Additions for the value of any part of the proceeds of any subsequent resale, d isposal, or use of the imported merchandise that accrues directly or indirectly to the seller, do not extend to the flow of dividends or other payments from the buyer to the seller that do not directly relate to the imported merchandise.”

The payments proposed to be made here do not appear to be related in any manner to payments for the imported merchandise. Additionally, these payments are not being made at the present time; therefore, their subsequent payment would not in any way impact on the payment for, or be directly related to, the imported merchandise. The payments to be made would ordinarily be declared at the beginning of each fiscal year, payable either once at mid-year or split into two payments, payable approximately at the beginning of the second and fourth quarters . While you state that this is something which has not yet been determined, from an appraisement perspecti ve, the number or method of payment would not make any difference.

HOLDING:

Under the Facts presented, the payments made to the individual members of the Board of Directors are not to be included in transaction value.

Sincerely,

John Durant, Director Commercial Rulings Division

© 2014 CustomsMobile | Disclaimer | Privacy | About