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HQ 544264


February 24, 1989

CLA-2 CO:R:CV:V 544264 VLB

CATEGORY: VALUATION

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 ------ 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.

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
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

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