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HQ 544787
February 20, 1992

VAL CO:R:C:V 544787 ILK

CATEGORY: VALUATION

RE: Payment of shipping agency bonus

This is in response to your request, dated June 25, 1991, (hereinafter referred to as "Request") for a ruling on a -------, Inc. (hereinafter referred to as the "Importer") and --- ---- ----- Mfg. Co. Ltd, (hereinafter referred to as the "Seller"). You request a ruling on the effect of the shipping bonus on the transaction value. We regret the delay in responding.

FACTS:

The imported goods consist of furniture imported through Seattle, Tacoma, Los Angeles and Long Beach. The importer is proposing payment of a -% shipping agency bonus to the seller for meeting specified shipping criteria. The criteria proposed are as follows:

1) Quantities must be within --% of the original or revised order quantity.

2) Orders must be shipped in consecutive order and not taken out of sequence.

3) A minimum of two weeks notice, prior to the scheduled shipment date, must be given to ------ regarding problems that would require the adjustment of the shipping schedule.

4) A minimum of four containers per week must be shipped with two exceptions that allow for only three containers to be shipped.

5) Ashley may adjust the purchase order dates and will adjust the shipping schedule and bonus accordingly.

6) The quality of goods must be acceptable to ------. A two week period for correction of defects is provided for. Unacceptable quality is caused (sic) for nullification of this agreement. (p. 1 of Request)

The method for determining the bonus will be arrived at prior to importation, and it will be related to performance on specific importations, but it may not be possible to confirm whether or not a bonus will be paid prior to importation. Payment of the bonus is anticipated to be made at the end of each month via wire transfer of funds.

ISSUES:

Whether the transaction value includes the amounts paid to the seller pursuant to the shipping agency bonus program.

LAW AND ANALYSIS:

The preferred method of appraisement is transaction value which is defined by TAA section 402(b)(1) as "the price actually paid or payable for the merchandise when sold for exportation to the United States..." The term "price actually paid or payable" is defined in TAA section 402(b)(4)(A) 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.

It has been the longstanding position of the Customs Service that all moneys paid to the foreign seller are part of the "price actually paid or payable" for the imported merchandise. See Generra Sportswear Co. v. United States, 715 F. Supp. 1101 (CIT 1989); Headquarters Ruling Letter (HRL) 542169 (TAA #6), dated September 18, 1980.

The fact that it may not be possible to determine whether a bonus is to be paid prior to importation is immaterial to the inquiry of whether the bonus payment is to be included in transaction value. Pursuant to TAA section 402(b)(1) the transaction value is the price actually paid or payable for the merchandise "when sold for exportation." In situations in which the price actually paid or payable is to be ascertained according to a formula which is in existence prior to the exportation of the merchandise, the price has been set prior to exportation. Thus, even though it may not be possible at the time of exportation to ascertain an exact dollar amount owed for the goods, a price actually paid or payable has been set. HRL 543189 dated October 19, 1983.

Pursuant to the proposed bonus program, the -% payment is made for the imported merchandise, and by the buyer to the seller. The bonus is to be determined according to a formula which is in existence prior to the exporation of the merchandise. Thus, the bonus payment meets the dutiability requirements of TAA section 402 (b)(4)(A). Therefore, the bonus payment would be part of the "price actually paid or payable" for the merchandise, and would be part of the transaction value of the merchandise.

HOLDING:

The bonus payment under the proposed shipping agency bonus program is for the merchandise, paid by the buyer to the seller and is part of the "price actually paid or payable" for the imported merchandise. Thus the bonus payments will be included in the appraised value of the merchandise.

Sincerely,

John Durant, Director
Commercial Rulings Division

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