HQ 0544739 - I.A. Request 28/91; currency conversion rate in effect; date of exportation vs. date of payment - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1993 HQ Rulings > HQ 0544687 - HQ 0545117 > HQ 0544739

HQ 544739

January 21, 1992

VAL CO:R:C:V 544739 DPS

CATEGORY: VALUATION

Area Director
New York Seaport

RE: I.A. Request 28/91; currency conversion rate in effect; date of exportation vs. date of payment

Dear Madam:

This is in response to your memorandum (CLA-2- 64:S:N:N3D-347-167) and a memorandum from the Assistant Area Director, New York Seaport (CLA-2-S:C:TOB:206/109) dated May 6, 1991, requesting internal advice on transactions involving Harbor Footwear Group, Ltd. with regard to the dutiability of currency fluctuations between the time of exportation and the time of payment. Harbor Footwear Group, Ltd. (the importer) initiated this I.A. request through its attorney, Richard C. Katz.

FACTS:

Harbor Footwear Group, Ltd. is an independent U.S. importer of mens' footwear. The company sources product from various countries, including Taiwan, Brazil, Italy and Spain. This I.A. request only concerns shipments from Spain. Counsel states that the importer is not "related" to any of the Spanish manufacturer/exporters involved in these transactions.

Prior to importation, the importer places orders for shoes with various factories in Spain at prices denominated in pesetas. Several months after these orders are placed the shoes are shipped to the United States. At the time of entry, the importer presents an invoice in Spanish pesetas that is converted to U.S. dollars at the official rate prevailing at the date of exportation, and estimated duties are deposited thereon. The importer is not required to pay its Spanish vendors until 60 days after the date of importation. At the time of payment, the importer sends a check in U.S. dollars to its Spanish vendors based on the current exchange rate for Spanish pesetas. Upon receipt, the Spanish factory converts the U.S. dollar check to pesetas. Invariably, the peseta amount received by the factory differs slightly from the peseta invoice amount. Any differences are accumulated over time and settled with the importer so that the factories ultimately receive the exact amount of pesetas provided on their commercial invoices.

The importer acknowledges that as a practical matter, it could pay the Spanish factories by directing its bank to make a wire transfer of pesetas in the amount of each commercial invoice at the time of required payment, i.e., 60 days after importation. These payments would always match, in pesetas, the amount of each commercial invoice. However, because of various administrative considerations, Harbor Footwear Group, Ltd. chose to pay the factories by issuing U.S. dollar checks in an amount calculated to convert into the peseta invoice amount at the time of payment.

The importer acknowledges that the amount of U.S. dollars ultimately paid by the importer to settle the denominated invoice 60 days after importation may differ slightly from the amount of U.S. dollars declared at the time of entry. The importer states that the differential is entirely a result of currency fluctuation after importation, and should have no impact on Customs valuation. It takes the position that the price actually paid or payable in U.S. dollars when the goods are sold for exportation to the U.S. is the peseta price converted to U.S. dollars as of the date of exportation. Your office takes the position that the price actually paid or payable is the price on the date of payment. Your office also notes that the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (19 U.S.C. 1401a(b); TAA) allows for inclusion in transaction value of increases in the price which occur after the date of importation but does not allow for rebates which occur after the date of importation.

ISSUE:

Whether discrepancies between the U.S. dollar entered values and the U.S. dollar amounts ultimately paid by the importer to the seller, due entirely to currency fluctuation between the time of export and the time of payment, are to be considered in determining the price actually paid or payable.

LAW & ANALYSIS:

For the purpose of this response, we assume that transaction value is the proper basis of appraisement. Transaction value, the preferred method of appraisement is defined in section 402(b)(1) of the TAA as the "price actually paid or payable for the merchandise" plus five enumerated statutory additions. As stated in 402(b)(4)(A):

The term "price actually paid or payable" means 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.

In the subject transactions, the price actually paid or payable is always a peseta denominated price. At the time that orders are made, at the time that the goods are shipped and at the time that the goods are finally paid for, the price is always the peseta price negotiated by the parties and documented by the accompanying commercial invoice. The payments are in U.S. dollars. No contract was presented indicating a fixed rate of exchange nor was information presented indicating agreement to change the price should currency fluctuations occur. Counsel indicated in a meeting with Headquarters' personnel that no such contract existed between the parties.

In previous Headquarters rulings involving currency conversion, Customs has held that where a purchaser has paid or intends to pay for imported merchandise in foreign currency, that amount, converted to U.S. dollars in accordance with sections 159.31-159.38 of the Customs Regulations (19 CFR 159.31 to 19 CFR 159.38), constitutes the price actually paid or payable for the merchandise. See Headquarters Ruling Letter (HRL) 543437, dated May 17, 1985.

Here, we know that the payments by the importer are in U.S. dollars, the only question is whether to use, for Customs purposes, the currency conversion rate in effect at the time of exportation or 60 days later, at the time of payment. Customs Statement of Administrative Action provides that the Customs Service will use the date of exportation for currency conversion purposes, in accordance with Section 522 of the Tariff Act of 1930, as amended (31 U.S.C. 5151, formerly 31 U.S.C. 372). 159.32, Customs Regulations, states that the date of exportation for currency conversion shall be fixed in accordance with 152.1(c) of the Customs Regulations. That section provides:

`Date of exportation,' or the `time of exportation' referred to is section 402, Tariff Act of 1930, as amended (19 U.S.C. 1401a), means the actual date the merchandise finally leaves the country of exportation for the United States. If no positive evidence is at hand as to the actual date of exportation, the district director shall ascertain or estimate the date of exportation by all reasonable ways and means in his power, and in so doing may consider dates on bills of lading, invoices, and other information available to him.

In accordance with the Customs Regulations and the Statement of Administrative Action, and absent an agreement between the parties to adjust the price by reason of currency conversion rate fluctuations, the appropriate rate of currency conversion for the subject importer, is the rate in effect on the date of exportation, which date shall be determined by the district director by all reasonable ways and means.

HOLDING:

The price actually paid or payable between the importer and the seller is the peseta price presented on the invoice at the time the merchandise is entered, converted to U.S. dollars in accordance with the appropriate currency conversion rate in effect on the date of exportation, as determined by the district director in accordance with sections 159.31-159.38 of the Customs Regulations.

Sincerely,

John Durant, Director

Previous Ruling Next Ruling