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HQ 546343

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May 22, 1996

RR:IT:VA 546343 EK

CATEGORY: VALUATION

Port Director
Chicago, Illinois 60607

RE: Application for Further Review of Protest No. 3901-96-100343; Dutiability of Quota Charges

Dear Sir:

This is in response to the application for further review of the above-referenced protest. The protest was filed on behalf of I.K.L. International, Inc., the importer of record, against your decision in the liquidation of an entry of ladies sweaters.

FACTS:

I.K.L. International purchased sweaters from COVO Knitters and imported them into the United States. The importer utilizes the services of a buying agent in reference to the purchase of the sweaters. The importer indicates that with respect to the purchase of quota, the charges were paid to Gerencia Co., Ltd., the buying agent. The importer claims that the quota charges were added to the invoice by mistake and the charges should not be added to the price actually paid or payable in the determination of transaction value.

ISSUE:

Whether the quota charges in this case are included in the price actually paid or payable as part of the transaction value of the imported merchandise.

LAW AND ANALYSIS:

The preferred method of appraisement is transaction value which is defined by section 402(b)(1) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA, 19 U.S.C. 1401a(b)), as "the price actually paid or payable for the merchandise when sold for exportation to the United States . . . ", plus certain additions specified in section 402(b)(1)(A) through (E). The term "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."

Customs has consistently held that quota payments made to the seller, or a party related to the seller, are part of the price actually paid or payable. If the quota payments are made to a third party, unrelated to the seller, the quota payments are not part of the value of the merchandise.

In a letter dated January 23, 1990, written to U.S. Customs on behalf of I.K.L. International, with regard the bona fides of the agency relationship between IKL and Gerencia, IKL states the following: "Please also be advised that there is also an overlapping of familial interest between Gerencia and Covo Knitters Ltd. (which means that the importer and seller (Covo) are also related)." While, there is no mention of this relationship in the protest application, the file does contain an invoice from the seller to the buying agent with an amount for quota included. The importer has not provided any documentation supporting its position that the quota payments are made to a third party, unrelated to the seller. The quota charges are either paid directly to the seller of the imported merchandise, through the buying agent, or the quota charges are remitted to a party related to the seller (the buying agent). Either way, the quota charges are part of the price actually paid or payable for the imported sweaters. Thus, it is our conclusion that insufficient evidence has been provided to indicate that Customs incorrectly appraised the merchandise.

HOLDING:

You are directed to DENY the protest in full. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised protest Directive, this decision should be mailed by your office to the Protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with this decision must be accomplished prior to mailing of this decision. Sixty days from the date of the decision, the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

Acting Director,

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