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HQ 547546

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January 18, 2000

RR:IT: VA 547546 LOR

CATEGORY: VALUATION

Mr. Bob King
Customs Manager
International Logistics
Meijer, Inc.
2725 Walker Avenue, NW
Grand Rapids, Michigan 94544

RE: Request for ruling on the proper currency conversion rate to be reported for transaction value.

Dear Mr. King:

This is in response to your October 13, 1999, letter on behalf of Meijer, Inc., (hereinafter “Meijer”) requesting a ruling on the proper currency conversion rate to be reported for trans-action value. In your ruling request, you sought confidential treatment regarding certain business information contained within your attachments. Pursuant to § 177.2(b)(7), Customs Regulations (19 C.F.R. §177.2(b)(7)), we grant your request for confidentiality. This ruling omits specific reference to this information.

FACTS

According to your submission, Meijer sources general merchandise from various countries including Italy and Spain in unrelated party transactions. The transactions are placed by purchase order in estimated U.S. Dollars. The Letter of Credit and the invoice, however, are established in either Lira or Peseta, depending on whether the transaction involves Italy or Spain. When the vendor has delivered the product to Meijer’s freight forwarder, the vendor presents documentation to a specified bank to obtain payment. The bank obtains the daily exchange rate to assign to the transaction, notifies Meijer of the Lira or Peseta draw amount, the exchange rate assigned to the transaction and the U.S. Dollar equivalent. You also state that payment is made to the vendor before the shipment is exported or before entry of the shipment with U.S. Customs in approximately 95% of transactions and that payment is made after entry in approximately 5% of transactions. During a telephone conversation on November 29, 1999, you stated that there is no written agreement between Meijer and the Italian and Spanish companies at issue that establishes the exchange rate to be used for assessing the transaction value for these shipments.

ISSUE:

Whether the currency exchange should be completed when payment is made or pursuant to § 159.31-38. Customs Regulations (19 C.F.R. § 159.31-38).

LAW AND ANALYSIS:

As you are aware, the preferred method of appraising imported merchandise is transaction value which is defined in § 402(b)(1) of the Tariff Act of 1930, as amended by the Trade Agreement Act of 1979 (TAA; 19 U.S.C. § 1401a(b)). This section provides, in pertinent part, that the transaction value of the imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to the United States plus amounts for certain items enumerated in § 403(b)(1) of the TAA. In this case, there is no dispute that transaction value is the appropriate basis of appraisement.

The Statement of Administrative Action (“SAA”), specifically adopted by Congress contains the following language further explaining the term “price actually paid or payable”:

The price actually paid or payable shall be considered without regard to its method of derivation. It may be the result of discounts or increases, or may be arrived at through some formula, or may be the result of negotiations.

SAA, H.R. Doc. No 153, Pt 11, 96th Cong., 1st Sess. (1979), reprinted in Department of the Treasury, Customs Valuation under the Trade Agreements Act of 1979 (at 1981), at 47.

In determining the price actually paid or payable, it is necessary to ascertain whether payment is made in U.S. or foreign currency. If at the time of entry, the purchaser has paid, or intends to pay for a shipment in U.S. dollars, then that amount constitutes the price actually paid or payable. If the purchaser has paid or intends to pay in foreign currency, the invoice amount converted to U.S. dollars, constitutes the price actually paid or payable. See HRL 543437 dated May 17, 1985; HRL 544754 dated October 24, 1991, and HRL 544739 dated January 21, 1992. Pursuant to the Letter of Credit instructions, Meijer, though a financial institution, has paid the peseta/lira invoiced amount in the relevant foreign currency. Thus, the price actually paid or payable is the foreign currency converted to U.S. dollars.

§ 159.32, Customs Regulations (19 C.F.R. § 159.32) states that the date of exportation for currency conversion shall be fixed in accordance with 19 C.F.R. § 152.1. 19 CFR §152.1 provides: the date of exportation as the actual date the merchandise finally leaves the country of exportation for the United States. Additionally, pursuant to § 159.34(a), Customs publishes a “Certified Quarterly Rate” to be used for 32 countries including Italy and Spain. The “Certified Quarterly Rate" is to be used for Customs purposes for any date of exportation within the quarter, except under the circumstances enumerated in §§ 159.34(b)(1) and 159.34(b)(2).

Based on the information presented, the currency exchange rate to be used on entries in transactions where payment is made to the vendor either prior to or after entry of the shipment, is the rate of exchange in effect on the date of exportation. In this case, where there is no agreement establishing the exchange rate to be used for Customs purposes between the U.S. importer and the Italian and Spanish vendors, § 159.34(a) controls and the applicable exchange rate would be the “Certified Quarterly Rate.”

HOLDING

Based on the information presented, the currency exchange rate to be used is the rate of exchange in effect on the date of export. 19 C.F.R. § 159.34(a) controls and the applicable exchange rate would be the “Certified Quarterly Rate.”

Sincerely,

Thomas L. Lobred
Chief, Value Branch

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