HQ 544031: Dutiability of Payments

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                                        HQ 544031

                                        January 19, 1988

          CLA-2 CO:R:C:V  544031 EK

          CATEGORY:  Valuation

          Robert L. Eisen, Esq.
          Coudert Brothers
          200 Park Avenue
          New York, New York  10166

          RE:  Dutiability of Payments

          Dear Mr. Eisen:

                This is in response to your letter of September 23, 1987,
          requesting a ruling as to the dutiability of payments made by
          your client (importer) to a foreign seller of imported
          merchandise.  As discussed in our meeting of January 15, 1988,
          pursuant to section 177.7(a), Customs Regulations [19 CFR
          177.7(a)], no ruling letter may be issued in regard to a
          completed transaction.  The subject importations in question with
          respect to your request have in fact been completed; therefore,
          we can not issue a binding ruling.  However, we will provide you
          with an informational letter regarding the issue.

          FACTS:

                You state that the importer has been purchasing merchandise
          produced in France and sold to the importer by a related company.
          The importer has been a licensee of a particular trademark.
          Recently, the licensor of the importer's trademark imposed a
          condition upon the renewal of the license which required all
          merchandise of the type imported to be produced in the United
          States.  The importer agreed to this condition.  You state that
          all pending contracts with the foreign seller have been fully
          honored; however, no further orders will be placed with the
          seller.  As a result, the foreign seller has been forced to close
          its factory.  The owner of the foreign seller (also the indirect
          owner of the importer) is responsible for providing compensation
          and benefits to the workers in France who have been terminated as
          a result of the factory closing.  In turn, the owner has
          negotiated with the importer an agreement whereby the importer
          will contribute approximately $2 million in compensation to the
          foreign seller as a result of the company's decision not to place
          new orders with the seller.  
















                                  - 2 -

                It is your position that the payment made by the importer
          to the foreign seller is not to be included in the "price
          actually paid or payable" of previously imported merchandise
          (section 402(b) of the Tariff Act of 1930, as amended by the
          Trade Agreements Act of 1979 (TAA)).  For purposes of this ruling
          request, we assume that transaction value is applicable in
          appraising the merchandise, given the fact that the parties are
          related within the meaning of section 402(g) of the TAA.

          ISSUE:

                Whether the payment at issue is to be included in the
          "price actually paid or payable" of previously imported
          merchandise.

          LAW AND ANALYSIS:

                In Headquarters Ruling No. 543943 dated December 8, 1987,
          an importer agreed to reimburse a foreign seller for lost sales
          and profits due to a cancellation of a six month purchase
          requirement in the original contract.  Subsequent to the payment
          of the termination fee, the importer neither purchased nor
          imported the product from the manufacturer in question.  In that
          case, we ruled that the "price actually paid or payable" for
          merchandise imported prior to the payment of the termination fee
          does not include the amount representing the termination fee.  If
          charges are incurred for termination of a contract, and
          merchandise is not imported to the United States as a result of
          the terminated contract, then payments made to the seller are not
          to be included in the "price actually paid or payable."  See,
          Headquarters Ruling No. 543770 dated February 10, 1987.

          HOLDING:

                The situation presented by the importer in this case is
          analogous to those cited above.  The only difference is that the
          importer is not breaching an ongoing contract and in fact has
          fully honored all existing contracts.  This fact does not alter
          the conclusion that the payments are properly excluded from the
          "price actually paid or payable" for merchandise imported prior
          to the payment.

                                        Sincerely,




                                        John Durant
                                        Acting Director, Commercial
                                        Rulings Division