HQ 544143: Ruling Request Regarding Dutiability of Payments Made for Consultation Services

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 544143
                                    July 5, 1988


          CLA-2 CO:R:CV:V  544143 EK

          CATEGORY:  Valuation

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

          RE:  Ruling Request Regarding Dutiability of Payments
               Made for Consultation Services

          Dear Mr. Eisen:

                This is in response to your letter of January 29, 1988,
          requesting a ruling as to the dutiability of certain payments
          made by your client (importer), to an unrelated Hong Kong company
          for consultation services in locating quota holding companies.
          You state that this request relates to prospective transactions.


          FACTS:

                You state that due to the importer's import volume and
          restrictions of articles of apparel from Taiwan, a substantial
          amount of quota allocations is necessary in order to import
          Taiwanese merchandise.  In order to facilitate this endeavor, the
          importer has commissioned the services of an unrelated Hong Kong
          company (hereinafter referred to as HT) to consult with the
          importer as to which manufacturers have available quota.

                Subsequent to locating a manufacturer to produce the
          imported merchandise, HT will contact another Taiwanese company
          (hereinafter referred to as company A) and instruct it to
          transfer the necessary quota sufficient to cover the importer's
          purchase order.  You indicate that HT and company A are related
          parties.  Company A will transfer the quota to the manufacturer
          designated by HT, and the manufacturer will pay the costs
          incurred in connection with the quota transfer.  




















                                        - 2 -


                The importer and the manufacturer then agree upon a price
          for the merchandise and the purchase order is placed.  Payment
          for the imported merchandise will be made by the importer
          directly to the manufacturer once the goods are shipped.

                In exchange for HT's services, the importer will pay a
          fixed consultation fee equal to $10 per dozen garments shipped.
          The payments are to be made once per season and are made directly
          to HT.  You state that the payments are not required as a
          condition to exportation of the merchandise and that the payments
          made by the importer to the manufacturers are entirely separate
          from the payments made to HT.  You indicate that HT is not
          related to any of the companies that will manufacture the
          imported merchandise.


          ISSUE:

                Whether the payments made by the importer to the unrelated
          Hong Kong company (HT) are to be included in the transaction
          value of the imported merchandise pursuant to section 402(b) of
          the Tariff Act of 1930, as amended by the Trade Agreements Act of
          1979 (TAA; 19 U.S.C. 1401a(b)).


          LAW AND ANALYSIS:

                For purposes of this ruling request, we are assuming that
          transaction value, the preferred method of appraisement, is
          applicable in appraising the imported merchandise.  Transaction
          value is defined in section 402(b) of the TAA as "the price
          actually paid or payable" for the merchandise when sold for
          exportation to the United States.  The phrase "the price actually
          paid or payable" is further defined in 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.

          Section 402(b)(1), in defining transaction value, enumerates
          certain additions to be made to the "price actually paid or
          payable."  However, none of these are relevant for purposes of
          this request, other than to indicate that the fees indicated by
          the importer are not one of the additions to transaction value.















                                        - 3 -


                The payments in question are not made to the seller of the
          imported merchandise.  The payments are made pursuant to an
          arrangement which is separate and apart from the transactions
          vis-a-vis the manufacturers of the imported goods.  As indicated
          above, the payments are not tied to particular shipments of
          merchandise but rather, are made once every season.


          HOLDING:

                In view of the foregoing, the payments made by the importer
          to HT in connection with services rendered in locating sources of
          quota are not to be added to the "price actually paid or
          payable," assuming the applicability of transaction value.

                                        Sincerely,




                                        John Durant
                                        Acting Director, Commercial
                                        Rulings Division