HQ 544264: Request for Prospective Ruling on Dutiability of Amounts Paid to a Foreign Quasi-Governmental Organization

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 544264


                                  February 24, 1989


          CLA-2  CO:R:CV:V  544264 VLB

          CATEGORY:  Valuation


          Francis W. Foote, Esquire
          Siegel, Mandell & Davidson, P.C.
          655 Fifteenth Street, N.W.
          Suite 300
          Washington, D.C.  20005

          RE:  Request for Prospective Ruling on Dutiability of Amounts
               Paid to a Foreign Quasi-Governmental Organization


          Dear Mr. Foote:

                This is in response to your letter dated November 8, 1988,
          requesting a ruling on the dutiability of payments made by ------
          -------------------- (hereinafter referred to as the "importer")
          to a foreign quasi-governmental organization (hereinafter
          referred to as the "organization").


          FACTS:

                The importer is proposing to use the services of a foreign
          quasi-governmental organization, located in New York, that
          advises American importers on the sourcing of products in the
          People's Republic of China (PRC).  The organization provides the
          following services:

                (1)  Economic analyses of market conditions in the PRC;

                (2)  Assistance in locating supply sources; and

                (3)  Advice on the availability of merchandise for shipment
                     to the U.S.

                You explain that in consideration for these services, the
          importer will agree to make monthly payments to defray a portion
          of the organization's operating expenses.  You emphasize that
          although the importer will make payments on a regular basis, the
          organization will render services on an intermittent, as-needed
          basis and the services may never result in the importation of
          merchandise into the U.S.












                                        - 2 -

                In addition, you state that the importer will choose the
          factories that it will deal with, and will order merchandise
          directly from the factories.  The importer and the factory
          personnel will negotiate directly the price, the delivery terms
          and other relevant details.

                  Finally, you allege that under this scenario the
          importer's payments to the organization should not be included in
          the transaction value of the merchandise.  You base your
          conclusion on the argument that the payments are not selling
          commissions or assists.  Rather, you contend that the payments
          "are in the nature of a retainer, intended to facilitate access
          to information as needed, and thus cannot be directly attributed
          either to the production or purchase of specific merchandise in
          the PRC or to the importation of specific merchandise into the
          U.S."


          ISSUE:

                Whether the payments to the foreign quasi-governmental
          organization are dutiable under transaction value.


          LAW AND ANALYSIS:

                Transaction value, the preferred method of appraisement, is
          defined in section 402(b) of the Tariff Act of 1930, as amended
          by the Trade Agreements Act of 1979 (TAA) as "the price actually
          paid or payable for the merchandise when sold for exportation to
          the United States," plus amounts for items enumerated in section
          402(b)(1) of the TAA.  The enumerated amounts include the value
          of packing costs, selling commissions, assists, royalty or
          license fees and proceeds of any subsequent resale.

                The "price actually paid or payable" is defined in section
          402(b)(4)(A) of the TAA as:

                . . . the total payment (whether direct of indirect. . .)
                made, or to be made for imported merchandise by the buyer
                to, or for the benefit of, the seller.

                For purposes of this ruling, we will assume that
          transaction value is the proper method of appraisement.

                You contend that the importer's payments to the
          organization are not selling commissions or assists.  You















                                        - 3 -
          cite Headquarters ruling 542605, dated January 5, 1982, to
          support your position.  In that case, the importer, a wholly-
          owned U.S. subsidiary of a foreign manufacturer paid outside
          consulting firms to conduct consumer market surveys in the U.S.
          We held that the costs were general expenses incurred by the
          importer that were not required for the perfection of the
          imported merchandise.  Therefore, the amounts were not dutiable
          assists.

                In the same case, the importer was monitering governmental
          regulatory activities that might affect the production,
          distribution or sale or the product that it imported.  In
          addition, the importer's personnel attended meetings of a non-
          profit professional organization that intended to play a role in
          influencing the direction of governmental regulation.  We again
          held that these activities were general expenses incurred by the
          importer and were not involved with the perfection of the
          merchandise.  Thus, the costs were not dutiable.

                Similarly, in the present case, the services performed by
          the organization are not required for the perfection of the
          imported merchandise.  Moreover, the payments to the organization
          are not for specific imported merchandise or for the benefit of
          the seller.  Rather, the payments appear to be general expenses
          incurred by the importer.  Therefore, based on the evidence
          provided, we hold that the payments are not dutiable under
          transaction value.



          HOLDING:

                The importer's payments to the foreign quasi-governmental
          organization are not dutiable under transaction value.



                                        Sincerely,



                                        John Durant, Director,
                                        Commercial Rulings Division