HQ 544482: Application for Further Review of Protest No. -------------

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 544482
                              August 7, 1990

VAL CO:R:C:V  544482 ML

CATEGORY:  Valuation

District Director
Los Angeles, California

RE:  Application for Further Review of Protest
     No. -------------

Dear Sir:

     This protest was filed against your decision in the
liquidation of various entries made by ----------------------- of
California, Inc., a distributor of --------- Vodka.  The
merchandise was manufactured in ------- by ----------.  The
merchandise was appraised 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)).

FACTS:

     The ---------- Corporation is the exclusive importer of ----
----- Vodka into the United States (hereinafter referred to as
the "importer").  -------------------------------------, Inc.,
an unrelated party, is one of the importer's appointed
distributors (hereinafter referred to as the "distributor").  The
vodka was appraised at the invoice prices less an 8% discount
from the FOB price which was allowed by the manufacturer as an
advertising allowance.  A minimum amount to be expended on
advertising is specifically enumerated in the contract between
the manufacturer and the importer.  The importer claims the
advertising allowance is a general expense of the manufacturer
and as such, is includable in the price actually paid or payable
for appraisement under transaction value.  With the addition of
an 8% advertising allowance, the imported vodka would qualify for
a significantly lower duty rate.

     The protestant is the distributor of the vodka for which the
importer has exclusive rights to importation.  The distributor
paid $53.22 for the 80 proof 1 liter size and $42.25 for the
750ML size.  All orders by the distributor were placed directly
with the importer and not the manufacturer.  Title and ownership
rights were transferred to the distributor at FOB shipping point,
with the distributor responsible for overseas insurance.

ISSUE:

     Whether the manufacturer's advertising allowances are part
of the price actually paid or payable for imported merchandise
valued under transaction value?

LAW AND ANALYSIS:

     The primary basis of appraisement is transaction value.
Transaction value is defined as the "price actually paid or
payable" for imported merchandise when sold for exportation to
the United States, plus certain enumerated additions.  This is
more specifically defined in section 402(b)(4)(A) of the Trade
Agreements Act of 1979, (TAA; 19 U.S.C. 1401a(B)(4)(A)), as the
following:

          The term "price actually paid or payable" means the
          total payment (whether direct or indirect, and
          exclusive of any costs, charges, or expenses incurred
          for transportation, insurance, and related services
          incident to the international shipment of the
          merchandise from the country of exportation to the
          place of importation in the United States) made, or to
          be made, for imported merchandise by the buyer to, or
          for the benefit of, the seller.

     The protestant argues that an advertising cost incurred by
the importer is part of the "price actually paid or payable" for
the imported merchandise.  He argues that this cost was a
general business expense of the manufacturer and was passed
along to the importer as a condition of sale.  We do not agree.
Our position has consistently been that there is no authority
under the above-cited definition to impute items to the "price
actually paid or payable."  An item is either part of the price
or it is not.  In this regard, section 152.103(a)(2), Customs
Regulations (19 CFR 152.103(A)(2)), provides in relevant part:

          "Activities such as advertising, undertaken by the
          buyer on his own account, other than those for which an
          adjustment is provided in section 152.103(b), will not
          be considered an indirect payment to the seller though
          they may benefit the seller.  The costs of those
          activities will not be added to the price actually paid
          or payable in determining the customs value of the
          imported merchandise."  (emphasis added)

     Accordingly, no legal authority exists to treat these
advertising expenses as part of the "price actually paid or
payable" for the imported merchandise.

HOLDING:

     In light of the foregoing, it is our conclusion that other
than those items which are part of the "price actually paid or
payable", no authority exists to make any additional inclusions
to the cost of the merchandise.

     You are directed to deny this protest.  A copy of this
decision should be attached to Form 19, Notice of Action, to be
sent to the protestant.

                                   Sincerely,


                                   John Durant, Director
                                   Commercial Rulings Division