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