Decision of Application for Further Review of Protest No. 0401-4-000375

HQ 543913 February 22, 1988 CLA-2 CO:R:C:V 543913 EK CATEGORY: Valuation District Director of Customs Boston, Massachusetts RE: Decision of Application for Further Review of Protest No. 0401-4-000375 Dear Sir: This protest was filed against your decision in the liquidation of Entry No. 83-308251 dated March 16, 1984. The protesting party is disputing the dutiability of quota charges incurred by the importer. The merchandise was appraised pursuant to transaction value, 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 goods were manufactured by (seller's name) (hereinafter referred to as seller) who is also a quota holder in Hong Kong. When the importer purchases merchandise from the seller, a portion of the seller's quota is provided to the importer as part of the agreed upon purchase price. On occasion, the importer purchases more garments than the seller is authorized to export under its quota allocation. Therefore, the importer provides the seller with quota authorization acquired from unrelated third parties. The importer states that the seller acts as its agent in receiving quota acquired from unrelated third parties. The importer argues that the manufacturer in receiving the quota from the unrelated third party merely acted as an intermediary and that the quota transaction is completely separate from the import transaction. ISSUE: Whether the amount assessed for quota is included in the price actually paid or payable. Whether the exchange rate in effect at the time of exportation is appropriate. - 2 - LAW AND ANALYSIS: The best evidence available in this case as to the identity of the seller and quota holder is the export license issued by the Hong Kong government. That document indicates the seller and quota holder as the same party. Moreover, no transfer documentation or record of payment has been submitted indicating that the importer purchased the quota from a third party. It is our conclusion that the amount assessed for quota is clearly included in the "price actually paid or payable" for the imported merchandise and forms part of transaction value. The transaction is governed by the well-settled proposition that if the payments are made to the seller, or a party related to the seller, then they are included in the transaction value of the merchandise. See, TAA Ruling Nos. 6 and 14. The importer further alleges that if in fact the payment is deemed to be dutiable, then the exchange rate in effect at the time of exportation is appropriate, rather than at the time the quota was purchased. We agree that the exchange rate which governs is that which exists at the time of exportation See, 31 U.S.C. 372. HOLDING: Accordingly, you should deny the protest with respect to the dutiability of the quota; however, the protest should be granted with respect to the exchange rate which should govern. A copy of this decision should be attached to the Form 19, Notice of Action, to be sent to the protestant. Sincerely, John Durant Acting Director, Commercial Rulings Division