Prospective Ruling Request

HQ 544230 December 22, 1988 CLA-2 CO:R:C:V 544230 EK CATEGORY: Valuation Ronald W. Gerdes, Esquire Sandler & Travis, P.A. 1120 Nineteenth Street, N.W. Washington, D.C. 20036 RE: Prospective Ruling Request Dear Mr. Gerdes: This is in response to your letters of August 11, 1988, and November 4, 1988, requesting a ruling as to the proper valuation of merchandise imported by your client (hereinafter referred to as importer). FACTS: You state that the importer currently imports brassieres assembled from American components in El Salvador by a related company. The merchandise is entered under item 807.00, Tariff Schedules of the United States, and is 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)). In the near future, you indicate that the importer will file a Transportation and Exportation Entry for the merchandise upon its arrival in New Orleans. The goods will then be shipped through McAllen, Texas, to a related party in Mexico. There the merchandise will be packaged for retail sale. You have submitted samples of the type of packing which will occur in Mexico. You state that the merchandise is assembled specifically for the United States market and that the importer only sells the - 2 - merchandise in the United States. All parties intend the merchandise to be shipped to the United States and diversion of the merchandise is not even a reasonable possibility. The cost of the packing will be paid separately to the Mexican related party and not the seller of the merchandise. The amount reflects approximately 2 - 5% of the current transaction value. ISSUE: Whether the sale for exportation to the United States for purposes of determining transaction value is between the importer and the El Salvadoran related party assembler and whether the cost of the packing is added to the price actually paid or payable. LAW AND ANALYSIS: The preferred method of appraisement, transaction value, is defined as the "price actually paid or payable" for merchandise when sold for exportation to the United States, plus certain additions including packing costs incurred by the buyer. For purposes of this response, we are assuming that transaction value is applicable in appraising the merchandise and that the relationship between the parties does not influence the price actually paid or payable. The concerned appraising officer has the responsibility of making the determination as to whether the price has been influenced by the relationship. With respect to the instant situation, the sale for exportation to the United States for purposes of determining transaction value occurs between the El Salvadoran related party seller and the importer. The packing operation in Mexico does not alter that conclusion. The "sale" for exportation to the United States occurs at the time the merchandise is sold from El Salvador. Please note that in Headquarters Ruling No. 555088 dated October 17, 1988, this office ruled that the entry and exportation of the assembled merchandise pursuant to a transportation and exportation bond does not preclude the application of item 807.00, TSUS, to the merchandise upon a subsequent importation. - 3 - Section 402(b)(1)(A) of the TAA requires that an addition to the price actually paid or payable be made for "the packing costs incurred by the buyer with respect to the imported merchandise. Section 402(h)(3) of the TAA defines packing costs as "the cost of all containers and coverings of whatever nature and of packing, whether for labor or materials, used in placing merchandise in condition, packed ready for shipment to the United States." Under the facts presented, the retail packing operation in Mexico in included in the statutory definition of packing costs and must be added to the price actually paid or payable. The imported merchandise in this case is not packed ready for shipment to the United States until the merchandise has been packed in Mexico. HOLDING: In view of the foregoing, it is our conclusion that transaction value pursuant to section 402(b) of the TAA is represented by the "price actually paid or payable" by the importer to the El Salvadoran seller. The packing costs incurred by the importer and paid to the Mexican related party are to be added to the "price actually paid or payable." Sincerely, John Durant, Director, Commercial Rulings Division