Inclusion of "finishing" costs within price actually paid or payable for merchandise; 19 U.S.C. 1401a(b)

HQ 545490 August 31, 1994 VAL CO:R:C:V 545490 LPF CATEGORY: Valuation Kenneth J. Nunnekamp, Esq. Finnegan, Henderson, Farabow, Garrett & Dunner 1300 I Street, NW Washington, D.C. 20005-3315 RE: Inclusion of "finishing" costs within price actually paid or payable for merchandise; 19 U.S.C. 1401a(b) Dear Mr. Nunnekamp: This is in response to your letter of December 6, 1993, on behalf of Lavanderia Candida, S.r.L. and Golden Trade, S.r.L., in which you request a ruling concerning the valuation of jeans and other denim products imported from Italy. We regret the delay in responding. FACTS: Golden Trade, S.r.L. ("Golden Trade") and its subsidiary, Lavanderia Candida, S.r.L. ("Candida"), intend to sell jeans and other denim products to Sun Apparel, Inc. ("Sun Apparel") of El Paso, TX. Candida performs what are described as "finishing" services on the goods, including one or more of the following: labeling, pressing, acid wash treatment, stone wash treatment, bleaching, softening, quality control, and delivery. Golden Trade wishes to invoice Sun Apparel separately for the imported denim goods and the "finishing" services performed by Candida. It is Golden Trade's position that such "finishing" services may not be subject to duties and may be invoiced separately. ISSUE: Whether "finishing" services performed by a subsidiary are part of the price actually paid or payable for the imported merchandise. LAW AND ANALYSIS: The preferred method of appraisement is transaction value pursuant to section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA), codified at 19 U.S.C. 1401a. Section 402(b)(1) of the TAA provides, in pertinent part, -2- that the transaction value of imported merchandise is the "price actually paid or payable for the merchandise when sold for exportation to the United States" plus enumerated statutory additions. The "price actually paid or payable" is defined in section 402(b)(4)(A) of the TAA as 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...) made, or to be made, for the imported merchandise by the buyer to, or for the benefit of, the seller." It has been Customs position that all monies paid to the seller, or a party related to the seller, are part of the price actually paid or payable for the merchandise under transaction value. See Generra Sportswear Co. v. United States, 8 CAFC 132, 905 F.2d 377 (1990) and Headquarters Ruling Letter 557331, issued September 9, 1993. As no information has been presented indicating that such fees have been paid to a party other than the seller or a party related to the seller, the payments made for the enumerated "finishing" operations are part of the price actually paid or payable. Customs has no legal authority to exclude these payments from the price paid or payable for the merchandise. Furthermore, because we do not have information regarding the "delivery" of the merchandise, we are unable, at this time, to determine whether the concerned "delivery" costs may be excluded from the price paid or payable for the merchandise. HOLDING: Based on the information provided, the enumerated "finishing" services performed by the subsidiary are part of the price actually paid or payable for the imported merchandise. Sincerely, John Durant, Director Commercial Rulings Division