Transaction value; discount; price actually paid or payable

HQ H090177 November 26, 2010 OT:RR:CTF:VS H090177 KSG Lisa Waller BDG International Inc. 840 Tollgate Road Elgin Ill 60123 Re: Transaction value; discount; price actually paid or payable Dear Ms. Waller: This is in response to your letter dated January 4, 2010, requesting a binding ruling on behalf of Hoffmaster Group Inc., to determine whether an early payment discount may be taken into account to determine the transaction value of certain imported goods. FACTS: Hoffmaster states that it negotiated with its unrelated vendors prior to the importation of the goods that payment of vendor invoices would be made within 60 days. If the invoices were paid within 30 days, there would be a 2% discount from the catalog price. You submitted two sample invoices that illustrate that the invoices offer a 2% discount if paid within 30 days. Exhibit A invoice lists 6 columns for each good: the order number, a description, quantity, U.S. dollar price, discount and amount (which is the discounted price). Exhibit B invoice lists 5 columns: marks and numbers, quantity total, description (which includes the classification, country of origin, delivery address, consignee and foreign manufacturer), price per unit, and amount. At the bottom of the Exhibit B invoice it shows a dollar amount and then a line “-2%” and the subtracted amount. Hoffmaster generally pays within 30 days so it usually receives the 2% discount. We assume for the purposes of this ruling that transaction value is the appropriate basis of appraisement. ISSUE: Whether the early payment discount, if negotiated prior to exportation of the goods and utilized by the importer, should be considered in determining the price actually paid or payable of the imported merchandise? LAW AND ANALYSIS: Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (19 U.S.C. 1401a). The preferred method of appraisement is transaction value, which is defined as the ”price actually paid or payable for the merchandise when sold for exportation to the United States,” plus certain enumerated additions, including the value apportioned as appropriate, of any assist. 19 U.S.C. 1401a(b)(1)(C). For the purposes of this decision, we assume that transaction value is the proper basis of appraisement. The provision set forth at 19 U.S.C. 1401a(b)(4) provides as follows: 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. Any rebate of, or other decrease in, the price actually paid or payable that is made or otherwise effected between the buyer and seller after the date of importation of the merchandise into the U.S. shall be disregarded in determining the transaction value under paragraph (1). U.S. Customs and Border Protection (“CBP”) ruled in Headquarters Ruling Letter (“HRL”) H021424, dated February 3, 2009, that an early payment discount negotiated prior to exportation of the goods to the U.S. and used by the importer may be taken into account in determining the price actually paid or payable of the imported merchandise. In HRL 547144, dated November 20, 1998, CBP stated that a discounted price agreed to and in effect prior to importation would constitute the price actually paid or payable and required that the documentary evidence be available to CBP at the time of entry. This case is similar to H021424. The two sample invoices submitted both demonstrate that an agreement for an early payment discount of 2% is agreed to prior to importation of the merchandise into the U.S. Since the early payment discount is negotiated and agreed to prior to importation, the discount may be considered in determining the price actually paid or payable for the imported goods assuming that Hoffmaster can demonstrate that it received the early payment discount in the particular transaction and that an invoice similar to Exhibit A or Exhibit B is submitted to CBP at the time of entry. Accordingly, we find that Hoffmaster may take into account the early payment discount it negotiates with the vendor prior to exportation in determining the price actually paid or payable of the imported merchandise if it can demonstrate at the time of entry that it was in effect prior to importation and that it received the discount for the imported goods. HOLDING: Hoffmaster may take into account the early payment discount it negotiates with the vendor prior to exportation in determining the price actually paid or payable of the imported merchandise if it submits to CBP at entry an invoice similar to Exhibit A or Exhibit B that shows agreement on an early payment discount prior to importation and that the early payment was made. A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs official handling the transaction. Sincerely, Monika R. Brenner Chief, Valuation & Special Programs Branch