VAL CO:R:C:V 544690 ML
District Director
San Francisco, CA 94111
RE: Dutiability of Bonuses Paid For Early Delivery of Imported
Merchandise; Protest No. XXXXX
Dear Sir:
This protest was filed against your appraisement decision in
the liquidation of various entries made by Mitsubishi Heavy
Industries America, Inc., (hereinafter referred to as the
"importer"), the importer of electrical generating equipment.
The merchandise was manufactured in Japan by Mitsubishi Heavy
Industries, (hereinafter referred to as the "seller"). The
merchandise was appraised pursuant to 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:
According to the submission, the imported merchandise
consisted of heavy generating equipment. Counsel for the
importer stated that the purchase contract specified amounts to
be paid for turbine generators, a spare rotor, and various
options. The amounts to be paid were invoiced and paid to the
seller for the merchandise. Additional payments relating to
delivery timing and procedures after the merchandise was
manufactured were separately billed and were made to the seller
in connection with an advanced delivery schedule.
ISSUE:
Whether the manufacturer's performance bonuses are part of
the "price actually paid or payable" for the imported merchandise
appraised under transaction value.
LAW AND ANALYSIS:
The primary method of appraisement is transaction value.
Transaction value is defined as the "price actually paid or
payable for the merchandise when sold for exportation to the
United States", plus certain enumerated additions. This is more
specifically defined in section 402(b)(4)(A) of the TAA, as the
following:
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.
The protestant argues that the bonus payments involved on
the entries in question hinge on the importer's arranging timely
ocean and inland carriage, as opposed to the ability of the
manufacturer to complete the products early. The importer argues
that the additional payments made in connection with the advanced
delivery schedule were separately stated specific amounts
relating to delivery timing occurring after manufacture, were
separately billed taking into consideration events occurring
after exportation, and were not part of the intrinsic value of
the merchandise. Counsel argues such expenses are more
reasonably related to construction and erection costs occurring
in the United States after exportation of the merchandise, which,
although paid to the foreign seller, are not part of transaction
value. Accordingly, these payments, counsel concludes, should
not be added to the invoice amounts.
In Headquarters Ruling Letter (HRL) 543183, dated July 17,
1984, Customs addressed the issue of bonus payments paid by the
importer to the seller for merchandise that exceeded a
contractually agreed upon performance level. In that case, the
parties agreed in the contract, that if the merchandise performed
above a specified level of efficiency, the buyer would pay an
additional amount or "bonus" to the manufacturer for the
merchandise. Customs held with respect to the dutiability of the
bonus amounts paid by the buyer to the seller, according to the
agreement between the parties, the bonuses were part of the total
payment for the imported merchandise and included in the "price
actually paid or payable", consistent with section 402(b)(4)(A)
of the TAA.
In the instant case, the importer has submitted no
documentation to substantiate its claim. The importer stated
only that the additional payments it made related to the delivery
of the imported merchandise. Therefore, based on the information
available to us, we conclude that the bonus payments made by the
buyer to the seller were part of the "price actually paid or
payable" for the imported merchandise and dutiable under
transaction value.
HOLDING:
In accordance with the above, the documentary evidence
presented does not support the importer's claim that the bonuses
paid by the importer to the seller do not form part of the "price
actually paid or payable" for the merchandise when sold for
exportation to the United States, as set forth in section
402(b)(4)(A) of the TAA.
Accordingly, you are hereby directed to deny the protest. A
copy of this decision should be attached to Form 19, Notice of
Action, to be sent to the protestant
Sincerely,
John Durant, Director