VAL CO:R:C:V 544739 DPS
Area Director
New York Seaport
RE: I.A. Request 28/91; currency conversion rate in effect;
date of exportation vs. date of payment
Dear Madam:
This is in response to your memorandum (CLA-2-
64:S:N:N3D-347-167) and a memorandum from the Assistant Area
Director, New York Seaport (CLA-2-S:C:TOB:206/109) dated May
6, 1991, requesting internal advice on transactions involving
Harbor Footwear Group, Ltd. with regard to the dutiability of
currency fluctuations between the time of exportation and the
time of payment. Harbor Footwear Group, Ltd. (the importer)
initiated this I.A. request through its attorney, Richard C.
Katz.
FACTS:
Harbor Footwear Group, Ltd. is an independent U.S.
importer of mens' footwear. The company sources product from
various countries, including Taiwan, Brazil, Italy and Spain.
This I.A. request only concerns shipments from Spain.
Counsel states that the importer is not "related" to any of
the Spanish manufacturer/exporters involved in these
transactions.
Prior to importation, the importer places orders for
shoes with various factories in Spain at prices denominated
in pesetas. Several months after these orders are placed the
shoes are shipped to the United States. At the time of
entry, the importer presents an invoice in Spanish pesetas
that is converted to U.S. dollars at the official rate
prevailing at the date of exportation, and estimated duties
are deposited thereon. The importer is not required to pay
its Spanish vendors until 60 days after the date of
importation. At the time of payment, the importer sends a
check in U.S. dollars to its Spanish vendors based on the
current exchange rate for Spanish pesetas. Upon receipt, the
Spanish factory converts the U.S. dollar check to pesetas.
Invariably, the peseta amount received by the factory differs
slightly from the peseta invoice amount. Any differences are
accumulated over time and settled with the importer so that
the factories ultimately receive the exact amount of pesetas
provided on their commercial invoices.
The importer acknowledges that as a practical matter, it
could pay the Spanish factories by directing its bank to make
a wire transfer of pesetas in the amount of each commercial
invoice at the time of required payment, i.e., 60 days after
importation. These payments would always match, in pesetas,
the amount of each commercial invoice. However, because of
various administrative considerations, Harbor Footwear Group,
Ltd. chose to pay the factories by issuing U.S. dollar checks
in an amount calculated to convert into the peseta invoice
amount at the time of payment.
The importer acknowledges that the amount of U.S.
dollars ultimately paid by the importer to settle the
denominated invoice 60 days after importation may differ
slightly from the amount of U.S. dollars declared at the time
of entry. The importer states that the differential is
entirely a result of currency fluctuation after importation,
and should have no impact on Customs valuation. It takes the
position that the price actually paid or payable in U.S.
dollars when the goods are sold for exportation to the U.S.
is the peseta price converted to U.S. dollars as of the date
of exportation. Your office takes the position that the
price actually paid or payable is the price on the date of
payment. Your office also notes that the Tariff Act of 1930,
as amended by the Trade Agreements Act of 1979 (19 U.S.C.
1401a(b); TAA) allows for inclusion in transaction value of
increases in the price which occur after the date of
importation but does not allow for rebates which occur after
the date of importation.
ISSUE:
Whether discrepancies between the U.S. dollar entered
values and the U.S. dollar amounts ultimately paid by the
importer to the seller, due entirely to currency fluctuation
between the time of export and the time of payment, are to be
considered in determining the price actually paid or payable.
LAW & ANALYSIS:
For the purpose of this response, we assume that
transaction value is the proper basis of appraisement.
Transaction value, the preferred method of appraisement is
defined in section 402(b)(1) of the TAA as the "price
actually paid or payable for the merchandise" plus five
enumerated statutory additions. As stated in 402(b)(4)(A):
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.
In the subject transactions, the price actually paid or
payable is always a peseta denominated price. At the time
that orders are made, at the time that the goods are shipped
and at the time that the goods are finally paid for, the
price is always the peseta price negotiated by the parties
and documented by the accompanying commercial invoice. The
payments are in U.S. dollars. No contract was presented
indicating a fixed rate of exchange nor was information
presented indicating agreement to change the price should
currency fluctuations occur. Counsel indicated in a meeting
with Headquarters' personnel that no such contract existed
between the parties.
In previous Headquarters rulings involving currency
conversion, Customs has held that where a purchaser has paid
or intends to pay for imported merchandise in foreign
currency, that amount, converted to U.S. dollars in
accordance with sections 159.31-159.38 of the Customs
Regulations (19 CFR 159.31 to 19 CFR 159.38), constitutes the
price actually paid or payable for the merchandise. See
Headquarters Ruling Letter (HRL) 543437, dated May 17, 1985.
Here, we know that the payments by the importer are in
U.S. dollars, the only question is whether to use, for
Customs purposes, the currency conversion rate in effect at
the time of exportation or 60 days later, at the time of
payment. Customs Statement of Administrative Action provides
that the Customs Service will use the date of exportation for
currency conversion purposes, in accordance with Section 522
of the Tariff Act of 1930, as amended (31 U.S.C. 5151,
formerly 31 U.S.C. 372). 159.32, Customs Regulations,
states that the date of exportation for currency conversion
shall be fixed in accordance with 152.1(c) of the Customs
Regulations. That section provides:
`Date of exportation,' or the `time of exportation'
referred to is section 402, Tariff Act of 1930, as
amended (19 U.S.C. 1401a), means the actual date
the merchandise finally leaves the country of
exportation for the United States. If no positive
evidence is at hand as to the actual date of
exportation, the district director shall ascertain
or estimate the date of exportation by all
reasonable ways and means in his power, and in so
doing may consider dates on bills of lading,
invoices, and other information available to him.
In accordance with the Customs Regulations and the
Statement of Administrative Action, and absent an agreement
between the parties to adjust the price by reason of currency
conversion rate fluctuations, the appropriate rate of
currency conversion for the subject importer, is the rate in
effect on the date of exportation, which date shall be
determined by the district director by all reasonable ways
and means.
HOLDING:
The price actually paid or payable between the importer
and the seller is the peseta price presented on the invoice
at the time the merchandise is entered, converted to U.S.
dollars in accordance with the appropriate currency
conversion rate in effect on the date of exportation, as
determined by the district director in accordance with
sections 159.31-159.38 of the Customs Regulations.
Sincerely,
John Durant, Director