VAL CO:R:C:V 544317 DHS
Robert L. Eisen, Esq.
200 Park Avenue
New York, New York 10166
RE: Payments for the purchase of samples; 19 U.S.C. 1401a(b)
Dear Mr. Eisen:
This is in reply to your letter of March 6, 1989, regarding
the effect of 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)), on certain payments contemplated to be made by
Bonaventure (U.S.A.) Inc. to Bonaventure Textiles, a related Hong
Kong manufacturer, for the maintenance and operation of a sample
room in which samples are produced and then mutilated prior to
the importation into the U.S. We regret the delay in responding.
You state that the importer purchases finished garments for
retail sale in the U.S. from Company A, a related company, in
Hong Kong. Company A is a supplier of wearing apparel
manufactured by Company B. Company B is also related to the
importer and located in Hong Kong.
The importer, however, obtains directly from the
manufacturer a substantial number of mutilated samples solely for
the purpose of soliciting orders. In order to produce samples
desired by the importer, the importer provides the manufacturer
with conceptual design sketches undertaken in the U.S. which
illustrate desired styling effects and specifications. Actual
samples are occasionally provided by the importer.
Mutilated prototype samples are shipped to the importer in
mutilated condition for approval. Once approved, the importer
instructs the manufacturer to produce additional samples of the
prototypes in various colors in order that the importer can
You state that in the past, both the prototype and the
modified samples were shipped to the importer in mutilated
condition, and at no charge. These samples therefore, were
entered in 1988 duty-free under item 860.30, Tariff Schedules of
the United States (TSUS).
The manufacturer is now requesting that the importer
reimburse it for the actual cost of the samples produced in 1988.
It further indicates that, in the future, it would like to be
reimbursed for samples on an annual basis. You state that the
price charged for the samples is to be based on the following
Total Cost of
Producing the Samples x Number of Samples Shipped
Number of Samples to the Importer
You state that the prices to be charged for the samples will
be higher than the prices charged for production merchandise,
because the samples are more expensive to produce. Furthermore,
the payments for the samples will have no effect on the prices
established for production of goods which will be eventually
imported into the U.S. The value of the samples as determined by
the manufacturer based on actual costs of production, will be
indicated on the commercial invoices accompanying each shipment.
Notwithstanding the possible duty-free classification of the
imported merchandise, the question presented must be addressed
with the presumption that all imported merchandise (including
samples) must be appraised. See 19 U.S.C. 1500. Accordingly, we
have approached the question presented as whether a lump-sum
payment made at the end of the year which equals the amount set
forth in all the commercial invoices for the year negates the
amount set forth on the commercial invoice for each shipment.
Whether a lump-sum payment made on an annual basis which
totals the value set forth on the invoices for the individual
shipments of samples made during the year negates the amount set
forth on the commercial invoice for each shipment?
LAW AND ANALYSIS:
We have assumed, without deciding for purposes of this
response, that the imported mutilated samples are entitled to
classification under subheading 9811.00.60, of the Harmonized
Tariff Schedule of the United States (HTSUS); the successor
provision to item 860.30, TSUS.
As provided in section 402b of the Tariff Act of 1930, as
amended by the Trade Agreements Act of 1979, (TAA: 19 U.S.C.
1401a(b)), the primary basis of appraisement is transaction
value. Transaction value is defined as the "price actually paid
or payable" for merchandise when sold for exportation to the United States. The term "price actually paid or payable" is
defined as the following:
The term "price actually paid or payable"
means the total payment ... made, or to be
made, for imported merchandise by the buyer
to, or for the benefit of, the seller.
Section 152.103(a)(1) of the Customs Regulations (19 CFR
152.103(a)(1)), provides that the "price actually paid or
...will be considered without regard to its method of
derivation. It may be the result of discounts, or
negotiations, or may be arrived at by the application
of a formula, such as the price in effect on the date
of export in the London Commodity Market. The word
"payable" refers to a situation in which the price has
been agreed upon, but actual payment has not been made
at the time of importation. . . .
It is not required that the final sales price for the
imported merchandise be quantified at the time of importation.
In situations in which the price actually paid or payable is
determined pursuant to a formula, a firm price need not be known
or ascertainable at the time of importation, although it is
necessary for the formula to be fixed at that time so that a
final sales price can be determined at a later time on the basis
of some future event or occurrence over which neither the seller
nor the buyer has any control.
As long as the amounts reimbursed on an annual basis equals
the sum of the invoices for the individual shipments we are of
the opinion that this situation falls within section
152.103(a)(1). We hold this opinion since the price for the
individual shipments of samples has been agreed upon at the time
of importation even though the actual payment has not been made.
It should be noted that transaction value would not apply to
this situation if the sale of, or the price actually paid or
payable for, the imported samples is subject to any condition or
consideration for which a value cannot be determined with respect
to these samples. See, section 402(b)(2)(A)(ii) of the TAA.
This point is brought to your attention because on the basis of
the information furnished, we are unable to ascertain whether
there is a tie-in between the sale of the samples and the
garments to be imported.
This determination does not affect the appraisement of the
imported garments represented by these samples. Further, we
offer no opinion on whether the relationship between the parties
has affected the price actually paid or payable within the
meaning of section 402(b)(2)(B) for either the samples or the
Based upon the foregoing, we conclude that the amount to be
paid on an annual basis which totals the value set forth on the
invoices for all the individual shipments of samples during the
year represents the transaction value of the imported samples.