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My apologies. It was actually Image Trace.
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PNG is a pixel image. You can't use pathfinder on it.
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I figured so. What I ended up doing is saving the PNG file as an Illustrator file and it worked.
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That sounds like you've got stupendous luck.
Are you claiming that Illustrator's Pathfinder operations do work after you saved the document as .ai although it just (still) contains a raster image?
Normally, that doesn't work.
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My apologies. It was actually Image Trace.