HQ 545846 - Application for Further Review of Protest No. 1101-94-100667; inclusion of commission in price actually paid or payable for imported merchandise - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1995 HQ Rulings > HQ 545721 - HQ 557445 > HQ 545846

Previous Ruling Next Ruling
HQ 545846

December 9, 1994

VAL CO:R:C:V 545846 IOR

CATEGORY: VALUATION

District Director
Philadelphia, Pennsylvania

RE: Application for Further Review of Protest No. 1101-94-100667; inclusion of commission in price actually paid or payable for imported merchandise

Dear Sir:

The subject protest and application for further review concerns the inclusion of an agency commission in the price actually paid or payable for merchandise imported by xxxxxxxx Inc. (hereinafter referred to as the "importer"). The protest was filed by Morris Friedman & Company (hereinafter referred to as the 'protestant"), as agent for the importer.

FACTS:

Protest is made against the liquidation of an entry of artificial flowers and Christmas decorations at the invoiced price which includes a seven percent buying commission. On June 17 1994 the importer entered artificial flowers and Christmas decorations. The entry documents include a Falcon Industries (Associated) Co. (hereinafter referred to as "FIA") invoice for artificial flowers and Christmas decorations. The invoice total is $14,237.44, and includes a separately itemized agent commission of $931.42. The protestant requests that the entry be reliquidated based on the invoice price exclusive of the commission. Submitted with the protest is a copy of a buying agency agreement with an effective date of November 14, 1994 between the importer and FIA, a packing list from FIA and declarations of origin executed by FIA. The agency agreement sets forth the obligations of each party, including the importer's compensation of FIA at the rate of seven percent of the FOB price of the merchandise ordered and shipped according to the agreement. It is the protestant's position that FIA is a bona fide buying agent. No other documents have been submitted on behalf of the importer.

ISSUE:

Whether the relationship between the importer and FIA meet the criteria of a bona fide buying agency relationship.

LAW AND ANALYSIS:

The preferred method of appraisement is transaction value which is defined by ?402(b)(1) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA, 19 U.S.C. 1401a(b)) as "the price actually paid or payable for the merchandise when sold for exportation to the United States..." plus certain additions specified in ?402(b)(1) (A) through (E). The term "price actually paid or payable" is defined in TAA

...the total payment (whether direct or indirect...) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller.

For the purpose of this ruling, we are assuming that transaction value is the appropriate basis of appraisement. It is clear from the statutory language that in order to establish transaction value one must know the identity of the seller and the amount actually paid or payable to him.

In a general notice published in the Customs Bulletin on March 15, 1989, Customs provided an explanation of its position on buying commissions:

While bona fide buying commissions are nondutiable, evidence must be submitted to Customs which clearly establishes that fact. In this regard, Headquarters Ruling Letter 542141, dated September 29, 1980, also cited as TAA No. 7, provided: ...an invoice or other documentation from the actual foreign seller to the agent would be required to establish that the agent is not a seller and to determine the price actually paid or payable to the seller. Furthermore, the totality of the evidence must demonstrate that the purported agent is in fact a bona fide buying agent and not a selling agent or an independent seller.

In this case the protestant has not provided Customs with an invoice or other documentation from a party that it claims is the seller of the imported merchandise. Customs has only been provided with an invoice from the purported agent and that is insufficient to establish that FIA is not a seller. The only price that Customs has upon which to base appraisement under transaction value is the total invoice price on the FIA invoice. While buying commissions cannot be added to the price actually paid or payable, neither may they be deducted. See TAA #7. In this case, the price actually paid or payable includes the payment to FIA for the alleged commission, and Customs has no authority to deduct the purported commission from the price.

Generally additional factors are considered in determining the existence of a bona fide buying agency, however in this case we do not reach those factors as we have only been provided the one invoice from the purported buying agent.

HOLDING:

Consistent with the foregoing, we are not satisfied that the importer and FIA meet the criteria of a bona fide buying agency, and that FIA is not the seller of the imported merchandise, therefore the "commission" is included in the price actually paid or payable for the imported merchandise.

Consistent with the decision set forth above, you are hereby directed to deny the subject protest. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels. A copy of this decision should be attached to the Customs Form 19 mailed to the protestant as part of the notice of action on the protest.

Sincerely,

John Durant, Director
Commercial Rulings Division

Previous Ruling Next Ruling