HQ 0544958 - Dutiability of Buying Agency Commissions - United States International Trade Commision Rulings

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HQ 544958
June 8, 1992

VAL CO:R:C:V 544958 ILK

CATEGORY: VALUATION

RE: Dutiability of Buying Agency Commissions

This is in response to your letter of March 24, 1992 (hereinafter referred to as the "request"). On behalf of your request a ruling that ---- may act as a bona fide agent to customers to whom it will, in addition, act as a "seller" in unrelated transactions. The request was followed by a June 3, 1992 meeting between you and members of my staff in the Value and Marking Branch.

FACTS:

This office has previously issued a ruling pertaining to -- -- In Headquarters Ruling Letter (HRL) 544676 dated July 24, 1991, we ruled that pursuant to the information provided, the commissions to be paid to ---- to perform the services of purchasing merchandise (wearing apparel) from manufacturers are to be considered bona fide buying commissions, and therefore not to be added to the price actually paid or payable. It was further ruled that amounts received by ---- from the manufacturers for performing certain services will not impact on the nondutiability of the buying commissions as long as ---- continues to work at the direction of its importers with the importers maintaining the requisite degree of control over the actions of ---.

Since the issuance of HRL 544676, you advise us that ---- is preparing to act as a seller to purchasers for which it currently presumably acts as a buying agent in accordance with HRL 544676, and to be the importer of record of the imported merchandise it sells. The transactions in which ---- will act as an importer are unrelated to the transactions in which it acts as an agent. When ---- will act as an importer it will provide assists in the form of piece goods, trim and other wearing apparel components to factories, which will use the assists provided to manufacture wearing apparel for the account of ---. In the transactions in which ---- is the importer, the parties will at all times deal at arms length, and no agency commission will ever be paid to ---. The request states that the transactions in which ---- will act as an importer/domestic seller will not affect or be affected by the transactions where B.Z. acts as a bona fide buying agent. At the June 3 meeting you stated that the entry documents would clearly indicate whether ---- is acting as a buying agent or an importer.

ISSUE:

Whether the status of a party as a bona fide buying agent is affected by the party also acting as an importer and domestic seller for the same U.S. customers for which it also acts as a buying agent in unrelated transactions.

LAW AND ANALYSIS:

For the purpose of this prospective ruling request, we are assuming that transaction value will be applicable as the basis of appraisement.

A set of facts analogous to the instant set of facts was the subject of HRL 543053 dated July 11, 1983. In HRL 543053 a party received a buying agency commission from importers for buying agent services, and in the same transaction an overseas branch office received a commission for performing services for the manufacturer. We ruled that the commission paid to the party as a buying agent was a bona fide nondutiable buying agent's commission. With respect to the effect of the party receiving a commission from the manufacturer we ruled that the branch's receipt of dutiable commissions from the factory does not cause the separate buying agent's commission received by the agent from the importer to become a dutiable element. We recognized that "a buying agent and a selling agent are two separate arrangements under applicable customs law" and that:

[T]he existence of a dutiable selling commission or a non-dutiable buying commission is a question of fact which must be determined on the basis of the information available at that particular point and time. The fact that a selling commission exists under certain circumstances would not negate the existence of a buying commission when applied to another set of facts. That is not to say, however, that once a non- dutiable buying agency arrangement exists that circumstances between the parties could not change.

The same reasoning would be applicable in this case, as well as the statement made in HRL 544676, supra, that the transactions between ---- and the manufacturers will not impact on the nondutiability of buying commissions "as long as the agent continues to work at the direction of his importers with the importers maintaining the requisite degree of control over the actions of its' agent." This position is consistent with the cases cited in the request, Bushnell Int'l., Inc. v. United States, 477 F.2d 1402 (C.C.P.A. 1973) and Jay-Arr Slimwear, Inc. v. United States, 681 F. Supp. 875 (C.I.T. 1988), which stated that the relationship between the seller and agent is not dispositive of whether a bona fide buying agency exists. Similarly, the fact that a party acts as an importer/domestic seller for a customer for which it also acts as a buying agent in unrelated transactions, should not be dispositive of whether a bona fide agency exists.

In this case, the agent is preparing to act as a seller to the same customers for which it also acts as an agent in unrelated transactions, and would also be acting as an importer of record. If the actions of ---- acting as an agent conform to the terms upon which prior HRL 544676 was based, and the entry documentation clearly indicates whether ---- is acting as a buying agent or importer, the nondutiable status of the buying agency commissions will not be affected.

Note, however, that the existence of a buying agency relationship is factually specific and could vary with each importation. The actual determination as to the existence of a buying agency will be made by the appraising officer at the applicable port of entry upon the presentation of entry documentation.

Based upon these considerations, we conclude that the commissions to be paid to ---- acting as a buying agent for other importations will not be affected by ---- also acting as an importer/seller for the same customers for which it acts as an agent.

This ruling presupposes without deciding that the sale to - --- would qualify for transaction value.

HOLDING:

In view of the foregoing, ------------'s status as a buying agent is not affected by its acting as an importer and domestic seller for the customers for which it also acts as a buying agent in unrelated transactions as long as ------------, as a buying agent, continues to work at the direction of its importers with the importers maintaining the requisite degree of control over

Sincerely,

John Durant, Director

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