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HQ 545100

March 2, 1993

VAL CO:R:C:V 545100 CRS

CATEGORY: VALUATION

District Director
U.S. Customs Service
Second and Chestnut Streets
Philadelphia, PA 19106

RE: Application for further review of Protest 1101-92-100430; information insufficient to establish existence of bona fide buying agency; commissions are part of price actually paid or payable.

Dear Sir:

Protest Number 1101-92-100430 dated July 17, 1992, filed in Harrisburg, Pa., by Wolf D. Barth Company, Inc., on behalf of Willits Footwear Worldwide (Protestant) of Halifax, Pa., has been referred to this office for a decision.

FACTS:

Protestant imports footwear from the Republic of Korea, in connection with which it employs an agent, N. Shasta Shoe, of Eugene, Oregon. N. Shasta is paid a ten percent commission for its services. Protestant contends this payment is a non-dutiable buying commission.

In support of its position, protestant has submitted a letter from N. Shasta Shoe dated July 6, 1992, which states that N. Shasta Shoe acts as a sourcing agent for protestant. When N. Shasta identifies a potential supplier, a price quote is obtained and referred to protestant. Provided the price is acceptable, protestant places its order directly with the supplier. If the terms are not acceptable, protestant negotiates directly with the manufacturer. Protestant is not obligated to order merchandise through N. Shasta.

ISSUE:

The issue presented is whether the commission in question is a buying commission such that it does not form part of the price actually paid or payable under 19 U.S.C. 1401a(b).

LAW AND ANALYSIS:

Merchandise imported into the United States is appraised in accordance with the provisions of Section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (19 U.S.C. 1401a; TAA). The principal method of appraisement is transaction value, defined as "the price actually paid or payable for merchandise when sold for exportation to the United States." 19 U.S.C. 1401a(b)(1). Accordingly, we have assumed for the purposes of this ruling that transaction value is the appropriate basis of appraisement.

The "price actually paid or payable" is defined as "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." 19 U.S.C. 402(b)(4). As a general matter, bona fide buying commissions are not added to the price actually paid or payable. Pier 1 Imports, Inc. v. United States, 708 F. Supp. 351, 13 CIT 161, 164 (1989); Rosenthal-Netter, Inc. v. United States, 679 F. Supp. 21, 23, 12 CIT 77, 78 (1988); Jay-Arr Slimwear, Inc. v. United States, 681 F. Supp. 875,878, 12 CIT 133, 136 (1988).

The existence of a bona fide buying commission depends upon the relevant factors of the individual case. J.C. Penney Purchasing Corp. v. United States, 451 F. Supp. 973 (Cust. Ct. 1978). In this regard the importer has the burden of proving the existence of a bona fide agency relationship and that payments to the agent constitute bona fide buying commissions. Rosenthal- Netter, 679 F. Supp. 21, 23; New Trends, Inc. v. United States, 645 F. Supp. 957, 960, 10 CIT 637 (1986); B.W. Wholesale Co., Inc. v. United States, 462 F. Supp. 1399, 1403, 58 CCPA 92, C.A.D. 1010, (1971).

In determining whether an agency relationship exists, the primary consideration, is the right of the principal to control the agent's conduct with respect to those matters entrusted to the agent. Jay-Arr Slimwear, 681 F. Supp. 875, 879. The degree of discretion granted the agent is a further consideration. New Trends Inc. v. United States, 645 F. Supp. 957 (1986). The existence of a buying agency agreement, moreover, has been viewed as supporting the existence of a buying agency relationship. Dorco Imports v. United States, 67 Cust. Ct. 503, 512, R.D. 11753 (1971). In addition, the courts have examined such factors as whether the purported agent's actions were primarily for the benefit of the principal; whether the agent was responsible for the shipping and handling and the costs thereof; whether the language used in the commercial invoices was consistent with a principal-agent relationship; whether the agent bore the risk of loss for damaged, lost or defective merchandise; and whether the agent was financially detached from the manufacturer of the merchandise. New Trends, 645 F. Supp. 957.

Evidence submitted to Customs must clearly establish the fact of a bona fide buying agency. Headquarters Ruling Letter (HRL) 544610 dated December 23, 1991. Moreover, "an invoice or other documentation from the actual foreign seller to the agent [is] required to establish that the agent is not a seller and to determine the price actually paid or payable to the seller." HRL 542141 dated September 29, 1980, also cited as TAA No. 7.

The information submitted in connection with in the instant protest is insufficient to support the existence of a bona fide agency relationship. There is no documentation that demonstrates protestant exercised control over N. Shasta, the purported buying agent, nor is there, for example, evidence that the risk of loss was borne by the protestant. Moreover, no invoices from the manufacturer to the purported agent were submitted with the protest. Consequently, the commissions are part of the price actually paid or payable and are dutiable.

HOLDING:

The commissions in question constitute part of the price actually paid or payable pursuant to 19 U.S.C. 1401a(b).

You are instructed to deny the protest in full. A copy of this decision should be attached to the Form 19 Notice of Action.

Sincerely,


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