HQ 0545140 - Application for Further Review of Protest No. 3701-92-100073 - United States International Trade Commision Rulings

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HQ 545140

August 24, 1993

VAL CO:R:C:V 545140 ph

CATEGORY: VALUATION

District Director
6269 Eighth Industrial Dr.
Cudahy, WI 53110

RE: Application for Further Review of Protest No. 3701-92-100073

Dear Sir:

The above-referenced application for further review concerns the dutiability of certain commissions by the importer to a third party.

FACTS:

According to a September 25, 1992 submission, Melco Clothing Co., Inc. (hereinafter referred to as "Melco"), the importer, paid F.J.& M./Winner Mate (hereinafter referred to as FJM), an unrelated party, an 8% commission to purchase merchandise on Melco's behalf. The importer submitted a copy of a buying agency agreement, dated January 1, 1986, between Melco and FJM. According to the terms of the agreement, FJM functions, in its capacity as agent, included placing orders with foreign manufacturers, at the specific direction of the importer; inspecting or causing the inspection of the goods before shipment to ensure compliance with the importer's specifications; assisting the importer on buying trips; and locating vendors. In addition, it was stated in the agreement that the agent would have no interest in any manufacturer or vendor from whom it purchased goods and that no part of its commission would be paid to or shared with any such manufacturer or vendor. In addition, the agent will submit a commercial invoice to the importer, showing the price paid or payable for the merchandise. Title to the merchandise will vest in the importer, automatically, upon delivery by the manufacturer.

We note that Melco has previously submitted to Customs a copy of the same agency agreement, with the same agent, in 1989. Based on additional information established by Customs at that time, Customs determined at that time that FJM was not a bona fide buying agent for Melco.

ISSUE:

Whether the described agency is a bona fide agency.

LAW AND ANALYSIS:

The preferred method of appraising merchandise is transaction value which is defined in 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) as the "price actually paid or payable" for the merchandise when sold for exportation to the United States, plus certain enumerated additions.

Buying commissions are not specifically included as one of the additions to the price actually paid or payable. The "price actually paid or payable" is defined in section 402(b)(4)(A) of the TAA as:

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

Whether or not a bona fide buying agency exists between an importer and an alleged "buying agent" is not determined by any single factor, but depends upon the relevant facts of each case. Se J.C. Penney Purchasing Corp. v. United States, 451 F. Supp. 973 (Cust. Ct. 1978). The primary consideration in determining whether a bona fide buying relationship exists between an importer and an alleged "buying agent" is the right of the principal to control the agent's conduct with respect to matters entrusted to the agent. B & W Wholesale Co., Inc. v. United States, 58 CCPA 92, C.A.D. 1010 (1971). 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. (See General Notice, Customs Bulletin, March 15, 1989.)

In this case, the evidence submitted for the subject protest consists of a copy of the same agency agreement reviewed in Headquarters Ruling Letter 544419, dated July 12, 1990. In that case, we found that additional evidence of the relationship between the importer and the agent and the importer did not support the existence of a bona fide buying agency. That is, the importer did not exert sufficient control over the agent and it was not clear that the agent was not related to any of the foreign manufacturers. The subject protest does not address whether any of those practices have been altered since HRL 544419 was issued. In light of the fact that the parties are the same and the agency agreement is the same, that issue would have been addressed in the protest.

Any determination of whether a bona fide buying relationship exists, depends on the facts of the particular case. The appraising officer at the port of entry makes the actual determination as to whether a bona fide buying agency exists, based upon the documentation submitted. In order to find that a bona fide buying agency exists, satisfactory documentation must be presented at the time of entry. In this case, the appraising officer determined that the importer had not submitted sufficient documentation to overcome our holding in HRL 544419. We support the appraising officer's conclusion.

HOLDING:

Based upon the information submitted and for the reasons stated above, we find that the commission paid to the agent in this case, does not constitute a bona fide buying commission.

Accordingly, you are directed to deny this protest. A copy of this decision should be attached to Customs Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

John Durant, Director
Commercial Rulings Division

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