HQ 0545266 - Internal Advice 85/92; assists; commissions paid to an agent for procuring material used to manufacture imported merchandise; HRL 544423. - United States International Trade Commision Rulings

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HQ 545266

June 30, 1993

VAL CO:R:C:V 545266 CRS

CATEGORY: VALUATION

Area Director
U.S. Customs Service
Hemisphere Center
Routes 1 & 9 South
Newark, NJ 07114

RE: Internal Advice 85/92; assists; commissions paid to an agent for procuring material used to manufacture imported merchandise; HRL 544423.

Dear Sir:

This is in reply to your memorandum dated December 10, 1992, under cover of which you forwarded a request for internal advice

FACTS:

The buyer imports leather gloves from its wholly-owned the buyer purchases the leather used in manufacturing the gloves and ***************. Payment is remitted to the tanneries by the subsidiary, and the tanneries ship the leather directly to the subsidiary. The buyer subsequently reimburses the subsidiary by debit note.

In addition to purchasing the leather on behalf of the buyer, the agent inspects and arranges for the shipment of the merchandise. As compensation for its services, the agent receives a commission of up to five percent of the f.o.b. value of the leather. The agent's commission is also paid through the subsidiary, with the latter being reimbursed, as above, through the issuance of debit notes from the buyer. Counsel states that payments generally are made only after the subsidairy receives specific authorization from the buyer.

The amount of the leather payments and commissions is not included in the price actually paid or payable for the imported gloves, but is declared as an assist. Counsel contends that the commissions are not part of the value of the assist.

In support of this contention, counsel notes that the agent has no interest in, or control of, the tanneries. The agent is not responsible for the cost of shipping and does not take title to the leather. The commissions do not inure to the benefit of the tanneries. While the agent has acted as agent for the buyer for a number of years, this arrangement has recently been formalized by a written agreement, a copy of which has been submitted by counsel.

ISSUE:

The issue presented is whether commissions paid to an agent for services rendered in acquiring assists are part of the cost of the assist such that they are added to the price actually paid or payable the imported merchandise.

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 preferred method of appraisement is transaction value, defined as "the price actually paid or payable for merchandise when sold for exportation to the United States," plus five statutory addition, including the value, apportioned as appropriate, of any assist. 19 U.S.C. 1401a(b)(1)(C).

The term "assist" refers to materials, components, parts and similar items incorporated in imported merchandise, and supplied free of charge or at a reduced cost by the buyer in connection with the production or sale for export to the United States of the merchandise. 19 U.S.C. 1401a(h)(1)(A)(i). The leather used in the production of the imported gloves is supplied free of charge by the buyer through the services of the buyer. Accordingly, the leather constitutes an assist under 19 U.S.C.

In Headquarters Ruling Letter (HRL) 544323 dated March 8, 1990, this office determined that the term "procurement assist" was not a term specified in the TAA, which simply defines what materials or services are considered assists. In HRL 544423 of June 3, 1991, we addressed the issue of whether commissions paid to a buying agent for obtaining piece goods supplied to apparel manufacturers and used in the production of imported garments should be considered part of the cost of the assist. There we held that such commissions were part of the cost of acquiring the assist and were therefore dutiable.

Similarly, the commissions paid to the agent by the buyer through the subsidiary for acquiring leather, i.e., assists, used to manufacture imported gloves are part of the cost of acquisition of the assist and should be added to the price actually paid or payable for the imported merchandise. Since this conclusion is independent of whether the agent is a bona fide buying agent, we do not reach this issue.

HOLDING:

Commissions paid by a buyer of imported merchandise to an agent for acquiring assists are part of the cost of acquisition of the assist and are to be added to the price actually paid or payable.

Sincerely,

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