HQ 545376 - Application for Further Review of Protest No. 3701-93-100085; Dutiability of Selling Commission - United States International Trade Commision Rulings

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HQ 545376

July 29, 1994

VAL CO:R:C:V 545376 LPF

CATEGORY: VALUATION

District Director
U.S. Customs Service
6269 Ace Industrial Drive
P.O. Box 37260
Milwaukee, WI 53237-0260

RE: Application for Further Review of Protest No. 3701-93-100085; Dutiability of Selling Commission

Dear Sir:

This is a decision on an application for further review of a protest filed May 7, 1993, against your decision concerning the valuation of cotton fabric. The entry was liquidated on March 19, 1993. We regret the delay in responding.

FACTS:

On October 7, 1992, Teijin Shoji America, Inc. ("Teijin America"), a U.S. corporation, made entry for cotton fabric at Milwaukee, WI. The file contains an invoice dated October 2, 1992, from Teijin Shoji Co., Ltd. ("Teijin Japan") to Teijin America for 11 cartons of cotton fabric.

Initially, Teijin America explained that they are related to Teijin Japan and that the latter is the parent of the former, that Teijin Japan pays Teijin America a 3 percent commission for handling the merchandise for Customs clearance and for delivering the merchandise to customers, and that the commission is included on the invoiced price of the merchandise, billed directly to the customer. However, after Teijin America received a Notice of Action (CF 29) from the Milwaukee District indicating that the appraised value on current as well as future entries would include a 3 percent selling commission, they stated that Teijin Japan does not pay a commission to Teijin America, but instead its customers pay a commission to Teijin America.

Apparently, in response to the Notice of Action, Teijin America submitted a Debit Note dated May 31, 1992, from Teijin Japan to Teijin America, as well as an invoice dated June 4, 1992, from Teijin America to J.H. Collectibles, a U.S. customer located in Milwaukee, as evidence that the amount at issue was not a selling commission. We note, however, that the submitted

Debit Note and invoice do not pertain to the specific transaction and merchandise currently at issue, but apparently relate to prior importations between Teijin America and Teijin Japan. Consequently, these documents have no particular relevance with regard to this particular transaction. The file contains no other documents concerning the entry at issue.

You appraised the merchandise at the price paid by Teijin America, including the addition of a 3 percent selling commission. The protestant, Teijin America, claims that the appraised value should be the price paid by Teijin America without additions for a selling commission.

ISSUE:

Whether the protestant has proffered sufficient evidence to prove that it is operating other than as a selling agent and, consequently, that the transaction value of the merchandise should not include additions for a selling commission.

LAW AND ANALYSIS:

As you are aware, the preferred method of appraisement is transaction value pursuant to section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA), codified at 19 U.S.C. 1401a. Section 402 (b)(1) of the TAA provides, in pertinent part, that the transaction value of imported merchandise is the "price actually paid or payable for the merchandise when sold for exportation to the United States" plus amounts for certain enumerated additions, including selling commissions incurred by the buyer. 19 U.S.C. 1401a(b)(1).

In Headquarters Ruling Letter (HRL) 544907, issued April 13, 1992, we determined that an invoiced amount qualified as a selling commission as opposed to a trade discount. In that decision it was explained that an agency relationship was found to exist between the parties (based on the admission of the parties and their labeling the invoiced amount as a commission) and that insufficient evidence was proffered to indicate that the amount was anything other than a selling commission.

Similarly, from the information contained in this file, it appears that Teijin America operated as a selling agent. The protestant acted for the account of the seller by contacting customers and arranging for entry and delivery of the goods. The remuneration Teijin America apparently receives for these services has been described as a "selling commission." We reiterate that initially the protestant stated that it was Teijin Japan's agent and was paid a selling commission for its delivery and clearance services and that even in response to the Notice of Action the protestant explained that it was paid a selling commission, albeit from its U.S. customers.

In sum, we are not satisfied that the evidence presented by the protestant in response to the Milwaukee District's Notice of Action substantiates the claim that the amount at issue is other than a selling commission. Because the protestant has not presented adequate evidence such as invoices, contracts, or purchase orders which indicate otherwise, we find the amount at issue to be dutiable as a selling commission.

HOLDING:

Based on the facts presented, the protestant has proffered insufficient evidence to prove that it is operating other than as a selling agent and, consequently, that the transaction value of the merchandise should not include additions for a selling commission.

You are directed to deny this protest. A copy of this decision with the Form 19 should be sent to the protestant.

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 to the public via the Diskette Subscription Service, Lexis, the Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director

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