HQ 545522 - Internal Advice; sale for exportation; transaction value; commission; IA:72/93 - United States International Trade Commision Rulings

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HQ 545522

April 26, 1995
VAL R:C:V 545522 IOR

CATEGORY: VALUATION

District Director
Pembina, North Dakota

RE: Internal Advice; sale for exportation; transaction value; commission; IA:72/93

Dear Sir:

This is in response to an internal advice request initiated by your memorandum dated August 9, 1993 regarding the appraisement of garments imported from Bangladesh. This request was received in Headquarters on January 12, 1994. We regret the delay in responding.

FACTS:

Steiman Enterprises, Inc. ("Steiman") is a U.S. corporation with an office in Minneapolis. Steiman's administration, accounting and financial affairs are handled by its office in Winnipeg, Canada. Steiman's bank account is in Canada. Although initially you took the position that there were two Steiman corporations, one in the U.S. and one in Canada, we have clarified with the concerned import specialist that there is one corporation with offices in the U.S. and Canada. According to Steiman's March 18, 1993 response to a CF 28, there is only one Steiman corporation, that which is incorporated in the U.S. Gary Steiman, president of Steiman is also president of Gemini Fashions ("Gemini") of Winnipeg, Canada. Steiman takes orders from U.S. purchasers for apparel. You state that Gemini processes these orders, and forwards them to the Steiman office in Canada, which places the orders for the merchandise with the foreign seller/manufacturer ("seller"). The merchandise is paid for by letter of credit drawn against the Steiman account.

The invoices in the file indicate that the merchandise is purchased on an FOB Bangladesh basis, and the consignee is Steiman, c/o broker's office in Pembina, North Dakota. Some of the invoices and packing lists from the foreign seller show that the merchandise is shipped to Pembina via Winnipeg, Canada. There is no information in the file indicating that the merchandise is held in Canada for any reason. According to Steiman's response to a CF 28, Steiman pays a Bangladesh agent a five percent commission for its services to follow up and inspect production. Your submission states that the commission is for inspection and packing. In your submission, you also state that Steiman charges Gemini a packaging fee, per set of clothing. In its March 18, 1993 response to Customs CF 28, Steiman sets forth the price at which it sells the imported merchandise to its U.S. purchasers. We have clarified with the concerned import specialist that the fee stated to have been charged to Gemini, was actually the price at which Steiman sells the imported clothing to its U.S. customers. In your submission, you refer to a management fee paid by Steiman U.S. to Steiman Canada. The file contains no documentation or further description of any management fee.

The entered value of the imported merchandise was the FOB invoice price paid by Steiman to the seller. The entry summary identifies the ultimate consignee as Steiman, at its Canadian address, and identifies Steiman as the importer of record, at its U.S. address.

You take the position that the imported merchandise should be appraised on the basis of computed value, and should include the five percent commission, the management fee paid to the Canadian Steiman office and the packaging fee charged to Gemini. You find that the sale between Steiman and the seller cannot be used for transaction value because Steiman's relationship with Gemini affects the price, there are no sales of identical or similar merchandise and as there is no sale for export to the U.S. the deductive value method cannot be applied. Your office has also verbally taken the alternative position that the merchandise can be appraised based on the sale between the U.S. purchaser and the seller, if Steiman is merely a selling agent. The Chief, NIS Branch is in agreement with your conclusion regarding appraisement of the imported merchandise on the basis of computed value.

ISSUE:

Whether transaction value applies and if so, whether there is a sale between Steiman and the seller which determines the "price actually paid or payable" for the merchandise when sold for exportation to the U.S.

LAW AND ANALYSIS:

The preferred method of appraisement is transaction value which is defined by §402(b)(1) 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 enumerated additions specified in 402(b)(1) (A) through (E). Included in those enumerated additions are:

(A) the packing costs incurred by the buyer with respect to the imported merchandise;

(B) any selling commission incurred by the buyer with respect to the imported merchandise.

The "price actually paid or payable" is defined in TAA §402(b)(4)(A) as "the total payment ... made, or to be made, for the imported merchandise by the buyer to, or for the benefit of, the seller."

We agree with the import specialist's position that it would be proper to base transaction value on the price the U.S. customer pays for the merchandise if Steiman was acting as a selling agent rather than as a buyer. Under TAA §402(b), transaction value is based on the price actually paid or payable for the merchandise when sold for exportation to the U.S. and the price actually paid or payable is the total payment made by the buyer. Therefore, if Steiman is actually the seller's agent and the U.S. customer is the buyer, transaction value would properly be based on the price the U.S. customer pays, plus any selling commissions.

However, in this case, there is nothing in the file which suggests that Steiman was the seller's agent and that the U.S. purchaser was the actual buyer. For example, there is no indication that the seller controlled Steiman's actions. There is also no indication that there were any direct dealings between the seller and the U.S. purchasers regarding the transactions. Rather, the entry documents and additional documents provided by Steiman in response to CF 28 are consistent with the finding that Steiman was an independent party which bought and resold for its own account. The method of payment and the commercial documents support this finding. Based on the submitted evidence, we find that there was a sale between the seller and Steiman upon which transaction value should be based.

There is no claim that Steiman is related to the seller, or that appraisement based on transaction value is precluded for any other reason. As the sale was between Steiman and the seller, the relationship between Steiman and Gemini is not a consideration in determining whether transaction value is the applicable basis of appraisement. Transaction value, based on the price paid by Steiman to the seller is the appropriate basis of appraisement.

Steiman also pays a five percent agency commission to a Bangladesh agent. It is not clear from the facts whether the fee is for inspection and packing or just inspection. Steiman has failed to provide any evidence with regard to the commission. Based on the facts, the commission could be a selling commission or a packing cost. Unless Steiman provides evidence establishing that the five percent fee is a nondutiable buying agency commission, the commission paid is to be added to the price actually paid or payable for the imported merchandise, and is included in the transaction value of the imported merchandise.

We have no evidence of any payments between Steiman and Gemini, and no basis for finding that payments from the U.S. Steiman office to the Canadian Steiman office should be included in the appraised value of the imported merchandise.

HOLDING:

Based on the evidence submitted, the imported merchandise should be appraised based on the transaction value of the sale between Steiman and the seller, and should include the fee paid by Steiman to the Bangladesh agent.

The Office of Regulations and Rulings will take steps to make this decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels 60 days from the date of this decision.

Sincerely,

John Durant, Director
Commercial Rulings Division

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