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HQ 547596

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July 13, 2000

RR:IT:VA 547596er
CATEGORY: VALUATION

Donald S. Stein, Esq.
Manatt, Phelps & Phillips, LLP
1501 M Street, NW
Suite 700
Washington, DC 20005-1702

RE: Ruling request; Selling commissions.

Dear Mr. Stein:

This is in response to your letters dated November 30, 1999 and July 11, 2000, in which Fasturn, Ltd. (“Fasturn”) requests a ruling on behalf of one of its clients, ( ). The ruling request concerns certain fees paid by Fasturn’s clients to Fasturn in exchange for postings on Fasturn’s web site. As the disclosure of your client’s identity would presently harm its competitive position, your request pursuant to 19 CFR 177.2(b)(7) for confidential treatment of your client’s name is granted. Your client’s name, accordingly, will be redacted from the published version of this ruling.

FACTS:

Fasturn operates an electronic commerce business that facilitates international trade in apparel and textiles by providing a platform for direct communication between buyers and sellers of such goods. Buyers may post requests for quotation on the Fasturn web site and if the buyer procures goods as a result of the posting, the buyer will pay a fee to Fasturn. Similarly, a seller may list the goods for sale on the Fasturn web site either in an auction format or a fixed price format. If the seller sells the goods as a result of the posting on the Fasturn web site the seller will pay a fee to Fasturn. In each case, the fee is based on a percentage of the sales price.

You state that the agreement between Fasturn and its users is not intended to create any legal relationship between Fasturn and its users and will provide in part as follows:

Fasturn is merely a site for electronic marketplace activities. Fasturn does not perform any offering, selling, purchasing or similar activities for itself or on behalf of any user. No agency, partnership, joint venture, employee-employer or franchiser-franchisee relationship is intended or created by this agreement between you and Fasturn.

ISSUE:

Whether the fees remitted to Fasturn by the buyers and sellers are dutiable as selling commissions?

LAW AND ANALYSIS:

Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA: 19 U.S.C. 1401a) The preferred method of appraisement is transaction value, which is defined as the “price actually paid or payable for merchandise when sold for exportation to the United States,” plus certain enumerated additions, including additions for any selling commission incurred by the buyer with respect to the imported merchandise. 19 U.S.C. 1401a(b)(1)(B). The Customs Service regulations define “selling commission” as any commission paid to the seller’s agent, who is related to or controlled by, or works for or on behalf of, the manufacturer or the seller. 19 CFR 152.102(b).

Additionally, in an Informed Compliance publication entitled “Buying and Selling Commissions”, Customs defines selling commissions as fees paid to a selling agent for the services it performs on behalf of the seller in the sale of the imported goods. The seller controls the actions of the selling agent with respect to those matters entrusted to the agent. Vol. 34 Cust. Bull. No. 25 dated June 21, 2000.

Both the Customs Service regulations and Informed Compliance publication quoted above indicate that in order for a commission to be treated as a bona fide selling commission, an agency relationship between the seller and some third party who receives the payment is presupposed. As noted above, based on your description of the services performed by Fasturn and the language in the agreement, we believe the buyer and seller are fully responsible for the transaction of the business and that no agency relationship exists between Fasturn and the seller. Therefore, as regards the fees paid by the buyer to Fasturn in exchange for posting requests for quotation on the Fasturn web site, because Fasturn is not performing these services for the seller, the fees are not “selling commissions” and are not dutiable.

Likewise, based on your description of the fees paid by the seller to Fasturn and based upon the language in the agreement between Fasturn and its users, we find that in posting a seller’s goods for sale Fasturn is not acting as an agent for the seller. The fees paid by the seller to Fasturn are not “selling commissions” within the meaning of the statute and regulations, and hence are not to be included as part of transaction value. Moreover, as regards these fees, the statute specifies that a selling commission is one incurred by the buyer. Hence, by definition, the fees paid by the seller to Fasturn for listing the goods for sale on the Fasturn web cite, are not “selling commissions” and are not dutiable. In the event, however, the seller includes the fee paid to Fasturn in the price it charges to the buyer, the fee would be dutiable, not as a “selling commission” but as part of the overall price actually paid or payable for the imported merchandise. 19 U.S.C. 1401a(b); Also see, “Buying and Selling Commissions”, Vol. 34 Cust. Bull. No. 25, June 21, 2000.

HOLDING:

Based on the description of the electronic posting services performed by Fasturn for buyers and sellers of imported merchandise, we find that the fees paid to Fasturn by such buyers and sellers are not dutiable selling commissions within the meaning of 19 U.S.C. 1401a(b)(1)(B) and 19 CFR 152.102(b).

Sincerely,

Thomas L. Lobred, Chief
Value Branch

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