VAL CO:R:C:E 544907 GG

District Director
U.S. Customs Service
40 S. Gay Street
Baltimore, Maryland 21202

RE: Application for further review of protest no. 1303-91- 100375; transaction value; deductions from transaction value; discounts; commissions

Dear Sir:

This is in response to the application for further review of the protest referenced above.


xxxxxxx xxxxxxxx Corp. ("xxxxxxx") imported a lotto drawing machine and balls from an unrelated French manufacturer, xxx xxxxxxx, on July 28, 1991. The total value listed on the Entry/Immediate Delivery (CF 3461) was $56,865; on the Entry Summary (CF 7501), $64,900. The invoice from xxx xxxxxxx to xxxxxxx indicated a total CIF Baltimore Airport price of $56,865, and broke down the charges as follows: Lotto machine - $52,000; 80 balls with attache case - $12,900; delivery and insurance to Baltimore Airport - $2,000; 15% ommission [sic] - $10,035. xxx xxxxxxx deducted the $2,000 delivery and insurance charge, and the $10,035 "commission", from the $66,900 total charges to arrive at the $56,865 bottom line figure.

The entry, as represented by the CF 7501, was liquidated "no change" on November 15, 1991. The importer, through its broker, timely protested the liquidation, arguing that the 15% commission was really a trade discount and should have been deducted from the dutiable value of the imported merchandise. To support this argument, the broker attached a letter, dated October 8, 1991, from xxxxxxx which stated that "xxxxxxx xxxxxxxx Corp. is the Sole Agent for xxx xxxxxxx . . . [xxxxxxx] has instructed [xxx xxxxxxx] to ship goods with actual cost of equipment, as opposed to their previous [sic] which calls a dollar figure less 15% commission. This is a Trade Discount . . . [xxx xxxxxxx] was not aware of terminology to describe costs and discounts". No further evidence was proffered to substantiate the discount position.

The broker also attached a revised CF 7501 to the protest; the new total value was $54,865, or the original total charges ($66,900) less the amounts for delivery and insurance ($2,000) and the "trade discount" ($10,035).


Whether an amount listed on the invoice as a commission was a discount which should have been considered in determining transaction value?


The primary method of valuing imported merchandise is transaction value. 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 additions for packing costs, selling commissions incurred by the buyer, assists, royalties or license fees, and proceeds of any subsequent resale that accrue to the seller. 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)).

The term "price actually paid or payable" is defined in section 402(b)(4)(A) of the TAA as "the total payment . . . made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller." Section 152.103(a)(1) of the Customs Regulations (19 CFR 152.103(a)(1)) provides that the price actually paid or payable " . . . will be considered without regard to its method of derivation. It may be the result of discounts, or negotiations, or may be arrived at by the application of a formula . . ." (emphasis added). A discounted price must be agreed to and effected prior to importation for it to constitute the price actually paid or payable. See HRL 543302, dated November 1, 1984; HRL 543537, dated February 14, 1986; HRL 543662, dated January 7, 1986.

The issue under consideration is whether the amount labeled by xxx xxxxxxx on the invoice as a "15% [c]ommission", was a selling commission or a trade discount. To reiterate, selling commissions are includable in transaction value whereas discounts, if agreed to and effected prior to importation, will be taken into account in determining the price actually paid or payable. A precondition for a finding that an amount in question is a commission is the existence of an agency relationship. By xxxxxxx's own admission (see October 8, 1991 letter), it was xxx xxxxxxx's "sole agent". That statement, together with xxx xxxxxxx's labeling of the 15% amount as a commission, suggest that the xxxxxxx - xxx xxxxxxx relationship was one of agency. As the field correctly points out, absent further proof that the amount in question was a discount, such as a corrected invoice from the seller, a copy of a contract or a purchase order, and an explanation of what the purported trade discount was for, xxxxxxx's assertion that the 15% amount was a trade discount is not enough to overcome the evidence that it was a selling commission.


The available evidence supports the conclusion that the amount listed on the invoice as a commission was a dutiable selling commission, not a trade discount.

You are directed to DENY this protest. A copy of this decision should be attached to the CF 19, Notice of Action, and sent to the protestant to satisfy the notice requirement of section 174.30(a) of the Customs Regulations.


John Durant
Director, Commercial