VAL CO:R:C:V 545100 CRS
District Director
U.S. Customs Service
Second and Chestnut Streets
Philadelphia, PA 19106
RE: Application for further review of Protest 1101-92-100430;
information insufficient to establish existence of bona fide
buying agency; commissions are part of price actually paid or
payable.
Dear Sir:
Protest Number 1101-92-100430 dated July 17, 1992, filed in
Harrisburg, Pa., by Wolf D. Barth Company, Inc., on behalf of
Willits Footwear Worldwide (Protestant) of Halifax, Pa., has been
referred to this office for a decision.
FACTS:
Protestant imports footwear from the Republic of Korea, in
connection with which it employs an agent, N. Shasta Shoe, of
Eugene, Oregon. N. Shasta is paid a ten percent commission for
its services. Protestant contends this payment is a non-dutiable
buying commission.
In support of its position, protestant has submitted a
letter from N. Shasta Shoe dated July 6, 1992, which states that
N. Shasta Shoe acts as a sourcing agent for protestant. When N.
Shasta identifies a potential supplier, a price quote is obtained
and referred to protestant. Provided the price is acceptable,
protestant places its order directly with the supplier. If the
terms are not acceptable, protestant negotiates directly with the
manufacturer. Protestant is not obligated to order merchandise
through N. Shasta.
ISSUE:
The issue presented is whether the commission in question is
a buying commission such that it does not form part of the price
actually paid or payable under 19 U.S.C. 1401a(b).
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 principal method of appraisement is
transaction value, defined as "the price actually paid or payable
for merchandise when sold for exportation to the United States."
19 U.S.C. 1401a(b)(1). Accordingly, we have assumed for the
purposes of this ruling that transaction value is the appropriate
basis of appraisement.
The "price actually paid or payable" is defined as "the
total payment (whether direct or indirect) made, or to be made,
for imported merchandise by the buyer to or for the benefit of
the seller." 19 U.S.C. 402(b)(4). As a general matter, bona
fide buying commissions are not added to the price actually paid
or payable. Pier 1 Imports, Inc. v. United States, 708 F. Supp.
351, 13 CIT 161, 164 (1989); Rosenthal-Netter, Inc. v. United
States, 679 F. Supp. 21, 23, 12 CIT 77, 78 (1988); Jay-Arr
Slimwear, Inc. v. United States, 681 F. Supp. 875,878, 12 CIT
133, 136 (1988).
The existence of a bona fide buying commission depends upon
the relevant factors of the individual case. J.C. Penney
Purchasing Corp. v. United States, 451 F. Supp. 973 (Cust. Ct.
1978). In this regard the importer has the burden of proving the
existence of a bona fide agency relationship and that payments to
the agent constitute bona fide buying commissions. Rosenthal-
Netter, 679 F. Supp. 21, 23; New Trends, Inc. v. United States,
645 F. Supp. 957, 960, 10 CIT 637 (1986); B.W. Wholesale Co.,
Inc. v. United States, 462 F. Supp. 1399, 1403, 58 CCPA 92,
C.A.D. 1010, (1971).
In determining whether an agency relationship exists, the
primary consideration, is the right of the principal to control
the agent's conduct with respect to those matters entrusted to
the agent. Jay-Arr Slimwear, 681 F. Supp. 875, 879. The degree
of discretion granted the agent is a further consideration. New
Trends Inc. v. United States, 645 F. Supp. 957 (1986). The
existence of a buying agency agreement, moreover, has been viewed
as supporting the existence of a buying agency relationship.
Dorco Imports v. United States, 67 Cust. Ct. 503, 512, R.D. 11753
(1971). In addition, the courts have examined such factors as
whether the purported agent's actions were primarily for the
benefit of the principal; whether the agent was responsible for
the shipping and handling and the costs thereof; whether the
language used in the commercial invoices was consistent with a
principal-agent relationship; whether the agent bore the risk of
loss for damaged, lost or defective merchandise; and whether the
agent was financially detached from the manufacturer of the
merchandise. New Trends, 645 F. Supp. 957.
Evidence submitted to Customs must clearly establish the
fact of a bona fide buying agency. Headquarters Ruling Letter
(HRL) 544610 dated December 23, 1991. Moreover, "an invoice or
other documentation from the actual foreign seller to the agent
[is] required to establish that the agent is not a seller and to
determine the price actually paid or payable to the seller." HRL
542141 dated September 29, 1980, also cited as TAA No. 7.
The information submitted in connection with in the instant
protest is insufficient to support the existence of a bona fide
agency relationship. There is no documentation that demonstrates
protestant exercised control over N. Shasta, the purported buying
agent, nor is there, for example, evidence that the risk of loss
was borne by the protestant. Moreover, no invoices from the
manufacturer to the purported agent were submitted with the
protest. Consequently, the commissions are part of the price
actually paid or payable and are dutiable.
HOLDING:
The commissions in question constitute part of the price
actually paid or payable pursuant to 19 U.S.C. 1401a(b).
You are instructed to deny the protest in full. A copy of
this decision should be attached to the Form 19 Notice of Action.
Sincerely,
John Durant, Director