HQ 543990: Non-dutiable buying commission

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                                       HQ 543990

                                    March 25, 1988


          CLA-2 CO:R:CV:V  543990 DH

          CATEGORY:  Valuation

          Peter S. Herrick, Esq.
          Herrick & Larsen
          2945 S. Miami Avenue
          Miami, Florida 33129

          RE: Non-dutiable buying commission

          Dear Mr. Herrick:

                This is in response to your letters of July 15, 1987,
          February 9, 1988 and March 10, 1988, requesting a ruling as to
          whether a change in the importer's name and a change in the
          amount and manner of determining the commission to be paid to an
          agent will revise the conclusion drawn in Headquarters Ruling
          Letter (HRL) 543461, dated March 1, 1985.

          FACTS:

                In HRL 543461, we held that the price of footwear imported
          directly from El Salvador to the United States, which the
          distributor negotiated with the manufacturer on the importer's
          behalf, and which the importer accepted prior to exportation, to
          represent the transaction value.  We further held that the $2.00
          per pair which the distributor invoiced either separately or as a
          separate item on the sales invoice was a non-dutiable buying
          commission.

          ISSUE:

                Are commissions to be paid to an exclusive distributor of
          the manufacturer considered buying commissions?

          LAW AND ANALYSIS:

                As you know, transaction value is defined in section 402,
          Tariff Act of 1930, as amended by the Trade Agreements Act of
          1979 (TAA; 19 U.S.C. 1401a), as the price actually paid or
          payable for the merchandise when sold for exportation to the
          United States, plus amounts for the items specifically enumerated
          in section 402(b)(1) of the TAA.  Although selling commissions
          are one of the items listed therein, buying commissions are not
          included as an item to be added to the price actually paid or
          payable.  The term "price actually paid or payable" is defined in
          section 402(b)(4)(A) as:











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                    ..the total payment (whether direct or indirect,
                    and exclusive of any costs, charges, or expenses
                    incurred for transportation, insurance, and
                    related services incident to the international
                    shipment of the merchandise from the country of
                    exportation to the place of importation in the
                    United States) made, or to be made, for imported
                    merchandise by the buyer to, or for the benefit
                    of, the seller.

                It is clear from the statutory language that in order to
          establish transaction value one must know the identity of the
          seller and the amount actually paid or payable to him.  Whether
          or not the purported agent is the seller is to be determined by
          the documents presented.  Furthermore, the totality of the
          evidence must demonstrate that the purported agent is in fact a
          bona fide buying agent and not a selling agent or an independent
          seller.  See TAA No.7, dated September 29, 1980 (542141).

                In order to continue to view the relationship of the
          parties as a bona fide buying agency, Customs must examine all
          the relevant factors.  J. C. Penney Purchasing Corporation et al.
          v. United States, 80 Cust. Ct. 84, C.D. 4741 (1978), 451 F. Supp.
          973 (1983): United States v. Knit Wits (Wiley) et al., 62 Cust
          Ct. 1008, A.R.D. 251 (1969).  The primary consideration, however,
          "is the right of the principal to control the agent's conduct
          with respect to the matters entrusted to him."  Dorf Int'l, Inc.,
          et al. v. United States, 61 Cust. Ct. 604, A.R.D. 245, 291 F.
          Supp. 690 (1968).  The degree of discretion granted the agent is
          an important factor.  New Trends Inc. v. United States, 10 CIT_,
          645 F. Supp. 957 (1986).

                In reviewing HRL 543461, we note several factors which
          impact negatively on the conclusion reached in the previous
          decision.  The establishment of the distributor as the exclusive
          world-wide distributor of the manufacturer's product is
          tantamount to the establishment of the distributor as a selling
          agent.  On the basis of the information furnished, we are of the
          opinion that the importer (subdistributor) does not exercise the
          requisite control over the distributor to establish a buying
          agency relationship.  The importer can not negotiate directly
          with the manufacturer or purchase directly from the manufacturer
          but must deal solely with the distributor.  Additionally, it is
          the complete discretion of the distributor to accept the order of
          the importer.  Based on these facts, the distributor appears to
          work for the manufacturer and/or seller.  Accordingly, you should
          have been previously advised that the services of the distributor
          were those of a selling commissionaire and that such services
          were dutiable.













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          HOLDING:

                We, therefore, are compelled to revoke, pursuant to section
          177.9(d), Customs Regulations (19 CFR 177.9(d)), the portion of
          HRL 543461 that addresses the commissions paid to the
          distributor, since the conclusion found in that ruling was in
          error.

                Accordingly, the commissions paid to the distributor are to
          be considered selling commissions; therefore, they are dutiable
          under section 402(b)(1) of the TAA.  This ruling will become
          effective upon the issuance of this letter.


                                        Sincerely,




                                        John Durant
                                        Acting Director,
                                        Commercial Rulings Division