VAL CO:R:C:V 544958 ILK
--------------------- Esq.
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---------------------
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Re: Dutiability of Buying Agency Commissions
Dear ------------:
This is in response to your letter of March 24, 1992
(hereinafter referred to as the "request"). On behalf of your
client, ------------ (hereinafter referred to as "----"), you
request a ruling that ---- may act as a bona fide agent to
customers to whom it will, in addition, act as a "seller" in
unrelated transactions. The request was followed by a June 3,
1992 meeting between you and members of my staff in the Value and
Marking Branch.
FACTS:
This office has previously issued a ruling pertaining to --
-- In Headquarters Ruling Letter (HRL) 544676 dated July 24,
1991, we ruled that pursuant to the information provided, the
commissions to be paid to ---- to perform the services of
purchasing merchandise (wearing apparel) from manufacturers are
to be considered bona fide buying commissions, and therefore not
to be added to the price actually paid or payable. It was
further ruled that amounts received by ---- from the
manufacturers for performing certain services will not impact on
the nondutiability of the buying commissions as long as ----
continues to work at the direction of its importers with the
importers maintaining the requisite degree of control over the
actions of ---.
Since the issuance of HRL 544676, you advise us that ---- is
preparing to act as a seller to purchasers for which it currently
presumably acts as a buying agent in accordance with HRL 544676,
and to be the importer of record of the imported merchandise it
sells. The transactions in which ---- will act as an importer
are unrelated to the transactions in which it acts as an agent.
When ---- will act as an importer it will provide assists in the
form of piece goods, trim and other wearing apparel components to
factories, which will use the assists provided to manufacture
wearing apparel for the account of ---. In the transactions in
which ---- is the importer, the parties will at all times deal at
arms length, and no agency commission will ever be paid to ---.
The request states that the transactions in which ---- will act
as an importer/domestic seller will not affect or be affected by
the transactions where B.Z. acts as a bona fide buying agent. At
the June 3 meeting you stated that the entry documents would
clearly indicate whether ---- is acting as a buying agent or an
importer.
ISSUE:
Whether the status of a party as a bona fide buying agent is
affected by the party also acting as an importer and domestic
seller for the same U.S. customers for which it also acts as a
buying agent in unrelated transactions.
LAW AND ANALYSIS:
For the purpose of this prospective ruling request, we are
assuming that transaction value will be applicable as the basis
of appraisement.
A set of facts analogous to the instant set of facts was the
subject of HRL 543053 dated July 11, 1983. In HRL 543053 a party
received a buying agency commission from importers for buying
agent services, and in the same transaction an overseas branch
office received a commission for performing services for the
manufacturer. We ruled that the commission paid to the party as
a buying agent was a bona fide nondutiable buying agent's
commission. With respect to the effect of the party receiving a
commission from the manufacturer we ruled that the branch's
receipt of dutiable commissions from the factory does not cause
the separate buying agent's commission received by the agent from
the importer to become a dutiable element. We recognized that
"a buying agent and a selling agent are two separate arrangements
under applicable customs law" and that:
[T]he existence of a dutiable selling commission or a
non-dutiable buying commission is a question of fact
which must be determined on the basis of the
information available at that particular point and
time. The fact that a selling commission exists under
certain circumstances would not negate the existence of
a buying commission when applied to another set of
facts. That is not to say, however, that once a non-
dutiable buying agency arrangement exists that
circumstances between the parties could not change.
The same reasoning would be applicable in this case, as well
as the statement made in HRL 544676, supra, that the transactions
between ---- and the manufacturers will not impact on the
nondutiability of buying commissions "as long as the agent
continues to work at the direction of his importers with the
importers maintaining the requisite degree of control over the
actions of its' agent." This position is consistent with the
cases cited in the request, Bushnell Int'l., Inc. v. United
States, 477 F.2d 1402 (C.C.P.A. 1973) and Jay-Arr Slimwear, Inc.
v. United States, 681 F. Supp. 875 (C.I.T. 1988), which stated
that the relationship between the seller and agent is not
dispositive of whether a bona fide buying agency exists.
Similarly, the fact that a party acts as an importer/domestic
seller for a customer for which it also acts as a buying agent in
unrelated transactions, should not be dispositive of whether a
bona fide agency exists.
In this case, the agent is preparing to act as a seller to
the same customers for which it also acts as an agent in
unrelated transactions, and would also be acting as an importer
of record. If the actions of ---- acting as an agent conform to
the terms upon which prior HRL 544676 was based, and the entry
documentation clearly indicates whether ---- is acting as a
buying agent or importer, the nondutiable status of the buying
agency commissions will not be affected.
Note, however, that the existence of a buying agency
relationship is factually specific and could vary with each
importation. The actual determination as to the existence of a
buying agency will be made by the appraising officer at the
applicable port of entry upon the presentation of entry
documentation.
Based upon these considerations, we conclude that the
commissions to be paid to ---- acting as a buying agent for other
importations will not be affected by ---- also acting as an
importer/seller for the same customers for which it acts as an
agent.
This ruling presupposes without deciding that the sale to -
--- would qualify for transaction value.
HOLDING:
In view of the foregoing, ------------'s status as a buying
agent is not affected by its acting as an importer and domestic
seller for the customers for which it also acts as a buying agent
in unrelated transactions as long as ------------, as a buying
agent, continues to work at the direction of its importers with
the importers maintaining the requisite degree of control over
the actions of ------------.
Sincerely,
John Durant, Director