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.
FACTS:
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).
ISSUE:
Whether an amount listed on the invoice as a commission was
a discount which should have been considered in determining
transaction value?
LAW AND ANALYSIS:
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.
HOLDING:
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.
Sincerely,
John Durant
Director, Commercial