December 10, 2009 CBP Bulletin Notice on Dutiability of Commission Payments
In the December 10, 2009 issue of the U.S. Customs and Border Protection Bulletin and Decisions (Vol. 43, No. 50), CBP published a notice revoking one ruling as follows:
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Revocation of ruling. CBP is revoking one ruling on certain commission payments included in the appraised value of imported merchandise under section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401a). Since this decision to revoke is based on the specific facts of the particular matter, CBP is not revoking or modifying any other treatment.
In a notice published in the Customs Bulletin, Vol. 43, No. 36, on September 3, 2009, CBP proposed revoking HQ H006588, dated December 17, 2007, relating to the dutiability of certain buying commission payments. No comments were received in response to this notice.
Accordingly, CBP is revoking HQ H006588 by issuance of HQ H022168, which will become effective on or after February 8, 2010.
Buying agency payments: The issue concerns the dutiability of certain payments made by David's Bridal Inc. ("DBI") to its related party Fillberg Limited, a purported buying agent in Hong Kong. CBP originally concluded that DBI had not met its burden of establishing that the payments constituted bona fide buying commissions. The payments in question were made pursuant to a 1995 buying agency agreement between DBI and Fillberg. The agreement specified Fillberg's duties, which are typical of those undertaken by a buying agent. They included: researching and investigating manufacturers or suppliers; arranging for the purchase of sample fabrics, labels or other items used in the manufacture of the imported merchandise; providing advice on prices, terms and conditions; inspecting merchandise and ensuring quality control; and arranging for shipment. DBI agreed to pay a commission equal to a specified percentage of the U.S. dollar FOB price of merchandise shipped in a particular calendar year.
Fillberg was formed pursuant to a joint venture agreement between DBI and Addwood Limited, Hong Kong. The joint venture agreement provided that Fillberg was to act as DBI's exclusive agent in regard to the original buying agency agreement. However, the joint venture agreement included a section that allowed Fillberg to engage in retail sales provided that DBI consented and subject to certain enumerated conditions.
CBP is now proposing to issue HQ H022168 in order to revoke HQ H006588, dated December 17, 2007, having determined that the commission payments at issue are not dutiable as they are part of a bona fide buying agency relationship.
In HQ H006588, CBP reasoned that the joint venture agreement which included language that might "override" the buying agency agreement disrupted the "paper trial" that would sufficiently establish the commissions at issue as nondutiable buying commissions.
Counsel for DBI has now asserted that the provision regarding retail sales has never been exercised, and there is no evidence in the record that would indicate that Fillberg engaged in retail sales. In addition, the 1995 buying agency agreement and joint venture agreement are no longer in effect. As of January 1, 2008, DBI amended the joint venture agreement, which in pertinent part now states "Fillberg shall not engage in any retail sales or any activity other than as a buying agent for DBI." Moreover, DBI actively controls the purchasing process and the payment process, and meets CBP's primary considerations in determining a buying agency relationship.
Accordingly, based on the evidence in the record, CBP now finds that Fillberg is a bona fide buying agent for DBI, that it does not act as an independent seller, and that its functions are separate and distinct from those of the manufacturers/sellers and are readily distinguished therefrom.
In conformity with the foregoing, the commission payments made by DBI to Fillberg under the 1995 buying agency agreement constitute bona fide buying commissions. As such, the payments are not included in transaction value.
(See ITT's Online Archives or 09/09/09 news, 09090945, for BP summary of proposed revocation.)
New: Commission payments not dutiable; Previous: commission payments dutiable
December 10, 2009 CBP Bulletin (Vol. 43, No. 50) available at http://www.cbp.gov/xp/cgov/trade/legal/bulletins_decisions/bulletins_2009/