CBP Ruling Wants Paper Trail Proving First Sale Treatment
CBP ruled an importer didn't provide enough documentation to qualify for first sale treatment, and that the middleman couldn't be considered a buying agent, either, because its relationship with the importer was a buyer/seller relationship.
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In the ruling, HQ H337972, dated Feb. 24, Houston-based Graniti Vicentia wanted to know whether a transaction involving Eswari Exports Private Limited could be considered for first sale valuation. In this situation, Eswari served as a middleman between Graniti, which specializes in the distribution and sale of hotel furniture, and Graniti's overseas supplier.
If the transaction couldn't be considered for first sale valuation, Graniti's legal counsel asked whether Eswari could be considered a bona fide buying agent whose commissions are properly excludable from the price actually paid or payable for the imported merchandise, according to CBP.
Graniti's questions arose following CBP's audit of the company in 2023. Through that audit, CBP "identified multiple instances where fees and duties were still owed," the ruling said.
One transaction entailed a January 2020 purchase of glass countertops, in which Eswari served as a middleman between Graniti and Chinese supplier Deyuan Stone, CBP said.
Graniti asked CBP's audit team whether it could use the first sale method of appraisement to calculate the duties for this transaction. After CBP rejected that request because the agency, at least at that time, believed that the relationship between Eswari and Graniti was more akin to an agency relationship than that of a buyer and seller. Graniti then asked for Eswari to be considered as a bona fide buying agent whose commissions are properly excludable from the price actually paid or payable for the imported merchandise, CBP said.
The agency in the ruling went on to describe two other transactions between Graniti and Eswari that might illustrate the relationship between the two entities. However, these transactions lacked a paper trail, which is why CBP ultimately determined that the first sale valuation would be insufficient.
"The submitted documents, including the purchase terms, invoices between the parties, the shipping information, and the wire transfer between Eswari and Deyuan is insufficient evidence of a complete paper trail showing the structure of the entire transaction," CBP said. "In particular, the documents fail to show that Graniti paid consideration to Eswari for the transaction at issue. None of 22 wire transfers provided by Graniti, match the $36,582.24 that Graniti owed Eswari, or contain any reference to that transaction. They also took place nearly two years after the initial transaction was completed. Therefore, insufficient evidence has been presented to support valuation based upon a first sale between Eswari and Deyuan. Accordingly, we find that the appraisement of the merchandise should be based upon the price paid by the protestant."
In looking at whether Eswari could be considered as a bona fide buying agent, CBP looked at whether the principal had the right to control the agent's conduct with respect to matters entrusted to the agent.
Specifically, CBP now relied on a 2015 agreement between the two parties to support its view that Eswari and Graniti were engaged in a buyer-seller relationship rather than that of a seller and buying agent. As a result, Eswari was not a bona fide buying agent.
Submitted documents "indicate that Eswari acted with a degree of independence that is not typical of a buying agent. This includes, controlling the sales terms and the final sale price, taking title to the goods, bearing the risk of loss, and independently handling all payments to the foreign supplier," CBP said.
"Therefore, we find that Graniti has not shown that Eswari acted as a bona fide buying agent and the payments from Graniti to Eswari cannot be deducted as buying agent commissions," the agency concluded.