Appealed from U.S. Court of International Trade, Judge Carman.
Bissell,*fn* Archer and Mayer, Circuit Judges.
Moss Manufacturing Company, Inc (Moss) appeals the judgment of the United States Court of International Trade affirming the United States Customs Service's (Customs) appraisal for duty purposes of a single entry of ceiling fans. Moss Manufacturing Co., Inc. v. United States, 13 C.I.T. 420, 714 F. Supp. 1223 (Ct. Int'l Trade 1989). We affirm.
Moss is an American company engaged in the buying and importation from the Far East of merchandise for resale in the United States. To facilitate transactions between itself and the foreign sellers and manufacturers with whom it deals, in 1981 Moss established D.M.Z. Offshore Services, Ltd. (DMZ) as an independent entity to function as its agent in the Far East. DMZ's responsibilities in this capacity include sourcing merchandise, negotiating prices and freight rates, and entertaining Moss' customers who visit the Far East. In exchange for these services, the agency agreement between them obligates Moss both to reimburse DMZ for any fees and costs incurred in facilitating a transaction and to pay DMZ a "buying commission"
The method of calculation and manner of payment of DMZ's commissions varied from transaction to transaction and year to year. Moss' primary objective in negotiating the commissions was to insure that, in any given year, their sum be sufficient to fund the operation of DMZ's offices in Hong Kong. As a consequence, Moss did not report the buying commissions to Customs in a consistent manner. In particular, at least until October of 1983, Moss paid DMZ commissions only on selected transactions; those commissions Moss did pay, even thereafter, were included variously as part of the "price paid", reported separately, or omitted altogether on Customs entry documents. This inconsistent treatment triggered, in 1985, a thorough Customs review of several hundred Moss entries over the preceding few years. The entry at issue here, which occurred in September of 1983, is one of those chosen for review. The parties have selected it as a "test case" pursuant to the rules of the Court of International Trade; that court has stayed three other actions between the same parties pending decision in this case.
This transaction involved the purchase by Moss of several sets and types of ceiling fans. By an undated "pro forma" invoice from Moss to C.E.C. Electrical Manufacturing Co., Ltd. (CEC), Moss ordered 1165 ceiling fans with a total price of $39,808.00. The invoice included an additional sum of $1,747.50, denoted as "Brokerage, Inspection Service Fee required to be remitted to DMZ Hong Kong Services, Ltd.". Thus, the total amount of the pro forma invoice was $41,555.50.
To pay for the merchandise, Moss applied for and received from Standard Chartered Bank of Miami, Florida (Standard Bank), a letter of credit for the same amount. However, the letter of credit recited only the aggregate amount of $41,555.50 and an "invoice value" of $39,808.00, together with the instruction that the beneficiary (CEC) remit $1.50 per fan to a second bank in Hong Kong to the account of DMZ. The effect of this condition would be the same as if Moss were to pay $1,747.50 directly to DMZ, but the alleged "commission" was not separately identified in the letter of credit and the letter gives no indication of what the $1.50 per fan payment was for. Moss' president and chief executive officer testified that DMZ was paid in this way because Standard Bank demanded it: the bank wanted all payments related to the transaction included in a single letter of credit.
CEC accepted, filled, and shipped Moss' order for 1165 fan sets. However, there were several significant discrepancies between the accompanying commercial invoice, dated September 26, 1983, and the pro forma invoice prepared by Moss. Most importantly, the total prices differed--$40,510.50 versus $39,808.00--and the commercial invoice did not identify any portion of the total amount or any separate amount as a "buying commission", "brokerage fee", or the like. Second, the unit price for each of the three types of fans ordered was higher on the commercial invoice. Finally, CEC erroneously shipped 480 five-bladed fans of a certain style instead of the 480 four-bladed fans of that style ordered by Moss.
Nevertheless, Moss accepted the shipment and under the letter of credit standard Bank paid CEC the total commercial invoice price plus the $1.50 per fan "commission". The record contains a "Negotiating Bank Certificate" indicating that DMZ was in turn paid the $1.50 per fan amount required by the letter of credit, but the certificate is silent about the source of the funds. The total amount paid by standard Bank, $42,258.00, exceeded the amount stated in the letter of credit by $702.50.
Based on the entry documentation, which included both the pro forma and commercial invoices as well as a copy of the Moss/DMZ agency agreement, Customs appraised the value of the entry for duty purposes at the full $42,258.00. Moss protested that the appraisal was incorrect because it included the $1.50 per fan "buying commission" indirectly remitted to DMZ. Such a commission, Moss argued, does not constitute part of the price paid "for the merchandise" and is therefore not includable in the "transaction value" upon which Customs bases its duty appraisals.
The Court of International Trade disagreed. It held that where the seller is responsible for disbursing a portion of the total payment to a buying agent who "assisted in bringing about the sale", that portion is money expended for the benefit of the seller, is properly includable as part of the price paid for the goods, and hence is part of the transaction value. 714 F. Supp. at 1229. The court concluded that Moss had not overcome the presumption of ...