Pier 1 Imports, Inc. v. US
| Decision Date | 23 February 1989 |
| Docket Number | Court No. 86-01-00097. |
| Parties | PIER 1 IMPORTS, INC., Plaintiff, v. UNITED STATES, Defendant. |
| Court | U.S. Court of International Trade |
Sheldon & Mak and Steven B. Lehat, Pasadena, Cal., for plaintiff.
John R. Bolton, Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office, Commercial Litigation Branch, Civil Div., U.S. Dept. of Justice, Saul Davis and Paula N. Rubin, New York City, for defendant.
Plaintiff challenges the United States Customs Service's (Customs) appraisement of several entries of merchandise from the People's Republic of China (PRC), the Philippines and Hong Kong. Pier 1 Imports, Inc., plaintiff, the importer of record and ultimate consignee of the involved merchandise, claims that the charges for "buying commissions" and "handling statement charges" in the appraised value are bona fide buying commissions properly excludable from the dutiable value of the subject merchandise. Customs maintains that Osco Limited (Osco), the entity paid the commissions and charges, was not a bona fide buying agent but the seller and/or selling agent of the merchandise. It is agreed that the proper basis of appraisal is transaction value under § 402(b) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1401a(b) (1982). Thus, the sole issue presented is whether a bona fide agency relationship existed between plaintiff and Osco.
At the trial of this action, three witnesses testified on behalf of plaintiff: David Walker, the Manager of Replenishment (inventory control) for Pier 1 Imports; Raul A. Quadros, Pier 1's Director of International Transportation; and Marvin J. Girouard, Pier 1's Senior Vice President of Merchandising. Defendant produced Janis Seal, Supervisor, Customs, Los Angeles District.
Mr. Walker testified that his principal responsibilities at Pier 1 entailed managing the store replenishment system and reorders for basic stock merchandise. His testimony primarily focused on the flow of payments involving Osco and merchandise originating from the PRC, the Philippines and Hong Kong. He further stated that he handled the pertinent documentation relating to these transactions, i.e., shipping and letter of credit documents.
Mr. Walker advanced that plaintiff's representatives traveled to the PRC, ordered goods, and instructed sellers to ship the merchandise to Osco in Hong Kong. Plaintiff paid for the goods, he added, by opening letters of credit in favor of Osco, either at sight or deferred at plaintiff's option, which Osco used to open its own letters of credit to pay the manufacturers. He further testified that plaintiff would reimburse Osco for banking charges, out-of-pocket expenses, and repacking charges in connection with these transactions.
On the shipments prepaid by Osco, Mr. Walker submitted that Osco charged plaintiff interest, and that the deferred payment option also applied to freight prepayments. He stated that plaintiff chose delayed payment financing on six of twenty shipments from the PRC, the one shipment from Hong Kong, and none of the Philippines transactions. Trial Transcript at 11 hereinafter Tr. at ____. He further testified that Osco's commissions were based on 6% of invoice price for f.o.b. contracts and 4% of invoice price for c.i.f. contracts, and plaintiff decided whether the shipment was to be f.o.b. or c.i.f.
Concerning plaintiff's purchases from the Philippines and Hong Kong, Mr. Walker stated that Osco received only service commissions, and no handling or out-of-pocket charges.
Raul A. Quadros testified that he was responsible for the shipments routed through Hong Kong to the United States. He declared that he negotiated the freight rates with the shipping lines on behalf of Pier 1 for the present 22 shipments. He also claimed that Osco followed plaintiff's instructions with respect to the shipment of the goods through shipping and routing guidelines attached to each purchase order and accompanying letter of credit.
Mr. Quadros further testified that plaintiff could have bought directly from the PRC suppliers, but chose instead to use Osco as a buying agent.
Marvin J. Girouard testified that he was in charge of setting the budgets and buying for plaintiff. He testified that he traveled to the PRC accompanied by Osco, and purchased the merchandise directly at the Canton Fair by meeting with representatives of the respective provinces and discussing price, delivery dates, packaging, quality and quantity. On reorders, he stated that plaintiff would telex Osco, and ask them to contact the PRC provinces which sold the particular product of interest and obtain quotations on price, delivery, and packing; plaintiff would then telex Osco to confirm the particulars.
On the Philippines and Hong Kong transactions, Mr. Girouard stated that plaintiff's buyers dealt directly with the manufacturers or manufacturers' representatives, in the presence of Osco. He also stated that reorders were made directly to the suppliers, with a copy sent to Osco.
Mr. Girouard additionally set forth plaintiff's justification for the structural difference between the PRC purchases and purchases from the Philippines and Hong Kong: when plaintiff bought goods from the PRC, they were purchased from several different provinces; therefore, it was in plaintiff's economic self-interest to consolidate the goods in Hong Kong before shipment to the United States.
Defendant's sole witness was Janis Seal, the import specialist for the involved entries, who testified that her duties included appraising, classifying, and enforcing the applicable rules and regulations with respect to imported merchandise as well as conducting importer interviews. She testified that the criteria upon which she determines if one is a buying agent are as follows:
if there was a bond filed, a buying agency agreement filed with U.S. Customs, if it was carried through, whether the agent was acting as an independent seller or whether he was working solely for the benefit of the importer and during this course, did he make any profits, get rebates, discounts which did he sic not pass onto the importer ... whether he purchased more merchandise than was ordered by the importer; by warehousing it, the excess quantity, whether the importer could refuse shipments thereby stockpiling this merchandise in the agent's warehouse ... the amount of control and discretion the agent had in the form of purchasing and payment of the merchandise.
As to the importations involved here, Ms. Seal testified that Pier 1 had been importing from Osco, goods manufactured in the PRC, shipped through Hong Kong and then ultimately to the United States. She observed that when plaintiff submitted Osco's invoices to Customs in f.o.b. terms, Osco's commission was itemized in the cost breakdown. But when subsequent invoices did not contain a breakdown of f.o.b. charges, she claims to have questioned plaintiff as to whether commissions were still included in the invoice price, and to have received no response when she requested invoices that itemized the f.o.b. charges. She also explained that Osco was listed as the seller on the Special Customs Invoices, that all documentation filed pointed to Osco being the selling agent, and that it was not sufficient, by itself, that an importer traveled to the PRC to order merchandise with its representative. Moreover, she stated that the invoices from the PRC listed Osco as the only entity, with no mention of Pier 1, and it appeared to her from the documents that Osco was buying for its own account and reselling the merchandise as an independent seller.
Bona fide buying commissions paid to an agent are not a proper element of dutiable value. Rosenthal-Netter, Inc. v. United States, 12 CIT ___, ___, 679 F.Supp. 21, 23 (1988), aff'd, 861 F.2d 261 (Fed.Cir.1988). Plaintiff has the burden of proving that a bona fide agency relationship exists and if plaintiff does not clearly establish that relationship, then it is not one of agency. Id. In deciding whether a bona fide agency relationship exists, the Court must examine all the relevant factors, id., and "each case is governed by its own particular facts." J.C. Penney Purchasing Corp. v. United States, 80 Cust.Ct. 84, 95, C.D. 4741, 451 F.Supp. 973, 983 (1978); United States v. Nelson Bead Co., 42 CCPA 175, 183, C.A.D. 590 (1955). No single factor is determinative; however, the primary consideration is the "right of the principal to control the agent's conduct with respect to the matters entrusted to him." 80 Cust.Ct. at 95, 451 F.Supp. at 983; Rosenthal-Netter, 12 CIT at ___, 679 F.Supp. at 23.
Plaintiff's Exhibit 25 (telex of May 20, 1980 at ¶ 3) (emphasis added). Control over the purchasing process is strong evidence that an agency relationship exists. See Rosenthal-Netter 12 CIT at ___, 679 F.Supp. at 24; J.C. Penney, 80 Cust.Ct. at 95-96, 451 F.Supp. at 983.
Additionally, in performing these functions, plaintiffs buyers and representatives traveled to the PRC conjointly with Osco, where they negotiated with the factories and set up purchase terms for the merchandise. See Tr. at 29, 288-90; Plaintiff's Collective Exhibit 2. This court accords significance to an importer who actually visits and participates in negotiations...
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Department of Energy==December 2004 Agreement with the United States Enrichment Corporation
... ... December 10, 2004 Agreement. [ 1 ] As agreed with your ... staff, this letter addresses two ... entire situation ... " Id. See also Pier 1 ... Imports, Inc. v. United States, 708 F.Supp. 351, 356 ... ...