United States v. KNIT WITS (WILEY)

• Decision Date: 10 March 1969
• Docket Number: A.R.D. 251,Reappraisements R65/1415
• Citation: 296 F. Supp. 949
• Parties: UNITED STATES, Appellant, v. KNIT WITS (WILEY) et al., Appellees.
• Court: U.S. Court of Customs and Patent Appeals (CCPA)

296 F. Supp. 949

UNITED STATES, Appellant, v. KNIT WITS (WILEY) et al., Appellees.

A.R.D. 251; Reappraisements R65/1415, etc.

United States Customs Court, Second Division, Appellate Term.

March 10, 1969.

William D. Ruckelshaus, Asst. Atty. Gen. (Mollie Strum, New York City, trial attorney), for appellant.

Glad & Tuttle, Los Angeles, Cal. (Edward N. Glad, Los Angeles, Cal., of counsel), for appellees.

Before RAO, Chief Judge, and FORD and NEWMAN, Judges.

RAO, Chief Judge:

This is an application for review of a decision and judgment sustaining the importers' claim and holding that there was a bona fide buying agency; that the commission paid to the agent was not a part of the dutiable value of the merchandise, and that the appraiser erroneously included it as part of the appraised value. Knit Wits (Wiley) et al. v. United States, 59 Cust.Ct. 753, R.D. 11401.

The merchandise consists of wool knitwear for women produced by a number of manufacturers in Italy and exported to the United States during the period from July 1960 through August 1963.

It was stipulated that export value, as that value is defined in section 402(b) of the Tariff Act of 1930, as amended by the Customs Simplification Act of 1956, was the proper basis for the appraisement of the merchandise and that the merchandise does not appear on the final list, 93 Treas.Dec. 14, T.D. 54521.

The official papers were received in evidence without being marked. The earlier invoices show Leon S. Sassoon as the seller-shipper and show three different prices, i. e., the "unit prices", the "export prices" which equal the "unit prices" plus a 5 percent commission on the "export prices", and the "home prices" which exceed the "export prices" by a little more than 5 percent. Near the end of 1961 the invoices show various manufacturers as the sellers and Leon S. Sassoon as the shipper. The three different values on the invoices, however, remain the same as above. In the latter part of 1962, the invoices still show various manufacturers as the sellers and Leon S. Sassoon as the shipper. The "unit prices" and the "export prices" are the same and the "home price" exceeds the former prices by a little more than 5 percent.

The invoices also show under the heading "Total", a total amount for each style calculated on the basis of the "unit prices" and the quantity involved, and a final total for the shipment. Added to the latter are an amount designated variously as "5 percent commission on export prices" or "5 percent on export prices" or "Buying Agent Commission" and an amount for "Stamps". The final total is designated "Total FOB Milano".

Entry was made by deducting from the total f. o. b. Milano figure the invoice items designated as "5 percent commission on export prices" or "5 percent on export prices" or "Buying Agent Commission" and "Stamps".

The red ink notation on a typical invoice reads:

APPRAISED AT INVOICE UNIT VALUES in column indicated, net, pkd.

The column checked is that headed "export prices".

Two official "Notices of Action—Increase in Duties" were received in evidence as plaintiffs' collective exhibit 4. One states:

All entries dated from Aug. 9, 1960 until Aug. 7, 1963 from shipper Leon S. Sassoon of Italy, are appraised at export value, net, packed. "Buying Commission" considered part of appraised value.

The other refers to entries from July 18, 1960 until August 17, 1960 and contains similar language.

It also appears from certain manufacturers' invoices and special customs invoices that the "export prices" included the commission.

Plaintiffs-appellees are contesting only the inclusion of the "buying commission" in the appraised values.

Under established principles, an appealing party in a reappraisement proceeding may challenge any one or more of the items entering into an appraisement, while relying upon the presumption of correctness of the appraiser's return as to the other elements, whenever the challenged items do not bring into question the balance of the appraisement. United States v. Dan Brechner et al., 38 Cust. Ct. 719, A.R.D. 71, and cases cited; United States v. Gehrig, Hoban & Co., Inc., 54 CCPA 129, C.A.D. 924; United States v. Chadwick-Miller Importers, Inc., et al., 54 CCPA 93, C.A.D. 914; United States v. Bud Berman Sportswear, Inc., 55 CCPA 28, C.A.D. 929.

In the Gehrig, Hoban case, the court considered the record in connection with the manner in which the appraiser reached the appraised value. The commercial invoice showed an amount as the price f. o. b. New York, duty paid, discount of 15 percent included, and 15 percent of that amount equalled the disputed sum. Special customs invoices set out the f. o. b. price along with a breakdown, which included items listed as packing and agent's commission. It appeared from the red check marks on the invoices that the appraiser had utilized the breakdown and had found the value to be the invoiced unit value including the packing and agent's commission, less the other charges. The court said that the method by which the appraiser calculated value was not significant; that the invoices showed what he did. It quoted the following from the decision of the appellate term as to the requirements for application of the separability rule (56 Cust.Ct. 782, 790, A.R.D. 204):

A separate unit price for appraised merchandise must be shown, and the item in dispute must be one clearly identifiable as having been considered by the appraiser and as affecting dutiable value. * * *

In the instant case the evidence identifies the item in dispute as that designated on the invoices as "5 percent commission on export prices" or "5 percent on export prices" or "Buying Agent Commission" and the "Notices of Action—Increase in Duties" show that it was an element in the appraised value. In the light of the Gehrig, Hoban case, we find that the appraisement is separable and that plaintiffs-appellees may rely upon the presumption of correctness attaching to the other elements of appraisement.

The issue before us is whether the trial court correctly determined that a bona fide buying agency existed, and that the 5 percent commission was not properly a part of the dutiable export value of the merchandise.

It is well settled, of course, that a bona fide buying commission, one which inures to the benefit of the purchaser, not the seller, is not part of the value of the merchandise. Stein v. United States, 1 Ct.Cust.Appls. 36, T.D. 31007; United States v. Case & Co., Inc., 13 Ct.Cust.Appls. 122, T.D. 40958; United States v. Dan Brechner et al., supra; Lollytogs, Ltd. v. United States, 55 Cust.Ct. 608, Reap.Dec. 11073. Whether a commission is a bona fide buying commission depends in each instance on the facts in the case, the burden of proof resting upon the plaintiff. Haddad & Sons, Inc. v. United States, 53 Cust.Ct. 423, Reap.Dec. 10825.

In the instant case the question concerns the relationship between the importer, Knit Wits, represented by Larry Taylor, president, and the so-called Sassoon group, consisting of Leon S. Sassoon, his son Ezra Sassoon, and his stepson Selim Haiatt. It appears from the record that the relationship had its inception in a contact between Taylor and Haiatt in Japan in 1956 and a subsequent visit by Taylor to Italy in 1957, at which time the Sassoons took him to a number of knitwear factories. Development of a business relationship was discussed and it was assumed that the Sassoons would act as agents for the Taylor interests.

This understanding was reduced to writing in December 1958, through a letter of Leon S. Sassoon (exhibit 2) which included the following:

1. You have nominated us as your exclusive Buying Agents for Italy working on 5% (Five percent) commission basis for all direct or indirect orders that you will place in Italy.

Mr. Taylor testified that he accepted the terms of this letter except paragraph 6, which related to the method of invoicing and paying the commission, and that all shipments were made according to the understanding set forth in the letter.

Mr. Taylor further testified that he traveled to Italy about three or four times a year and placed orders personally with the factories. On those occasions, he wrote down the size, color, style, and number of pieces desired and Ezra Sassoon, who served as interpreter, prepared formal contracts between the factory and Mr. Taylor. Taylor stated that he dealt with the individual factories and...