United States v. Nelson Bead Co. , 31 Cust. Ct. 481 ( 1953 )

Kao, Judge:

This is an application for review of a decision and judgment of a single judge upon a reappraisement appeal in which it was held that an item, described on the invoice as a 15 per centum buying commission, was, in fact, a bona fide buying commission, and, therefore, not properly a part of the export value of an importation from Czechoslovakia of crystal prisms or trimmings for illuminating glassware.

The merchandise in question, identified by the manufacturer's item numbers 130 and 131, in various sizes, and of two qualities, was ordered on October 28, 1946, and shipped in November 1946. It was entered on the basis of the invoice unit values, plus 3 per centum for cases and packing, and was appraised .at the invoice units, plus 15 per centum, less 2 per centum cash discount, plus 3 per centum for cases and packing. Thus, it is apparent that the ultimate issue for determination here, as it was in the trial court, is whether the 15 per centum buying commission is properly a part of the value of the merchandise.

It being conceded that export value, as defined in section 402 (d) of the Tariff Act of 1930, is the proper basis of value for the instant merchandise, and the only item in dispute being the so-called buying-commission, the trial court properly invoked the doctrine of United States v. Fritzsche Bros., Inc., 35 C. C. P. A. (Customs) 60, C. A. D. 371, to the effect that the presumption of correctness of an appraisement stands as to every element essential thereto except the one which has been challenged.

On the issue of the dutiability of the buying commission, two witnesses testified in behalf of plaintiff, and there were introduced into evidence an affidavit of the manufacturer of the subject merchandise, plaintiff’s exhibit 1, and an affidavit of appellee’s commissionaire, plaintiff’s exhibit 2. Five witnesses were called for the defendant and six exhibits were offered and received in evidence. These include an invoice from a Czechoslovakian exporter listing purchases from various manufacturers, among whom was the manufacturer of the instant merchandise (defendant’s exhibit 3); certain correspondence between the Czecho-Slovak Crystal Importers Association, Inc., and the Economic Group' of the Glass Industry of Czechoslovakia, defendant’s collective exhibit 4; correspondence between a Czechoslovakian manufacturer and commissionaire and an American importer, defendant’s collective exhibit 5; an invoice from the manufacturer of the instant merchandise covering goods sold to an American importer, defendant’s exhibit 6; another invoice from a Czechoslovakian manufacturer, defendant’s exhibit 7; and a price list from that same manufacturer, dated March 5, 1946, defendant’s exhibit 8.

The trial judge carefully and fully reviewed and evaluated the evidence in this case, and no useful purpose would be served in detailing it at length here. It is sufficient to observe that it has been amply established by the instant record that in the purchase of crystal prisms of the type involved in this case, American buyers ordinarily and usually employ a commissionaire in the country of exportation. The commissionaire serves the function of taking the prospective purchaser from one factory to another in the area where prisms are produced; helping the purchaser to transact his business with the manufacturer; receiving the purchased goods; inspecting the same; preparing the invoices and other shipping documents; and arranging for the exportation of the merchandise. For these services in connection with overseas shipments, the commissionaire receives a commission of 15 per centum of the total invoice value.

These buying commissionaires represent the purchasers only, are paid by the purchasers, are recognized by the manufacturers as representatives of the purchasers, and are not retained either directly or indirectly by the manufacturers. Neither do they receive from the manufacturer any fee or other compensation whatsoever.

There is also evidence in the record that although the foregoing is the usual, ordinary, and prevailing system in Czechoslovakia for the purchase of glass prisms, and was the method by which the instant merchandise was purchased, manufacturers will, and on occasion do, sell directly to American buyers for exportation to the United States without the intervention of a commissionaire. On such occasions, sales of glass prisms, packed ready for shipment to the United States, are made ex-factory, at the invoice unit prices, plus a commission of 15 per centum for export services rendered. The exact nature of the services for which the commission is charged is not, however, established.

In connection with direct sales by the manufacturer, defendant’s collective exhibit 4 contains a communication from the Economic Group of the Glass Industry of Czechoslovakia, in answer to an inquiry posed by the appraiser at New York and forwarded by the Czechoslovak Crystal Importers Association, Inc., an American association of importers of glass prisms, of which all of the trade witnesses in the instant case are members, in which the following is stated:

2 If a Czechoslovakian manufacturer supplies an importer direct, without the intervention of a commissionaire, he, as a rule, also charges a 15 % advance under the title of “15% advance for export service rendered.” If, for instance, a chandelier trimming item is sold by the manufacturer in the home market at the price of 100, he will, by transacting the export business direct, have to cover his overhead expenses accruing by the export business, namely in such a way that he puts on the price of 100 a 15% advance for export service rendered. By this selling advance the export overheads of the manufacturer are being covered which, as a matter of fact, are omitted for an inland business.

Defendant’s collective exhibit 5, a communication from A. Schon-bek & Co. of Smrzovka, Czechoslovakia, both a manufacturer and a commissionaire, to I. Albert Co., of which defendant’s witness, Isaac Albert, is a partner, also reveals the practice obtaining with respect to direct sales. It states:

The merchandise made by ourselves we shall invoice hereafter as follows:

We are charging the ground prices like on merchandise we are purchasing from manufacturers and add the 15% selling advance separately at foot of the invoice, under the title “15% advance for export service rendered”.

This proposition was worked out by our Ministry for foreign trade, who most likely represents the stand-point that the 15% advance for export service rendered is to be considered as a non-duty item and that, therefore, from a custom technical point of view, it will be the same for the American Importer whether he purchases from the manufacturer direct, or through the intermediary of an Exporter.

We do hope that the American Customs will represent the same stand-point as our Ministry for foreign trade.

It should be considered as logical that the 15% advance has not to be paid duty on as, de facto, it does not represent any additional profit but a remuneration for the expenses involved with the settlement of the export transactions, which the manufacturer has to bear likewise, if he exports directly and for which the exporter gets a remuneration in the way of a commission of 15%.

It further appears from a price list of the firm of A. Schonbek & Co., dated March 5, 1946, defendant’s exhibit 8, that subsequent to the war, but prior to July 1946, when the practice outlined in defendant’s collective exhibits 4 and 5 was initiated, merchandise of the type here involved was offered for sale by the manufacturer at unit prices which were inclusive of a 15 per centum commission. We think, however, that it is sufficiently established that at and prior to the time the instant merchandise was exported the 15 per centum commission for export services rendered was separately invoiced. Moreover, it is clear to us that this method of invoicing was open and aboveboard, and constituted a bona fide endeavor to present the question of the durability of this item to our customs officials.

Thus, it will be seen that there existed in Czechoslovakia at all the times pertinent to the instant transaction an established setup for direct sales from manufacturer to American purchaser, and in such cases a charge for export services rendered was made by the seller, which charge coincided with the commission paid to the buying agents of American importers.

The trial judge recognized the existence of the procedure whereby sales were made without the intervention of a buying commissionaire, but, after carefully analyzing and weighing all the evidence in the case, came to the conclusion that sales made in that fashion were fugitive and occasional and not in the ordinary course of trade. Hence, he refused to accept the same as having any material bearing on the question of whether the commission charged by the buyer’s agent was a dutiable item. He found affirmatively that the disputed commission was “a charge for services associated with the purchase of merchandise in the foreign market, and * * * not an amount that inures to the benefit of the seller, * * *.” Under the authority of the cases of United States v. Bauer et al., 3 Ct. Cust. Appls. 343, T. D. 32627; United States v. Case & Co., Inc., 13 Ct. Cust. Appls. 122, T. D. 40958; United States v. Alfred Kohlberg, Inc., 27 C. C. P. A. (Customs) 223, C. A. D. 88; and Stein v. United States, 1 Ct. Cust. Appls. 36, T. D. 31007, the trial court held the commission to be a bona fide buying commission, not a part of the export value of the merchandise.

We are of opinion that the weight of the evidence sustains the finding that direct sales by the manufacturers were not made in the ordinary course of trade, and that the usual and ordinary method of purchasing glass prisms was through the intervention of a buying agent who received a bona fide buyer’s commission for the services he rendered in facilitating delivery to his principal of the goods which were ordered in the foreign market. Some more compelling evidence than two isolated instances of direct sales of such or similar merchandise, defendant’s exhibits 6 and 7, an outmoded price list, defendant’s exhibit 8, and a practice for handling such sales when, and if, they occurred, would be necessary to counteract the effect of the convincing testimony of plaintiff’s witnesses Nelson and Gottesman and defendant’s witnesses Levin and Albert. Nelson testified that “99% of my business — all my purchases and all my records were always through a commissionaire.” Gottesman’s business was always conducted through a commissionaire. Levin, one of the major importers of such and similar merchandise, stated that prior to 1948 he made no attempt to buy from a manufacturer directly. As for Albert, except in isolated cases, all of his business was transacted through commissionaires.

We are not, however, content to rest our decision upon this ground alone. Even were it to be considered that sales made without the assistance of a buying commissionaire, though not numerous, were, nevertheless, in the usual course of trade, the commission charged by the manufacturer for export services rendered, would not, in our opinion, enter into the market value of such or similar merchandise.

In the case of United States v. International Commercial Co., Inc., and Armour & Co.; International Commercial Co., Inc., and Armour & Co. v. United States, 28 Cust. Ct. 629, Reap. Dec. 8112, it was stated:

Any reading of the provision for export value contained in section 402 (d) of the Tariff Act of 1930 must reveal that the value therein contemplated is for merchandise “in condition, packed ready for shipment to the United States,” that is to say, a value including the per se value of the goods and only those costs, charges, and expenses which accrue up to the time when the merchandise is in the said condition. Any costs, charges, or expenses, other than the foregoing, even though included in the offered price, are not part of the export value for tariff purposes. See United States v. New England Foil Corp., 10 Cust. Ct. 596, Reap. Dec. 5856, and Henry D. Gee Co. v. United States, 24 Cust. Ct. 508, Reap. Dec. 7772.

Plaintiff’s exhibit 1 makes it clear that the items of merchandise contained in the shipment at bar were freely offered for sale at the factory, packed ready for shipment to the United States, at the invoice prices. The additional charge did not accrue, or become an element in the price to the purchaser, until after it was known whether the services associated with effecting delivery to the purchaser would be assumed by one other than the seller. If an American purchaser approached a manufacturer in the company of a commissionaire, or indicated that a commissionaire would enter into the transaction, the seller did not include in his price a charge for such additional services. It was only when a manufacturer was called upon to do something more than place his merchandise in condition,, packed ready for shipment to the United States; when he was required to undertake the duties of facilitating delivery to the purchaser, that he charged a fee to defray the expenses of such acts. As stated in Stein v. United States, supra:

* * * The commission would seem to be a service connected with the fulfillment of the contract, rather than a performance of any of its terms. It entered into the cost of the goods to the importer but did not become a part of their actual market value.

Since the merchandise was in condition, packed ready for shipment to the United States, prior to the time when the charge for export services accrued, the charge, when assessed, did not become a part of the export value of the merchandise, as that value is defined in section 402 (d) of the Tariff Act of 1930.

We therefore find as matters of fact that—

1. The merchandise in question consists of glass prisms, identified by manufacturer’s item numbers 130 and 131, of various sizes and of two qualities, exported from Czechoslovakia and entered at the port of New York.

2. At the time of exportation of the articles in question, such or similar merchandise was usually and ordinarily purchased in the foreign market for exportation to the United States through a commissionaire, who acted as buying agent for the American importer.

3. For his services in connection with the purchase and exportation of the merchandise, the commissionaire received a commission of 15 per centum of the invoice value.

4. A commission for export services rendered, charged by the manufacturer in sales directly to the American importer without the intervention of a commissionaire, did not accrue until after the merchandise was in condition, packed ready for shipment to the United States.

Accordingly, we hold as matter of law that export value, as that value is defined in section 402 (d) of the Tariff Act of 1930, is the proper basis for appraisement of the instant merchandise, and that such value does not include the item described on the invoice as “15% buying-commission.”

The judgment of the trial court is, therefore, affirmed.

Judgment will be entered accordingly.