United States v. Shalom & Co. , 57 Cust. Ct. 767 ( 1966 )

Richaedson, Judge:

The instant application was filed by the Government for a review of the decision and judgment of a single judge sitting in reappraisement in Shalom & Co. v. United States, 56 Cust. Ct. 625, Reap. Dec. 11141, decided February 14, 1966, and holding that export value, represented herein by the appraised values less a 5 percent buying commission computed on the basis of the f.o.b. price, is the proper basis of value of the involved transistor radios and their accessory parts.

The merchandise at bar was exported from Japan, entered at New York, and advanced in value upon appraisement. There was no dispute between the parties below and none here as to the basis of valuation. The parties agree that export value as defined in 19 U.S.C.A., section 1401a (b) (section 402(b), Tariff Act of 1930, as amended by the Customs Simplification Act of 1956) is the proper basis of value of the merchandise. The dispute centers around an item described in the invoice as a 5 percent commission and said by the importer to be excluded from the dutiable value because it is a bona fide 'buying commission, and claimed by the Government to constitute part of the value of the merchandise.

It appears from the official papers placed in evidence before the court that the radios and related parts were entered at a value of $8.92 each, and were appraised at a value of $9,555 each, net packed. The various items of cost are described on the commercial invoice No. SC-62/400 of Shriro Trading Co., Ltd., under date of October 8, 1962, as follows:

The appraisement is noted on this invoice, among other notations, as follows:

App’d [at] U.S. $9.555 each net Pkd.

Value included Lea case -20 $ea.

Earphones-12 ‡ ea.

Battery -10 $ ea.

Also included among the official papers is the confirmation of the order for the instant merchandise which among other tilings, contains the following:

Hillel Tsusho Co., Ltd.

Messrs. Shalom & Co., New York

Our Order Ño. TS/447, September 7, 1962

Your Order No. SC-2-2002

Gentlemen:

We hereby confirm having bought on your behalf:- — [Emphasis added.]

FOB

* * * Description Quantity Exfactory Net Total * * * per set

* * * “Fleetwood” 8-Tr. 1000 sets $8. 92 $9. 10 $9,100. -* * *

2Band Radio, Model NTR-800, complete with leather case, earphone, battery & rod antenna, and with 18 Spare Parts.

5% Our Commission 455. -

Total FOB $9, 555. -

Shipment: End of Sept., 1962 Remarks:

Terms of Payment: L/C For Buyer:

For Seller:

Hillel Tsusho Co., Ltd.

[Signature]

Please sign and return one copy

Without liability for non-delivery or delays arising from circumstances entirely beyond our control.

The evidence adduced by the importer, the appellee here, before the trial judge consisted of the testimony of two witnesses, and a contract which was received in evidence as plaintiff’s exhibit 1. The Government, appellant here, offered no evidence. Sam Lustig, customs line examiner at the port of New York, testified that his duties include the examination of merchandise for appraisement and classification purposes, that he advisorily appraised the merchandise at bar at $9.555 each, net packed, and that his appraisement included all charges of which the item of $455 shown on the invoice, supra, as a commission, was one. It was stipulated by counsel that Mr. Lustig’s appraisement was adopted by the appraiser.

Victor Shalom, a partner in the importing firm, testified that he is the firm’s general manager and buyer, that he makes frequent trips to Japan and Hong Kong for the purpose of buying merchandise, including electronics and sundries, that he personally placed the order for the instant merchandise. He further testified that Hillel Tsusho Co., Ltd., of Tokyo, Japan, is the firm’s commission or buying agent whose duty it is to keep the firm posted on market conditions, prices, to send samples to Shalom & Co. in the United States, to accept orders from the firm, and to arrange for delivery dates and inspection and shipment of the merchandise. Mr. Shalom also testified that his firm had an arrangement with Hillel Tsusho Co., Ltd., under which Hillel was paid a commission for its services, and which arrangement was reduced to writing. The writing to which the witness referred is on Hillel’s letterhead and is plaintiff’s exhibit 1, the text of which reads as follows:

AGREEMENT

This is to confirm our understanding as follows:

Messrs. Shalom & Co. hereby appoints the firm of Hillel Tsusho Co., Ltd. as a Buying Agent in Japan.

Hillel Tsusho Co., Ltd. must visit manufacturers in Japan, collect samples, submit those samples to Messrs. Shalom & Co. and to report regularly about the market situation, quoting prices at which the merchandise can be purchased.

Upon instructions from Messrs. Shalom & Co., Hillel Tsusho Co., Ltd. will place orders with manufacturers, inspect merchandise and arrange shipment.

Hillel Tsusho Co., Ltd. will be entitled to a buying commission of 5%.

In order to avoid misunderstanding in communicating with each other in quoting prices, it is hereby agreed that Hillel Tsusho Co., Ltd. will always submit to Messrs. Shalom & Co. the cost of merchandise F.O.B. Japanese port in United States Hollars which shall exclude their buying commission.

Consular and Commercial Invoices have to be made out in United States Hollars on basis of Ex-Factory, price, specifying all charges like packing, inland freight to port, insurance to steamer, storage, hauling and lighterage, etc., as well Agent’s buying commission.

This contract shall be in effect as of March 1, 1962 and will continue until one year after written nitification [sic] by one of the parties that they desire to discontinue this agreement.

The Buying Agent shall have no authority to bind Messrs. Shalom & Co. except upon written order or authorization by Messrs. Shalom & Co.

It is understood and agreed that the Agency hereby created is not exclusive.

Shalom & Co. Hillel Tsusho Co., Lro.

VS [signature]

Mr. Shalom stated that this agreement was in effect on the date the order was placed and the date when the merchandise was shipped.

The importer urged the trial court to find that “HILLEL TSUSHO CO., LTD., performed services for plaintiff in connection with the pur-olíase of the instant merchandise and received a buying commission of 5% on the F.O.B. price,” and further, that “The appraised value included a buying commission of 5% on the F.O.B. price.” The Government contended that there has been a failure of proof on the part of the importer to establish the commission as a bona -fide buying commission; that the appraisement is inseparable and as such prevents plaintiff from limiting its proof just to this item; and that there is an absence of proof of performance of the buying agency agreement and an absence of proof in the record showing the alleged agent did not act as a selling agent.

The trial court concluded that the evidence was sufficient to establish that the buying agency agreement had been substantially performed, and that, therefore, the item in question was a bona fide buying commission and as such, was non-dutiable.

On this application for review the Government reiterates the arguments it made before the trial judge, and in addition, has advanced new arguments before us. The same must be said of the importer’s arguments with respect to its position both before the trial judge and before us.

The trial judge stated that the invoice shows “that the appraiser disallowed all invoiced inland charges and the 5 percent commission in arriving at the unit invoice value per radio.” Actually on the invoice the appraiser marked the inland charges and the commission as non-dutiable and then proceeded to increase the unit price of the items of merchandise to a total figure that equaled the inland freight charges, and added an amount to the purchase price equal to the value of the buying commission. The customs examiner stated at the trial that the appraisement included “all the charges.” (B,.7.)

We think it was proper for the trial court to resolve the case on the issue of the alleged buying commission alone under the so-called “separability” rule, and we regard the buying commission as the only issue before us. Under the rule enunciated by ,our appeals court in United States v. Freedman & Slater, Inc. (Household Utilities Mfg. Corp.), 25 CCPA 112, T.D. 19241, and followed by that court in United States v. Schroeder & Tremayne, Inc., James H. Rhodes & Co., 41 CCPA 243, C.A.D. 558, and by the Customs Court in Nelson Bead Co. v. United States, 29 Cust. Ct. 490, Reap. Dec. 8175, affirmed, United States v. Nelson Bead Co., 31 Cust. Ct. 481, A.R.D. 36, affirmed without comment on the point in 42 CCPA 175, C.A.D. 590, a party challenging a particular item of an appraisement need only present evidence to support its contention with respect to the disputed item, and that as to the unchallenged items the presumption of correctness of the appraisement still obtains.

With respect to the evidence at bar, we agree with the trial judge’s finding that the buying agency agreement was substantially performed. Also there is in the instant case no evidence which tends to establish that Hillel was a seller of its own merchandise, as did the documentary evidence before us in Morris Friedman v. United, States, 52 Cust. Ct. 660, A.R.D. 178. In Morris Friedman v. United States, supra, on which reliance is placed by appellant, the alleged buying agency agreement before the court contained no stipulation of the amount or rate of commission to be paid to the alleged agent. In the case at bar, the agreement in question contains a stipulation of the amount or rate of commission. In the cited case there was no evidence before the court that the alleged contract had been performed. Here, there is substantial evidence of the performance of the contract. In the Morris Friedmcm case, there was evidence which beclouded the role of the exporter, and no evidence negating the role of the exporter as selling agent. In the instant case there is no evidence in the record which beclouds the role of the buying agent in the transaction under review which requires such evidence of negation. In Morris Friedman the sole evidence of an ex-factory price is based upon averments in affidavits pertaining to executory agreements. Here, evidence of an ex-factory price is established in the performance of the agreement as shown by the invoice and the corroborating testimony of the importer. In the Morris Friedman case the alleged agent, Hosho Corp., was designated as the seller on most of the consular invoices before the court. Here, the firm of New Hope Industrial Co., Ltd., is designated on the invoice as the seller. And in the Morris Friedman case, in further repudiation of the Hosho Corp.’s role as buying agent, the agreement mentioned in the consular invoices is there described as “Agreement of Purchase.” In the instant case there is no such characterization of the agreement. Also, in Mortis Friedman the testimonial evidence is marked by vagueness and uncertainty of the witness on essential matters. In the case at bar, the testimony is not vague or uncertain, but is clear and convincing.

We do not pass upon contentions advanced by appellant and ap-pellee which were not made before the trial judge, or ruled upon in that judge’s decision, where as here a decision on such matters is not necessary to dispose of the case. Appellate Divisions try cases upon the record made below and not upon the afterthoughts of counsel.

Upon the record before us, we find as matters of fact:

1. That the involved merchandise consists of transistor radios and accessories which were exported from Japan on or about October 29, 1962.

2. That the involved merchandise does not appear on the Final List, T.D. 54521, promulgated by the Secretary of the Treasury.

3. That said merchandise was appraised on the basis of export value as defined in 19 U.S.O.A., section 1401a(b) (section 402(b), Tariff Act of 1930, as amended by the Customs Simplification Act of 1956) at an advanced ex-factory unit price of $9,555 each, net packed.

4. That the issue herein is limited to the sole question of whether an item appearing on the invoice as a 5 percent commission in the amount of $455 is a bona fide commission.

5. That the evidence establishes that Hillel Tsusho Co., Ltd., Tokyo, Japan, performed services for the importer as an agent in buying the imported merchandise under a written agreement, and was entitled thereby to a bona fide buying commission of 5 percent of the f.o.b. invoiced price of $9,100, amounting to $455.

6. That the evidence further establishes that the buying commission was included in the appraised unit value.

We, therefore, conclude as matters of law:

1. That export value, as defined in 19 U.S.C.A., section 1401a (b), is the proper basis for determining the value of the merchandise herein.

2. That the buying commission referred to in finding of fact No. 5 is not properly a part of the export value of the involved merchandise.

3. That the proper dutiable export value of such merchandise is the appraised value, less the buying commission referred to in finding of fact No. 5.

The judgment of the trial judge is affirmed.

Judgment will be entered accordingly.