Consulting Fees Are Not Included in Transaction Value, CBP Rules

Fees paid to a consultant for services connected to sourcing and importation of Indian textiles and home furnishings are bona fide buying commissions not to be included in the transaction value of imported merchandise, CBP said in a Nov. 16 ruling.

The ruling was in response to a request from Triburg Design Studio, which provides consulting services for unrelated importers in the U.S. Triburg submitted a “consultancy agreement” that it will enter into with U.S. importers. The agreement will appoint Triburg as a "non-exclusive Product Development Consultant" to conduct market research; attend trade shows; provide information related to fashion forecasts, emerging fashion trends in textiles and other related materials; and advise the contracted company on prices and sources of merchandise.

Orders by the importers will be placed directly with foreign suppliers, which will be paid directly. The consultancy agreement stipulates that importers will pay Triburg a monthly "consulting fee" calculated at 3% of the FOB value of all imported goods obtained with Triburg's assistance.

According to CBP, consulting fees may be part of the transaction value if they constitute a "selling commission," defined as any commission paid to the seller’s agent, who is related to, or works for or on behalf of, the manufacturer or the seller.

In contrast, bona fide buying commissions are not included in transaction value. The distinction between a buying commission and a selling commission is whether the expense is associated with selling or producing the merchandise, rather than "some ministerial function in procuring the goods," CBP noted.

The services that Triburg proposes to provide to U.S. importers are nearly identical to those offered by a buying agent in a 2010 HQ ruling. In that case, Walmart entered into an agreement with a buying agent that found manufacturers and suppliers of merchandise, conducted market research, and facilitated buying trips.

The responsibilities Triburg outlined in the consultancy agreement were enough to convince CBP that the importers would exercise a degree of control over Triburg’s conduct similar to that of a bona fide buying agency. Triburg will have no control over the purchasing processes and is unrelated to the manufacturers and sellers it identifies.

Further, Triburg will not take title or risk of loss on any merchandise and demonstrated "financial detachment" from the manufacturers and sellers, CBP said. Finally, Triburg showed it will "work for the benefit of the buyers, rather than the sellers." Therefore, CBP ruled the consulting fees are bona fide buying commissions that will not be included in the transaction value of the imported merchandise.