CBP Finds Company Acted as Buying Agent, Despite Appearing as Seller on Docs

CBP issued a ruling that found a company acted as a buying agent on a transaction, despite being listed as a buyer on shipping documentation. The agency said it would grant a protest from Tianjin Leviathan Corporation, a wholly owned subsidiary of Leviathan Corporation, that found the buying commissions it earned should be deducted from the valuation of merchandise that was actually bought by its parent.

The recent ruling, at CBP headquarters based on an application for further review, said that initially the Automotive and Aerospace Center of Excellence and Expertise ruled that Tianjin was the buyer of the merchandise rather than a buying agent.

"Based on the documents submitted to it, and particularly the sales contract listing Tianjin Leviathan as the 'buyer' and the commercial invoice that was issued by Tianjin, the Center concluded that Tianjin was acting as a buyer/seller of merchandise, rather than as a buying agent on behalf of Leviathan," CBP said.

The order was for 254 tires from a Chinese tire manufacturer in 2018 for a total of $30,734.00, CBP said. The final price also included commissions listed for $2,151.36. As a result of its finding that Tianjin was not a buying agent, CBP disallowed the deductions for commissions that Leviathan paid Tianjin and liquidated the entries with an appraised value of $32,885.38.

In its request for further review, Leviathan provided additional documentation, including a "Buying Agency/Financing Agreement.” It argued that "the substance of the transactions and conduct of the parties, rather than the labels used on the commercial invoice and sales contract, demonstrate that Tianjin Leviathan was, in fact, a legitimate buying agent," CBP said.

On further review, CBP headquarters determined that an "agency relationship" existed between Tianjin and Leviathan. CBP found that Tianjin acted as a "bona fide buying agency" by surveying the market, identifying a supplier, inquiring about and attempting to negotiate prices. Tianjin also acted as a buying agent when it "assisted with translations, placed orders on Leviathan’s instructions, and arranged for payment," the agency said. Tianjin was also only authorized to act under the instructions of Leviathan, CBP said. Leviathan also reimbursed Tianjin for the payment of the tires.

Additionally, Tianjin never accepted "title or risk of loss for the goods," CBP said. While the center was concerned that Tianjin was listed as the "buyer" on the sales contract, that alone doesn't void a "legitimate buying agency," the agency said.

CBP noted that, in a previous ruling on the subject, it "emphasized that neither the relationship between the importer and the purported agent nor the method of payment negated an otherwise legitimate buying agency," CBP said. "The payment information indicates that Tianjin paid Shandong the purchase price $30,734.00 and was subsequently reimbursed by Leviathan for $32,885.38, representing the purchase price plus Tianjin’s commission of $2,151.36."

Leviathan didn't respond to our request for comment.