H311666

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection 
 HQ H311666 December 15, 2020 OT:RR:CTF:VS H311666 CMR CATEGORY: Valuation Sidney Kuflik, Esq. Lamb & Lerch 233 Broadway Suite 2702 New York, NY 10279 RE: Dutiability of certain sourcing fees; Related parties Dear Mr. Kuflik: This is in response to your request of June 9, 2020, supplemented by letter, dated November 19, 2020, made on behalf of your client, BMW of North America, LLC, (hereinafter, BMW NA), regarding the dutiability of certain sourcing fees paid by BMW NA to its parent company, Bayerische Motoren Werke Aktien-gesellschaft of Munich, Germany (hereinafter, BMW AG), under a Sourcing Assistance Agreement. You have requested that Customs and Border Protection (CBP) extend confidential treatment to the Sourcing Assistance Agreement and not release it to the public. In addition, you have requested that certain information identified in your supplemental submission be treated as confidential. Inasmuch as your request conforms to the requirements of Title 19, Code of Federal Regulations (“C.F.R.”), Section 177.2(b)(7), your request for confidentiality is approved. The information contained within brackets and the attachment to your supplemental request for a binding ruling will not be released to the public and will be withheld from the published version of this ruling. In addition, the Sourcing Assistance Agreement will not be released to the public. FACTS: BMW AG and BMW NA entered into a Sourcing Assistance Agreement under which BMW AG negotiates prices for various automobile parts and other conditions related to the purchase of these parts from North American vendors, i.e., vendors located in the United States, Canada and Mexico. These parts are not for the manufacturing of automobiles, but are aftermarket automotive parts sold by BMW NA to unrelated distributors and to two related parties located in Canada and Mexico. After BMW AG reaches agreement with the North American vendors, BMW NA issues purchase orders directly to these vendors for the purchase of parts as it requires them. The parts are delivered directly to BMW NA by the vendors who issue invoices to BMW NA. BMW AG charges BMW NA a sourcing fee for its services. BMW NA asserts that the sourcing fee is an arm’s length payment and explained the formula for arriving at the fee amount. ISSUE: Whether the sourcing fee paid by BMW NA to BMW AG is dutiable. LAW AND ANALYSIS: Merchandise imported into the United States is appraised in accordance with Section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. § 1401a). The preferred method of appraisement is transaction value, which is defined as the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus certain statutory additions. 19 U.S.C. § 1401a(b)(1). Among the statutory additions is selling commissions. However, buying commissions are not dutiable. In this case, the sourcing fee is due on transactions that are purely domestic, that is, within the United States, and transactions on merchandise imported from Canada and Mexico. Based on the information provided, the vast majority of transactions subject to the sourcing fee do not involve importations into the United States, but involve transactions occurring within the United States between BMW NA and U.S. vendors. These transactions, not involving importations, are of no concern to U.S. Customs and Border Protection (CBP). Of the transactions involving importations, when we consider the actions of BMW AG in negotiating prices on behalf of BMW NA, we find that BMW AG is acting somewhat like a buying agent. However, we do not find that BMW AG is a buying agent for BMW NA. No agency relationship is claimed, nor does the Sourcing Assistance Agreement establish such a relationship. The agreement simply provides that BMW AG, due to its experience and volume leverage, will negotiate prices with vendors and BMW NA benefits from those negotiated prices. For that service, BMW NA pays BMW AG a fee. Negotiating prices on behalf of another party is a service CBP has found to be typically provided by buying agents. See Headquarters Ruling Letter (HQ) H298982, dated April 1, 2019, wherein we stated, in relevant part: . . . the Agent will be performing services on behalf of the Company that are typically performed by a bona fide buying agent, such as compiling market information, managing sample submissions, assisting in price negotiations, performing quality control inspections, and arranging for shipment and payment. [citation omitted; bold added]. See also, HQ 544684, dated July 31, 1992. Although there is no agency relationship established by the Sourcing Assistance Agreement, as BMW NA is not a principal who can control the conduct of BMW AG, but a beneficiary of BMW AG’s services, we find that the fee paid for BMW AG’s services is not an addition to the price actually paid or payable with regard to transactions involving imported goods and thus is not dutiable with regard to those transactions. HOLDING: The fees paid by BMW NA to BMW AG for services provided for under the submitted Sourcing Assistance Agreement are not dutiable additions to the price actually paid or payable under transaction value. Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction. Sincerely, Monika R. Brenner, Chief Valuation and Special Programs Branch

Merchandise imported into the United States is appraised in accordance with Section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. § 1401a). The preferred method of appraisement is transaction value, which is defined as the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus certain statutory additions. 19 U.S.C. § 1401a(b)(1). Among the statutory additions is selling commissions. However, buying commissions are not dutiable. In this case, the sourcing fee is due on transactions that are purely domestic, that is, within the United States, and transactions on merchandise imported from Canada and Mexico. Based on the information provided, the vast majority of transactions subject to the sourcing fee do not involve importations into the United States, but involve transactions occurring within the United States between BMW NA and U.S. vendors. These transactions, not involving importations, are of no concern to U.S. Customs and Border Protection (CBP). Of the transactions involving importations, when we consider the actions of BMW AG in negotiating prices on behalf of BMW NA, we find that BMW AG is acting somewhat like a buying agent. However, we do not find that BMW AG is a buying agent for BMW NA. No agency relationship is claimed, nor does the Sourcing Assistance Agreement establish such a relationship. The agreement simply provides that BMW AG, due to its experience and volume leverage, will negotiate prices with vendors and BMW NA benefits from those negotiated prices. For that service, BMW NA pays BMW AG a fee. Negotiating prices on behalf of another party is a service CBP has found to be typically provided by buying agents. See Headquarters Ruling Letter (HQ) H298982, dated April 1, 2019, wherein we stated, in relevant part:. . . the Agent will be performing services on behalf of the Company that are typically performed by a bona fide buying agent, such as compilin