H337972

H337972 February 24, 2025 OT:RR:TCF:ME H337972 ME CATEGORY: Valuation Center Director Industrial and Manufacturing Materials Center of Excellence and Expertise Office of Field Operations U.S. Customs and Border Protection Buffalo, NY 14225 RE: Internal Advice; First Sale Appraisement / Buying Agent Rules Dear Center Director, This is in response to a letter of March 9, 2024, submitted by Diaz Trade Law on behalf of their client Graniti Vicentia LLC (“Graniti”) regarding the applicability of first sale valuation for a transaction in which Eswari Exports Private Limited (“Eswari”) served as a middleman between Graniti and its overseas supplier. In the alternative, counsel requests that Eswari be considered a bona fide buying agent whose commissions are properly excludable from the price actually paid or payable for the imported merchandise. FACTS: Graniti is a Houston-based company, specializing in the distribution and sale of hotel furniture. In 2023, Graniti became the subject of an audit by U.S. Customs and Border Protection (“CBP”). As a result of this audit, CBP identified multiple instances where fees and duties were still owed. One of these transactions was a January 2020 purchase of glass countertops, in which Eswari served as a middleman between Graniti and its Chinese supplier 1 Deyuan Stone (“Deyuan”). For the purpose of calculating duties, Graniti requested the use of the “first sale” method of appraisement. The audit team rejected this request, believing that the relationship between Eswari and Graniti was more consistent with an agency relationship than that of a buyer/seller. Consequently, on March 9, 2024, Graniti requested Internal Advice from the Office of Trade, Regulations and Ruling (“RR”) on this issue. In the alternative, Graniti requested that Eswari be considered a bona fide buying agent whose commissions are properly excludable from the price actually paid or payable for the imported merchandise Eswari is an Indian distribution company, focusing on the sale of goods used aboard ships. The owners of Graniti and Eswari are brothers. Since approximately 2013, Eswari has served as a middleman for certain transactions between Graniti and its overseas suppliers. Initially, counsel claimed that there was no formal buying agreement between Graniti and Eswari. However, counsel later produced two contracts from 2013 and 2015. The first contract dated September 9, 2013, stipulated that Eswari would use its line of credit to purchase goods for Graniti from international suppliers. Under the terms, Eswari would not negotiate the price, quality control or shipment of the goods. It “would be purely facilitating the finance of the goods and nothing else.” Graniti would be responsible for placing orders, quality control and shipping. In exchange for its services, Eswari would charge Graniti a 1015% fee over the cost of the supplier. However, under the second contract, signed February 3, 2015, all previous agreements were nullified and superseded. The terms stated that Eswari would purchase goods from foreign suppliers and sell them to Graniti for a profit, at a price of its choosing. Graniti had the right to either purchase or decline the offers. Eswari would initiate the purchase of goods from the suppliers upon receiving an order from Graniti. Regarding who would own title to the goods and bear the risk of loss, the contract stated: That Eswari is responsible for delivering the goods at USA port and owns the title of goods till the container arrives to the USA port. If either the product in the container is fully or partially damaged due to unforeseen conditions during ocean transit or if the vessel is sunk and all the goods are lost, Eswari if fully responsible and bears all risk of loss. Graniti holds no responsibility or risk of loss till the goods are fully inspected. That Graniti is responsible for pulling the container out of USA port and to inspect goods and confirm that the goods are intact and matching with the packing slip as per the purchase order issued to Eswari. It's agreed and assumed that all goods arrived in good condition and shape and there will be no dispute in invoice raised by Eswari, if Graniti fails to inform of any damages or discrepancy in the packing slip within a week's time. In addition to this, Graniti provided a collection of transaction documents, which it claims demonstrate that a bona fide sale had occurred between Eswari and Deyuan. Graniti first produced a purchase order for multiple glass products including “vanity top,” “window sills,” “kitchen sink clips,” and “vanity sink clips,” dated November 22, 2019. The purchase order 2 showed a balance of $33,255.34 for the goods, and also listed $36,582.24 as “applied payment/other#.” Graniti claims that this was provided to Eswari who then passed it onto Deyuan. Graniti also turned over a commercial invoice for $33,255.34 from Deyuan to Eswari dated January 16, 2020, for those same goods, with the invoice number GV2019058. The invoice indicated a delivery date of January 16, 2020, and claimed that the goods would be shipped from Xiamen, China to the Port of Seattle and arrive on February 2, 2020. The invoice also stated that the factory would be liable for any damage during the loading process and included the description “FOB (FREE ON BOARD) XIAMEN,” which Graniti claims means that title to the goods transferred from Deyuan to Eswari when they passed the ships rail in Xiamen. In addition, Graniti provided a bill of lading from Laufer Group International which showed the same shipping information as the invoice and listed Deyuan as the exporter on behalf of Eswari, with Graniti as the consignee. Graniti did not provide any separate written contract between Eswari and Deyuan. Furthermore, Graniti produced a $36,582.24 invoice issued by Eswari to Graniti for the goods, dated January 20, 2020, with the invoice number 2001161 and purchase order number P016773. Eswari’s expected profit on the transaction was $3,326.90. Graniti also provided a signed CBP Form 7501 and CBP Form 3461, showing that the goods were entered into the United States on February 6, 2020, at the Port of Seattle and Graniti was listed as the importer of record. The merchandise was listed as 16 packages of “ARTICLE OF CHINA, US NTE 20 9903.88.03 18866KG SLABS, SQURES, 0TH ART GLA 7016.90.1050.” However, the items were undervalued at $3,464.00, with an assessed duty of $1,143.12. In a supplemental submission on May 10, 2024, Graniti produced a Telex release and an Arrival Notice for a shipment of sixteen package of glass products that arrived at the Port of Seatle from Xiamen China on February 6, 2024. Graniti also provided an invoice for U.S. freight showing that the goods were sent directly from the Port of Seattle to its jobsite near Houston. Outside of this transaction, Graniti also produced a separate invoice from Deyuan to Eswari for $4,892.28, dated January 20, 2020, with the invoice number GV2019054. The invoice was for similar countertop materials and indicated that the goods would be loaded at Yantian Port, China on January 20, 2020, and arrive at Los Angeles, CA on February 5, 2020. Finally, Graniti provided several documents detailing payment. The first one shows a $38,147.62 SWIFT wire transfer from Eswari to Deyuan, dated November 2, 2020. Graniti claims that this payment is for Eswari’s combined transactions with Deyuan ($4,892.28 + $33,255.34). Under “Remittance Information,” the invoice numbers GV2019054 and 058 were listed, reflecting that the payment was for the two separate orders. Next, counsel provided a list of 21 wire transfers from Graniti to Eswari totaling $353,000.00. All transfers were sent from Allegiance Bank on January 28, 2022, two years after the initial transaction, with the reference number W-0128. No single transfer matched the $36,582.24 invoiced from Eswari, nor did they contain a reference to any invoice or purchase order number. Additionally, while not hi

Based upon the information, Graniti has not meet its burden of showing that the transaction between itself and Eswari qualifies for first sale treatment, because it failed to provide CBP with a complete paper trail of the entire transaction. Furthermore, Graniti has failed to show that Eswari acted as a bona fide buying agent, and that payments to the agent constitute bona fide buying commissions. You are to mail this decision to the internal advice requester no later than 60 days from the date of the decision. At that time, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (CROSS) at https://rulings.cbp.gov/ which can be found on the U.S. Customs and Border Protection website at http://www.cbp.gov and other methods of public distribution. 
Sincerely,
 Monika R. Brenner, Chief Valuation and Special Programs Branch 7