## Facts

- Rapid transit passenger cars were imported from Japan to the United States between 1983 and 1985 under a three-party arrangement involving a manufacturer (Kawasaki Heavy Industries, Ltd.), a trading company middleman (Nissho Iwai Corporation), and an ultimate U.S. purchaser (Metropolitan Transportation Authority of New York City).
- The U.S. subsidiary (Nissho Iwai American Corporation) contracted with the MTA for passenger cars at a stated unit price, and contemporaneously assigned its contract rights and obligations to its Japanese parent (the middleman).
- The contract specified that the cars would be manufactured by Kawasaki in Japan for use in New York City’s transit system, indicating U.S. destination at the outset.
- Customs appraised the imports using the middleman-to-MTA price as “transaction value” under 19 U.S.C. § 1401a(b)(1), rather than the manufacturer-to-middleman price.
- Customs also included in dutiable value an amount characterized by NIAC as a “buying commission,” which NIAC argued should be excluded as a bona fide buying-agent commission.

## Issues

1. In a multi-tier distribution system, whether “transaction value” under 19 U.S.C. § 1401a(b)(1) should be based on the manufacturer-to-middleman sale price or the middleman-to-ultimate-U.S.-purchaser sale price when both sales relate to exportation to the United States.
2. Whether the claimed “buying commission” was excludable from dutiable value based on a bona fide buying agency relationship between NIAC and the MTA.

## Decision

- The Federal Circuit reversed the trial court’s use of the middleman-to-U.S.-purchaser price and held that, on these facts, transaction value had to be based on the manufacturer-to-middleman (“first sale”) price.
- The court affirmed the inclusion of the claimed buying commission in dutiable value, upholding the finding that no bona fide agency relationship existed.
- The case was remanded for valuation consistent with the manufacturer-to-middleman transaction value, while leaving the commission ruling intact.

## Legal Principles

- Under 19 U.S.C. § 1401a(b)(1), “transaction value” is the price actually paid or payable for merchandise “when sold for exportation to the United States.”
- In multi-tier transactions, Customs may base transaction value on the manufacturer-to-middleman sale if the importer proves that sale:
  - is a bona fide sale,
  - is negotiated at arm’s length, and
  - involves goods clearly destined for export to the United States.
- Transaction value is not categorically limited to the last sale before importation; more than one sale may qualify as a sale “for exportation to the United States.”
- A claimed buying commission is not excludable from dutiable value absent a bona fide principal–agent relationship; where no such agency exists, the amount is treated as part of the price actually paid or payable.

## Conclusion

The Federal Circuit held that Customs valuation for multi-tier imports may use the manufacturer-to-middleman “first sale” price when it is bona fide, arm’s-length, and tied to goods clearly destined for the United States, but it affirmed that a purported buying commission remained dutiable because NIAC did not act as a bona fide buying agent for the MTA.


Nissho Iwai Am. Corp. v. United States, 982 F.2d 505 (Fed. Cir. 1992)