Study Guide
8. Method I: Transaction value
8.11. Commissions and brokerage
A commission is financial consideration usually paid to an intermediary (an agent) who buys or sells goods for the account of a buyer or seller but never takes title to them. An agent acting for the seller is a selling agent; an agent acting for the buyer is a buying agent. Brokerage is the fee paid to a broker: an agent who works for both sides, bringing buyer and seller together, often specialising in commodities such as oil, sugar or grain.
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Key Point: Article 8 adds all commissions to the price except buying commissions. Every other commission and brokerage the buyer pays to intermediaries is added, provided the seller has not already built the amount into the invoiced selling price. |
Selling commission
The payment a selling agent receives for concluding a contract is usually called the selling commission. Goods sold through a seller's agent usually cannot be bought without paying the selling agent's commission.
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No adjustment needed |
Add to the price |
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· The supplier pays the agent and quotes an inclusive price · The commission is already reflected in the invoiced price |
· The terms of sale require the buyer to pay a commission · The buyer pays it (usually direct to the agent) on top of the invoiced price |
Buying commission
Buying commissions are specifically excluded as an adjustment under Article 8 (See WCO Commentary 17.1). To decide whether a payment to a buying agent is consistent with the Commentary, Customs administrations consider whether:
• The agent’s role and function are set out in a written contract or agreement
• The agent acts in line with the role the contract defines
• The importer controls the purchasing process
• The manner of payment is made shows the agent buys the goods only at the importer’s direction
• The agent’s actions show it acted primarily for the benefit of the importer or buyer
• The relationship, especially the financial one, indicates that the parties are actually acting as a principal and agent.
• The importer or buyer carries the risk for damaged, lost or defective goods
• The agent makes no profit beyond the commission the buyer pays
• The buyer is entitled to full disclosure of any transactions the agent makes on the buyer’s account