Fees paid by U.S. company to German parent company under sourcing-assistance agreement not dutiable

Fees paid by U.S. company to German parent company

U.S. Customs and Border Protection (CBP)—in a ruling regarding the dutiability of certain sourcing fees paid by a U.S. company to its German parent company under a sourcing-assistance agreement—concluded that the fees were not subject to customs duty.


Read the Headquarters Ruling Letter HQ H311666 (December 15, 2020)


The U.S. company and its German parent company entered into a sourcing-assistance agreement under which the German parent company negotiated prices for various automobile parts and other conditions related to the purchase of these parts from vendors located in the United States, Canada, and Mexico. These parts were not for the manufacturing of automobiles, but were aftermarket automotive parts sold by the U.S. company to unrelated distributors and to two related parties located in Canada and Mexico.

After the parent company reached agreement with the North American vendors, the U.S. company issued purchase orders directly to these vendors for the purchase of parts as it required them. The parts were delivered directly to the U.S. company by the vendors that issued invoices to the U.S. company.

The German parent company charged the U.S. company a sourcing fee for its services. The U.S. company asserted that the sourcing fee was an arm’s length payment and explained the formula for arriving at the fee amount.

The U.S company sought a ruling from CBP as to whether the sourcing fee paid by the U.S. company to its German parent company was dutiable. CBP, in the ruling, concluded that the fees paid by the U.S. company to the German parent company for services provided under the submitted sourcing-assistance agreement were not dutiable additions to the price actually paid or payable under transaction value.

CBP explained in the ruling that it considered the actions of the German parent company in negotiating prices on behalf of the U.S. company was acting “somewhat like a buying agent” but that CBP did not find the German parent company was a buying agent because no agency relationship was claimed, and the sourcing-assistance agreement did not establish an agency relationship. Rather, the agreement simply provided that the German parent company “due to its experience and volume leverage” negotiated prices with vendors and that the U.S. company benefitted from those negotiated prices and for which it paid a fee to the German parent company.

For more information on this topic or to learn more about KPMG’s Trade & Customs Services, contact:

Doug Zuvich
Partner and Global Practice Leader
T: 312-665-1022
E: dzuvich@kpmg.com

John L. McLoughlin
Principal and East Coast Leader
T: 267-256-2614
E: jlmcloughlin@kpmg.com

Andy Siciliano
Partner and National Practice Leader
T: 631-425-6057
E: asiciliano@kpmg.com

Steve Brotherton
Principal and Global Export and Sanctions Leader
T: 415-963-7861
E: sbrotherton@kpmg.com

Luis (Lou) Abad
Principal, Washington National Tax
T: 212-954-3094
E: labad@kpmg.com

Irina Vaysfeld
T: 212-872-2973
E: ivaysfeld@kpmg.com

Amie Ahanchian
T: 202-533-3247
E: aahanchian@kpmg.com

Christopher Young
T: 312-665-3229
E: christopheryoung@kpmg.com

Gisele Belotto
Managing Director
T: 305-913-2779
E: gbelotto@kpmg.com

George Zaharatos
T: 404-222-3292
E: gzaharatos@kpmg.com

Andy Doornaert
Managing Director
T: 313-230-3080
E: adoornaert@kpmg.com

Jessica Libby
Managing Director
T: 612-305-5533
E: jlibby@kpmg.com

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