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Pursuant to the agreement, petitioner paid J.R. Fong and R.A.
Leon a fee (calculated as a percentage of petitioner's gross mail
courier revenues) for services provided with respect to the
Guatemalan leg of the shipment. The fee was renegotiated annually.
For the period May 1, 1992, to April 30, 1993, the fiscal year in
issue, the fee was 45 percent of petitioner's gross mail courier
revenues.
The Guatemalan Companies' Business--"Inbound Deliveries"
The Guatemalan companies offered courier services from
Guatemala to the United States: items originating in Guatemala were
shipped by air to Los Angeles International Airport (by either
United or Taca International Airlines). The shipments typically
consisted of two boxes, each weighing up to 70 pounds. Petitioner
picked up the items five or six times a week and processed them for
delivery. Petitioner subcontracted with United Presort (an
unrelated company in the business of bundling bulk mail into zip
codes in order to qualify for reduced postal rates) to pick up the
items at petitioner's Los Angeles office. United Presort processed
the items and used the U.S. Postal Service to deliver the items to
their ultimate U.S. destinations. Petitioner paid United Presort
for its service and did not seek reimbursement from the Guatemalan
companies.
Each piece of Guatemalan inbound mail came in an envelope with
petitioner's insignia. Inside each such envelope was a smaller
envelope containing a letter or other documents originating in
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