VAL CO:R:C:V 544413 DPS
Mr. Weine Alstranner
D & M Lumber Products Co., Inc.
110 Varick Ave.
P.O. Box 716
Brooklyn, N.Y. 11237
RE: Dutiability of foreign inland freight
Dear Mr. Alstranner:
Your letter of June 1, 1989, to our New York office,
concerning the dutiability of inland transportation charges on
D & M Lumber Products Co., Inc.'s (D & M) importations of lumber
products from Brazil, has been referred to this office for reply.
You state that the cost of inland transportation in Brazil should
be treated as a non-dutiable expense. We regret the delay in
responding to your inquiry.
FACTS:
Based on information provided by D & M, the following facts
are relevant to the ruling request. D & M purchases hardboard
from Duratex S.A. of Sao Paulo, Brazil on a C & F basis. The
supplier prepays in Brazil all inland transportation, handling
charges at the port of exportation and the costs of ocean
transportation.
At the request of the National Import Specialist (NIS) in
New York, D & M provided additional detailed information to
Customs on how the merchandise is transported from the mill in
Brazil to the port of importation in the U.S. Between the mill
and the port of exportation, the merchandise is transported via
truck and rail. The charges for transportation from the mill to
the port of exportation are covered by inland freight agreements
between the trucking companies, railroads and Duratex S.A., the
manufacturer/exporter. The handling charges at the port of
exportation are paid by the exporter to the port authorities in
accordance with established tariffs. Transportation from the
port of exportation to the U.S. port of importation is
negotiated with shipping companies who operate regularly from
and to the selected ports. The bill of lading is issued by the
shipping line, and covers the transportation from the port of
exportation to the U.S. port of importation. D & M, through
Duratex S.A., has made it clear that the bill of lading covers
only the ocean freight costs from the port of exportation to the
U.S. port of importation.
ISSUE:
Whether, under the facts presented, foreign inland freight
charges are non-dutiable.
LAW AND ANALYSIS:
As amended by T.D. 84-235, section 152.103(a)(5), Customs
Regulations, reads as follows:
(5) Foreign inland freight and other inland charges
incident to the international shipment of merchandise.
(i) Ex-factory sales. If the price actually paid
or payable by the buyer to the seller for the
imported merchandise does not include a charge for
foreign inland freight and other charges for
services incident to the international shipment of
merchandise (an ex-factory price), those charges
will not be added to the price.
(ii) Sales other than ex-factory. As a general
rule, in those situations where the price actually
paid or payable for imported merchandise includes
a charge for foreign inland freight, whether or
not itemized separately on the invoices or other
commercial documents, that charge will be part of
the transaction value to the extent included in
the price. However, charges for foreign inland
freight and other services incident to the
shipment of the merchandise to the United States
may be considered incident to the international
shipment of that merchandise within the meaning of
section 152.102(f) if they are identified
separately and they occur after the merchandise
has been sold for export to the United States and
placed with a carrier for through shipment to the
United States.
(iii) Evidence of sale for export and placement
for through shipment. A sale for export and
placement for through shipment to the United
States under paragraph (a)(5)(ii) of this section
shall be established by means of a through bill of
lading to be presented to the district director.
Only in those situations where it clearly would be
impossible to ship merchandise on a through bill
of lading (e.g., shipments via the seller's own
conveyance) will other documentation satisfactory
to the district director showing a sale for export
to the United States and placement for through
shipment to the United States be accepted in lieu
of a through bill of lading...
The circumstances of this case are similar to the situation
we addressed in Headquarters Ruling Letter (HRL) 544033, dated
January 21, 1988. Therein, we stated:
In reviewing your proposal, Customs is of the opinion
that the language set forth in the last sentence of
(iii) above is quite clear; that is, only where it is
impossible to obtain a through bill of lading would
other documentation be satisfactory. Neither degree of
difficulty nor contingency of diversion has been set
forth as a factor in this matter.
Headquarters Ruling Letter 543989, dated May 2, 1989, also
focused on the dutiability of inland freight. It cited HRL
544033 and T.D. 84-235, in support of its conclusion denying the
importer's protest of duty assessments on merchandise that had
an invoice price which included foreign inland freight charges.
Essentially, the policy adopted by Customs requires a through
bill of lading.
The facts presented by D & M indicate that there is no
through shipment of merchandise from the mill to the United
States. Separate bills of lading are issued by each of the
trucking companies, railroads and ocean carriers utilized in
Brazil. As such, there is no document which meets the definition
of a "through bill of lading" as required by the Customs
Regulations, 19 CFR 152.103(a)(5)(ii) and (iii).
HOLDING:
Absent a through bill of lading, the charges for foreign
inland freight are considered part of the price actually paid or
payable regardless of whether the seller itemizes it separately
on the invoice. Accordingly, under the circumstances, there is
no authority to permit a deduction for foreign inland freight
costs, from the Duratex S.A. mill to the port of exportation.
Sincerely,
John Durant, Director
Commercial Rulings Division