VAL CO:R:C:V 545625 RSD
Area Director of Customs
JFK Airport Area
Building 178
Jamaica, New York 11430
RE: Transaction value; price actually paid or payable; freight; HRL 544911; HRL 544646
Dear Sir:
This is in response to your memorandum dated April 18, 1994, concerning an
application for further review on protest number 1001-92-102744 filed on behalf of the
importer Berkshire Fashions, by its attorney, Siegel, Mandell & Davidson, on April 15,
1992. The protest concerns the appraisement of ladies fleece slippers imported from Taiwan
and the Philippines.
FACTS:
The importer Berkshire Fashions, Inc. located in New York imported ladies Fleece
Slippers from Shin Shing International Co. Ltd. located in Taiwan. Because Shin Shing failed
to meet production shipping schedules, Berkshire threatened to cancel the contract. In order to
compensate Berkshire, Shin Shing agreed to take responsibility for the freight costs and ship
the merchandise by air freight. The transaction was originally arranged on a FOB basis, but
was subsequently changed to C&F prior to exportation after the late delivery problems arose.
The importer originally submitted two invoices to Customs which showed that the
transaction was FOB, but claims that was due to a clerical mistake. The importer submitted a
second set of invoices which they referred to as the "corrected" invoices. The dates shown on
the first set of invoices and "corrected" invoices are the same. In addition, the importer
submitted air way bills from China Air which show that the freight was prepaid but it does not
show who paid the freight costs.
To further support its contention that the second set of invoices were accurate and that
the parties agreed to change the transaction from FOB to C&F, the importer submitted two
order confirmations prepared by Shin Shing. The first order confirmation dated May 1, 1991,
states FOB Taiwan. The second order confirmation is dated September 20, 1991, and was for
the part of the shipment that was listed on the first order confirmation but was not delivered on
time to the importer and is the subject of this case. Both documents are labeled with No.
027/91. The second order confirmation provides C&F New York.
The importer further represents that it did not directly or indirectly pay for, assume, or
reimburse the seller for any portion of the freight. It is our understanding
that the parties did not change the amount that the seller would receive for the merchandise
when they amended the terms of the transaction from FOB to C&F.
ISSUE:
Whether the evidence presented supports a change in the transaction to FOB to C&F
without any corresponding change in price?
LAW AND ANALYSIS:
The preferred method of appraisement is transaction value which is defined by
402(b)(1) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA,
19 U.S.C. 1401a(b)) as "the price actually paid or payable for the merchandise when sold for
exportation to the United States..." plus certain additions specified in 402(b)(1)(A) through
(E). The term "price actually paid or payable" is defined in TAA 402(b)(4)(A) as:
...the total payment (whether direct or indirect and exclusive of any costs, charges or
expenses incurred for transportation, insurance, and related services incident to
international shipment of the merchandise from the country of exportation to place of
importation in the United States or to be made, for imported merchandise by the buyer
to, or for the benefit of the seller.
In HRL 544646 dated December 23, 1991, we ruled that Customs was unable to make
an adjustment to transaction value for freight charges as the charges did not appear to have
been included in the price actually paid or payable for the imported merchandise. However, in
that case the commercial invoice filed in support of the entry summary stated that the invoice
price was "FOB HONG KONG" and the seller had to pay the increased air freight cost
because of the late delivery pursuant to a separate purchase agreement. In HRL 544911, April
6, 1993, we indicated if there was a renegotiation of the price where the C&F renegotiated
price does include the freight charges, the C&F renegotiated price, less international freight
charge included therein, would be the price actually paid or payable for the imported
merchandise.
The change in the delivery terms from FOB to C&F is shown by the confirmation
orders and a set of invoices. Berkshire also claims that the shipper agreed to bear the freight
costs prior to the exportation of the merchandise to the United States. They contend that this
is demonstrated by the air way bills from China Air dated October 1, 1991, which show that
the freight was prepaid and by the order confirmation dated September 20, 1991, which
indicates that the delivery terms at that time were C&F. The airway bill references the
number 027/91, which also appears on the order confirmations.
Apparently, confusion has occurred in this case because the importer submitted a first
of set invoices to Customs which showed that the terms of sale were FOB. The importer
claims that these invoices were incorrect and were only issued due to a mixup and a clerical
mistake in Shin Shing's shipping department. The importer submitted a second set of invoices
to Customs which show that the delivery terms were C&F. This change in shipping terms is
supported by the order confirmations which show that transaction became C&F. We have no
reason to believe that the importer has not provided an accurate representation of what
transpired. However, if your office thinks differently, you may require specific evidence in
support of the C&F transaction. Otherwise, we find that the international freight costs should
be deducted from the price actually paid or payable to arrive at the transaction value for the
imported merchandise.
HOLDING:
Consistent with the foregoing, the actual freight costs are to be deducted from the
transaction value of the merchandise.
Under these circumstances, you are directed to grant the protest. A copy of this
decision with the Form 19 should be sent to the protestant. In accordance with Section
3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised
Protest Directive, this decision should be mailed by your office to the protestant no later than
60 days from the date of this letter. Any reliquidation of the entry in accordance with the
decision must be accomplished prior to mailing of the decision. Sixty days from the date of
the decision, the office of Regulations and Rulings will take steps to make the decision
available to Customs personnel via the Customs Rulings Module in
ACS, and to the public via the Diskette Subscription Service, Lexis, the Freedom of
Information Act and other public access channels
Sincerely,
John Durant, Director
Commercial Rulings, Division