VAL OT:RR:CTF:VS H196897 EE
Michael C. Perez
Alps Electric (North America), Inc.
7100 International Parkway
McAllen, TX 78503
RE: Transaction value; international transportation; insurance costs; charges incident to the international shipment of the merchandise
Dear Mr. Perez:
This is in reply to your letter, dated December 7, 2011, requesting a ruling on behalf of your client, Alps Electric (North America), Inc. (“Alps Electric North America”), on whether certain charges for services provided by Alps Logistics Co., Ltd. (“Alps Logistics”), a global logistics provider, should be included in the transaction value of the imported merchandise.
FACTS:
You state that Alps Electric North America is a manufacturer and buyer of electronic devices. Alps Logistics, a non-vessel operating common carrier (“NVOCC”) licensed with the Federal Maritime Commission (“FMC”), provides international transportation and other related services to Alps Electric North America. For the purposes of this ruling request, Alps Electric Co., Ltd. (“Alps Electric”), located in Japan, is the seller of the imported merchandise. You state that Alps Electric North America, Alps Logistics, and Alps Electric are all related. You state that until recently, Alps Electric North America purchased merchandise on a “Free on Board” or FOB port of shipment basis. However, the sales terms have changed to “Cost, Insurance and Freight” or CIF port of destination; therefore, certain amounts for international transportation and insurance is now included in the vendors’ sales price.
You provided documentation from four sample transactions for illustrative purposes. The documentation consists of commercial invoices and packing lists from Alps Electric to Alps Electric North America, waybills issued by Alps Logistics and Nippon Express, freight memos issued by Alps Logistics to Alps Electric, a publishing order issued by Descartes Systems Group Inc. (“Descartes”) to Alps Logistics, and a certificate of marine cargo insurance issued by Mitsui Sumitomo Insurance Co., Ltd. (“Mitsui Sumitomo Insurance”).
Each invoice lists the merchandise, the quantity, the unit price, and the total price. The term of sale listed on each invoice is “CIF McAllen.” The waybills reference the invoices and packing lists. The freight memos issued by Alps Logistics to Alps Electric reference the waybills and list the services and fees per container or bill of lading.
You claim that the dutiable value should be based upon Alps Electric’s invoice value less the charges assessed by Alps Logistics including international transportation, insurance costs, fuel adjustment fee, and Advance Manifest Surcharge (“AMS”) fee, on the basis that those charges are incident to the international shipment of the merchandise.
ISSUE:
Whether the amounts for freight, insurance, fuel adjustment fee, and AMS fee may be excluded from transaction value as international transportation and costs incident to the international shipment of the merchandise.
LAW AND ANALYSIS:
Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. § 1401a). The preferred method of appraisement is transaction value, which is defined as “the price actually paid or payable for the merchandise when sold for exportation to the United States,” plus amounts for certain statutorily enumerated additions to the extent not otherwise included in the price actually paid or payable. 19 U.S.C. § 1401a(b)(1). If, for any reason, sufficient information is not available with respect to the additions to the price actually paid or payable, the transaction value of the imported merchandise is treated as one that cannot be determined. 19 U.S.C. § 1401a(b)(1).
The term “price actually paid or payable” is defined as:
[T]he total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller.
19 U.S.C. § 1401a(b)(4)(A).
In Treasury Decision (“T.D.”) 00-20, U.S. Customs and Border Protection (“CBP”) reiterated its longstanding position that with regard to freight, insurance and other costs incident to international shipment, including foreign inland freight, the importer of record must deduct the actual costs for these charges from the price actually paid or payable in determining transaction value, if these costs are included in the price actually paid or payable. The notice advised that CBP considers actual costs to constitute those amounts ultimately paid to the international carrier, freight forwarder, insurance company or other appropriate provider of such services. Commercial documents to and from the service provider such as an invoice or written contract separately listing freight/insurance costs, a freight/insurance bill, a through bill of lading or proof of payment of the freight/insurance charges (i.e., letters of credit, checks, bank statements) are examples of some documents which typically serve as proof of such actual costs. Other types of evidence may be acceptable.
CBP has previously determined that fuel surcharges (HQ H004683, dated April 12, 2007) and AMS fees (HQ H148715, dated November 16, 2011) are charges incident to the international shipment of the merchandise. Consistent with these rulings, the bunker fuel adjustment and the AMS fee charged by Alps Logistics are costs incident to the international shipment of the merchandise to Alps Electric North America.
As stated in T.D. 00-20, deductions for transportation, insurance, and related services incident to the international shipment of the merchandise is appropriate only to the extent they are included in the price actually paid or payable. In the instant case, in the first three sample transactions, Alps Logistics freight memos to the Alps Electric itemize the international freight charge, the bunker fuel adjustment, and the AMS fee. In the fourth sample transaction, the international freight and the AMS fee are listed on the air waybill issued by Nippon Express. Although Alps Electric invoices to Alps Electric North America do not provide a similar itemization, the use of the “CIF” term of sale on the invoices indicates that the price for the merchandise includes all costs relating to the goods until they have been delivered to the named port of destination. See Incoterms 2010, 105 (2010). As these actual charges are substantiated by documentary evidence, they may be excluded from the price actually paid or payable for the imported merchandise. Regarding the cost of insurance, you submitted a copy of the certificate of marine cargo insurance issued by Mitsui Sumitomo Insurance which indicates the insurance rate charged to Alps Electric for insuring the ocean cargo. Based on the information provided, we find that the cost of insurance may be deducted from the price actually paid or payable.
You state that Alps Electric and Alp Logistics are related. CBP does not prohibit freight deductions, as appropriately evidenced by the actual costs for such amounts, in cases where the seller/shipper and freight or other service provider are related. See HQ 547074, dated September 17, 1999. As previously noted, you submitted a publishing order issued by Descartes on behalf of Alps Logistics which lists the current rates for bunker fuel adjustment and ocean transportation charged to Alps Electric. You state that the publishing order is part of a larger rate listing available on the FMC for FMC members to use. NVOCCs are allowed to publish these rates with/through the FMC as a means to solicit business as well as determine their competition in the market place. We find that the publishing order is satisfactory evidence that the fuel surcharge and international freight are the actual costs which may be excluded from the price actually paid or payable for the imported merchandise.
HOLDING:
Based on the information presented, the international freight, insurance, bunker fuel adjustment, and AMS fees charged by Alps Electric may be excluded from the price actually paid or payable for the imported merchandise provided that all documentary requirements are satisfied.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
Sincerely,
Monika R. Brenner
Chief
Valuation & Special Programs Branch