VAL OT:RR:CTF:VS H237182 EE
Quinn O’Rourke
LaCrosse Footwear, Inc.
17634 NE Airport Way
Portland, OR 97230
RE: Transaction value; charges incident to the international shipment of the
merchandise; foreign inland freight
Dear Mr. O’Rourke:
This is in response to your letter, dated December 28, 2012, in which you request a ruling whether certain charges for services by your freight forwarder should be included in the transaction value of the imported merchandise.
FACTS:
LaCrosse Footwear, Inc. / Danner, Inc. import merchandise and utilize a freight forwarder to assist with a variety of origin related services. You state that the fees for the services offered encompass the following as examples:
Fee charged by the carrier’s booking agent for booking services;
Bill of lading charge by the carrier for issuing the bill of lading;
Container Freight Station (“CFS”) fee for receiving, unloading, storing and packing cargo into containers;
Foreign customs clearance fee;
Container Yard (“CY”) monitoring fee;
Foreign inland freight costs in the country of export;
Fee charged by the carrier for equipment management;
Fee for handling Less than Container Load (“LCL”) cargo;
Port construction fee;
Port security charge;
Supply chain security fee;
Wharfage charge;
10+2 filing fee;
Terminal fee charged by the carrier for entering the terminal;
Handling charges by the freight forwarder to process the shipment;
Documentation fee for issuing the bill of lading and/or the Freight Cargo Receipt (“FCR”);
Container seal fee charged by the freight forwarder for issuing a container seal.
You provided documentation from a sample transaction for illustrative purposes. The documentation consists of a purchase order from the importer to the seller, a commercial invoice, and a packing list from the seller to the importer for certain footwear. The commercial invoice lists the merchandise, quantity, unit price, and total price. You claim that the charges for the services above are included in the invoice as part of the price of the merchandise. The term of sale listed on each invoice is “FOB port of export.”
You also submitted a bill of lading issued by the freight forwarder and freight invoice from the freight forwarder to the seller listing the various charges you claim are incident to the international shipment of the merchandise. The freight invoice lists the breakdown of services and fees charged by the freight forwarder per bill of lading. Additionally, you submitted invoices from a shipping company to the seller for foreign inland transportation services. All of these documents reference the information on the invoices, packing lists, and the purchase orders.
You claim that the dutiable value should be based upon the foreign seller’s invoice value less the charges assessed by the freight forwarder, on the basis that those charges are incident to the international shipment of the merchandise.
ISSUE:
Whether certain charges that are included in the invoice price for the imported merchandise may be properly excluded from transaction value as 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, 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 the 10+2 management fee, carrier agent booking fee, carrier bill of lading, CFS receiving, customs clearance, CY monitoring, documentation fee, equipment management fee, FCR/HBL issuance, LCL handling, port construction charge, port security charge, supply chain security fee, terminal handling charge, and wharfage fees are charges incident to the international shipment of the merchandise. See Headquarters Ruling Letter (“HQ”) H092560, dated April 7, 2010; see also HQ H119858, dated September 9, 2010; and HQ H119857, dated September 9, 2010. CBP has also held that a container seal fee for the affixation of a special security seal on the container is a charge incident to the international shipment of the merchandise. See HQ H219516, dated July 30, 2012.
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, the freight forwarder’s invoice to the seller of the merchandise itemizes the various charges. Although the seller’s invoice to the importer does not provide a similar itemization, the use of the “FOB” term of sale on the invoices indicates that the price for the footwear includes all costs relating to the goods until they are on board the vessel at the named port of shipment. See Incoterms 2010, 90 (2010). Further, we note that the freight forwarder’s invoice to the seller for the services provided indicate the same FOB location as the commercial invoice from the seller to the importer and reference the same port of loading listed on the bill of lading.
Nevertheless, we note that even though this ruling request deals with a variety of fees that might be charged by the freight forwarder, as referenced in the FACTS section of this ruling letter, the freight invoice for the sample transaction only specifies the following charges: terminal fee charged by the carrier for entering the terminal, handling charges by the freight forwarder to process the shipment; documentation fee for issuing the bill of lading and/or the FCR, and container seal fee charged by the freight forwarder for issuing a container seal. Therefore, inasmuch as these are the only actual charges substantiated by the documentary evidence in the sample transaction, only these fees may be excluded from the price actually paid or payable in this case. The CFS charges for receiving, unloading, storing and packing cargo into containers may not be deducted if the CFS is not located within the port limits. Similarly, the CY monitoring fee may not be deducted if the CY is not located within the port limits. However, the rest of the charges may be deducted from the price actually paid or payable in line with our ruling HQ H092560, if supported by the necessary documentation.
As previously noted, the invoice issued by the seller to the importer specifies “FOB” delivery terms. With respect to foreign inland freight in sales other than ex-factory, section 152.103(a)(5)(ii), CBP Regulations (19 C.F.R. § 152.103(a)(5)(ii)), provides:
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 § 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.
According to section 152.103(a)(5)(iii), CBP Regulations (19 C.F.R. § 152.103(a)(5)(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 port 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 port 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.
In All Channel Products v. United States, 16 CIT 169, 173, 787 F. Supp. 1457, 1460 (1992), aff'd, 982 F.2d 513 (Fed. Cir. 1992), the court interpreted 19 C.F.R. § 152.103(a)(5)(ii) and (iii) as permitting the deduction of foreign inland freight charges in a CIF or other non-ex-factory sale as incident to international shipment of the merchandise “only in cases where the merchandise was placed with one freight forwarder or carrier for through shipment from the factory to the United States documented by a through bill of lading (or other satisfactory documentation establishing through shipment).”
The bill of lading submitted reflects the shipment of the merchandise from the Port of Hong Kong to the Port of Indianapolis; it does not show through shipment from the factory to the Port of Indianapolis. Since there is no evidence of through shipment from the factory to the U.S., no deduction may be made for foreign inland freight charges.
HOLDING:
Based on the information presented, the following costs charged by the freight forwarder may be excluded from the price actually paid or payable for the imported merchandise with respect to the sample transaction: terminal fee charged by the carrier for entering the terminal, handling charges by the freight forwarder to process the shipment, documentation fee for issuing the bill of lading and/or the FCR, and container seal fee charged by the freight forwarder for issuing a container seal. The CFS charges for receiving, unloading, storing and packing cargo into containers may not be deducted if the CFS is not located within the port limits. The CY monitoring fee may not be deducted if the CY is not located within the port limits. Additionally, carrier agent booking, foreign customs clearance, equipment management, LCL handling, port construction charge, port security charge, supply chain security fee, wharfage fees, and 10+2 management fee may be excluded from the price actually paid or payable of the imported merchandise in line with our ruling in HQ H092560, provided that all documentary requirements are satisfied.
The foreign inland freight charges should be included in the price actually paid or payable for the imported merchandise.
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