OT:RR:CTF:VS CMR
Center Director Ann Marie Paul
U. S. Customs and Border Protection
Industrial and Manufacturing Materials
Center of Excellence and Expertise
726 Exchange Street, Suite 400
Buffalo, NY 14201
RE: Request for Internal Advice Regarding Deductions from Entered Value of Softwood Lumber; Countervailing Duties; Anti-Dumping Duties
Dear Ms. Paul:
This is response to an internal advice request received by this office from the Industrial and Manufacturing Materials Center of Excellence and Expertise (“CEE”) posing various questions with regard to the deduction of countervailing duties (case C-122-858) and anti-dumping duties (case A-122-857) from entries of softwood lumber. The CEE has received hundreds of Post Summary Corrections (PSCs) for value changes for entries involving foreign importers of record who used Delivered Duty Paid (DDP) terms of sale. These PSCs involve either a claim that anti-dumping/counter- vailing duties (AD/CVD) were inadvertently not deducted from the entered value at the time of entry, or the type 03 entry had either anti-dumping duties (ADD) or countervailing duties (CVD) declared at time of entry, but was missing the other related case. The PSCs result in the submission of the ADD or CVD and a reduction in the entered value as a result of a deduction of these additional duties.
FACTS:
A representative entry was selected for examination. The entry at issue involves the filing of a PSC claiming that ADD was inadvertently omitted at the time of entry. CVD was declared at the time of entry and deducted from the invoice value. Your CEE requested documentation from the filer (the importer of record’s broker) to substantiate the deductions. Various documents were submitted to this office for our review involving this entry of softwood lumber (planed lumber).
The invoice from the importer of record (Canadian seller) to the U.S. buyer, dated January 11, 2018, indicates under “Freight Terms/Mode d’expedition” that “Transport not included/TRANSP.NON INCLUS.” It described the softwood lumber being sold and indicates a price per thousand board feet (MBF) of $387.43, along with a total price for the lumber of $43,739.30. In addition, the invoice shows a freight charge of $8,192.86. The invoice total consists of the total price for the lumber plus the freight charge and totals $51,932.16. The invoice also indicates that if the invoice is paid on or before January 21, 2018, the buyer can deduct $218.70 as a discount. The invoice is void of any shipping terms or terms of sale, with the exception of payment terms which are “.5% 10 days net 11 days.” The seller’s “Sales Acknowledgement,” dated January 11, 2018, indicates terms as “.5% 10 days net 11 days.” As in the invoice, it indicates shipping terms as “Transport not included/TRANSP.NON INCLUS.” It indicates the transportation is by rail and is to be billed to a specific IRS number. The sales acknowledgement document reflects the same prices as the invoice, i.e., $387.43/MBF for a total of $43,739.30 for the lumber and $8,192.86 for the freight.
By email, dated April 4, 2019, the importer explained that the reference to “Transport not included” on the invoice to the U.S. buyer “means that the freight charge itemized on the invoice must be added to (it is not already included) in the amount listed for the quantity of lumber purchased.” The importer stated that “[i]t is a reminder to us too that we should itemize the freight separately on our invoice. It does not mean that the customer pays the freight separately themselves.” In addition, the importer submitted documentation to show that the freight providers invoiced the importer and the importer paid for the freight. The documentation included invoices from the freight providers to the importer and proof of payment by the importer to the freight providers.
The invoice that the Canadian seller provides to the broker for customs clearance provides not only the U.S. buyer’s name and address, but also the buyer’s IRS number, which matches the number on the sales acknowledgement document as the IRS number to which the freight is to be billed. The invoice provides the discount amount, the terms “.5% 10 days net 11 days,” and the same quantity of lumber as reflected on the invoice to the U.S. buyer and on the sales acknowledgement document. However, while the invoice reflects the same total invoice amount of $51,932.16, it indicates that the price per MBF is $460. There is a slight difference in the freight amount reflected on this document from the invoice to the U.S. buyer, with the freight reflected on this document as $8,193.27. Further, this invoice states on its face:
The invoice total includes the following charges:
Customs Brokerage, and whenever applicable, CVD and Anti-Dumping Duties. Cash Discount to be Deducted.
The document indicates that the price includes the customs duty, brokerage, and freight. A separate piece of paper with a breakout of the components of the invoice price was received with the customs clearance invoice. That document lists material (wood), discount, freight, broker’s fee, ADD, CVD and the amount of each to total the invoice price including freight.
The original entry summary, filed on January 26, 2018, and signed by the customs broker on January 24, 2018, indicates an invoice value of $51,932.16 from which the following were deducted: Cash Discount, $218.69; Freight Charge, $8,193.27; Brokerage fee, $126; and Government Charge (CVD), $5,392.49. After deductions, the entered value on the Customs and Border Protection Form (CF) 7501 was $38,001.71, rounded to $38,002.
The revised entry summary, submitted as a PSC, and signed by the customs broker on July 12, 2018, reflects the same invoice value of $51,932.16 from which the following were deducted: Cash Discount, $218.69; Freight Charge, $8,193.27; Brokerage fee, $92; and Government Charge, $7,307.27 (ADD, $2,181.71; and, CVD, $5125.57). After deductions, the entered value on the CF 7501 was $36,120.93, rounded to $36,121.
CBP also received documents provided to the broker by the seller including a “Pre-Alert Invoice for the Railroad,” a “Softwood Lumber FAX Cover Sheet,” a “Softwood Lumber Export Permit Cover Sheet,” a copy of the “Plant and Plant Product Declaration Form” (APHIS form); and a copy of the “Softwood Lumber Export Permit” issued by the Canadian government.
The total value for the lumber indicated on the softwood lumber permit is $43,487.00 (USD). The export price, if the product has undergone only primary processing, is “the value that would be determined FOB at the facility where the product underwent its last primary processing before export.” The “Pre-Alert Invoice for the Railroad” indicates the lumber value at $43,487.19. The “Softwood Lumber FAX Cover Sheet,” prepared by a representative of the seller, shows the “export price” of the lumber as $43,487.19 and contains a definition of “export price” on the document. “Export price” is defined as:
The export price is the price of product at the last foreign based plant, typically FOB plant. The export price is currently required on the SWL permit.
The “Softwood Lumber Export Permit Cover Sheet” shows a value for permit purposes of $43,487.19, and indicates that transportation will be by rail. Finally, the APHIS form requires the entered value of the imported article, in this case, the softwood lumber. The entered value on the APHIS form is $43,487.19.
The documents reviewed by CBP do not contain any terms of sale or freight terms, other than the payment terms referenced above. Via email, dated November 2, 2018, the seller has explained that there is no purchase order to provide and no contract. Sales are made by telephone and the seller confirms sales via the issuance of a “Sales Acknowledgement” document. The seller has explained that because the Canadian seller acts as the importer of record and pays all customs duties and fees associated with the importation, the seller includes the duties in the invoice price. The seller believes that because it provides invoices to its customs broker for customs clearance purposes with a specific statement notating that the invoice total includes the charges for customs brokerage fees and CVD and ADD, and boxes are checked reflecting that the price includes customs duty, brokerage and freight, that this is conducive to a DDP term of sale.
By letter, dated November 16, 2018, the seller explained that in its phone sales to customers, it agrees to sell the lumber for a delivered price that includes duties. They submitted a letter from the buyer of the lumber at issue confirming that the buyer has “always understood that our price included our agreement to pay customs duties and fees.” The letter, dated November 15, 2018, states, in relevant part:
This is to confirm that both parties are in agreement that all sales orders, including sales order [X], for lumber purchased from [the seller] by [the buyer] includes all compensating taxes (CVD and ADD) in the selling price. These taxes are then paid to the department of commerce by [the seller].
The seller’s letter further states that: “[The buyer] and our other customers agreed and understood that we are selling our lumber to them on DDP basis.” Further, the seller, citing Headquarters Ruling Letter (HQ) 545304, dated January 4, 1994, indicated that it was the seller’s understanding the CBP had “decided previously in a 1994 ruling that if the antidumping and countervailing duties are identified separately on the Customs Form 7501, it is sufficient documentation to show that those duties may be deducted from the transaction value.” With regard to the values for the lumber provided on the APHIS form and Canadian Export Permit, the seller stated that it had “mistakenly included customs duties and fees in the values for these two forms.”
CBP understands the seller’s explanation to be that the buyer and seller agree upon a price for the lumber which includes anti-dumping and countervailing duties owed upon importation into the United States. However, the seller does not know the amount of these duties until the lumber is to be entered, at which time their broker calculates the anti-dumping and countervailing duties owed and the entered value based upon the total invoice price less the freight. When the broker informs the seller of the amounts for the anti-dumping and countervailing duties, the seller books the duties into an expense account.
This office requested, and received, copies of documents from the seller’s books and records which relate to the entry at issue. One page is described as a document from the seller’s accounting software that books the freight and sales (duties included) into the seller’s accounting system. The sales amount of $43,739.30 is clearly identified on the document, which provides amounts in Canadian and U.S. dollars. The freight amount of $8,192.86 is listed directly above the sales amount and is identified as a “Financial Credit” and “TRSP-FRAIS.” The seller provided a page which lists various invoices, with their export dates, customer reference, U.S. tax, entered value, duties owed, duties billed, brokerage charges, and invoice total. In addition, the seller provided a screen shot of the company booking the CV duties and brokerage charge into the seller’s expense account for sales. Another document provides an overview of the seller’s sales ledger for January 2018. Excerpts of a breakdown of all sales in January 2018 show the total for the month of January 2018 and a line specific to the entry at issue. A page entitled, “General Ledger Inquiry Report,” was submitted showing the amount of money the seller paid to its broker in Canadian dollars for the entry at issue to cover the duties owed and the brokerage fee. Additional documents were provided to show the booking of an estimated amount paid to the broker to be used in the PSCs filed on behalf of the seller; the return of a portion of the estimated amount (as the original estimate amount was in excess) and booking of the final actual cost; and, excerpts from the expense account showing the same information.
The Office of Regulatory Audit conducted an on-site audit of the importer in July 2019 and examined a sampling of entries subject to the ADD and CVD orders. The objective of the audit was to determine if the ADD/CVD were included in the invoice price. The auditors concluded that the invoice prices included the ADD/CVD and that the ADD/CVD were booked to the correct General Ledger accounts of the importer.
ISSUES:
Whether ADD/CVD are allowed to be deducted from the invoice value at the time of entry.
Whether ADD/CVD are allowed to be deducted from the entered value via a PSC.
Whether specific dollar amounts need to be identified on documents between the parties or is generic wording, such as, “the invoice total includes the following charges: customs brokerage, and whenever applicable, CVD and Anti-Dumping Duties” acceptable.
Whether ADD/CVD needs to be identified separately on the invoice between the U.S. buyer and the foreign seller, or may it be identified on any document such as one between the foreign seller (acting as importer of record) and the customs broker. Whether identifying the ADD/CVD separately on the CF 7501 is sufficient.
With regard to entries in which ADD/CVD deductions are allowed from the invoice price under transaction value, if the Department of Commerce issues a liquidation rate which is different than the estimated rate in effect at the time of entry, whether such entries are subject to changes to their entered values and, if yes, whether CBP is responsible for editing the entries or it falls to the importer to file a protest after liquidation.
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 certain statutory additions. 19 U.S.C. § 1401a(b)(1).
In this case, the seller uses transaction value as the basis of appraisement and claims the sale is a delivered duty paid (DDP) sale. DDP is described in Incoterms® 2010, ICC Rules for the use of domestic and international trade terms, published by the International Chamber of Commerce (2010), at 69, as follows:
“Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.
Under DDP sales, the seller must contract, at its own expense, for the transportation of the goods to the named place of destination. See supra at 70. In addition, the seller pays the duties, fees, taxes and other charges payable upon export and import of the goods. See supra at 72.
In determining the transaction value of merchandise, it is necessary to determine what the “price actually paid or payable for the merchandise when sold for exportation to the United States” actually is. At 19 U.S.C. § 1401a(b)(4), the statute provides:
For purposes of this subsection –
The term “price actually paid or payable” means the 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.
Any rebate of, or other decrease in, the price actually paid or payable that is made or otherwise effected between the buyer and seller after the date of the importation of the merchandise into the United States shall be disregarded in determining the transaction value under paragraph (1).
Furthermore, at 19 U.S.C. § 1401a(b)(3), the statute provides, in relevant part:
The transaction value of imported merchandise does not include any of the following, if identified separately from the price actually paid or payable and from any cost or other item referred to in paragraph (1):
* * *
(B) The customs duties and other Federal taxes currently payable on the imported merchandise by reason of its importation, and any Federal excise tax on, or measured by the value of, such merchandise for which vendors in the United States are ordinarily liable.
Reading 19 U.S.C. § 1401a(b)(3) and (b)(4) together, it appears that while § 1401a(b)(4) defines “price actually paid or payable” in a manner that includes customs duties and other Federal taxes within the phrase, § 1401a(b)(3) clarifies that customs duties and other Federal taxes currently payable may be deducted from the price actually paid or payable if these charges are identified separately. However, if they are not identified separately, they are not deductible.
CBP has previously held that ADD/CVD fall within the phrase “customs duties and other Federal taxes currently payable” in 19 U.S.C. § 1401a(b)(3). See Headquarters Ruling Letter (HQ) 545304, dated January 4, 1994; HQ 546191, dated April 12, 1999. Therefore, if the ADD/CVD are identified separately from the price actually paid or payable for the merchandise, these charges may be deducted from the transaction value of the merchandise, that is, the invoiced amount paid by the buyer. In a DDP transaction, as noted above, the seller pays the duties, fees, taxes and other charges payable upon export and import of the goods, which includes the customs duties and other Federal taxes currently payable on the imported merchandise by reason of its importation. If the seller can show that the invoice amount paid by the buyer includes these charges, per § 1401a(b)(3), the seller may reduce the invoice amount to remove these charges from the transaction value of the merchandise for purposes of appraisement. In other words, the seller needs to show the amounts within the invoice that are attributable to duties, and not just that the responsibility for paying duties lies with the seller.
Issues 1 and 2
With regard to your first question, whether ADD/CVD are allowed to be deducted from the invoice value at the time of entry, the answer is yes, if they are part of the invoice amount and they are separately identified. With regard to your second question, whether ADD/CVD are allowed to be deducted from the entered value via a PSC, the answer is also yes. On June 24, 2011, the General Notice, “Post-Summary Corrections to Entry Summaries Filed in ACE Pursuant to the ESAR IV Test,” was published. See 76 Federal Register 37136. Clearly, PSCs for ADD/CVD were contemplated as PSCs for these duties are discussed in the notice. However, just as when ADD/CVD deductions from the transaction value price are claimed at entry, when claimed through a PSC, the ADD/CVD must be separately identified. Of course, the CEE may request supporting evidence to show that the ADD/CVD amounts to be deducted were part of the invoice amount.
Issues 3 and 4
In the sample transaction at issue, stated to be a DDP sale, the CVD was identified at the time of entry on the CF 7501, but the ADD was not identified until the filing of a PSC. In the representative transaction, there are no terms of sale on the invoice between the seller and the buyer. Only the invoice provided to the customs broker by the seller for customs clearance contains an indication that the invoice total may include CVD and ADD, as it indicates they are included “whenever applicable.” The answer to whether these duties need to be identified separately on the invoice between the U.S. buyer and the foreign seller, or whether a document, such as one between the seller and the customs broker in this case, will suffice, lies within 19 CFR § 141.90(c), which provides:
The importer must show in clear detail on the invoice or on an attached statement the computation of all deductions from total invoice value, such as the nondutiable charges, and all additions to invoice value which have been made to arrive at the aggregate entered value. In addition, the entered unit value for each article on the invoice must be shown where it is different from the invoiced unit value.
Finally, 19 CFR § 142.6(a)(3) requires that, among other things, the commercial invoice, or documentation acceptable in place of a commercial invoice, such as a pro forma invoice, shall contain “[t]he values or approximate values of the merchandise.”
One of the purposes of the invoicing requirements is to enable CBP to ascertain the value of the imported merchandise. Although CBP fixes the final appraisement of merchandise and the final amount of duties owed at the time of liquidation, the importer of record is still required to follow the cited regulations and identify the non-dutiable charges within the invoice price, including duties in the case of a DDP transaction, and provide CBP with the value of the imported merchandise.
The invoice between the importer and the importer’s broker for purposes of customs clearance would be acceptable in this case if it, or an attachment to it, provided the computation of all the deductions from the total invoice value as required by 19 CFR § 141.90(c). The invoice provided to the broker simply states that the invoice total includes “customs brokerage, and, whenever applicable, CVD and Anti-Dumping Duties.” A general statement, such as this, is insufficient. The statement is not definitive as to the inclusion of the ADD/CVD as it states “whenever applicable.” As stated in HQ H247240, dated April 3, 2017:
The specificity required by the statue is more than a general and generic statement that “duties” are included. Rather, the antidumping duties must be “identified separately from the price actually paid or payable for the importer merchandise.” 19 U.S.C. § 1401a(b)(3)(B).
However, a separate document, provided with this invoice, did breakout the computation of all the deductions from the total invoice price, including the ADD/CVD. This document meets the requirements of 19 CFR § 141.90(c) and 19 CFR § 142.6(a)(3).
You ask whether identifying the ADD/CVD separately on the CF 7501 is sufficient. While the non-dutiable charges and calculations may be provided on the CF 7501, that does not relieve the importer of the requirements of 19 CFR § 141.90(c) and 19 CFR § 142.6(a)(3). If the non-dutiable charges are only provided on the CF 7501 and the documentation required by the regulations is not provided at entry summary, the CEE or port may certainly request the information required and the importer should be able to provide it without delay.
The information on the invoice, attached statement to the invoice, or pro forma invoice may be subject to verification by the port or the CEE. Under section 500 of the Tariff Act of 1930, as amended, which constitutes CBP’s general appraisement authority, the appraising officer may:
fix the final appraisement of merchandise by ascertaining or estimating the value thereof, under section 1401a of this title, by all reasonable ways and means in his power, any statement of cost or costs of production in any invoice, affidavit, declaration, other document to the contrary notwithstanding. . . .
19 U.S.C. § 1500(a). As stated in the Statement of Administrative Action (SAA), which forms part of the legislative history of the TAA: “Section 500 authorize[s] the appraising officer to weigh the nature of the evidence before him in appraising the imported merchandise. This could be the invoice, the contract between the parties, or even the recordkeeping of either of the parties to the contract.” Thus, for example, in the case of softwood lumber importations for which the Government of Canada issues “Softwood Lumber Export Permits,” by definition, the export price, if the product has undergone only primary processing, is “the value that would be determined FOB at the facility where the product underwent its last primary processing before export.” Thus, the export price value on the permit would not include freight or duties and could be used to substantiate whether the invoice value from which freight and duties are deducted under a DDP transaction were or were not included in the invoice price. See also, 19 CFR § 141.0a(b).
Issue 5
You have asked if the Department of Commerce issues a liquidation rate for ADD/CVD which is different than the estimated rate in effect at the time of entry for entries valued under the transaction method of valuation and from which ADD/CVD deductions are allowed from the invoice price, whether such entries are subject to changes to their entered values as a result of the change. The answer is no. It is incumbent upon the importer to provide CBP with the necessary information to ascertain the value of the entered merchandise at the time of entry, in accordance with 19 CFR § 141.90(c) and 19 CFR § 142.6(a)(3). Thus, the entered value of the merchandise should not change. It is merely the amount of ADD/CVD duty owed on that entered value that changes, based upon the final liquidation rate order from the Department of Commerce.
Ordinary customs duties which are fixed at the time of entry and ascertainable by reference to the Harmonized Tariff Schedule of the United States are different from antidumping or countervailing duties for which only estimated duties are generally known at the time merchandise is sold for export to the United States and at the time of entry of such merchandise as the final duties are not known until the Department of Commerce issues a final determination and liquidation instructions to CBP. CBP has consistently held that when duties are included in the invoice price, the proper amount of duty to be deducted is the actual duty paid. However, that deduction is limited to the extent to which the amount of the actual duty paid is included in the invoice price paid by the buyer. In other words, if the estimated duties included in the invoice price are greater than the actual duties assessed, an importer may only deduct the actual duties it pays. See HQ 542401, dated May 21, 1981. However, if the estimated duties included in the invoice price in a DDP transaction are less than the actual duties assessed, the importer may only deduct the amount of duties included in the invoice price paid by the buyer. To allow the importer to deduct additional duties charged in excess of the estimated duties included in the invoice price would allow the importer to reduce the price actually paid or payable after importation in violation of 19 U.S.C. § 1401a(b)(4)(B). Any additional antidumping duties assessed at final liquidation, beyond the estimated duties, could not have been included in an invoice to a buyer at the time the merchandise was sold for export to the United States because, in general, only the estimated antidumping duties are known at the time of sale, not the actual antidumping duties.
The Representative Sample
With regard to the representative transaction at issue, as noted above, only the invoice presented to the customs broker for purposes of making entry indicates that the invoice total includes the ADD/CVD “whenever applicable.” As in HQ H247240, this statement is insufficient, as it is too general. However, an attachment to the seller’s invoice submitted to CBP with the PSC, provided a breakout of the computation of all the deductions from the total invoice price, including the ADD/CVD. As discussed above, PSCs allow for corrections in entry filings. Therefore, although the original entry did not include an amount for the ADD, a correction through a PSC is allowable.
In this matter, the importer presented evidence, via a letter from a buyer, to show that the parties agreed the invoice price includes the ADD/CVD and that the seller pays those duties. The values for the lumber provided on the APHIS form and Canadian Export Permit were of concern to this office as these documents did not support the lower entered value claimed by the importer. As noted earlier, the seller stated that it had “mistakenly included customs duties and fees in the values for these two forms.” While importers may make mistakes on their documents, as mistakes do happen, care needs to be exercised with regard to such documentation, especially documentation with very explicit definitions, such as of export value in this case. CBP will look at the information on these documents. When the documentation does not support the values claimed, CBP will likely rely upon the documentation unless the importer is able to present evidence to support their claim that it was simply a mistake. Fortunately, in this case, the Office of Regulatory Audit was able to conduct an on-site audit of this importer and concluded that the invoice prices included the ADD/CVD. The conclusion of the auditors supports the importer’s claim that the amounts on the APHIS form and Canadian Export Permit included customs duties and fees, in error, and that the transaction values on their invoices included the ADD/CVD.
HOLDING:
With regard to the questions from the CEE, the following responses, in accordance with the above analysis, are provided.
ADD/CVD are allowed to be deducted from the invoice value at the time of entry, and may be deducted from the entered value via a PSC.
General statements on invoices, such as, “the invoice total includes, whenever applicable, ADD/CVD,” are not acceptable by themselves. Importers must meet the requirements of 19 CFR § 141.90(c) and 19 CFR § 142.6(a)(3) as set forth in the CBP Regulations.
With regard to entries in which ADD/CVD deductions are allowed from the invoice price under transaction value, if the Department of Commerce issues a liquidation rate for ADD/CVD which is different than the estimated rate in effect at the time of entry, such entries are not subject to changes to their entered values as a result of the change.
This decision should be mailed to the internal advice applicant no later than sixty days from the date of this letter. On that date, Regulations and Rulings of the Office of
International Trade will make the decision available to CBP personnel and to the public via the CBP Home Page on the World Wide Web at www.cbp.gov, through the Freedom of Information Act, and by other methods of public distribution.
Sincerely,
Monika R. Brenner, Chief Valuation and Special Programs Branch