OT:RR:CTF:VS H312640 EE
Shannon Dillinger
UWL, Inc
1340 Depot St. Ste. 200
Rocky River, OH 44116
RE: Transaction value; charges incident to the international shipment of the merchandise; foreign inland freight
Dear Ms. Dillinger:
This is in response to your correspondence, dated July 20, 2020, in which you request a ruling whether certain charges for services by a global logistics provider should be included in the transaction value of the imported merchandise.
FACTS:
This is in reply to your letter, dated July 20, 2020, requesting a ruling on behalf of your client, Cracker Barrel Old Country Store, Inc. (“CBOCS”), an importer, on whether certain charges for services provided by Damco Customs Services Inc. (“Damco”), a global logistics provider, should be included in the transaction value of the imported merchandise. CBOCS sources products from various sellers around the world and utilizes the services of Damco to assist with the origin coordination, supplier/vendor communication, cargo handling, and a variety of other 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;
-Equipment management fee charged by the local career to move a container from the factory/loading facility to the port of export;
-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;
-Documentation fee for issuing the Freight Cargo Receipt (“FCR”);
-Container seal fee charged by the freight forwarder for issuing a container seal.
-Telex release fee by the freight forwarder to inform the destination port that the bill of lading has been released
-Origin VAT (6%) charge imposed by the Chinese government on the freight services of an international freight forwarder performed at the port of export.
-Warehousing fee for handling goods into or out of the warehouse including receiving, storing and loading the goods into shipping containers to be exported.
-Brokerage Fee
-AMS/Electronic Manifest Fee
-Gate fee / Late Gate fee
-Fuel surcharge
-Freight Forwarder handling fee
-Terminal Handling Charge
You provided documentation from a sample transaction for illustrative purposes. The documentation consists of two purchase orders from the importer to the seller, a commercial invoice, and a packing list from the seller to the importer for certain decorative articles. 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 the purchase orders, which correspond to the commercial invoice and packing list, is “FOB Ningbo.”
You also submitted a waybill issued by the carrier and a freight and transportation summary statement issued by Damco. All of these documents reference the information on the purchase orders, invoice, and packing list. The freight and transportation summary statement references the waybill and lists the breakdown of services and fees charged by Damco per bill of lading.
You claim that the dutiable value should be based upon the foreign seller’s invoice value less the charges assessed by Damco, 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 primary 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 the Automated Manifest System (“AMS”) fee is a charge incident to the international shipment of the merchandise. See HQ H148715, dated November 16, 2011. Additionally, CBP has held that the container seal fee 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 and transportation summary statement issued by Damco to the seller of the merchandise itemize various charges. Although the seller’s invoice to the importer do not provide a similar itemization, the use of the “FOB” term of sale on the invoice indicates that the price for the decorative articles includes all costs relating to the goods until they are on board the vessel at the named port of shipment. Further, we note that the freight and transportation summary statement issued by Damco indicates the same FOB location as the purchase orders from the importer to the seller and references the same port of loading listed on the waybill.
Nevertheless, we note that even though this ruling request deals with a variety of fees that might be charged by Damco, as referenced in the FACTS section of this ruling letter, the documents for sample transaction only specifies the following charges: 10+2 management fee, carrier agent booking fee, carrier bill of lading, CY monitoring, documentation fee, equipment management fee, port security charge, supply chain security fee, and terminal handling charge.
Based on documents provided for the sample transaction the 10+2 management fee, carrier agent booking fee, carrier bill of lading, documentation fee, port security charge, supply chain security fee, and terminal handling charge may be deducted from the price actually paid or payable of the imported merchandise. The CY fees may not be deducted from the price actually paid or payable of the imported merchandise if the CY is not located within the port limits. The fee for handling LCL cargo may not be deducted from the price actually paid or payable of the imported merchandise if the warehouse is not located within the port limits. Concerning the rest of the charges, the CFS charges may not be deducted from the price actually paid or payable of the imported merchandise if the CFS is not located within the port limits. Further, warehousing fees may not be deducted from the price actually paid or payable of the imported merchandise. While payments to third parties unrelated to the seller for warehousing services are not dutiable (HQ 543569, July 16, 1985), if an amount for warehousing expenses is included in the price actually paid or payable by the buyer, there is no authority to deduct the expense from the transaction value of the imported goods. HQ 543622, June 23, 1986. You stated on August 18, 2020, that the late gate fee and the fuel surcharge are incorporated into the price of the goods. Since these charges are included in the price actually paid or payable of the merchandise, they may be deducted if supported by the necessary documentation. To the extent that the VAT assessed represents a tax on the freight services of an international freight forwarder and not a tax on the merchandise, we find that it is a charge incident to the international shipment of merchandise if supported by the necessary documentation. See Caterpillar Inc. v. United States, 20 C.I.T. 1169, 941 F. Supp. 1241 (1996) (where the court found that a VAT assessed by the British government upon the sale of the merchandise may not be included in the transaction value of the merchandise when separately identified and refunded to the importer). See also HQ H264877, dated July 10, 2015. The rest of the charges may be deducted from the price actually paid or payable in line with our ruling HQ H092560, if included in the price actually paid or payable of the imported merchandise and supported by the necessary documentation.
As previously noted, the purchase order issued by the importer to the seller 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 waybill submitted reflects the shipment of the merchandise from the Port of Ningbo to the Port of Savannah, GA; it does not show through shipment from the factory to the Port of Savannah. Since there is no evidence of through shipment from the factory to the U.S., no deduction may be made for foreign inland freight costs. The equipment management fee charged by the local career to move a container from the factory/loading facility to the port of export is a service incident to foreign inland freight which may not be deducted.
HOLDING:
Based on the information presented, the following costs charged by Damco may be excluded from the price actually paid or payable for the imported merchandise with respect to the sample transaction: the 10+2 management fee, carrier agent booking fee, carrier bill of lading, documentation fee, port security charge, supply chain security fee, and terminal handling charge. Additionally, the foreign customs clearance fee, supply chain security fee, terminal fee, gate fees, fuel surcharge, terminal handling charge, port construction fee, wharfage charge, freight forwarder handling charge, container seal fee, telex release fee, brokerage fee, and AMS 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. VAT may also be excluded from the price actually paid or payable for the imported merchandise, provided it is for freight services and not for the merchandise itself.
The foreign inland freight charges and the equipment management fee charged by the local career to move a container from the factory/loading facility to the port of export should be included in the price actually paid or payable for the imported merchandise. Warehousing fees may not be deducted from the price actually paid or payable of the imported merchandise. The CFS and the CY fees should be included in the price actually paid or payable for the imported merchandise if the CFS and the CY is not located within the port limits. The fee for handling LCL cargo may not be deducted from the price actually paid or payable of the imported merchandise if the warehouse is not located within the port limits.
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.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch