OT:RR:CTF:VS H335828 JH
Center Director
Agriculture & Prepared Products CEE
U.S. Customs and Border Protection
301 E. Ocean Bl., Fl. 14
Long Beach, CA 90802-4826
Attn: Carl Vickerson, Senior Import Specialist
RE: Internal Advice; Dutiability of Freight and Insurance Charges; 19 U.S.C. §
1401a(b)(4)(A)
Dear Center Director:
This is in response to the memorandum dated November 17, 2023, forwarding a
request for internal advice submitted by Season Harvest Foods, Inc. (“Season Harvest”),
whether certain freight and insurance charges should be included in the transaction value
of the imported merchandise. The request for internal advice arose in connection with an
audit conducted by the San Francisco Office of Trade Regulatory Audit Division
(“TRA”) and a prior disclosure filed by Season Harvest’s attorney on November 16,
2021.
This decision is being issued subsequent to the following: (1) a review of the
internal advice request submitted by Roberts & Kehagiaras LLP on behalf of Season
Harvest dated July 2, 2023; and (2) a review of the documents that you forwarded to
ourffice on November 17, 2023.
FACTS:
Season Harvest is an importer located in Los Angeles that acts as a distributor for
their Chinese suppliers. Season Harvest imports and distributes quick frozen and
dehydrated herbs and vegetables. Season Harvest receives purchase orders from mostly
U.S. customers, and then they arrange pick-ups and distributions of the products.
Season Harvest claims that deductions for freight and insurance were properly
made on entries of foodstuffs because the costs associated with freight and insurance are
not the estimated costs, but the actual costs paid to the freight forwarder supported with
sufficient documentation. They indicate that they are not related to the freight forwarder
or the vendor. The specific deductions were the subject of an audit conducted by TRA
dated June 21, 2022. TRA determined that Season Harvest’s freight and insurance cost
should not be deducted because their evidence lacked sufficient detail to determine the
actual costs and specific type of freight and insurance charges.
The following documents were submitted by counsel for Season Harvest for
seven entries:
• Commercial invoices from the Chinese vendors to Season Harvest listing the
merchandise, the quantity, the unit price, and the total price. The invoice
includes a separate amount for freight and insurance. The term of sale listed
on each invoice is “CIF Oakland” or “CIF New York”.
• Invoices from Chinese vendors to Season Harvest listing an amount for
freight and insurance in U.S. dollars, and attachment for some of these
amounts itemizing the freight and insurance charges.
• Invoices from Chinese freight forwarders to vendors listing an amount for
freight and insurance in Chinese Yuan.
• Bank statements from Season Harvest indicating an online international wire
to the Chinese vendors.
ISSUE:
Whether certain freight and insurance charges that are included in the invoice
price for the imported merchandise may be properly excluded from the transaction value
of the imported merchandise.
LAW AND ANAYLSIS:
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 enumerated additions.
Section 402(b)(4)(A) of the TAA defines the term “price actually paid or payable”
as:
The total payment (whether direct or indirect, and exclusive of any costs,
charges, or expenses incurred for transportation 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).
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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.
Further, CBP regulations provide for the attachment of information detailing the
freight and insurance charges where they are not detailed on the invoice. Each invoice of
imported merchandise shall contain an itemized list of freight and insurance costs, but
also provide that “where the required information does not appear on the invoice as
originally prepared, it must be shown on an attachment to the invoice.” 19 C.F.R. §
141.86(a)(8). 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 nondutiable
charges, and all additions to invoice value which have been made to arrive at the
aggregate entered value.” 19 C.F.R. § 141.90(c) (emphasis added). Furthermore, the
regulations do not provide any consequences for not itemizing freight and insurance
charges on the invoice, and do not preclude the importer from providing the appropriate
documentation later in time if it is not available at the time of entry.
As stated in T.D. 00-20, deductions for transportation, insurance, and related
services incident to the international shipment of the merchandise are appropriate only to
the extent they are included in the price actually paid or payable. In the instant case, the
term of sale listed on the commercial invoices from the Chinese vendors to Season
Harvest are “CIF Oakland” or “CIF New York”. This indicates that the price for the
merchandise includes all costs and freight necessary to bring the goods to the named port
of destination. See Incoterms 2000, 65 (1999). However, the bank statements for
payment from Season Harvest to the vendors for the imported merchandise do not
correspond to the amounts listed on the commercial invoices issued from the vendors to
Season Harvest for the specific entries. TRA also noted that payments from Season
Harvest to the vendors could not be linked to specific import transactions. Since we are
unable to verify whether the freight costs were included in the price of the merchandise,
freight and insurance charges may not be deducted.
With respect to foreign inland freight in sales other than ex-factory, 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
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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 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 the instant case, evidence reflecting through shipment of the merchandise from
the factory to the United States was not submitted. Accordingly, no deduction may be
made for foreign inland freight charges.
HOLDING:
Based on the information submitted, we find that the freight and insurances
charges may not be deducted from the price actually paid or payable for the imported
merchandise.
You are instructed to provide this decision to the internal advice requester no later
than sixty (60) days from the date of the decision. Sixty days from the date of the
decision, the Office of Trade, Regulations and Rulings will make the decision available
to CBP personnel, and to the public on the Customs Rulings Online Search System
(CROSS) at https://rulings.cbp.gov/ which can be found on the U.S. Customs and Border
Protection website at http://www.cbp.gov and other methods of public distribution.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch
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