Protest No. 2006-08-100003; transaction value; international transportation costs

HQ H023812 April 4, 2008 OT:RR:CTF:VS H023812 GG CATEGORY: Valuation Port Director U.S. Customs and Border Protection 3150 Tchulahoma Road, Suite 1 Memphis, TN 38118 RE: Protest No. 2006-08-100003; transaction value; international transportation costs Dear Port Director: This is in response to the application for further review of the protest referenced above. FACTS: FHBC America, Inc. (“FHBC”) purchased ball bearings from FAG Bearings Korea Corp. of Seoul, South Korea (“FAG”). In the “Remarks” box of the commercial invoice, separate line items list, in descending order, a DDP value, a freight charge, an insurance charge, a loading cost, a customs entry fee, an amount for duty and tax, and finally, an FOB value. A box at the bottom of the first page of the invoice gives a total invoice price in U.S. dollars that is identical to the stated DDP value. The term of sale “DDP Detroit USA” is displayed on the second page of the invoice. A “grand invoice total” equal to the stated DDP value also appears on that page. The merchandise was entered on September 18, 2006. The invoiced value reflected on the CBP Form 7501 matched the DDP amount shown on the invoice. The total freight charges displayed in Column 33 of the CBP Form 7501 Entry Summary were $2,700.00. The entry was liquidated on August 3, 2007. In a protest filed on December 20, 2007, FHBC explains that the CBP Form 7501 understates the actual international freight charges, which it asserts were in fact $32,528.00. It presented a rated bill of lading from the Yang Ming Marine Transport Corporation as evidence of the actual freight charges. This sea waybill, which reflects that 293 cartons were shipped in 11 containers, shows a total freight prepaid cost of $32,528.00. The number of cartons – 293 – corresponds to the number shown on the packing list prepared by FAG, which in turn cross references the invoice described above. The sea waybill does not make reference to either FAG or FHBC but instead lists the freight forwarder/broker as the shipper, consignee and notify party. In addition to the sea waybill, the protestant has presented a copy of an invoice issued by Yang Ming Marine Transport Corporation that reflects total charges of $32,528.00. It cross references the sea waybill number. Aside from the name of the transportation company, all other information on the invoice is in Chinese, with no English translation provided. As a result of the understatement of the actual freight charges, FHBC claims that it overpaid duties. It is protesting the appraisement and liquidation of the entry and is requesting a refund of the amount overpaid. ISSUE: Whether the protestant may deduct the claimed international freight charges from the price actually paid or payable for the imported ball bearings. LAW AND ANALYSIS: The preferred method of appraisement is transaction value which is defined by section 402(b)(1) of the TAA (19 U.S.C. § 1401a(b)) as "the price actually paid or payable for the merchandise when sold for exportation to the United States..." plus certain additions specified in section 402(b)(1) (A) through (E). The term "price actually paid or payable" is defined in section 402(b)(4)(A) of the TAA as: ...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. Transportation and insurance costs pertaining to the international movement of merchandise from the country of exportation, to the extent included in the price actually paid or payable, are to be excluded from the total payment made for imported merchandise appraised under transaction value. These costs are not the estimated costs, but the actual costs paid to the freight forwarder, transport company, etc. See Treasury Decision (“T.D.”) 00-20. T.D. 00-20 provides the following with respect to evidence of actual freight costs: Customs 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. FHBC has submitted the sea waybill and the international carrier’s invoice as evidence of actual freight costs. While these two documents list freight charges of $32,528.00, they do not enable us to ascertain the party that paid the freight costs. The sea waybill does indicate that freight was prepaid, which typically means payment by the shipper. The waybill, however, identifies the freight forwarder as the shipper, and makes no reference to FAG. The freight invoice is in Chinese, so we are unable to determine to whom it was issued. Efforts to obtain proof of payment of the freight charges, and to verify that FHBC did pay a DDP price, were unsuccessful. Without this information we are unable to verify that the transaction in question was made pursuant to DDP terms, with international freight charges included in the price for the goods. Accordingly, the importer may not make a deduction for international freight costs, and the protest must be DENIED. HOLDING: The protestant has not provided sufficient evidence to show that the international freight costs were included in the price paid by the buyer to the seller of the imported ball bearings. Accordingly, no deduction may be made for international freight costs. In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Myles B. Harmon Director Commercial and Trade Facilitation Division