Transaction value; charges incident to the international shipment of the merchandise

HQ H179139 October 11, 2011 VAL OT:RR:CTF:VS H179139 EE CATEGORY: Valuation . Gregory Watts [***] 680 Knox Street, Suite 200 Torrance, CA 90502 RE: Transaction value; charges incident to the international shipment of the merchandise Dear Mr. Watts: This is in reply to your letter, dated March 9, 2011, and your supplement letter, dated July 27, 2011, requesting a ruling on behalf of your client, [***] (“Company A”), on whether certain charges for services provided by [***] (“Company B”), a global logistics provider, should be included in the transaction value of the merchandise imported by Company A. In accordance with 19 C.F.R. § 177.2(b)(7), you have requested that certain information in your submission be treated as confidential. Pursuant to your request, we will excise the bracketed confidential information from public versions of this decision. FACTS: Company A sources products from various suppliers around the world and utilizes the services of Company B 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: 10+2 management fee to assist Company A in providing the required information to U.S. Customs and Border Protection (“CBP”); Fee charged by the carrier’s booking agent for booking services; Fee charged by the carrier for issuing the bill of lading; Container Freight Station (“CFS”) receiving fee for receiving and packing cargo into containers at the loading port; Foreign customs clearance fee; Container Yard (“CY”) monitoring fee for handling the cargo; Fee charged by the carrier for equipment management; Documentation fee for issuing the Freight Cargo Receipt (“FCR”) or the House Bill of Lading (“HBL”); Fee for handling Less than Container Load (“LCL”) cargo; Port construction fee; Port security charge; Supply chain security fee; Terminal handling charge; Wharfage charge. You provided documentation from three sample transactions for illustrative purposes. The documentation consists of commercial invoices, purchase orders, and packing lists from the suppliers to Company A for certain sporting goods. Each invoice lists the merchandise, the quantity, the unit price, and the total price. You state that the charges are included in the invoice as part of the price of the merchandise. On the first page of each invoice, you handwrote an amount for what you describe as the nondutiable charges, which is the sum of the fees charged by Company B. You also wrote in an amount for the entered value, which is the total invoice price less the nondutiable charges. The terms of sale listed on each invoice are “FOB port of export.” You also submitted invoices (freight and transportation detailed statements) from Company B to the suppliers which provide the breakdown of charges based upon the quantity and units of measure as indicated on the vendor documentation. Additionally, you submitted two bills of lading and one waybill which correspond to the invoices and packing lists. You claim that the dutiable value should be based upon the supplier invoice value less the charges assessed by Company B, 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). CBP has previously determined that 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 fee 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; HQ H119857, dated September 9, 2010. 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. As in HQ H092560, Company B’s invoices to the suppliers of the merchandise itemize the various charges. Although the suppliers’ invoices to Company A do not provide a similar itemization, the use of the “FOB” term of sale on the invoices indicates that the charges are included in the price for the sporting goods. Nevertheless, we note that even though this ruling request deals with a variety of fees that might be charged by Company B, as referenced in the FACTS section of this ruling letter, the documents for sample transaction #1 only specify the following charges: carrier bill of lading, CY monitoring, documentation fee, equipment management fee, supply chain security fee, and terminal handling fee. The documents for sample transaction #2 list CY monitoring fee, documentation fee, and supply chain security fee. The documents for sample transaction #3 specify the following charges: 10+2 management fee, carrier bill of lading, CY monitoring, documentation fee, equipment management fee, port construction, port security, supply chain security, and terminal handling fee. Therefore, in as much as these are the only actual charges substantiated by the documentary evidence in all three sample transactions, only these fees may be excluded from the price actually paid or payable in this case. However, the rest of the charges may also be deducted from the price actually paid or payable in line with our ruling HQ H092560, if supported by the necessary documentation. HOLDING: Based on the information presented, the following costs charged by Company B may be excluded from the price actually paid or payable for the imported merchandise with respect to the sample transactions: (1) carrier bill of lading, CY monitoring, documentation fee, equipment management fee, supply chain security fee, and terminal handling fee, as specified in sample transaction #1; and (2) CY monitoring, documentation fee, and supply chain security fee, as specified in sample transaction #2; and (3) 10+2 management fee, carrier bill of lading, CY monitoring, documentation fee, equipment management fee, port construction, port security, supply chain security, and terminal handling fee, as specified in sample transaction #3. Additionally, carrier agent booking, CFS receiving, foreign customs clearance, LCL handling, and wharfage fees 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. Please note that 19 CFR §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