Transaction value; charges incident to the international shipment of the merchandise; foreign inland freight

HQ H205797 June 7, 2012 VAL OT:RR:CTF:VS H205797 EE CATEGORY: Valuation Tom Molloy UPS Supply Chain Solutions 19701 Hamilton Ave. Suite 250 Torrance, CA 90502 RE: Transaction value; charges incident to the international shipment of the merchandise; foreign inland freight Dear Mr. Molloy: This is in response to your letter, dated February 16, 2012, requesting a ruling on behalf of your customers, who are the importers, on whether certain charges for services provided by UPS Supply Chain Solutions (“UPS”) should be included in the transaction value of the imported merchandise. FACTS: UPS, a global freight forwarder, provides a variety of origin related services to its importer customers. You state that the fees for the services offered encompass the following as examples: 10+2 management fee to assist the importer 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”); Fee for handling Less than Container Load (“LCL”) cargo; Port construction fee; Port security charge; Supply chain security fee; Terminal handling charge; and Wharfage charge. You provided documentation from a sample transaction for illustrative purposes. The documentation consists of a purchase order from the importer to the vendor, a commercial invoice and a packing list from the vendor to the importer for certain auto accessories. The commercial invoice lists the merchandise, the quantity, the unit price, and the total price. The term of sale listed on the invoice is “FOB China.” You claim that the charges for the services above are included in the invoice as part of the price of the merchandise. You also submitted a bill of lading issued by UPS, a freight and transportation summary statement issued by UPS, a freight invoice from UPS to the manufacturer, and a container manifest issued by UPS to the importer. All of these documents reference the information on the invoice, packing list, and the purchase order. The freight invoice references the bill of lading and lists the breakdown of services and fees charged by UPS per bill of lading. You claim that the dutiable value should be based upon the foreign vendor’s invoice value less the charges assessed by UPS, 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 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. 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 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 UPS freight invoice to the manufacturer of the merchandise itemizes the various charges. Although the vendor’s invoice to the importer do not provide a similar itemization, the use of the “FOB” term of sale on the invoices indicates that the price for the auto accessories includes all costs relating to the goods until they are on board the vessel at the named port of shipment. See Incoterms 2010, 90 (2010). Further, we note that the UPS invoice to the manufacturer for the services provided indicates the same FOB location as the commercial invoice from the vendor to the importer and references the same port of loading listed on the bill of lading. Nevertheless, we note that even though this ruling request deals with a variety of fees that might be charged by UPS, as referenced in the FACTS section of this ruling letter, the documents for the sample transaction submitted only specify the following charges: terminal handling charge, foreign customs clearance, carrier bill of lading fee, 10+2 management fee, port security charge, and carrier agent booking fee. Therefore, inasmuch as these are the only actual charges substantiated by the documentary evidence in all the sample transaction, 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. As previously noted, the invoice issued by the vendor to the importer 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 bill of lading submitted reflects the shipment of the merchandise from the port of Shanghai to the port of Los Angeles; it does not show through shipment from the factory to the port of Los Angeles. Since there is no evidence of through shipment from the factory to the U.S., no deduction may be made for foreign inland freight charges. HOLDING: Based on the information presented, the following costs charged by UPS may be excluded from the price actually paid or payable for the imported merchandise with respect to the sample transaction: terminal handling charge, foreign customs clearance, carrier bill of lading fee, 10+2 management fee, port security charge, and carrier agent booking fee. Additionally, CFS receiving fee, CY monitoring, equipment management fee, FCR/HBL issuance, LCL handling, port construction charge, supply chain security fee, 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. The foreign inland freight charges should be included in the price actually paid or payable for the imported merchandise. 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.” Sincerely, Monika R. Brenner Chief Valuation & Special Programs Branch