Request for Internal Advice Regarding Deductions from Entered Value of Softwood Lumber; Countervailing Duties; Anti-Dumping Duties

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H305053 October 6, 2021 OT:RR:CTF:VS H305053 CMR CATEGORY: Valuation Center Director Ann Marie Paul U. S. Customs and Border Protection Industrial and Manufacturing Materials Center of Excellence and Expertise 726 Exchange Street, Suite 400 Buffalo, NY 14201 RE: Request for Internal Advice Regarding Deductions from Entered Value of Softwood Lumber; Countervailing Duties; Anti-Dumping Duties Dear Ms. Paul: This is in response to an internal advice request dated May 22, 2019, by Pennington P.A., on behalf of their client, Phoenix Forest Products Inc. (“Phoenix”), regarding the proper appraisement of their client’s product, Canadian softwood lumber, and the correctness of their client’s invoicing method. FACTS: Phoenix is a Canadian exporter of lumber products to the United States and acts as the importer of record. Phoenix sells its lumber to U.S. customers on a delivered duty paid (DDP) basis. The lumber is subject to antidumping duties (ADD) and countervailing duties (CVD). Phoenix uses its customs broker’s Lumber Portal to generate an export permit and customs invoice. The customs invoice shows that the total price includes the customs brokerage charges, ADD/CVD and freight, including the amount of the freight charge. Phoenix’s customs broker uses the export permit, customs invoice, and Plant and Plant Product Declaration, to produce the Customs and Border Protection (CBP) Form 7501 and to produce an ADD/CVD calculation sheet. The broker uses the customs invoice and calculation sheet to file the entry. The carrier presents the customs invoice and eManifest to CBP at the border crossing. The customer invoice issued by Phoenix to its customers indicates that the terms of sale are DDP and contains the following statement: “Prices include freight, brokerage and applicable antidumping and countervailing duties.” The customer invoice total price matches the total price on the customs invoice, but the customer invoice does not break out the various charges. The customs invoice indicates that customs brokerage fees, freight and CVD/ADD are included in the price, but only identifies separately the amount for freight. Counsel submitted an export permit, customs invoice, Plant and Product Declaration (APHIS form), CBP Form 7501, and an ADD/CVD calculation sheet for an entry at issue. In addition, counsel submitted a sample customer invoice. In addition, in counsel’s response to a CBP Form 29, dated May 3, 2019, counsel submitted declarations by Phoenix’s U.S. customers stating the customers understood that the prices they paid included the applicable ADD/CVD; sample invoices to the same customers reflecting prices before and after the issuance of preliminary results of the countervailing duty investigation; a spreadsheet showing prices before and after the issuance of the preliminary result of the countervailing duty investigation; sample invoices to the same customers immediately before and after the issuance of the preliminary result of the antidumping duty investigation; a spreadsheet showing prices before and after the issuance of the preliminary results of the antidumping duty investigation; sample invoices to the same customers before and after the issuance of both of the preliminary results of the countervailing duty investigation and of the antidumping duty investigation; and, a spreadsheet showing the price increase due to the combined effects of ADD and CVD. ISSUE: Whether the correct appraisement of the imported Canadian lumber is the total invoice price minus freight, customs brokerage and applicable ADD/CVD. Whether the invoicing method used by Phoenix satisfies Customs’ statutory and regulatory requirements concerning invoices. 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 certain statutory additions. 19 U.S.C. § 1401a(b)(1). In this case, the seller uses transaction value as the basis of appraisement and claims the sale is a DDP sale. DDP is described in Incoterms® 2010, ICC Rules for the use of domestic and international trade terms, published by the International Chamber of Commerce (2010), at 69, as follows: “Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities. Under DDP sales, the seller must contract, at its own expense, for the transportation of the goods to the named place of destination. See supra at 70. In addition, the seller pays the duties, fees, taxes and other charges payable upon export and import of the goods. See supra at 72. In determining the transaction value of merchandise, it is necessary to determine what the “price actually paid or payable for the merchandise when sold for exportation to the United States” actually is. At 19 U.S.C. § 1401a(b)(4), the statute provides: For purposes of this subsection – The term “price actually paid or payable” means 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. Any rebate of, or other decrease in, the price actually paid or payable that is made or otherwise effected between the buyer and seller after the date of the importation of the merchandise into the United States shall be disregarded in determining the transaction value under paragraph (1). Furthermore, at 19 U.S.C. § 1401a(b)(3), the statute provides, in relevant part: The transaction value of imported merchandise does not include any of the following, if identified separately from the price actually paid or payable and from any cost or other item referred to in paragraph (1): * * * (B) The customs duties and other Federal taxes currently payable on the imported merchandise by reason of its importation, and any Federal excise tax on, or measured by the value of, such merchandise for which vendors in the United States are ordinarily liable. Reading 19 U.S.C. § 1401a(b)(3) and (b)(4) together, it appears that while § 1401a(b)(4) defines “price actually paid or payable” in a manner that includes customs duties and other Federal taxes within the phrase, § 1401a(b)(3) clarifies that customs duties and other Federal taxes currently payable may be deducted from the price actually paid or payable if these charges are identified separately. However, if they are not identified separately, they are not deductible. CBP has previously held that ADD/CVD fall within the phrase “customs duties and other Federal taxes currently payable” in 19 U.S.C. § 1401a(b)(3). See Headquarters Ruling Letter (HQ) 545304, dated January 4, 1994; HQ 546191, dated April 12, 1999. Therefore, if the ADD/CVD are identified separately from the price actually paid or payable for the merchandise, these charges may be deducted from the transaction value of the merchandise, that is, the invoiced amount paid by the buyer. In a DDP transaction, as noted above, the seller pays the duties, fees, taxes and other charges payable upon export and import of the goods, which includes the customs duties and other Federal taxes currently payable on the imported merchandise by reason of its importation. If the seller can show that the invoice amount paid by the buyer includes these charges, per § 1401a(b)(3), the seller may reduce the invoice amount to remove these charges from the transaction value of the merchandise for purposes of appraisement. In other words, the seller needs to show the amounts within the invoice that are attributable to duties, and not just that the responsibility for paying duties lies with the seller. Nineteen CFR § 141.90(c), provides: 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 the nondutiable charges, and all additions to invoice value which have been made to arrive at the aggregate entered value. In addition, the entered unit value for each article on the invoice must be shown where it is different from the invoiced unit value. The purpose of the invoicing requirements, among other things, is to enable CBP to ascertain the value of the imported merchandise. Nineteen CFR § 142.6(a)(3) requires, among other things, that the commercial invoice, or documentation acceptable in place of a commercial invoice, such as a pro forma invoice, shall contain “[t]he values or approximate values of the merchandise.” When read together, the regulations indicate that the commercial invoice does not need to specifically provide the ADD/CVD amounts on its face, as long as acceptable documentation is available in place of a commercial invoice, or a statement attached to the commercial invoice provides the required information in accordance with 19 CFR § 141.90(c) and 19 CFR § 142.6(a)(3). In this case, the customs invoice provided by the importer to their broker separately identifies the freight charges and indicates that the invoice price includes the freight, brokerage, and ADD/CVD. An ADD/CVD calculation sheet showing the itemized deductions, i.e., the discount, freight, broker fee, CVD, and ADD is included with the entry documentation. The calculation sheet provides the computation of all the deductions from the total invoice value as required by 19 CFR § 141.90(c). This is sufficient to meet the requirement of 19 U.S.C. § 1401a(b)(3)(B) to identify the customs duties separately from the price actually paid or payable for the imported merchandise. In addition, in this case, additional documentation has been submitted to support the importer’s claim that the invoice price included the ADD/CVD duties, including statements from numerous customers that they were aware the price they paid included ADD/CVD. Thus, the deductions indicated on the calculation sheet included with the customs invoice and other entry documentation are allowable deductions. See Headquarters Ruling Letter (HQ) H304314, dated November 5, 2019; and HQ H301048, dated May 26, 2021. In HQ H301048, CBP stated: The invoice between the importer and the importer’s broker for purposes of customs clearance would be acceptable in this case if it, or an attachment to it, provided the computation of all the deductions from the total invoice value as required by 19 CFR § 141.90(c). The invoice provided to the broker simply states that the invoice total includes “customs brokerage, and, whenever applicable, CVD and Anti-Dumping Duties.” A general statement, such as this, is insufficient. The statement is not definitive as to the inclusion of the ADD/CVD as it states, “whenever applicable.” As stated in HQ H247240, dated April 3, 2017: The specificity required by the statue is more than a general and generic statement that “duties” are included. Rather, the antidumping duties must be “identified separately from the price actually paid or payable for the importer merchandise.” 19 U.S.C. § 1401a(b)(3)(B). However, a separate document, provided with this invoice, did breakout the computation of all the deductions from the total invoice price, including the ADD/CVD. This document meets the requirements of 19 CFR § 141.90(c) and 19 CFR § 142.6(a)(3). Similarly, here the “customs invoice” provided by Phoenix to its broker is submitted with an accompanying ADD/CVD calculation sheet which breaks out the computation of all the deductions from the total invoice price. Thus, the invoicing method used by Phoenix meets the requirements of the relevant statute and regulations. HOLDING: As discussed above, the deductions taken by the importer with regard to its DDP transactions were separately identified on the ADD/CVD calculation sheet accompanying the customs invoice issued by the importer to their broker. As such, these deductions, including the ADD/CVD, are allowable as the importer has met the requirements of 19 U.S.C. § 1401a(b)(3)(B), 19 CFR § 141.90(c), and 19 CFR § 142.6(a)(3). You are to mail this decision to the Internal Advice requester no later than 60 days from the date of the decision. At that time, the Office of International Trade, Regulations and Rulings, will make the decision available to CBP personnel and the public on the CBP website located at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Monika R. Brenner, Chief Valuation and Special Programs Branch