VAL CO:R:C:V 544881 ILK
District Director
Nogales, Arizona
RE: Application for Further Review of Protest No. 2904-8-
000120; dutiability of foreign inland freight and brokerage
fees
Dear Sir:
The subject protest and application for further review
concerns the dutiability of foreign inland freight and brokerage
fees incidental to international shipment in certain transactions
between xxxxxxxx (hereinafter referred to as the "importer") and
xxxxxxxxxxx S.A. de C.V. (hereinafter referred to as the
"manufacturer").
FACTS:
Protest is made against the liquidation of entries of
multiple outlet strips at the invoice price. Documents submitted
in support of the protest include representative entry summaries
and their corresponding invoices. The merchandise is imported
from Nogales, Sonora, Mexico into the United States. Each
invoice lists the merchandise and quantity, the "unit costs" and
the "total costs," which are separated into "dutiable" and "non
dutiable" columns. For example in one entry the invoice shows
that for 50 multiple outlet strips the non dutiable unit cost is
$x.xxxx, the nondutiable total cost is $xxx.xx, the dutiable unit
cost is $x.xxxx, and the dutiable total cost is $xxx.xx. The
invoice also states the unit cost and total cost for packing
materials. At the bottom of each column of figures is a total
for dutiable and non dutiable unit costs and total costs, and
packing materials unit and total costs, the total of which is
identified as the "total value of shipment." At the bottom of
each invoice is a space marked "total freight" filled in with the
handwritten amount of $50.00.
The importer's position is that foreign inland freight
charges and related brokerage fees are included in the invoice
"total value of shipment" amount, are nondutiable, and should be
deducted from the invoice amount to determine the transaction
value of the merchandise.
ISSUE:
Whether separately itemized foreign inland freight charges
and related brokerage fees are non dutiable based on the facts
presented.
LAW AND ANALYSIS:
As provided in 152.101, Customs Regulations (19 CFR
152.101) the preferred method of appraisement is transaction
value. Transaction value is defined as the "price actually paid
or payable" for merchandise when sold for exportation to the
United States. This is more specifically defined in 402
(b)(4)(A) of the Trade Agreements Act of 1979, (19 U.S.C. 1401a
(B)(4)(A); 19 CFR 102(f)):
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. (Emphasis added.)
The expenses related to foreign inland freight charges are
not covered by the foregoing provision. However 152.103(a)(5),
Customs Regulations (19 CFR 152.103(a)(5)) addresses foreign
inland freight and the terms under which it "may be considered
incident to the international shipment" of merchandise, and will
be discussed below.
The importer is of the opinion that the foreign inland
freight charges and related brokerage fees are identified
separately and should not be added to the price of the
merchandise pursuant to 152.103 (a)(5)(i), Customs Regulations
(19 CFR 152.103 (a)(5)(i)). Section 152.103 (a)(5)(i) is
applicable only to ex-factory sales as follows:
(5) Foreign inland freight and other inland
charges incident to the international
shipment of merchandise.
-(i) Ex-factory sales. If the price actually paid or
payable by the buyer to the seller for the imported
merchandise does not include a charge for foreign
inland freight and other charges for services incident
to the international shipment of merchandise (an ex-
factory price), those charges will not be added to the
price.
In this case, the invoices to the importer clearly include
the amounts the importer wants excluded from the price of the
merchandise, although they are separately listed and identified.
Customs has previously ruled that if the buyer's total payment to
the seller includes charges for foreign inland freight, then
these charges form part of the price actually paid or payable.
See Headquarters Ruling Letter (HRL) No. 542101 dated March 4,
1980 (TAA No. 1); HRL No. 542231 dated March 26, 1981; HRL No.
542546 dated August 14, 1981. Thus, the price actually paid or
payable includes those amounts identified as "nondutiable" and
subparagraph (a)(5)(i) is not applicable.
The facts and the documentation presented do not identify
the means of transportation or shipment of the merchandise, nor
is a through bill of lading included. Assuming that the costs
itemized as "non dutiable" actually involve inland freight
charges and related brokerage fees, 152.103 (a)(5), Customs
Regulations (19 CFR 152.103 (a)(5)) set forth those instances in
which foreign inland freight "may be considered incident to the
international shipment" of merchandise:
...(ii) 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 international 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.
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 district 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 district 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. (emphasis added)
The documentary requirements set forth in the foregoing
paragraph (iii) were explained in T.D. 84-235 as follows:
To avoid any confusion, it has been determined that in
order for foreign inland freight to be deemed incident
to the international shipment of merchandise, instead
of requiring that freight costs occur subsequent to the
placing of imported merchandise on the exporting
carrier, the freight costs and other services incident
to the shipment of the merchandise must occur after the
goods have been sold for export to the United States
and are placed with a carrier for through shipment to
the United States. This will cover shipments by more
than one mode of transportation, by multiple freight
companies, or through reload centers, as long as the
merchandise has been sold for export to the United
States, as evidenced by the presentation to Customs of
a through bill of lading. The through bill of lading
is necessary to permit Customs officers to verify
objectively that the above conditions have been
satisfied.
The issue of foreign inland freight has been previously
considered by Customs. In HRL No. 543744 dated July 30, 1986, in
reference to T.D. 84-235, we pointed out:
The intent of the T.D. in question was to permit
foreign inland freight to be nondutiable where such
charges are identified separately, and they occur after
merchandise has been sold for export to the United
States. To ensure that the above criteria have been
met Customs mandated in the T.D. that a "through bill
of lading" for the purpose of the T.D. was defined in
field instructions dated February 6, 1985, as "a
contract, waybill, invoice, issued by one carrier or
forwarder which controls the manner of shipment from
the point or place of manufacture or origin to the U.S.
port of importation or beyond (although the shipment
may extend over two or more lines of connecting
carriers), show the origin and destination of the
shipment, consignor and consignee, route of movement
and applicable rate or rates." (emphasis supplied)
Similarly, in HRL 543801, dated January 8, 1987, and HRL 543534,
dated June 3, 1985, it was stated that the evidence required to
establish a sale for export and placement for through shipment is
a through bill of lading presented to the district director.
Most recently the United States Court of Appeals for the Federal
Circuit has upheld Customs' requirement of a through bill of
lading, holding that 19 CFR 152.103(a)(5) "only permits
exclusion from transaction value of foreign inland freight
charges if (a) the merchandise is shipped on a through bill of
lading or (b) absent such a bill of lading, a single carrier or
forwarder has sole control of the shipment from the foreign
factory to the United States border." All Channel Products v.
United States, Slip op. 92-1299, at p.2, December 29, 1992.
The Court affirmed the Court of international Trade:
Because it was undisputed that All Channel's imported
merchandise was neither subject to a through bill of
lading, nor under the control of a single carrier or
forwarder, the Court of International Trade granted
Customs' Motion for Summary Judgment sustaining
Customs' appraisement and dismissing the action.
Id.
In view of the foregoing regulatory and interpretative
language, the documentation submitted without a through bill of
lading, is not sufficient evidence that the foreign inland
freight charges and related brokerage fees occurred after the
merchandise was sold for export to the United States and placed
with a carrier for through shipment to the United States, for the
purpose of satisfying the criteria set forth in 152.103
(a)(5)(ii), Customs Regulations.
HOLDING:
Although separately itemized, foreign inland freight charges
and related brokerage fees are part of the transaction value of
the merchandise, unless an appropriate through bill of lading is
presented to Customs pursuant to 152.103(a)(5)(ii), Customs
Regulations.
Consistent with the decision set forth above, you are hereby
directed to deny the subject protest. A copy of this decision
should be attached to the Customs Form 19 mailed to the
protestant as part of the notice of action on the protest.
Sincerely,
John Durant, Director
Commercial Rulings Division