RR:IT:VA 546111 KCC
Port Director
U.S. Customs Service
P.O. Box 619050
Dallas/Fort Worth Airport, Texas 75261-0950
RE: Application for Further Review of Protest 5501-95-100293;
transaction value; the price actually paid or payable;
402(b)(4)(A)and (b)(3); 19 CFR 152.103(i); transportation
charge; U.S. duty; HRLs 544538, 543827, 542467
Dear Port Director:
This is in regard to Application for Further Review of
Protest 5501-95-100293 concerning the proper method of
determining transaction value for footwear imported by I.C.R.
Inc. (the importer). The footwear was appraised pursuant to
transaction value, 402(b) of the Tariff Act of 1930, as amended
by the Trade Agreements Act of 1979 (TAA), codified at 19 U.S.C.
1401a(b).
FACTS:
The merchandise at issue is two entries of footwear which
were appraised pursuant to transaction value, 402(b) of the TAA,
based on the invoices provided at the time of entry. These
invoices indicated that the shipment terms were "F.O.B. DALLAS."
Thus, you liquidated the entries on the total invoice price of
Invoice A at $18,052.50 and Invoice B at $74,806.00. The total
invoice prices included amounts for "EX FACTORY", "TRANSPORT",
"BROKERAGE", "INSURANCE" and "ESTIMATE US DUTY."
In a protest, timely filed on June 22, 1995, the protestant
presented two invoices for the footwear showing the terms of sale
to be "CIF AIRPORT DALLAS." Both sets of invoices are identical
except for the terms of sale. The importer contends that the
price actually paid or payable for the footwear is the price
listed on the invoices as "EX FACTORY AMOUNT" or $15,219.00 for
Invoice A and $63,446.00 for Invoice B
It is now your position that appraised value for the
footwear is $15,396.00 for Invoice A and $65,035.00 for Invoice
B. The difference between your position and that of the
protestant lies in the figures you used for actual transportation
cost and actual U.S. duty. You obtained two airway bills for the
entries showing the actual transportation cost associated with
the entries. For Invoice A, the original airway bill from
Lufthansa showed a charge of $589.00 paid in Italian Lire. You
used a conversion rate of .000606 from the date of export. For
Invoice B, the original airway bill from Federal Express showed a
charge of $2,077.63. These airway bills also indicate that
shipments were made "DELIVERED DUTY PAID AIRPORT OF DESTINATION."
You calculated the actual U.S. Duty for Invoice A as $1568.95 and
for Invoice B as $6,627.06. Additionally, you note that both
invoices are between related parties which the importer did not
indicate on Customs Form (CF) 7501.
ISSUE:
Should a deduction be made for the actual cost of
transportation and U.S. duty charges?
LAW AND ANALYSIS:
The preferred method of appraisement is transaction value
which is defined by 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 402(b)(1) (A) through (E). The parties
are related, therefore pursuant to 402(b)(2)(B) of the TAA,
transaction value is acceptable only if an examination of the
circumstances of the sale indicates that the relationship between
the importer and foreign manufacturers does not influence the
price actually paid or payable or if the transaction value of
imported merchandise closely approximates the transaction value
of identical or similar merchandise in sales to unrelated buyers
in the U.S. or the deductive or computed value for identical or
similar merchandise. This decision does not address the
acceptability of transaction value.
The term "price actually paid or payable" is defined in
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.
As regards costs that are incurred after the merchandise has
been imported, 402(b)(3) of the TAA states that:
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.
See also, 152.103(i), Customs Regulations (19 CFR 152.103(i).
The above cited statutory provision clearly states that the
transaction value of imported merchandise does not include any
cost incurred for customs duties of the imported merchandise that
is identified separately from the price actually paid or payable.
Transportation 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. The costs associated with
transportation and U.S. duty are not the estimated costs, but the
actual costs paid to Customs and the freight forwarder, transport
company, etc.
In Headquarters Ruling Letter (HRL) 544538, issued December
17, 1992, Customs acknowledged that pursuant to 402(b)(4)(A) the
cost of international transportation is to be excluded from the
price actually paid or payable for imported merchandise.
However, Customs explained that in determining the cost of the
international transportation or freight, it always looked to
documentation from the freight company, as opposed to the
documentation between the buyer and the seller which often
contains estimated transportation costs or charges. In essence,
Customs requires documentation from the freight company because
the actual cost, and not the estimated charges, for the freight
is the amount that Customs excludes from the price actually paid
or payable. See also HRL 543827, issued March 9, 1987, in which
Customs determined that the proper deduction from the price
actually paid or payable for marine insurance
was the amount actually paid to the insurance company by the
seller, as opposed to the amount paid by the related
importer/buyer; and HRL 542467 dated August 13, 1981.
The actual U.S. duties, not the estimated duties, are
excluded from the price actually paid or payable. Documentation
establishing the actual transportation costs to be excluded was
acquired by Customs in the form of the original airway bills from
Lufthansa and Federal Express for the entries at issue. The
original airway bills show the actual cost for transportation
which is different from the transportation costs listed on the
footwear invoices. Therefore, the actual cost for transportation
are excluded from the price actually paid or payable in
determining transaction value.
HOLDING:
The price actually paid or payable for the imported
merchandise does not include the actual cost for transportation
and U.S. duties.
The protest should be GRANTED IN PART as set forth above.
In accordance with Section 3A(11)(b) of Customs Directive 099
3550-065 dated August 4, 1993, Subject: Revised Protest
Directive, this decision, together with the Customs Form 19,
should be mailed by your office 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 the decision. Sixty days from the date of the
decision the Office of Regulations and Rulings will take steps to
make the decision available to customs personnel via the Customs
Rulings Module in ACS and the public via the Diskette
Subscription Service, Freedom of Information Act and other public
access channels.
Sincerely,
Acting Director
International Trade Compliance
Division