RR:IT:VA 547146 MMC
Port Director
U.S. Customs Service
300 S. Ferry Street
Terminal Island, CA 90731
RE: Application for Further Review of Protest 2704-98-100494; Dutiability of Terminal Handling Charge; International Freight; §402(b)(4)(A); §402(b)(3); Kurt Orban v. United States; HRLs 544538, 543827, 542467, 543518, 545917.
Dear Port Director:
This is in regard to the Application for Further Review of Protest 2704-98-100494 dated July 29, 1998 filed by Western States Import Inc. (“Western States”) concerning the dutiability of a terminal handling charge under §402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (codified at 19 U.S.C. 1401a, et seq.). Through its broker, Western States made supplemental submissions. We regret the delay in responding.
FACTS:
Western States is an importer of bicycles and bicycle parts from Taiwan. Ramiko Co., Ltd. (“Ramiko”) is an exporter that procures the bicycles and bicycles parts from several different manufacturers in Taiwan. The invoices submitted by Western States indicate that Ramiko ships the merchandise F.O.B. Taiwan. As such, the price Ramiko charges Western States should include all costs up to and including loading the merchandise onboard the oversees vessel in Taiwan. However, in addition to the unit price, Ramiko’s invoice includes a charge for an item described as a “terminal handling charge.”
The port is of the opinion that, because the terminal handling charge was part of the total price paid to Ramiko, Customs has no authority to deduct it from the price paid for the merchandise. Furthermore, at the time of importation, Western States had not submitted through bills of lading for the entries. Therefore, entries were liquidated at the bottom-line invoiced price, which included the terminal handling charge. Western States has subsequently submitted a through bill of lading for each of the four protested entries.
According to Western, the terminal handling charge includes the services of inspecting, weighing and loading containers which have already been delivered to the dock. Western States’ believes that the terminal handling charge constitutes a cost incident to the international shipment of their merchandise and, as such, is not dutiable.
According to supplemental information provided by Ramiko, the terminal handling charge originates as a cost from the steamship line to Ramiko. However, it does not always appear on the steamship’s bill of lading. Rather, the steamship line sends an invoice to Ramiko’s customs broker. The customs broker then pays the terminal handling charge upon receipt of the bill of lading from the steamship line. The customs broker then invoices Ramiko for the terminal handling charge when they receive all shipping documents. Ramiko then pays their broker by cash or check, depending on the amount. Ramiko recoups this fee by including it on its invoices to Western States.
ISSUE:
Whether the terminal handling charges that the buyer, Western States, pays the seller, Ramiko, are excludable from transaction value as a cost incident to the international shipment of the merchandise.
LAW AND ANALYSIS:
Merchandise imported into the United States is appraised in accordance with §402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (“TAA”), codified at 19 U.S.C. 1401a. The preferred method of appraisement is transaction value, which is defined in §402(b) of the TAA as the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus certain enumerated additions. For purposes of this ruling, we assume transaction value applies.
The term “price actually paid or payable” is more specifically defined 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 the imported merchandise by the buyer to, or for the benefit of, the seller.” §402(b)(4)(A)(emphasis added). Therefore, transportation costs and insurance 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. These costs are not the estimated costs, but the actual costs paid to the freight forwarder, transport company, etc.
There is a rebuttable presumption that all payments made by a buyer to a seller, or party related to a seller, are part of the price actually paid or payable. See, Headquarters Ruling Letter (HRL) 545663 dated July 14, 1995. This position is based on the meaning of the term “price actually paid or payable” as addressed in Generra Sportswear Co. v. United States, 8 CAFC 132, 905 F.2d 377 (1990) [hereinafter Generra]. In Generra, the court considered whether quota charges paid to the seller on behalf of the buyer were part of the price actually paid or payable for the imported goods. In reversing the decision of the lower court, the appellate court held that the term "total payment" is all inclusive and that "as long as the quota payment was made to the seller in exchange for merchandise sold for export to the United States, the payment properly may be included in transaction value, even if the payment represents something other than the per se value of the goods." The court also explained that it did not intend that Customs engage in extensive fact finding to determine whether separate charges, all resulting in payments to the seller in connection with the purchase of imported merchandise, were for the merchandise or something else.
In this case, the terminal handling charges are part of the total price actually paid or payable. According to Ramiko’s invoice, in addition to the unit price for the goods, Western makes payment to Ramiko for the terminal handling charge. Since the terminal handling charge is part of the total price actually payed or payable to Ramiko, it can only be excluded from the price actually paid or payable if qualifies as a statutorily permissible exclusion.
Section 402(b) of the TAA states in pertinent part that: The term “price actually paid or payable” excludes 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. As such, we must determine whether the terminal handling charges are, excluded from the price actually paid or payable as costs for transportation, insurance or incidental services to the international shipment of the merchandise. The terminal handling charges cannot be described as transportation or insurance costs. It remains to be determined whether they are costs incident to the international shipment of merchandise.
In HRL 544538, December 17, 1992, Customs acknowledged that pursuant to §402(b)(4)(A) of the TAA 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, it looks to documentation from the shipping company, as opposed to the documentation between the buyer and the seller. Information from the buyer and seller often contains estimated transportation costs or charges, while documentation from the shipping company contains the actual cost for shipment. It is the actual cost that Customs excludes from the price actually paid or payable. See also HRL 542467 dated August 13, 1981.
We are unaware of any court decisions or rulings which specifically address the issue of whether terminal handling charges are to be taken into account when determining the actual amount paid for international transportation. However, in Kurt Orban v. United States, 65 CCPA 73, 79 (1978), the dutiability of loading charges associated with loading imported merchandise aboard vessels bound for the United States was addressed. The court determined that loading charges should not be included in the dutiable value of the imported merchandise based, in part, on the fact that “the loading process is an essential step in the ocean transportation service.” See also HRL 543518, September 3, 1985, where Customs held that charges for moving steel products off the pier and onto the ocean vessel and for placing or storing the steel after it is aboard ship, are expenses incurred incident to the international shipment of the goods within the meaning of section 402(b)(4)(A) of the TAA. See, HRL 546868 dated August 19, 1998, which held that despatch and demurrage charges for loading steel onto vessels constituted part of the actual international freight costs and, thus, were not included in the price actually paid or payable for imported steel.
In addition to loading charges, in HRL 545917, August 1, 1996, Customs determined that certain payments relating to van stuffing and palletizing operations were incidental to the international shipment of the goods, and not part of transaction value. Van stuffing and palletizing was described as the operation of placing and arranging the packed cartons into containers to minimize wasted space and freight charges. Although these operations were performed at the Philippine facility by the importer’s related company, the evidence presented indicated that these services were identical to services normally performed by independent cargo consolidators and shipping companies.
Similarly, we find that the terminal handling charges at issue here are costs incident to the international shipment of the merchandise. The amounts in question reflect the costs of loading the merchandise onto the vessel. Therefore, we find that these charges were incurred for services incident to the international shipment of the merchandise from Taiwan to the place of importation in the United States. While the terminal handling charges are part of the total price actually paid or payable, they are nonetheless excluded from it, pursuant to §402(b)(4)(A) of the TAA, as they are considered costs incident to the international shipment of the merchandise.
HOLDING:
Based on the evidence presented, we find that the terminal handling charges were incurred for loading and similar services incident to the international shipment of the merchandise. As such, they are excluded from the price actually paid or payable as costs incident to the international shipment of the merchandise.
The protest should be ALLOWED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550 065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries 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 make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Thomas L. Lobred
Chief, Valuation Branch