OT:RR:CTF:VS H119858 YAG
Mr. Gregory Watts
Damco Customs Services, Inc.
680 Knox Street, Suite 200
Torrance, CA 90502
RE: Transaction value; Charges incident to the international shipment of the merchandise
Dear Mr. Watts:
This is in response to your letter, dated August 16, 2010, requesting a ruling, on behalf of your client, [***] (“Company A”), on whether certain charges for services provided by [***] (“Company B”) should be included in the transaction value of the merchandise imported by Company A.
You have asked that certain information submitted in connection with this ruling request be treated as confidential. Inasmuch as your request conforms to the requirements of 19 CFR §177.2(b)(7), your request for confidentiality is approved. The information contained within brackets and all attachments to the ruling request, forwarded to our office, will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
Company A imports its products from various suppliers around the world and utilizes the services of Company B to assist with the origin coordination, supplier/vendor communication, cargo handling, and a variety of other origin related services. You state that the fees for the services offered encompass the following as examples:
10+2 management fee to assist Company A in providing the required information to U.S. Customs and Border Protection (“CBP”);
Carrier agent booking fee: fee charged by the carrier’s booking agent for booking services;
Carrier bill of lading: fee charged by the carrier for issuing the bill of lading;
Container Freight Station (“CFS”) fee: receiving fee for receiving, unloading, storing for 7 days, and packing cargo into containers;
Customs clearance: fee for origin export Customs clearance services and formalities;
Container Yard (“CY”) monitoring fee: fee for handling the cargo, vendor management, receiving vendor booking, coordinating carrier booking, coordinating equipment, handling documentation, performing systems update;
Documentation fee for issuing the Freight Cargo Receipt (“FCR”) or the House Bill of Lading (“HBL”);
Drayage/haulage/trucking in the country of export;
Fee charged by the carrier for equipment management;
Fee for handling Less than Container Load (“LCL”) cargo;
Port construction fee: charge from the carrier for port construction;
Port security charge: cost to build, maintain, and manage port security facilities;
Supply chain security fee: Company B service charge in relation to the CBP 24-hour carrier rule;
Terminal handling charge: fee charged to Company A by the carrier for entering the terminal; and,
Wharfage charge: port usage fee paid to the Port Authority.
You provided documentation from three sample transactions for illustrative purposes. The documentation consists of freight bills/arrival notices, commercial invoices, packing lists, purchase orders, waybills, and entry summaries concerning the importation of quilts. Each invoice lists the merchandise, the quantity, the unit price, and the total price. You state that the charges are included in the invoice as part of the price of the merchandise. On the first page of each invoice, you handwrote an amount for what you describe as the nondutiable charges, which is the sum of the fees charged by Company B. You also wrote in an amount for the entered value, which is the total invoice price less the nondutiable charges. The terms of sale listed on each invoice are Free on Board (“FOB”), port of export.
You also submitted invoices (freight and transportation detailed statements) from Company B to the suppliers which provide the breakdown of charges based upon the quantity and units of measure as indicated on the vendor documentation. You claim that the dutiable value should be based upon the supplier invoice value less the charges assessed by Company B, on the basis that those charges were 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 primary 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. See 19 U.S.C. §1401a(b)(1). The term “price actually paid or payable” is 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 imported merchandise by the buyer to, or for the benefit of, the seller. 19 U.S.C. §1401a(b)(4)(A).
In Headquarters Ruling Letter (“HRL”) H092560, dated April 7, 2010, CBP determined that under FOB terms of sale, the 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 were incident to the international shipment and, thus, excluded from the price actually paid or payable of the imported merchandise. In HRL H092560, you submitted for our consideration commercial invoices, purchase orders, packing lists, bills of lading corresponding to the invoices and packing lists, waybills, as well as the invoices from Company B to suppliers which provided the breakdown of the charges based upon the quantity and units of measure of the merchandise as indicated on the vendor documentation.
In 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 in HRL H092560, Company B’s invoices to the suppliers of the merchandise itemize the various charges. Although the suppliers’ invoices to Company A do not provide a similar itemization, the use of the “FOB” term of sale on the commercial invoices indicates that the charges are included in the price of the footwear. HRL H092560, dated April 7, 2010. Nevertheless, we note that even though this ruling request deals with a variety of fees that might be charged by Company B, as referenced in the FACTS portion of this ruling letter, the documents for sample transactions ##1 and 3 only specify the following charges: 10+2 management fee, carrier agent booking fee, carrier bill of lading, CY monitoring, documentation fee, port security charge, supply chain security and terminal handling fees. Similarly, the documents for sample transaction #2 mention the equipment management fee in addition to the fees referenced in sample transactions ## 1 and 3. Therefore, inasmuch as these are the only actual charges substantiated by the documentary evidence in all three sample transactions, 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 in HRL H092560, if supported by the necessary documentation. HOLDING:
Based on the information presented, the following costs charged by Company B may be excluded from the price actually paid or payable for the imported merchandise with respect to the sample transactions: (1) 10+2 management fee, carrier agent booking fee, carrier bill of lading, CY monitoring, documentation fee, port security charge, supply chain security and terminal handling fees, as specified in sample transaction ##1 and 3; and (2) 10+2 management fee, carrier agent booking fee, carrier bill of lading, CY monitoring, documentation fee, port security charge, supply chain security and terminal handling fees, and equipment management fee, as specified in sample transaction #2. Additionally, CFS receiving, Customs clearance, drayage/haulage/trucking, LCL handling, port construction, and wharfage fees, may be excluded from the price actually paid or payable of the imported merchandise in line with our ruling in H092560, provided that all documentary requirements are satisfied.
Please note that 19 CFR §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 and Special Programs Branch