OT:RR:CTF:VS H131675 SEK
U.S. Customs and Border Protection
Office of International Trade, Regulatory Audit
ATTN: Sara Dao
2220 Grandview Drive, Suite 215
Fort Mitchell, Kentucky 41017
RE: Toyota Tsusho American, Inc.; Freight; Insurance Charges
Dear Ms. Dao:
This is in response to your request for internal advice regarding the acceptability of documentation that Toyota Tsusho American, Inc. (“TAI”) submitted as evidence of the amounts paid for freight and insurance charges pertaining to the international movement of automobile manufacturing materials imported into the United States.
This decision is being issued subsequent to the following: (1) a review of the ruling request submitted by Miller & Chevalier Chartered on behalf of TAI dated October 20, 2010; and (2) a review of the documents that you forwarded to this office on March 10, 2011.
FACTS:
According to the October 20, 2010 ruling request, TAI is a New York corporation that is a wholly owned subsidiary of the Japanese corporation, Toyota Tsusho Corporation (“TTC”). Both TTC and TAI are trading companies that serve as intermediaries for the acquisition, transportation, and logistics for the materials used by Toyota automotive assembly plants in the U.S. or the original equipment manufacturers (“OEMs”) that supply parts and components to the Toyota automotive assembly plants and other customers in the U.S. Typically, a U.S. customer issues a purchase order for merchandise to TAI, which in turn issues a purchase order to TTC. TTC purchases the merchandise and re-sells it to TAI, which then re-sells it to the U.S. customer who ordered it.
TAI claims that sales transactions between TAI and TTC are generally either “Cost, Insurance and Freight” (“CIF”) or “Delivered Duty Paid” (“DDU”), in which case TTC purchases and pays for the freight and cargo insurance. TAI asserts that in most instances, invoices from TTC itemize the non-dutiable charges of freight and insurance as specified in 19 U.S.C. § 1481 and 19 CFR § 141.86(a)(8). However, sometimes TTC does not itemize these charges and they are referred to on the invoice as “DDU charges and expenses,” and the invoice contains the applicable incoterm. At other times, the itemized freight and insurance expenses may not be the actual costs paid to the carrier or the insurance company, as at the time the particular transaction is entered into, the actual (as opposed to estimated) costs for freight and insurance are not known. TAI asserts that with respect to these scenarios, TAI has issued instructions to its customs brokers, based on the guidance in the “Proper Deductions of Freight and Other Costs from Customs Value,” Informed Compliance Publication (ICP), to deduct the itemized freight and insurance expenses from the invoice price only where the broker has proof of the actual freight and insurance charges in the form of a rated bill of lading from the carrier and an insurance premium debit note, both made out to the shipper, TTC. TAI has requested your office seek internal advice from Regulations and Rulings with regard to the acceptability of deducting freight and insurance charges where the charges are not itemized on the invoice, but are substantiated by verifiable proof of the actual charges.
ISSUE:
Whether the charges claimed for international freight and insurance costs may be deducted from the price actually paid or payable for the imported automobile manufacturing materials where the charges are not itemized on the commercial invoice, but where the commercial invoice specifies the nature of the transaction and there is acceptable proof of such charges at the time of entry?
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 enumerated additions.
Section 402(b)(4)(A) of the TAA defines the term “price actually paid or payable” as:
The total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation 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).
Transportation 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. See Treasury Decision (“T.D.”) 00-20. T.D. 00-20 provides the following with respect to evidence of actual freight costs:
CBP considers actual costs to constitute those amounts ultimately paid to the international carrier, freight forwarder, insurance company or other appropriate providers 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 might be acceptable.
T.D. 00-20 also states that CBP officials have discretion in accepting various types of evidence to verify the amounts deducted for freight.
CBP regulations provide for the attachment of information detailing the freight and insurance charges where they are not detailed on the invoice. CBP regulations require that each invoice of imported merchandise shall contain an itemized list of freight and insurance costs, but also provide that “where the required information does not appear on the invoice as originally prepared, it must be shown on an attachment to the invoice.” 19 CFR § 141.86(a)(8). CBP regulations also state that the importer “shall show in clear detail on the invoice or on an attached statement the computation of all deductions from total invoice value, such as nondutiable charges, and all additions to invoice value which have been made to arrive at the aggregate entered value.” 19 CFR § 141.90(c) (emphasis added). Furthermore, the regulations do not provide any consequences for not itemizing freight and insurance charges on the invoice, and do not preclude the importer from providing the appropriate documentation later in time if it is not available at the time of entry. Therefore, when freight and insurance charges are not itemized on the invoice, the charges should still be deducted from the transaction value when the commercial invoice specifies the nature of the transaction and the importer is able to provide verifiable proof of such costs in an attachment to the invoice.
HOLDING:
International freight and insurance costs that are not itemized on the invoice may be deducted from the price actually paid or payable when the importer is able to provide an attachment with sufficient proof of such charges at the time of entry and where the commercial invoice specifies the nature of the transaction.
Please promptly provide a copy of this ruling to the internal advice requester. Sixty days from the date of the decision the office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Monika Brenner, Chief
Valuation and Special Programs Branch