OT:RR:CTF:VS H249096 GaK
David Rutt
Damco Customs Services, Inc.
9300 Arrowpoint Blvd.
Charlotte, NC 28273
RE: Transaction value; charges incident to the international shipment of the merchandise
Dear Mr. Rutt:
This is in reply to your letter, dated January 2, 2014, and additional information you submitted on June 11, 2014, October 27, 2014 and February 5, 2015, requesting a binding ruling on behalf of your client, BCBG Max Azria Group Inc. (“BCBG”). You ask whether the charges for services provided by BCBG’s foreign vendors can be deducted from the Free Carrier (“FCA”) or Free on Board (“FOB”) prices declared to U.S. Customs and Border Protection (“CBP”), as fees for services incident to the international shipment of merchandise.
FACTS:
BCBG sources the production of wearing apparel throughout the world and imports them into the U.S. Foreign vendors will arrange and pay freight forwarders to transport the merchandise and the charges will be included in the foreign vendors’ invoice price to BCBG under standard FCA/FOB terms. You provided sample transactions from three freight forwarders: Apex Logistics International Ltd. (“Apex”), DHL Global Forwarding Corp. (“DHL”), and Speedmark Logistics Co. Ltd. (“Speedmark”). You state that the fees for the services offered encompass the following as examples:
Airline documentation, airway bill (“AWB”) fee, bill of lading (“BOL”) fee: fee charged by carrier for issuing the BOL;
Automated Manifest System (“AMS”) recording fee: fee related to collecting and transmitting AMS data to CBP (U.S. DOCS fee in DHL transaction);
Container Freight Station (“CFS”) fees: warehouse in and out charges, applied when receiving or unloading cargo from loose cargo shipments;
Document fee for issuing the Forwarder’s Cargo Receipts (“FCR”) and House BOL;
Port entry fee/port security fee: pass through charge from the carrier for port construction, port security management;
Amendment fee: adjusting a document to correct an error (Apex and Speedmark);
Booking fee: fee charged to the vendor by the carrier’s booking agents (Apex and Speedmark);
Customs clearance/declaration fee: fee for origin export CBP clearance services and formalities (Apex and Speedmark);
Inspection fee: fee applies when airline terminal checks each carton to determine if the packaging and pallet quality meet the terminal requirements (Apex and Speedmark);
Equipment management fee: securing garments on hanger equipment (DHL); Garments on hangers (“GOH”) handling charge applicable for Container Freight Station-Container Yard (“CFS-CY”) and equipment interchange receipt (Speedmark);
Seal fee: fee for applying a security seal to a container for recording or tracking it (DHL and Speedmark);
Commodity inspection fee: fee charged by Chinese Customs when performing inspection of the commodity based on the Harmonized Tariff Schedule (Apex);
Container loading fee: receiving and unloading cargo, storing for 7 days, stuffing cargo into the container (includes handling), applied to full container load shipments (Apex);
Handling fee: fee to process all paperwork and coordinate shipment with vendor and factory (Apex);
Magnetic inspection fee: applies to commodities with a magnetic device (Apex);
Terminal fee/toll fee: fee charged when cargo enters the terminal (Apex);
Wharfage fee: port usage to be paid to Port Authority (Apex);
Less than container load (“LCL”) Admin fees/CFS-CFS administration: origin administrative fee for CFS/CFS (DHL);
Container yard (“CY”) Administration fee: origin administrative fee for CY shipments (DHL);
Origin receiving charge (“ORC”) (20’)/ORC (40’)/ORC/Terminal handling charge (“THC”): origin terminal handling for a 20’ and 40’ container (DHL);
Repackaging fee: fee for repackaging of goods at vendor’s request pursuant to BCBG’s Corporate Packaging Guide. The Corporate Packaging Guide lists requirements for hangers, garment protection, carton markings, carton dimensions, packing instructions, folding instructions, and container loading. Shipments that are not in conformity with its Corporate Packaging Guide are subject to offset fees. The repackaging charge is applied when delivered cartons are damaged and vendors are required to re-send the cartons to warehouses for repackaging and the costs are absorbed by the vendor (DHL);
U.S. Manifest surcharge: cost from carrier related to manifest services (DHL);
Telex release: fee charged when the original BOL cannot be mailed to the destination prior to cargo release without the goods incurring storage charges and the telex release is requested after the BOL is issued (Speedmark);
Trucking fee: foreign inland freight charge that applies when the agent is requested by shipper to pick up the cargo from the shipper’s location (Speedmark);
Unloading fee: container pick-up fee (CY-CY load), unloading of the shipment from shipper’s truck at the time of delivery to the CFS warehouse (Speedmark);
Customs examination fee (may include an x-ray of a shipment performed by Chinese Customs) (Speedmark).
You provided documentation from sixteen sample transactions for illustrative purposes. The documentation consists of purchase orders from the importer to the seller, commercial invoices, bills of lading, packing lists, and payment confirmations. Each commercial invoice lists the merchandise, quantity, unit price, and total price. The terms of sale listed on each invoice are FCA. You claim that the fees for services are incident to the international shipment and should be deducted from the FCA prices declared to CBP.
ISSUE:
Whether certain charges that are included in the invoice price for the services provided by the importer’s foreign vendors may be properly deducted from the value as costs incident to the international shipment of the merchandise.
LAW AND ANALYSIS:
Merchandise imported into the U.S. 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:
[T]he 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 Treasury Decision (“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.
CBP has previously determined that 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 are charges incident to the international shipment of the merchandise. See Headquarters Ruling Letter (“HQ”) H092560, dated April 7, 2010; see also HQ H119858, dated September 9, 2010; and HQ H119857, dated September 9, 2010. CBP has also held that AMS fee and AMS amendment fee are charges incident to the international shipment of the merchandise. See HQ H148715, dated November 16, 2011; and HQ H229700, dated January 30, 2013. Additionally, CBP has held that the container seal fee is a charge incident to the international shipment of the merchandise. See HQ H219516, dated July 30, 2012.
As in HQ 092560, the freight forwarders’ invoices to the sellers/manufacturers of the merchandise itemize the various charges. Although the sellers’ invoices to the importer do not provide a similar itemization, the use of the FCA term of sale on the invoices indicates that the price for the apparel includes all costs relating to the goods until they are on board the vessel at the named port of shipment. See Incoterms 2010, 26 (2010). Further, we note that the freight forwarder’s invoices to the sellers/manufacturers for the services provided indicate the same FCA location as the commercial invoice from the sellers to the importer and reference the same port of loading listed on the waybills.
We note that even though this ruling request deals with a variety of fees that might be charged by the freight forwarders, as referenced in the FACTS section of this ruling letter, the documentation for the various transactions only lists certain charges. For example, Apex sample transaction #1 only specifies the following charges: customs declaration fee, AMS fee, AWB fee, terminal fee, and inspection fee. Therefore, only the charges substantiated by the documentary evidence in the sample transactions may be excluded from the price actually paid or payable in this case. The CFS fees for receiving or unloading cargo into containers may not be deducted if the CFS is not located within the port limits. Similarly, the equipment management fee, container loading fee, magnetic inspection fee, LCL Admin fees/CFS-CFS administration fee, and unloading fee may not be deducted if the CY is not located within the port limits. However, the rest of the fees may also be deducted from the price actually paid or payable in line with our ruling HQ H092560, H148715, H219516, and H119858 if supported by the necessary documentation.
As previously noted, the invoices issued by the sellers to the importer specify “FCA” delivery terms. With respect to foreign inland freight in sales other than ex-factory, section 152.103(a)(5)(ii), CBP Regulations (19 C.F.R. § 152.103(a)(5)(ii)), provides:
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 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.
According to section 152.103(a)(5)(iii), CBP Regulations (19 C.F.R. § 152.103(a)(5)(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 port 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 port 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.
In All Channel Products v. United States, 16 CIT 169, 173, 787 F. Supp. 1457, 1460 (1992), aff'd, 982 F.2d 513 (Fed. Cir. 1992), the court interpreted 19 C.F.R. § 152.103(a)(5)(ii) and (iii) as permitting the deduction of foreign inland freight charges in a CIF or other non-ex-factory sale as incident to international shipment of the merchandise “only in cases where the merchandise was placed with one freight forwarder or carrier for through shipment from the factory to the United States documented by a through bill of lading (or other satisfactory documentation establishing through shipment).” The BOL submitted in the Speedmark transaction reflects the shipment of the merchandise from the Port of Shanghai to the Port of Long Beach, CA; they do not show through shipment from the factory to the Port of Long Beach, CA. Since there is no evidence of through shipment from the factory to the U.S., no deduction may be made for trucking fees.
One of the enumerated additions to the price actually paid or payable for the merchandise is “packing costs incurred by the buyer with respect to the imported merchandise.” 19 U.S.C. § 1401a(b)(1)(A).
In this regard, 19 U.S.C. § 1401a(h)(3) defines “packing costs” as:
. . . the cost of all containers and coverings of whatever nature and of packing, whether for labor or materials, used in placing merchandise in condition, packed ready for shipment to the United States.
See also 19 C.F.R. § 152.102(e).
We find that the services defined as repackaging are costs used in placing the merchandise in condition, packed ready for shipment to the U.S.: requirements for hangers, garment protection, carton markings, carton dimensions, packing instructions, folding instructions, and container loading. In HQ 546690, dated June 18, 1997, CBP held that the cost of opening, scanning, resealing and repacking cartons, including labor costs, were dutiable as packing costs and included in the transaction value as an addition to the price actually paid or payable. CBP determined that the costs were incurred in order to place the imported merchandise in condition, packed ready for shipment to the U.S. See also HQ H212283, dated June 19, 2014. Similarly, the repackaging services provided in this case referred to above are dutiable as packing costs and should be added to the price actually paid or payable for the merchandise and may not be excluded to the extent it is already included.
HOLDING:
Based on the information presented, the following costs charged by the freight forwarders may be excluded from the price actually paid or payable for the imported merchandise with respect to the sample transactions: airline documentation/AWB/BOL fee, AMS recording fee (U.S. DOCS fee), CFS fee, document/FCR fee, port entry/security fee, customs clearance/declaration fee, inspection fee, equipment management fee (equipment interchange receipt, GOH fee), seal fee, container loading fee, handling fee, magnetic inspection fee, terminal/toll fee. CY administration fee, ORC fee (ORC/THC fee), U.S. manifest surcharge, telex release, and customs examination fee.
Additionally, amendment fee, booking fee, commodity inspection fee, wharfage fee, LCL admin fees/CFS-CFS administration, and unloading fee may be excluded from the price actually paid or payable of the imported merchandise in line with our rulings H092560, H148715, and H219516, provided that all documentary requirements are satisfied.
The CFS fees for receiving or unloading cargo into containers may not be deducted if the CFS is not located within the port limits. Similarly, the equipment management fee, container loading fee, magnetic inspection fee, LCL Admin fees/CFS-CFS administration fee, and unloading fee may not be deducted if the CY is not located within the port limits.
The trucking fee from Speedmark may not be excluded from the price actually paid or payable for the imported merchandise. In addition, the repackaging fee from Apex is a packing cost and may not be excluded from the price actually paid or payable for the imported merchandise.
Please note that 19 C.F.R. § 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 & Special Programs Branch