HQ 0544413 - Dutiability of foreign inland freight - United States International Trade Commision Rulings

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HQ 544413

October 29, 1990

VAL CO:R:C:V 544413 DPS

CATEGORY: VALUATION

Mr. Weine Alstranner
D & M Lumber Products Co., Inc.
110 Varick Ave.
P.O. Box 716
Brooklyn, N.Y. 11237

RE: Dutiability of foreign inland freight

Dear Mr. Alstranner:

Your letter of June 1, 1989, to our New York office, concerning the dutiability of inland transportation charges on D & M Lumber Products Co., Inc.'s (D & M) importations of lumber products from Brazil, has been referred to this office for reply. You state that the cost of inland transportation in Brazil should be treated as a non-dutiable expense. We regret the delay in responding to your inquiry.

FACTS:

Based on information provided by D & M, the following facts are relevant to the ruling request. D & M purchases hardboard from Duratex S.A. of Sao Paulo, Brazil on a C & F basis. The supplier prepays in Brazil all inland transportation, handling charges at the port of exportation and the costs of ocean transportation.

At the request of the National Import Specialist (NIS) in New York, D & M provided additional detailed information to Customs on how the merchandise is transported from the mill in Brazil to the port of importation in the U.S. Between the mill and the port of exportation, the merchandise is transported via truck and rail. The charges for transportation from the mill to the port of exportation are covered by inland freight agreements between the trucking companies, railroads and Duratex S.A., the manufacturer/exporter. The handling charges at the port of exportation are paid by the exporter to the port authorities in accordance with established tariffs. Transportation from the port of exportation to the U.S. port of importation is negotiated with shipping companies who operate regularly from and to the selected ports. The bill of lading is issued by the shipping line, and covers the transportation from the port of exportation to the U.S. port of importation. D & M, through Duratex S.A., has made it clear that the bill of lading covers only the ocean freight costs from the port of exportation to the U.S. port of importation.

ISSUE:

Whether, under the facts presented, foreign inland freight charges are non-dutiable.

LAW AND ANALYSIS:

As amended by T.D. 84-235, section 152.103(a)(5), Customs Regulations, reads as follows:

(5) Foreign inland freight and other inland charges incident to the international shipment of merchandise.

(i) Ex-factory sales. If the price actually paid or payable by the buyer to the seller for the imported merchandise does not include a charge for foreign inland freight and other charges for services incident to the international shipment of merchandise (an ex-factory price), those charges will not be added to the price.

(ii) 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 section 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.

(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 district 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 district 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...

The circumstances of this case are similar to the situation we addressed in Headquarters Ruling Letter (HRL) 544033, dated January 21, 1988. Therein, we stated:

In reviewing your proposal, Customs is of the opinion that the language set forth in the last sentence of (iii) above is quite clear; that is, only where it is impossible to obtain a through bill of lading would other documentation be satisfactory. Neither degree of difficulty nor contingency of diversion has been set forth as a factor in this matter.

Headquarters Ruling Letter 543989, dated May 2, 1989, also focused on the dutiability of inland freight. It cited HRL 544033 and T.D. 84-235, in support of its conclusion denying the importer's protest of duty assessments on merchandise that had an invoice price which included foreign inland freight charges. Essentially, the policy adopted by Customs requires a through bill of lading.

The facts presented by D & M indicate that there is no through shipment of merchandise from the mill to the United States. Separate bills of lading are issued by each of the trucking companies, railroads and ocean carriers utilized in Brazil. As such, there is no document which meets the definition of a "through bill of lading" as required by the Customs Regulations, 19 CFR 152.103(a)(5)(ii) and (iii).

HOLDING:

Absent a through bill of lading, the charges for foreign inland freight are considered part of the price actually paid or payable regardless of whether the seller itemizes it separately on the invoice. Accordingly, under the circumstances, there is no authority to permit a deduction for foreign inland freight costs, from the Duratex S.A. mill to the port of exportation.

Sincerely,

John Durant, Director
Commercial Rulings Division

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