HQ 0544501 - Appropriate Deduction for U.S. Inland Freight Costs; Applications for Further Review of Protest Nos.XXX, and XXX - United States International Trade Commision Rulings

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HQ 544501

October 18, 1991
VAL CO:R:C:V 544501 ML

CATEGORY: VALUATION

District Director
Laredo, Texas

RE: Appropriate Deduction for U.S. Inland Freight Costs; Applications for Further Review of Protest Nos.XXX, and XXX

Dear Sir:

These protests were filed against your appraisement decisions in the liquidation of various entries made by Maria C. Longoria, (hereinafter referred to as the "importer"), of tile, floor and wall ceramic. While the subject protests were filed in 1985 and 1986, the files were received at Headquarters in 1990. Nonetheless, we regret the delay for the time the file has been in Headquarters.

FACTS:

According to the submission, the imported merchandise consisted of tile, floor and wall ceramic. The importer presented an invoice to Customs which stated the price of the merchandise and charges for U.S. inland freight. The terms of sale were FOB San Antonio, Texas. In an interview with Customs, shippers stated that all operating costs on their trucks were being apportioned over those miles travelled in the U.S. and ignoring those miles operated in Mexico. You believe this is inconsistent with generally accepted accounting procedures.

Customs requested and received the annual transportation expenses for operating trucks both in Mexico and the U.S. from the shippers. The annual mileage operated in Mexico and the U.S. by the shippers was also received. The import specialist then calculated what it believed was a reasonable cost per mile by dividing the total annual miles operated in Mexico and the U.S. by the total annual expenses. The resultant figure was $XXX per mile. The amount was used to arrive at the calculated cost of U.S. inland freight to various destinations.

Your office recommended that the protests be denied since no actual evidence of the freight charges claimed was furnished by the importer.

ISSUE:

Whether a separately identified, reasonable cost or charge for the transportation of the merchandise after importation existed and should not have been included in the transaction value of the imported merchandise.

LAW AND ANALYSIS:

Transaction value, the preferred method of appraisement, is defined in section 402(b)(1) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (19 U.S.C. 1401a(b); TAA) as the "price actually paid or payable" for imported merchandise when sold for exportation to the United States, plus certain enumerated additions. This is more specifically defined in section 402(b)(4)(A) of the TAA, as the following:

The term "price actually paid or payable" means 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. (emphasis added)

In T.D. 84-235 (49 Fed. Reg.46886), dated November 29, 1984, Customs amended 19 CFR 152.103(a)(5), covering the dutiability of foreign inland freight and other services incident to the international shipment of merchandise. The applicable provision of the amended regulation, 19 CFR 152.103(a)(5)(ii) states the following:

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. (emphasis added)

As regards transportation costs that were incurred after the merchandise has been imported, section 402(b) allows a deduction for ...any reasonable cost or charge that is incurred for b) the transportation of the merchandise after such importation. (See, 152.103(i), Customs Regulations (19 CFR 152.103(i)). Specifically, section 402(b)(3) of the TAA provides:

(3) The transaction value of imported merchandise does not include any of the following, if identified separately from the price actually paid or payable and from any cost or other item referred to in paragraph (1):

(A) Any reasonable cost or charge that is incurred for...

(ii) the transportation of the merchandise after such importation.

(B) The customs duties and other Federal taxes currently payable on the imported merchandise by reason of its importation, and any Federal excise tax on, or measured by the value of, such merchandise for which vendors in the United States are ordinarily liable.

The above cited statutory provision clearly states that the transaction value of imported merchandise does not include any reasonable cost incurred for post-importation transportation of the merchandise that is identified separately from the price actually paid or payable.

In an interview with your office, shippers stated that all of the operating costs on their trucks were being apportioned over the miles travelled in the U.S., disregarding the miles operated in Mexico. You believe the method used by the shippers to compute U.S. inland freight was not in keeping with generally accepted accounting procedures (GAAP) and resulted in an inflated deduction for U.S. freight. No authority exists for deducting transportation charges where it is unclear whether the invoiced amount was for foreign inland freight or for post-importation freight costs. Since sufficient evidence is not available to make the adjustment, no adjustment to the price will be made.

HOLDING:

In accordance with the above, insufficient evidence exists to make a deduction from transaction value for the transportation of the merchandise after importation.

Accordingly, you are directed to deny the protests. A copy of this decision should be attached to Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

John Durant, Director

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