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HQ 545173




September 19, 1994

VAL CO:R:C:V 545173 CRS

CATEGORY: VALUATION

Regional Commissioner
U.S. Customs Service
10 Causeway, Room 801
Boston, MA 02222-1056

RE: Appraised value; charges for duty, freight and brokerage; tolling charges; copper rods

Dear Sir:

This is in reply to a memorandum, dated December 10, 1992, from the Regional Director, Commercial Operations Division, requesting internal advice concerning charges for freight and brokerage fees included in the price of imported merchandise. We regret the delay in responding.

FACTS:

Alcatel NA, Inc., imports copper rods manufactured in Canada by Alcatel Canada Wire. The imported merchandise was manufactured from U.S. origin copper cathodes supplied by Alcatel NA, free of charge, to Alcatel Canada. The imported copper rods are eligible for duty-free treatment under subheading 9802.00.60, Harmonized Tariff Schedule of the United States Annotated (HTSUSA). See Headquarters Ruling Letter (HRL) 556345 dated February 10, 1992. A commercial invoice and a CF 7501 relating to an actual entry of copper rods were attached to your memorandum. The invoice reflects one amount for the value of the U.S. origin copper cathodes, and a second amount in respect of a "tolling charge," which represents the amount paid for the processing work performed in Canada. The terms of sale were "delivered duty paid" (DDP). International Chamber of Commerce, Incoterms 1990, at 92.

You have advised that there is a difference between the ports of Buffalo and Champlain in regard to the appraisement of the copper rods. Champlain did not include the cost of freight (****) and brokerage (****) in the appraised value of the copper rods. Buffalo, however, apportioned the cost of freight and brokerage between the value of the U.S. copper cathodes and the cost of the Canadian processing, i.e., the tolling charge. Thus, under Buffalo's method, a portion of the freight and brokerage costs was included in the appraised value of the imported merchandise. You have asked that we rule on this matter in the interest of uniformity.

ISSUE:

The issue presented is whether transportation costs and brokerage fees included in a DDP price should be included in the appraised value of imported 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. the basis of appraisement in this case. Although the concerned parties are related as defined by section 402(g)(1) of the TAA, there were no indications that the relationship influenced the price.

Transaction value is defined as the price actually paid or payable for merchandise sold for exportation to the United States, plus certain additions including the value, apportioned as appropriate, of any assist. 19 U.S.C. ? 1401a(b)(1). The term "assist" refers to that which is supplied directly or indirectly by the buyer, and free of charge or at a reduced cost, for use in connection with the production and sale for export to the U.S. of imported merchandise. It includes materials, components, parts and similar items incorporated in imported merchandise. 19 U.S.C. ? 1401(h)(1)(A). The copper cathodes were supplied free of charge by the buyer, Alcatel NA, and were incorporated in the imported merchandise. Consequently, the cathodes are an assist and their value should be included in transaction value.

The term "price actually paid or payable" is defined as "the total payment (whether direct or indirect...) 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). The total payment made by the buyer to the seller was the amount of the tolling charge. However, the TAA provides that the price actually paid or payable should be determined "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." See also 19 C.F.R. ? 152.103(a)(5)(ii), regarding foreign inland freight. For purposes of this ruling we have assumed that a through bill of lading was presented.

In this case the terms of sale were DDP and included, inter alia, freight and brokerage fees. In accordance with section 402(b)(4)(A) of the TAA, the price actually paid or payable should be adjusted so as to exclude the costs of transportation and related services incident to the international shipment of the imported merchandise; however, the manner in which this adjustment should be effected is disputed. The port of Champlain deducted the full amount of the transportation and brokerage costs incurred, i.e., $****. In contrast, the port of Buffalo deducted a percentage of this amount based on the ratio of the tolling charge to the total amount shown on the commercial invoice, i.e., the cost of the U.S. origin copper cathodes plus the tolling charge.

The TAA provides that the actual costs of transportation and related services incident to international shipment should be excluded from the price actually paid or payable. E.g., Headquarters Ruling Letter (HRL) 544236 dated October 31, 1988. Accordingly, the actual costs of freight and brokerage fees should have been excluded in determining the transaction value of the imported copper rods.

HOLDING:

Pursuant to the foregoing, transportation costs and brokerage fees should not be included in the transaction value of the imported copper rods.

This decision should be mailed by your office to the internal advice requester no later than sixty days from the date of this letter. On that date, the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS, and to the public via the Diskette Subscription Service, the Freedom of Information Act, and other public access channels.

Sincerely,


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