HQ 545592A - Application for Further Review of Protest No. 1901- 93100046; Dutiability of Foreign Inland Freight Charges. - United States International Trade Commision Rulings

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HQ 545592

September 15, 1994
VAL CO:R:C:V 545592 er

CATEGORY: VALUATION

District Director
Mobile, Alabama

RE: Application for Further Review of Protest No. 1901- 93100046; Dutiability of Foreign Inland Freight Charges.

Dear Sir:

This is in response to the above-referenced protest, filed with your office on August 13, 1993 by xxxxxxxxxx on behalf of their client [protestant] ("importer"), and forwarded to this office for reply. We regret the delay in responding.

FACTS:

The imported merchandise consists of certain tiles manufactured by [manufacturer] in Italy and purchased by the importer. The merchandise was entered on June 6, 1989, and the entry was liquidated on July 2, 1993. Protestant disputes the duty increase attributable to foreign inland freight charges. Protestant claims that in view of the fact that a buying agency agreement exists which provides that the foreign inland freight charges are paid by the agent, the charges should not have been added to the claimed ex-factory price of the imported merchandise. The manufacturer and the buying agent are the same company, xxx. A copy of the buying agency agreement was not included with this submission.

It is your position that because the terms of sale are C&F Mobile, and not ex-factory as claimed by protestant, under section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979, ("TAA"), only international freight charges can be deducted because there is no through bill of lading.

ISSUE:

Whether the foreign inland freight charges should have been excluded from the transaction value of the imported merchandise?

FACTS:

The primary basis of appraisement under the valuation statute, section 402 of the TAA is transaction value. This is defined in section 402(b) of the TAA as "the price actually paid or payable for the imported merchandise when sold for exportation to the United States," plus amounts for packing costs which are incurred by the buyer, any selling commission, the value of any assist, any royalty or license fee the buyer is required to pay as a condition of the sale, and the proceeds of any subsequent resale that accrue to the seller.

The price actually paid or payable is defined in section 402(b)(4)(A) of the TAA as the "total payment, ... made, or to be made, for the merchandise buy the buyer to ... the seller." The price actually paid or payable does not include 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. Deductions may be made for costs incurred for transportation of the merchandise after importation, if such costs are identified separately from the price actually paid or payable.

Foreign inland freight charges are considered to be incident to the international shipment of merchandise, and are not added to the price actually paid or payable by the buyer to the seller for imported merchandise, when the sale was based on an ex-factory price. Section 152.103(a)(5)(i) of the Customs Regulations (19 CFR 152.103(a)(5)(i)). An ex-factory price is the cost of the goods at the seller's loading dock and usually includes export packing, but no other costs. It does not include foreign inland freight costs. See Incoterms, 1980 edition; and 19 CFR 152.103(a)(5)(i). The existence of an ex-factory sale must be established for the importer to be able to exclude, under this provision, foreign inland freight charges from the price actually paid or payable.

Protestant claims that the terms of sale were ex-factory but submits no evidence to this effect. To the contrary, the manufacturer's invoice reveals that the terms of sale are C&F Mobile, which is consistent with the facts described by your office. Consequently, an ex-factory sale has not been established. Customs correctly appraised the merchandise using the C&F Mobile price.

A sale on C&F terms means that the seller must pay the costs and freight necessary to bring the goods to the named destination. See, Incoterms, 1980 edition. Foreign inland freight charges will be one of those costs, in instances where foreign inland freight charges are incurred. By regulation, when the price actually paid or payable for imported merchandise includes a charge for foreign inland freight, as it does here in this C&F sale, then that charge will be part of the transaction value to the extent it is included in the price. It is immaterial that the freight charges were itemized separately on the invoice. Section 152.103(5)(ii) of the Customs Regulations (19 CFR 152.103(5)(iii). However, charges for foreign inland freight may be considered incident to the international shipment of that merchandise, and thus excludable, 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. Id. A sale for export and placement for through shipment to the United States is established by means of a through bill of lading. Section 152.103(5)(iii) of the Customs Regulations (19 CFR 152.103(5)(iii)). The bill of lading presented by protestant reflects shipment of the merchandise from Bremerhaven to Mobile; it does not show through shipment from Fiorano Modenese, Italy, where the factory apparently is located, to Mobile. The protest is denied because there is no evidence of through shipment from the manufacturing site to the United States.

HOLDING:

The foreign inland freight charges were properly included in the transaction value of the imported merchandise, because the sale for exportation was based on C&F, not an ex-factory, price and no through bill of lading was furnished by the importer. You are instructed to deny this protest in full.

In accordance with section 3A(11) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision 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 the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director
Commercial Rulings Division

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