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HQ 545257

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July 6, 1994

VAL-CO:R:C:V 545257 GG

CATEGORY: VALUATION

Mr. Thomas Mattina
Area Director
Kennedy Airport Area
U.S. Customs Service
6 World Trade Center, Room 762
New York, New York 10048

RE: Application for Further Review of Protest No. 1001-2-103242; dutiability of international freight charges

Dear Mr. Mattina:

This is in response to the application for further review of the protest referenced above. We regret the delay in responding.

FACTS:

The Haddad Group, Ltd. ("the buyer"), entered a shipment of babies' snowsuits on October 3, 1991. Haddad had purchased the snowsuits from P.T. Busana Idaman Nurani ("the seller") in Indonesia.

The snowsuits were originally ordered at FOB Indonesia prices. They were to be shipped by sea with the buyer paying the ocean freight charges.

The purchase order/contract between the buyer and seller provided for delivery by April 1991. However, the seller did not have the merchandise ready by the specified date, therefore the purchase order was amended to indicate a late August 1991 delivery date.

As a result of the delay in delivery, the buyer and seller agreed to renegotiate the purchase terms prior to exportation. The new terms provided for the shipment of the finished merchandise by air. The terms of sale were changed from FOB Indonesia to C&F New York because the seller was responsible for the additional air freight costs. The purchase order was again amended to reflect this change.

The merchandise was exported from Indonesia on September 27, 1991. The shipment was accompanied by an invoice which reflected the C&F terms negotiated prior to exportation. The buyer's customhouse broker entered the merchandise at the full C&F value of $48,777.09 without making a deduction for the differential between the air freight and estimated ocean freight charges. The entry was liquidated as entered.

The buyer protested the liquidation of the entry, claiming that the correct value was the invoice price less air freight charges plus the original estimated costs of ocean freight. Despite the C&F price terms, the airway bill listed the shipping payment arrangements as "freight collect". An inquiry to the protestant's attorney confirmed that the buyer did in fact pay the freight forwarder for the freight charges. The submitted documents also reveal that the buyer paid the seller $19,676.09, through a letter of credit, for the merchandise. There is no evidence to show that the seller reimbursed the buyer for the differential between the air freight and estimated ocean freight charges, and from discussions with importer's counsel it appears that Haddad paid the full transportation costs.

ISSUE:

Under these circumstances, whether the price actually paid or payable for the imported merchandise was correctly determined?

LAW AND ANALYSIS:

The primary basis of appraisement under the valuation statute, section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA), is transaction value. This is defined in section 402(b) of the TAA as "the price actually paid or payable for 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 by 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.

When the price of imported merchandise is renegotiated prior to the exportation of the merchandise, and the delivery terms are changed from FOB to C&F, and the freight charges are included in the C&F renegotiated invoice price, the C&F price, less the international freight charges included therein, would be the price actually paid or payable for the imported merchandise. See HRL 544911, dated April 6, 1993. Here, however, the actual transaction between Haddad and the seller appears to have occurred on an FOB Indonesia basis, notwithstanding the attempted change of delivery terms on the purchase orders and invoice, because the buyer paid for the freight costs. Therefore, the holding in HRL 544911 with regard to C&F transactions is not applicable. The renegotiated price listed on the invoice to Haddad is the same as the original, agreed upon price of $48,777.09. Therefore, the price actually paid or payable for the snowsuits is $48,777.09.

HOLDING:

Based on the evidence presented, the price actually paid or payable for the imported merchandise was correctly determined.

You are directed to DENY this protest. In accordance with Section 3A(ii)(b) 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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