HQ 547735 - Application for Further Review of Protest No. 5201-00-100151; Freight, Insurance, and Other Costs Incident to International Shipment - United States International Trade Commision Rulings

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HQ 547735

January 22, 2002

RR:IT:VA 547735 DCC

CATEGORY: VALUATION

Port Director
Miami Service Port
P.O. Box 025280
Miami, FL 33102-5280

RE: Application for Further Review of Protest No. 5201-00-100151; Freight, Insurance, and Other Costs Incident to International Shipment

Dear Port Director:

This is in response to the Application for Further Review ("AFR") of Protest Number 5201-00-100151, filed by Grunfeld, Desiderio, Lebowitz & Silverman LLP on behalf of Value City Imports ("Value City" or the "Importer"). In addition to the Protest, Counsel made submissions dated March 10 and April 15, 2000. This AFR concerns three entries of merchandise: Entry Nos. [ ] ("841-3"); [ ] ("880-1"); and [ ] ("879-3"). We apologize for the delay in responding.

FACTS:

On January 13, 1999, Value City made three entries of cotton knit brassieres and panties. At the time of entry, Value City's broker declared the value of the merchandise based on the transaction value of the sale between Value City and the overseas exporter, Zip Buena Vista Exports ("ZBV" or the "Exporter") of Villanueva, Cortez, Honduras.

Counsel claims, however, that Value City purchased the merchandise from ZBV on an FOB Miami rather than an FOB Honduras basis and, therefore, the declared value incorrectly includes nondutiable charges for freight, brokerage, and duties. To illustrate the alleged error we describe below the importation of merchandise for Entry No. 841-3 based on commercial documents provided by Counsel. The merchandise, identity of the parties, and structure of the transactions was the same for all three entries.

The purchase order for Entry No. 841-3, P.O. No. 668625, dated December 8, 1998, states that the terms of sale were "FOB Point: Miami." In addition, Value City presented two commercial invoices from the Exporter for the subject merchandise. The first invoice, Invoice No. ZB 90-047, dated December 21, 1998, states that the Exporter sold [ ] dozen brassieres and the same quantity of panties, with a per dozen price of [ ] and [ ], respectively. This invoice states that the total dutiable value for the merchandise was [ ] but does not state the terms of sale.

The second invoice from ZBV, Invoice No. ZBV-005, dated December 28, 1998, states that the terms of sale were "FOB: Miami," and the value of the merchandise was [ ]. This higher value on the second invoice includes additional merchandise of the same style which was entered separately.

The Importer also provided an invoice, Invoice No. T-8746, dated January 21, 1999, from a freight forwarder, Union Shipping, Co. According to this invoice, for Entry 841-3, the freight forwarder charged ZBV a total of [ ] for the following services: Customs Entry Service; Brokerage; In & Out To [illegible]; Forwarding Fee; G.O. Fee Pd To SML; Incoming Freight; Duties Paid To U.S. Customs; Accounting Fee; Telephone/Telefax; and Postage.

Lastly, Value City provided payment and accounting records including copies of checks. The relevant check, dated March 15, 1999, records a payment for the account of ZBV in the amount of [ ]. The corresponding check stub shows that [ ] of that total was payment for Invoice No. ZBV-005.

Your office liquidated Entry Nos. 880-1 and 879-3 on November 26, 1999, and Entry No. 841-3 on January 7, 2000. Customs appraised the merchandise on the basis of the value declared at the time of entry. Counsel claims, however, that the Importer purchased the merchandise from ZBV on an FOB Miami rather than an FOB Honduras basis and, therefore, the declared value incorrectly includes nondutiable charges for freight, brokerage, and duties.

With regard to the time of filing, your office noted that the Protest was received on February 25, 2000. In addition, the Customs date stamp on the Protest reads "00 FEB 25 AM 11." Based on this date, your office determined that the Protest was untimely with regard to Entry Nos. 880-1 and 879-3. You therefore denied the Protest for these two entries.

Counsel claims that the Protest was filed timely on February 24, 2000. The original Protest includes a typed notation that states "FAXED 2-24-00." In addition, Counsel provided a copy of the facsimile cover sheet and transmission confirmation printout. According to the cover sheet, Counsel sent the facsimile to the Protest Section at the Port of Miami on February 24, 2000. In addition, according to the confirmation printout, the facsimile was sent to the Miami Protest Section at 9:55 a.m. on February 24, 2000.

ISSUES:

Whether the Importer timely filed the Protest for Entry Nos. 880-1 and 879-3.

Whether the appraised value incorrectly includes nondutiable charges for international freight and brokerage expenses.

LAW AND ANALYSIS:

1. Timeliness of Protest Filing

Protests must be filed within 90 days after, but not before, the notice of liquidation. See 19 U.S.C. § 1514(c)(3) and 19 C.F.R. § 174.12(e). As the Court of International Trade has noted, "[t]his statute of limitations is strictly construed. Where a protest is untimely filed, courts have declined to assert jurisdiction regardless of the ensuing hardship visited upon a party." Atari Caribe, Inc. v. United States, 16 CIT 588, 589 (1992).

The record indicates that Customs issued the notice of liquidation for Entry Nos. 880-1 and 879-3 on November 26, 1999. For these two entries, the ninetieth after the notice of liquidation, and the corresponding deadline for filing a protest, was February 24, 2000.

Counsel claims that the protest was timely filed for Entry Nos. 880-1 and 879-3. According to Counsel, the Protest was submitted by facsimile on February 24, 2000. In Box No. 12 of the Protest, Counsel typed "FAXED 2-24-00" to indicate that the Protest was sent by facsimile on February 24, 2000. Counsel also relies on the facsimile cover sheet and transmission confirmation report as evidence that the Protest was filed on February 24, 2000.

The issue of timeliness of a protest filing arose in the case of Group Italglass U.S.A., Inc. v. United States, 17 C.I.T. 1205 (1993). Although similar, the circumstances in the present case are distinguishable from those in Italglas. In Italglas, the importer submitted a protest by facsimile after regular business hours on the ninetieth day after the notice of liquidation. Moreover, the importer sent the protest by facsimile to the Customs office in charge of fines, penalties and forfeitures rather than the Customs protest office. The Court of International Trade found that the after hours filing with an unauthorized Customs office did not constitute a legal filing. The fact that a Customs facsimile machine was able to receive a transmission in the evening did not imply that Customs intended to accept protests filed after business hours.

The facts in this case demonstrate that the Importer timely filed the Protest. The facsimile confirmation printout, the facsimile cover sheet, and Counsel's notation on the Protest, together support Counsel's claim that the Protest was filed at the Miami Customs Protest Section before the close of business on February 24, 2000. We therefore determine that the Protest is timely with regard to all three entries.

2. Freight, Insurance and Duties

Merchandise imported into the United States is appraised in accordance with the provisions of Section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 ("TAA"; codified at 19 U.S.C. § 1401a). Transaction value is the preferred method of appraisement under the TAA, and was the basis of appraisement in this case. Transaction value is defined as "the price actually paid or payable for merchandise when sold for exportation to the United States." 19 U.S.C. § 1401a(b)(1). The term "price actually paid or payable" is defined as:
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.

TAA Section 402(b)(4)(A). See also, 19 U.S.C. § 1401a(b)(1); 19 CFR § 152.102(f).

Based on the terms of sale, Counsel claims that the Exporter paid all costs including U.S. duties, freight, and brokerage services associated with delivering the merchandise from Honduras to the United States. Counsel asserts that an FOB named port of destination contract is in fact a Delivered Duty Paid ("DDP") contract under the Incoterms. Counsel notes that under a DDP contract, the seller fulfills his obligation to deliver the merchandise when the goods have been made available at the named place in the country of importation. Counsel further notes that pursuant to a DDP contract, the seller bears the risk of loss and costs, including duties, taxes and other charges of delivering the goods until cleared for importation. Because the terms of sale were FOB Miami, Counsel claims that the merchandise was sold on a delivered basis and that ZBV paid all of the costs of transportation and clearance into the United States. Because the broker failed to deduct these costs, Counsel argues that the appraised value should be adjusted to exclude these charges.

It is your position that Counsel submitted insufficient documentation to support the Importer's claim that the transaction value included payment for international freight and brokerage services. You state that the documents provided by Counsel do not demonstrate that the declared value included nondutiable charges. You also note that the commercial invoices accompanying the entry documents indicate that the terms of sale were FOB rather than DDP and that the Importer was unable to provide a corrected invoice from the Exporter.

According to the Incoterms, the term of sale "Free on Board" means "that the seller delivers when the goods pass the ship's rail at the named port of shipment." Incoterms 2000, International Chamber of Commerce, at 49 (1999) (emphasis added). Under an FOB contract, the buyer pays the cost of freight and insurance from the foreign port of shipment. The use of a named destination in an FOB contract is inconsistent with the Incoterms, which requires a named port of shipment. If the parties intended ZBV to pay the cost of freight, insurance and duties, they should have used the term DDP rather than FOB. Therefore, based on the terms of sale alone, it is not clear whether the Exporter was obligated to pay the cost of freight, insurance and duties.

The terms of sale offer some evidence that ZBV was obligated to pay the cost of international freight and duties. Because the terms of sale are unclear, however, they are not conclusive evidence of which party paid these costs. See HRL 546267, dated December 4, 1998 ("[T]he terms of sale are confusing and, therefore, are not persuasive in establishing that U.S. freight and customs duties are included in the price actually paid or payable.").

Based on the totality of the circumstances, however, we find that ZBV paid the cost of freight, U.S. duties, and other costs incident to the international shipment of the imported merchandise. Unlike HRL 546267, in which there was no evidence aside from the confusing terms of sale to show that the overseas seller paid the freight and U.S. duties, the present case includes such evidence. According to its January 21, 1999, invoice, the freight forwarder billed ZBV for the costs of freight, duties, and customs brokerage. Based on this invoice, we determine that the Exporter was obligated to pay these costs.

In accordance with section 402(b)(4)(A) of the TAA, the price actually paid or payable should exclude the costs of transportation and related services incident to the international shipment of the imported merchandise. Because the evidence demonstrates that the international freight charges were included in the price paid by the Importer and that the Exporter paid these costs, an adjustment should be made to determine the appraised value of the merchandise.

HOLDING:

The protest should be GRANTED. Based on the evidence presented, the Protest was timely and the appraised value of the merchandise incorrectly included the cost of transportation and related services incident to the international shipment.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065 dated August 4, 1993, Subject: Revised Protest Directive, this decision, together with the Customs Form 19, should be mailed by your office to the protestant no later than 60 days from the date of this letter. Reliquidation of the entry in accordance with the decision must be accomplished prior to mailing 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, Freedom of Information Act and other public access channels.

Sincerely,

Virginia L. Brown
Chief, Value

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