HQ 544501: Appropriate Deduction for U.S. Inland Freight Costs; Applications for Further Review of Protest Nos.XXX, and XXX

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                                   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