Proper Deductions for Freight & Other Costs
March, 2000
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be incurred from the country of exportation to the United States may be excluded from
the price actually paid or payable and therefore not comprise part of the transaction
value of the merchandise pursuant to § 402(b)(4)(A) of the Tariff Act of 1930, as
amended by the Trade Agreements Act of 1979 (“TAA”; 19 U.S.C. §1401a(b)(4)(A)). It
also informed the public that in order to be deducted, such costs must first comprise
part of the price actually paid or payable and that the amount to be deducted from the
price actually paid or payable for freight, insurance and other costs incident to the
international shipment of merchandise, including foreign inland freight costs, are the
actual, as opposed to the estimated, costs. Additionally, the 1997 General Notice
stated that, pursuant to 19 U.S.C. §1484(a)(1), the importer of record is required, using
reasonable care, to make and complete entry by filing with Customs, among other
things, the declared value of the merchandise. The importer of record’s declaration of a
transaction value excluding an amount for freight/shipment charges based on estimated
costs may constitute a failure to exercise reasonable care.
In this area, Customs has consistently found that a majority of the problems
experienced by the importer of record concern the procedures in accounting for the cost
of freight, insurance and other costs incident to international shipment. These problems
are now compounded with the recent passage of the Ocean Shipping and Reform Act
(“OSRA”), which became effective on May 1, 1999. The OSRA, in part, provides for the
confidential treatment of freight rates that can now be freely negotiated between
shippers and shipping lines. With the passage of the OSRA a shipping line may now
refuse to divulge its actual freight charge to a third party, such as a Customs broker,
who may have an interest in the matter as a customer or competitor to the shipping line.
With the enactment of OSRA, there now exists the potential for conflict between the
confidential treatment of freight rates, which can now be freely negotiated between
shippers and shipping lines, and the reporting requirements of Customs and Census
found in 13 U.S.C. §§ 301 and 303.
Under 13 U.S.C. §301, the Department of Commerce is required to compile and
publish data on import charges. Under 13 U.S.C. §303, the Department of Treasury is
charged with collecting the information required by the Department of Commerce in
preparing our nation’s trade statistics. Section 30.70, Commerce and Foreign Trade
Regulations (15 CFR §30.70), requires importers to report information for statistics on
merchandise entering the U.S. on Customs entry documents such as Customs Form
(“CF”) 7501, Entry Summary. The information required for statistical purposes includes
value, “in accordance with the definitions set forth in the Tariff Schedules of the United
States Annotated (TSUSA) and sections 402 and 402a of the Tariff Act of 1930, as
amended.” Id. 15 CFR §30.70. Thus, trade statistics, such as value, must be collected
by Customs in a timely manner at the time of entry. While there may be a potential
conflict between this law and OSRA, Customs cannot ignore its responsibilities
specifically provided in 13 U.S.C. §303.
Following the responsibilities imposed on Customs by the Customs
Modernization Act or “Mod Act” (Title VI of the North American Free Trade Agreement
Implementation Act [Pub. L. 103-182, 107 Stat. 2057], December 8, 1993), this General