The United States Court of International Trade recently denied a request to deduct certain freight charges that the importer argued were included in the transaction value of the goods as a result of the vendors’ late shipment.
In Cutter & Buck, Inc. v. United States, Slip Op. 13-45 (April 3, 2013), the court primarily found that because the terms of the purchase order did not specifically provide for a change in negotiated price and a change in the terms of sale from FOB to CFR to reflect the inclusion of freight costs in the price, the importer was unable to claim deduction of the freight costs from the invoice price.
These entries in issue involved “late shipments” and were governed by the provisions of a late delivery clause contained in the importer’s purchase orders. While the clause shifted responsibility for the payment of freight charges from the importer to the foreign seller, it did not expressly change the terms of sale, i.e., from FOB to cost and freight (“CFR”), or provide for a reduction in the price of the goods. The importer paid the “FOB” price for the goods. The port liquidated the entries at the “FOB” price without a reduction for the airfreight charges. The Court synthesized Customs’ approach to this issue in three questions:
1. Whether the price of the imported merchandise was renegotiated prior to the exportation of the merchandise?
2. Whether the delivery terms were changed from FOB to CFR?
3. Whether the CFR price includes freight charges?
The Court held that nothing on the court record proved that the price actually paid by the importer included shipping costs because the applicable terms and conditions neither called for a price reduction nor mandated a change in the shipment terms from FOB to CFR. Moreover, the bulk of the shipping documents identified FOB or FCA as the relevant shipping term.
In light of this decision, importers should reexamine their “Late Shipment” procedures to assure they can properly claim and support deductions for freight and/or other price adjustments.
Please do not hesitate to contact David M. Murphy if you have any questions or concerns regarding this case. Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP is an EACC New York Member.