Kurt Orban Co., Inc. v. United States

• Decision Date: 15 June 1978
• Docket Number: Appeal No. 77-23.
• Citation: 577 F.2d 1125
• Parties: KURT ORBAN CO., INC., Appellant, v. The UNITED STATES, Appellee.
• Court: U.S. Court of Customs and Patent Appeals (CCPA)

577 F.2d 1125

KURT ORBAN CO., INC., Appellant, v. The UNITED STATES, Appellee.

Appeal No. 77-23.

United States Court of Customs and Patent Appeals.

June 15, 1978.

Samuel Frankel, New York City, atty. of record, for appellant.

Barbara Allen Babcock, Asst. Atty. Gen., Washington, D.C., David M. Cohen, Chief, Customs Section, Saul Davis, New York City, for United States.

Before MARKEY, Chief Judge, and RICH, BALDWIN, LANE and MILLER, Judges.

MILLER, Judge.

This appeal is from the judgment of the United States Customs Court in Kurt Orban Co. v. United States, 78 Cust.Ct. 122, C.D. 4697, 432 F.Supp. 198 (1977). The parties agree that appraisement of the merchandise was properly based on export value as defined in section 402(b) of the Tariff Act of 1930, as amended by the Customs Simplification Act of 1956, 19 U.S.C. § 1401a(b).¹ The issue is the propriety of the Government's inclusion of charges for loading the merchandise in Japan "from Barge onto Vessel" bound for the United States in determining the export value here involved. The Customs Court held that such inclusion was proper. We reverse.

Facts

The merchandise consists of steel bars exported from Kobe, Japan on August 28, 1969, and entered at the port of Detroit, Michigan on October 17, 1969. The steel bars were sold to appellant by Nissho-Iwai Co., Ltd., through its American subsidiary (Nissho) at various C. & F. Detroit² prices. On each special customs invoice (Customs Form 5515), the overseas transportation charges for the merchandise were broken down rather than shown as a single total, thus:

                    Element of Transportation                           Entry       Entry
                            Expense                                     128466      128467
                (a) Ocean freight (free in
                       free out)                                         $ 511.02    $4038.89
                (b) Loading charge in Japan
                    from barge onto
                    vessel                                                 119.24      942.21
                (c) Estimated discharging cost
                    from vessel to pier
                    in Detroit                                             174.77     1381.30
                (d) Survey and tally fees                                   17.03      134.63
                (e) Other various charges
                        (insurance, agency
                        fee, etc.)                                          13.63      107.70
                

The appraisements were made by the appraising officer on a per se, or unitary, basis by adopting the C. & F. Detroit prices minus allowances for the invoiced cost of ocean carrying and unloading charges (items (a) and (c) above).³ Appellant contends that further allowance should have been made for items (b), (d) and (e).⁴

Opinion Below

Relying principally upon Plywood & Door Northern Corp. v. United States, 62 Cust.Ct. 1044, A.R.D. 256, 304 F.Supp. 1030 (1969), the Customs Court concluded that the loading charges are akin to inland freight charges since they "accrue in the foreign country prior to shipment to the United States" and are "not charges which accrued subsequent to exportation of the merchandise." Accordingly, it held that the loading charges, like inland freight charges, when constituting "an integral part of the purchase price," are part of the dutiable value of the merchandise. It noted that there is no evidence of actual sales, or of offers of sale, of such or similar merchandise at the claimed F.A.S. prices, exclusive of the disputed loading charges.⁵ The Customs Court further noted that mere willingness to sell on any trade terms is insufficient when there are no sales at the claimed F.A.S. prices exclusive of the disputed loading charges. The Customs Court also rejected appellant's argument that the appraisement was separable with respect to the disputed charges.

OPINION

Ocean freight charges have long been held not to constitute part of the export value of merchandise. United States v. Samuel Shapiro & Co., 65 Treas.Dec. 1650, R.D. 3268 (1934); John Shillito Co. v. United States, 5 Treas.Dec. 555, T.D. 23851 (1902); accord, Josef Manufacturing, Ltd. v. United States, 62 Cust.Ct. 763, 767, R.D. 11616, 294 F.Supp. 956, 959 (1969), aff'd, 64 Cust.Ct. 865, A.R.D. 274, 314 F.Supp. 51 (1970), aff'd, 460 F.2d 1079, 59 CCPA 146, C.A.D. 1057 (1972). It is also well settled that inland freight charges are part of the export value only where the merchandise is offered for sale at an F.O.B. price or a price which includes the inland freight charge, and never where the sale is at an ex-factory price. Albert Mottola v. United States, 46 CCPA 17, C.A.D. 689 (1958); United States v. Paul A. Straub & Co., 41 CCPA 209, C.A.D. 553, cert. denied, 348 U.S. 823, 75 S.Ct. 37, 99 L.Ed. 649 (1954). Therefore, the dispositive question is whether the disputed loading charges are to be identified with ocean freight charges and excluded from export value or with inland freight charges, which may or may not be part of the export value. Only if the loading charges should be identified with inland freight charges would it be necessary to consider whether the merchandise was freely sold or, in the absence of sales, offered for sale at a price without the disputed charges.⁶

A. Trade Practices

Mr. J. F. Gibson, vice president of the Retla Steamship Company, which ships steel from Japan to the United States, testified⁷ that on "conference" vessels a quotation for ocean freight charges is in "berth terms,"⁸ which include in a single figure the combined charges of loading, ocean carriage, and unloading, plus related "minor things." This single figure is used on bills of lading and invoices since the loading, carrying, and unloading is paid by the shipper. However, if the shipment is by a charter or nonconference vessel, the price is usually quoted in "free in, free out" terms, under which the cost of each component of the total freight charge—loading, carrying, and unloading—is itemized. This is because the charter shipper only presents the ship for loading and unloading at the respective ports.

Uncontested testimony below indicates that if the shipping freight charges are stated as a single dollar amount, the uniform practice of the Customs Service is to deduct the entire amount. Thus, the Customs Court's decision would have this anomalous result: for shipments on conference vessels (which use berth terms), the total freight charge (including loading) would be deducted in calculating export value; but, for shipments on nonconference vessels (which use free in, free out terms), the loading charge would not be deducted. Nevertheless, regardless of the type or ownership of the vessel used for exportation, the importer ultimately bears the cost of all freight charges including loading.⁹ This court in United States v. Josef Manufacturing, Ltd., 460 F.2d at 1082, 59 CCPA at 150, stated that the freight charges from the principal market in the country of exportation "should be treated in the same fashion" regardless of the mode of transportation. Thus, whether the vessel used for exportation is a conference or a chartered vessel should not be determinative of the treatment of the ocean freight charges; more particularly, it should not be determinative of whether the loading charges are included in the export value of the merchandise.¹⁰

We note from the testimony below that in the common parlance of importers and marine carriers, ocean freight includes loading as well as transportation and unloading.¹¹

B. Case Law

While section 402(b) makes no mention of deductions, it is clear that the value contemplated is the per se price of the goods in the principal market of the country of exportation, inclusive of the cost of packing and other expenses incidental to the placing of the goods in a condition for shipment.¹² Any charges costs, or expenses accruing subsequent to the time the merchandise is in the principal market "in condition, packed ready for shipment to the United States," even though included in the offered price, are not ordinarily part of the export value for tariff purposes.¹³A. W. Fenton Co. v. United States, 61 Cust.Ct. 437, 446 R.D. 11556, application for review dismissed, 61 Cust.Ct. 613, A.R.D. 246 (1968); United States v. International Commercial Co., 28 Cust.Ct. 629, 636, R.D. 8112 (App.Term 1952). Accordingly, ocean freight has been determined not to be part of the export value because it accrues subsequent to the time the merchandise is in the principal market in condition ready for shipment.¹⁴John A. Steer & Co. v. United States, 30 Cust.Ct. 504, R.D. 8196 (1953), cited with approval in United States v. Paul A. Straub & Co., supra; United States v. Samuel Shapiro & Co., supra.

The rationale of the Customs Court's decision that loading charges are includable in dutiable value is that these charges accrue within the country of exportation prior to shipment to the United States. Although the Government cites several cases for the proposition that "loading charges and/or pier charges were held to be part of the export value of the merchandise,"¹⁵ only one case, Plywood & Door Northern Corp. v. United States, supra, which was relied upon by the trial court, merits detailed discussion. After distinguishing the dutiable treatment of ocean freight and inland freight charges, the Customs Court, supra at 1047, 304 F.Supp. at 1033, concluded:

Accordingly, it is not significant that charges (inland freight or loading) may "accrue" after the merchandise has been packed ready for shipment to the United States and has left the principal market. Indeed, the inland freight included in the unit values of the plywood involved in this case is conceded by appellant to be dutiable. Hence, as in Straub and Mottola, the important consideration here is that the price at which the merchandise was freely offered for sale in the principal market always included the disputed charge, and not that the loading charges accrued after the merchandise had left the principal market, viz., Helsinki.

Additionally, since loading charges like other "inland charges" accrue in

...