Issue 261, June 20, 2000
Recently, the Customs Service had issued several publications which clearly signaled the intention of the Customs Service to increase the importing community?s compliance levels with respect to accurately reporting freight and insurance charges. The Customs Service published T.D. 00-20, which it describes as a ?General Notice? to the importing community on this subject. In addition, it issued an Informed Compliance Publication reviewing the requirements of the international freight and insurance deductions, as well as foreign inland freight and post importation freight charge deductions.

In addition to reviewing the statutory requirements, these publications seem to have raised the reasonable care bar for importers in this area. In the past, it was understood that the importer could abstain from deducting freight and insurance if it was unable to substantiate a deduction. These publications make clear, however, that under the importer?s obligation of reasonable care, the importer is required to deduct the actual amount of freight and insurance, as substantiated, or to affirmatively declare at the time of entry that these charges cannot be determined.

In addition, Customs will now require that the importer continue to make an effort post-entry to accurately determine the freight and insurance charges. If these charges still cannot be determined, the importer will be expected to file a statement with the Customs Service that he has been unable to determine these charges. Reconciliation can be used to fulfill this post-entry reporting requirement.

Any charges that are reported must be supported by appropriate documentation, which Customs had described as being letters of credit, checks, bank statements or commercial documents to or from the service provider. However, the acceptability of other documentary evidence is left to the discretion of the appropriate Customs official.

From this rule, Customs has exempted the cost of foreign inland freight and post importation transportation costs. Unlike the international freight and insurance (which Customs views as required reporting for statistical and other purposes since these costs may or may not be deductible), and depending on how the transaction is structured, no obligation arises on the importer to use reasonable care to determine and declare these charges to Customs. Finally, while deductions for foreign inland freight must be based on actual charges, post importation transportation costs may be based on any reasonable cost or charge.

Our contributing writer, Sandra Liss Friedman, is a Partner in the Customs and internatioanl trade firm of Barnes, Richardson & Colburn in New York and can be reached via email or at (212) 725-0200.

Please note that due to the complex nature of the subject matter, Danzas AEI cannot be responsible for actions taken by the reader in reliance on the information contained herein without prior consultation with Danzas AEI.