'Force Majeure' Charges Paid by Importer Are Part of Transaction Value, CBP Rules

Additional force majeure charges imposed by a French seller of pipe-in-pipe assemblies are dutiable as part of the transaction value, CBP determined in a Feb. 23 ruling. The seller claimed the war in Ukraine affected its sourcing and transportation of the materials and, as a result, it imposed the additional force majeure charges through a change order when it was unable to fulfill its signed purchase agreement with KZJV, a U.S. importer.

The valuation statute does not exclude charges incurred as a result of force majeure, CBP said in response to KZJV's request for a binding ruling. As long as the additional charges were payments by the importer to the seller in connection with the imported merchandise, those payments are dutiable as part of the price paid for the merchandise, CBP ruled.

The preferred method of appraisement is transaction value, which is defined as “the price actually paid" for the merchandise when sold for exportation to the U.S. "Price actually paid" is defined as the total payment made for imported merchandise by the buyer to the seller. Exemptions from transaction value pricing are limited to service costs related to the construction, assembly or maintenance of the merchandise, or transportation and technical assistance costs along with duties and fees paid to the U.S. government, CBP said. None of these exemptions applies to the additional charges imposed by the seller in this case, it said.

Instead, the charges were treated as any other form of cost increase, CBP said, noting: "All payments made by a buyer to a seller are part of the price actually paid or payable for imported merchandise under transaction value." The U.S. Court of Appeals for the Federal Circuit has held that the term “total payment” in the definition of the phrase “price actually paid or payable” was intended to be “all-inclusive,” CBP said.

The importer argued the force majeure charges could be treated as interest, citing the 2019 ruling HQ H299343, which involves the dutiability of interest charges. CBP disagreed: "While the additional payments here relate directly to the goods to ensure that they are manufactured according to agreed-upon specifications and delivered on time, interest charges pertain to the cost of financing the purchase of goods and not to the goods themselves."