Suzanne Kane
Akin Gump Strauss Hauer & Feld LLP
1333 New Hampshire Avenue NW
Washington DC, 20036

RE: Transaction value; discounts

Dear Ms. Kane:

This is in response to your correspondence, dated January 28, 2020, on behalf of your client, JetBlue Airways Corporation (“JetBlue”), in which you request a ruling concerning the proper valuation of certain imported aircraft.

You have asked that certain information submitted in connection with this request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information designated as confidential in your request and contained within brackets in the ruling will not be released to the public and will be withheld from published versions of this ruling.


JetBlue, incorporated in Delaware and headquartered in Long Island City, New York, carries more than 42 million customers a year to more than 100 cities in the United States, Caribbean and Latin America with an average of 1,000 daily flights. JetBlue’s fleet of aircraft include the [X] Family of aircraft (“[X] Family”), which are manufactured in [Country A], [Country B] and the United States, among other locations. The [X] Family includes the following models: [X] aircraft.

You state that these aircraft are classified under subheading 8802.40.0040, Harmonized Tariff Schedule of the United States (“HTSUS”), and are entitled to duty-free treatment pursuant to the World Trade Organization (“WTO”) Agreement on Trade in Civil Aircraft. Currently, however, new aircraft classified under subheading 8802.40.0040, HTSUS, are subject to additional tariffs under Section 301 of the Trade Act of 1974.

[Company A] manufactures the [X] Family aircraft, which are single-aisle passenger jetliners, at its facilities in [Country A, Country B] and the United States, among other locations. Generally, airlines that select [X] Family aircraft have a choice of engines to power their aircraft. Either contemporaneously with an airline’s selection of [Company A] as its aircraft supplier, or within an agreed period thereafter, airlines typically require the engine manufacturers to compete in order to be selected as the engine supplier. The airline is free to select the combination of engine prices, services, guarantees and other commitments that best suits its needs. The result of the selection is reflected in an agreement between the airline and the engine supplier.

You state that in this instance, engines are purchased by [Company A] pursuant to an engine purchase agreement between [Company A] and the engine supplier, [Company B], which is owned in part by [Company C]. [X]. Subsequently, [Company B] issues to [Company A] commercial invoices for the purchase of engines at the full prices. [Company A] may pay [Company B] in [X] payments that cover the purchase of multiple engines from different purchase orders and may include several different airlines’ aircraft. When [Company A] receives engines from [Company B], [Company A] installs the engines on the [X] Family aircraft through a two-step process which involves operations such as joining or fitting solid components together using bolts or fasteners. After assembly of an aircraft is complete, the airline is invited to inspect it and, if it passes inspection, the airline accepts delivery and remits the final payment for the relevant aircraft.

Pursuant to an October 19, 2011 purchase agreement between JetBlue and [Company A], as amended from time to time (the “Purchase Agreement”), JetBlue purchases the [X] Family aircraft, including the [X] aircraft and corresponding [Company B] aircraft engines from [Company A]. As of December 2019, JetBlue has accepted delivery of approximately [X] [X] Family aircraft from [Company A] and has an additional [X] [X] Family aircraft on order. Under the Purchase Agreement, JetBlue pays [X] for the purchase of the aircraft. On March 30, 2018, JetBlue and [Company B] entered into a purchase and support agreement (“Support Agreement”) related to [Company B] engines in JetBlue’s fleet. The Support Agreement provides that, when JetBlue purchases an aircraft from [Company A] fitted with [Company B] engines, JetBlue receives from [Company B] a credit of approximately $[X] on each new aircraft delivery, which represents a discount off the price of the engines (“Engine Discount”) [X]. Accordingly, the Engine Discount is applied to reduce the effective price of such engines to JetBlue.

Pursuant to the Support Agreement, JetBlue may assign the Engine Discount to [Company A]. Furthermore, JetBlue, [Company A] and [Company B] entered into an agreement (the “Partial Assignment”) on November 20, 2019, providing that JetBlue affirmatively assigns its rights to the Engine Discount to [Company A] so that [Company B] issues the Engine Discount directly to [Company A]. As a result, the net price of each [X] Family aircraft that JetBlue purchases is reduced by the amount of the Engine Discount. [Company B] pays [Company A] the amount of the Engine Discount for each new aircraft in advance of such aircraft’s delivery to JetBlue. You state that JetBlue, [Company A] and [Company B] are unrelated.

In summary, transactions between JetBlue, [Company A] and [Company B]—for the sale of [X] Family aircraft and installed engines involve the following steps:

[Company A] designs and launches [X] Family aircraft and derivatives; The design process includes alternative provisions for installation of more than one type of engine; JetBlue orders [X] Family aircraft from [Company A]; JetBlue negotiates the Engine Discount with [Company B] applicable if [Company B] engines are selected by JetBlue to power its [X] Family fleet (or a portion thereof); JetBlue chooses [Company B] engines to power the [X] Family aircraft and notifies [Company A] of its choice; [Company A] issues purchase orders for [Company B] engines to be installed on A320 Family aircraft; [Company A] pays for the engines at [X] in accordance with the agreement between [Company A] and [Company B]; JetBlue assigns to [Company A] the Engine Discount for the [Company B] engines; Shortly before delivery of an [X] Family aircraft to JetBlue, [Company B] issues the Engine Discount directly to [Company A]; JetBlue accepts delivery of the [X] Family aircraft and makes final payment for the aircraft to [Company A]; The price paid by JetBlue for the [X] Family aircraft is the list price [X], less credits issued to JetBlue but reassigned to [Company A], as discounts reducing the prices of their respective portions of the aircraft and, therefore, the price of the aircraft as a whole; and JetBlue imports the aircraft into the United States.

To illustrate JetBlue’s transactions involving [X] Family aircraft equipped with [Company B] engine(s), you included documents for the purchase and entry of an [X] aircraft (the “December 2019 Aircraft”) that is equipped with a shipset of [Company B] engines. The Entry Summary (CBP Form 7501) provides that the December 2019 Aircraft entered the United States on December 5, 2019 under entry number [X]. The December 2019 Aircraft’s U.S. Federal Aviation Administration (“FAA”) registration number is [X], the manufacturer’s serial number (“MSN”) for the aircraft is [X] and the engines’ serial numbers are [X] (manufactured in the United States) and [X] (manufactured in [Country A]). The December 2019 Aircraft was exported from [Company A]’s delivery center in [Country A], and its value was declared as $[X]. You state that the set of documents for entry number [X] is generally representative of the documents and factual circumstances of all of JetBlue’s transactions with [Company A] and [Company B] for the sale of the [X] Family aircraft that are equipped with [Company B] engines.

You provided a commercial invoice (“[Company B] Invoice”) from [Company B] to [Company A], dated September 23, 2019, for purchase order [X] for the purchase of a [X] model engine, assigned engine serial number [X]. According to the [Company B] Invoice, the total amount due from [Company A] for [X] was $[X]. You provided the air waybill for the shipment evidencing that [Company B] shipped [X] to [Company A] on September 13, 2019. You also provided [Company A]’s summary of its purchase orders for [Company B] engines, confirming that [Company A] issued purchase order [X] to [Company B] with a Purchase Order Delivery Date of [X]. You provided a [Company A] payment receipt dated [X], which lists a payment of $[X] from [Company A] to [Company B], [X], for the purchase of multiple engines, including [X]. You state that [Company A] remits payment to [Company B] for the purchased engines [X]. Additionally, you included a supplementary internal [Company A] document and SAP data from [Company A] that confirm the [X] payment of $[X] includes a payment of $[X] for invoice number [X].

You state that the expected delivery date for the December 2019 Aircraft was November 14, 2019. On November 13, 2019, [Company B] wired to [Company A] $[X] for the Engine Discount. The delivery of the December 2019 Aircraft was ultimately delayed until November 21, 2019, when [Company A] issued a bill of sale to JetBlue for the December 2019 Aircraft equipped with [Company B] engines (serial numbers [X] and [X]) (“[Company A] Bill of Sale”). The [Company A] Bill of Sale states that the seller ([Company A]) sells, transfers and delivers title of the aircraft, registered as [X], to JetBlue. Additionally, you provided an invoice from [Company A] to JetBlue, dated November 21, 2019, for the December 2019 Aircraft that reflects a total amount of $[X]. The invoice from $[X] separately identifies the Engine Discount as the “Propulsion Systems manufacturer discount” for $[X].

On November 21, 2019, JetBlue paid the final outstanding amount of $[X] for the purchase of the December 2019 Aircraft, which also included $[X] of interest due on the deferred pre-delivery payment, pursuant to [X] of the Purchase Agreement. Together, JetBlue’s deposit, installment payments and final payment, total the December 2019 Aircraft’s invoiced price of $[X], plus $[X] of interest, for a total of $[X], as demonstrated by the commercial invoices that [Company A] issued to JetBlue for the December 2019 Aircraft. The Entry Summary submitted indicates that the December 2019 Aircraft is registered as [X] and entered the United States for consumption on December 5, 2019, under subheading 9903.89.05, HTSUS.


Whether the engine manufacturer’s discount should be taken into account in determining the price actually paid or payable for the imported aircraft.


Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. § 1401a). The preferred method of appraisement is transaction value, which is defined as “the price actually paid or payable for the merchandise when sold for exportation to the United States,” plus amounts for certain statutorily enumerated additions to the extent not otherwise included in the price actually paid or payable. 19 U.S.C. § 1401a(b)(1). If, for any reason, sufficient information is not available with respect to the additions to the price actually paid or payable, the transaction value of the imported merchandise is treated as one that cannot be determined. 19 U.S.C. § 1401a(b)(1). The term “price actually paid or payable” is defined as:

[T]he total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller.

19 U.S.C. § 1401a(b)(4)(A).

The U.S. Customs and Border Protection (“CBP”) Regulations further provide that in determining transaction value, the price actually paid or payable “will be considered without regard to its method of derivation. It may be the result of discounts, increases, or negotiations, or may be arrived at by the application of a formula, such as the price in effect on the date of export in the London Commodity Market.” 19 C.F.R. § 152.103(a)(1).

Furthermore, the word “payable” refers to a situation in which the price has been agreed, but actual payment has not been made at the time of importation.

On the other hand, the Statement of Administrative Action states that changes in the price actually paid or payable which are arrived at subsequent to the time of importation shall not be taken into account in determining transaction value. This would apply to renegotiation, deferred quantity discounts, or rebates. Moreover, 19 U.S.C. § 1401a(b)(4)(B) states that “any rebate, or other decrease in, the price actually paid or payable that is made or otherwise affected between the buyer and the seller after the date of the importation of the merchandise into the United States shall be disregarded in determining the transaction value.”

CBP has consistently enumerated three criteria in determining whether a discount or price adjustment should be considered part of the transaction value of imported merchandise. See Headquarters Ruling Letter (“HQ”) 563419, dated May 4, 2006. First, the discount or price adjustment must be agreed on prior to the importation of the merchandise. See Allied International v. United States, 795 F. Supp. 449 (CIT 1992) (importer required to affirmatively show that there was a pre-importation agreement for the claimed discount). See also HQ 964192, dated February 15, 2002 (discounted price constituted the price actually paid for the imported footwear because the discounts were agreed to and effected prior to importation); and HQ 547019, dated March 31, 2000 (discounted price, which was based on established criteria from a price list and was agreed to prior to importation, constituted the price actually paid or payable for the imported merchandise).

The second criterion is that the importer must be able to furnish CBP with sufficient documentary evidence to support the existence of the discount and establish that it was agreed to before the time of entry. See HQ 547144, dated November 20, 1998; see also HQ 545659, dated October 25, 1995 (unconditional discount factored into the value declared at the time of entry and reflected on the invoice presented to CBP, may be taken into account in determining transaction value).

The third criterion requires that the discount or price adjustment be unconditional, or if conditional all the conditions must be met prior to importation. We articulated this criterion in HQ 545659, supra, in which we determined that a discount is unconditional when there are no specified purchasing obligations placed on the customer. In that case, we held with respect to both the unconditional and conditional discounts indicated on the invoice at the time of entry when no amount is rebated, that these discounts are taken into consideration in determining transaction value. In those instances where the customer has not yet fulfilled the specified purchasing obligation at the time of entry, the conditional discounts are not taken into consideration in determining transaction value. Id.

You state that the Engine Discount is agreed to by JetBlue, [Company B], and [Company A] prior to the importation of the December 2019 Aircraft. The Engine Discount is established by the Support Agreement, the Purchase Agreement, and the Partial Assignment. As previously noted, the Support Agreement is dated March 30, 2018; the Purchase Agreement is dated October 19, 2011; and, the Partial Assignment is dated November 20, 2019. All of these agreements establishing the Engine Discount are dated before the December 2019 Aircraft was imported into the United States on December 5, 2019. Accordingly, we find that the Engine discount is agreed upon prior to the importation of the aircraft at issue.

Further, the discount is reflected as the “Propulsion Systems manufacturer discount” for $[X] on the commercial invoice, dated November 21, 2019, from [Company A] to JetBlue for the December 2019 Aircraft for a total amount of $[X]. The invoice amount including the discount corresponds to the total payment remitted by JetBlue to [Company A] for the December 2019 Aircraft. These documents indicate that JetBlue, [Company B], and [Company A] agreed to the Engine Discount reflected on the documents and are sufficient to support the existence of the discount.

In support of the assertion that the Engine discount in this case is unconditional, you state that the condition for the discount is the selection of [Company B] engines and this is met prior to importation. This condition is set forth in the Support Agreement and the Partial Assignment, and supported by the transaction documents. Accordingly, we find that the discounts under consideration are unconditional.

Based on the information submitted, we find that the Engine Discount may be taken into account in determining the price actually paid or payable of the imported aircraft, since the discount is effected prior to the date of importation.


Based on the information submitted, the Engine Discount, which JetBlue, [Company B] and [Company A] agree upon prior to the importation of the aircraft, may be taken into account in determining the price actually paid or payable for the imported aircraft.

Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”


Monika R. Brenner, Chief
Valuation and Special Programs Branch