OT:RR:CTF:VS H324885 EE
Center Director
Electronics Center of Excellence and Expertise
U.S. Customs and Border Protection
7501 Esters Blvd, Suite 160
Irving, TX 75063
RE: Application for Further Review of Protest No. 4197-22-106050; Transaction Value
Dear Center Director:
This is in reference to the Application for Further Review (“AFR”) of Protest No. 4197-22-106050, timely filed on December 20, 2022, on behalf of the importer, [X] (hereinafter, the “protestant”), concerning the valuation of certain electronics goods.
The protestant asked that certain information submitted in connection with this ruling 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 contained within brackets and all attachments to this ruling request, forwarded to our office, will not be released to the public and will be withheld from published versions of this decision.
FACTS:
The protestant, as a distributor of electronic components, enters into pricing adjustment policies with its unrelated suppliers. In 2021, the protestant imported into the United States various integrated circuits that were purchased from its unrelated supplier [X].
The protestant filed post-summary corrections to amend the valuation of the entries to account for the discounts received from the supplier. CBP initially liquidated the entries reflecting the amended valuation and accordingly noted a “change decrease”. Subsequently, on June 24, 2022, CBP re-liquidated the entries noting a change increase, denying the post-summary correction. The protestant protests CBP’s appraisement of the entries at reliquidation and requests that CBP reliquidate the entries at the original post-summary correction values.
The protestant provided the following documents:
-A copy of the Distribution Agreement dated December 19, 2012.
-Invoice no. 8907361890, dated June 17, 2021, issued from the supplier, shipped to the protestant for [X] pieces of LEDs for $[X]. The price per item is $[X]. The terms of delivery are EXW shipper origin. The terms of payment are “within 30 days after date of invoice” and “up to 7/17/2021 without deduction”. The invoice references purchase order no. CCAW8S, which was not provided to our office.
-A packing list, dated June 16, 2021, from [X] c/o [X] in Guangdong, China, to the protestant. The packing list indicates [X] pieces of items.
-A waybill, dated June 18, 2021, listing the shipper as [X] located in Hong Kong and the receiver as the protestant. The weight listed is 144 kg and the quantity listed is 26 pieces.
-A screen-print from the supplier’s order system of the Ship and Debit request and approval, dated May 27, 2021, to reduce the price of the entered merchandise to $[X] per piece. The item number on the screen-print corresponds to the item number listed on invoice no. 8907361890 and the packing list. The screen-print lists quote number as Q-00102930, quote name as [X], indicating opportunity name as “non-DR special price request”. Status listed is “approved”. Approve/reject date is listed as May 27, 2021. Special cost listed is $[X] per piece which is a total of $[X] for the line item at issue ($4,125.00 less than the invoice price).
-A credit memo, dated July 16, 2021, from the supplier billed to the protestant’s parent and shipped to the protestant, providing a credit of $[X]/1000 pieces for a total of $4,125.00 for the specific line item at issue. The final total amount listed on the credit memo which includes other credits is $[X]. The terms of payment are “within 30 days after date of invoice” and “up to 8/15/2021 without deduction”. The credit memo refers to invoice no. 8907361890. The customer material number and item type number listed on the credit memo correspond to the numbers listed on invoice no. 8907361890.
-Debit note no. MC7367, dated July 22, 2021, from the protestant to the supplier for a total of $[X].
-A printout of a payment overview indicating payment from the protestant to the supplier, dated July 23, 2021, in the amount of $[X]. The printout lists invoice no. 8907361890 for the amount of $[X].
-A spreadsheet that documents the payment detail for the payment of $[X]. Row 231 includes the original invoice amount $[X]. Row 2 of the spreadsheet includes the debit note no. MC7367 for $[X]. The line item detail for $[X] is included in the credit memo which is the credit for $4,125.00 for [X] pieces of LEDs.
-A spreadsheet listing wire transfers to the supplier. Row 136 of the spreadsheet includes the wire transfer for $[X] on July 23, 2021.
ISSUE:
Whether the imported merchandise may be appraised under transaction value based on the discounted price.
LAW AND ANALYSIS:
Merchandise imported into the United States is appraised for customs purposes 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 primary 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. See 19 U.S.C. § 1401a(b)(1). The term “price actually paid or payable” is more specifically defined in 19 U.S.C. § 1401a(b)(4)(A) as the “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 …) made, or to be made, for the imported merchandise by the buyer to, or for the benefit of, the seller.” The 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 . . .” 19 C.F.R. § 152.103(a)(1). The CBP Regulations further cite the following example:
A seller offers merchandise at $100, less a two percent discount for cash. A buyer remits $98 cash, taking advantage of the cash discount. The transaction value is $98, the price actually paid or payable. 19 C.F.R. § 152.103(a)(1), Example 5.
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.”
The protestant claims that the Distribution Agreement, which sets forth the terms and conditions of discounted pricing offered to the protestant through the supplier’s Ship from Stock and Debit (“SSD”) and Market Price Program (“MPP”) discounted programs, establishes that the discounted pricing received by the protestant was agreed to and effected prior to importation. The Distributor Agreement provides in Schedule (G), Section II that:
Where a Product is designated as being subject to SSD pricing, it is priced and sold to Distributor with the understanding that Distributor may find it necessary to sell the Product at a lower price to be competitive in the market. The SSD procedure allows [the supplier] to make adjustments to the Distributor's purchase price after resale by way of rebate, thereby providing pricing flexibility. Under the SSD program, Distributor will purchase the Products at [the supplier’s] list prices set forth in the applicable Price Book(s). After re-selling the Product to its customer pursuant to an SSD Quote and Debit Authorization approved by [the supplier], Distributor will submit to [the supplier] SSD claims including the information required in subsection B below. These claims can be submitted monthly through a written or electronic report showing its compliance with the applicable SSD Quote Price (as hereinafter defined). Where the sale is confirmed and validated by [the supplier], Distributor will be issued a rebate equivalent to the difference between the Product price listed in the applicable Price Book(s) and the SSD Quote Price (as hereinafter defined) for such Product (the “SSD Rebate”).
To receive the SSD Rebate, Distributor must follow the following
procedure:
SSD Quote: Distributor must notify [the supplier] in advance of an intended sale transaction involving a Product subject to SSD pricing by submission of the [the supplier] Special Quotation Request Form or such other form as may be required from time to time by [the supplier] (an “SSD Quote Request”). All portions of the Special Quotation Request Form should be completed by Distributor for proper opportunity qualification. [The supplier] may request additional/clarifying information prior to responding to an SSD Quote Request.
[The supplier] will respond to Distributor’s SSD Quote Request within a commercially reasonable time and as such, [the supplier] will make commercially reasonable efforts to respond no later than forty eight (48) hours providing either its written approval, or proposing modifications for Distributor’s further acceptance. After [the supplier] has approved a final SSD Quote Request (the final approved SSD Quote Request is referred to herein as the “SSD Quote”, and the final approved adjusted price for a Product under this SSD program is referred to herein as a “SSD Quote Price”), Distributor may resell the Products to its customer and apply to [the supplier] for an SSD Rebate. The SSD Quote Price is not subject to modification during the validity period set forth in the SSD Quote. (emphasis added).
As previously noted, the Distribution Agreement establishing the price adjustments pursuant to the SSD process is dated December 19, 2012. The Ship and Debit request and approval provided as a screen-print from the supplier’s order system to reduce the price of the entered merchandise from $[X] to $[X] per piece is dated May 27, 2021. These documents submitted support the protestant’s claim that the merchandise was renegotiated at a discounted price. Additionally, the dates noted on these documents indicate that the protestant and the supplier agreed to the price reduction before the merchandise was imported into the United States on June 30, 2021. As noted in the facts section, the Ship and Debit request and approval screen-print indicates that the price of the entered merchandise is reduced to $[X] per piece. The credit memo issued by the supplier lists a credit of $[X] per piece, thereby reducing the actual cost of the merchandise from $[X] to $[X] per piece, which corresponds to the discounted price indicated on the Ship and Debit request. As noted on the credit memo from the supplier, the difference between the total invoice price and the discounted price for [X] pieces is $4,125. The sum of all the credits listed at the bottom of the credit memo is $[X], which corresponds to the debit note issued by the protestant. This amount is reflected in the spreadsheet which lists wire transfers to the supplier including a wire transfer for $[X]. The payment details for the wire transfer list the original invoice amount of $[X] and the debit note for $[X], which includes the credit for $4,125.00 for [X] pieces of LEDs.
Based on the information presented, and in the absence of evidence to the contrary, we find that the discounted price for the imported merchandise is supported by the documents provided and is an acceptable price actually paid or payable consistent with 19 U.S.C. § 1401a(b)(4)(A) and 19 C.F.R. § 152.103(a). We note that this decision applies only to the entries at issue in this protest. Documentation presented in related protests must be similarly structured for this decision to be applicable to those protests.
HOLDING:
Based on the information provided, the imported merchandise may be appraised under transaction value based on the discounted price. The protest should be ALLOWED.
You are instructed to notify the protestant of this decision no later than 60 days from the date of this decision. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to this notification. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel and the public on the Customs Rulings Online Search System (CROSS) at https://rulings.cbp.gov/, or other methods of public distribution.
Sincerely,
for Yuliya A. Gulis, Director
Commercial and Trade Facilitation Division