OT:RR:CTF:VS H349649 AMW
Taeho Bae
[ ]
[ ]
[ ]
RE: “First sale” appraisement; imported automotive parts
Dear Mr. Bae:
This is in response to your letter, dated June 4, 2025, on behalf of [
] (the “Requestor” or the “Parent”) for a prospective ruling on the use of “first sale”
valuation of certain importations of automotive parts into the United States.
You have requested confidential treatment for the information contained in its
submission, which includes certain identifying information. Inasmuch as the request conforms to
the requirements of 19 CFR §177.2(b)(7), the company’s request for confidentiality is approved.
The information contained within brackets and all attachments to the request will not be released
to the public and will be withheld from published versions of this ruling.
FACTS:
The following facts are based on your June 4, 2025, ruling request and follow-up
information provided to this office on November 24, 2025, and January, 22, 2026. [
] [the “Importer”] is a U.S.-based subsidiary of the Requestor that
manufactures finished motor vehicles in the United States. The Importer imports certain
component parts from the [ ] (“Country A”) via a related middleman, [
] (the “Middleman”). The Middleman is an affiliate of the Requestor and is a
related party to the Importer. The Middleman, meanwhile, purchases the component parts from
unrelated manufacturers in Country A, including [ ] (the “Manufacturer”).
To illustrate the prospective transactions, you provided representative documentation
regarding a transaction involving the importation of a Shaft Assembly Propeller (the
“components” or the “merchandise”) produced by the Manufacturer. The request states that the
exemplary transaction occurs as follows:
1. The Importer places a purchase order with the Middleman;
2. The Middleman places a corresponding purchase order with the Manufacturer;
3. The Manufacturer produces and sells the components to the Middleman;
4. The components are transported to a facility owned by the Middleman in Country A;
5. The Middleman inspects the components, pays the Manufacturer, and packages and
prepares the components for exportation;
6. The Middleman sells the components to the Importer and exports the components to
the United States.
In support, the Requestor provided the following documentation relating to a
representative transaction related to the import of components purchased from the Manufacturer
via the Middleman:
• Purchase order issued by the Importer to the Middleman and generated within the
Parent’s internal sales system, described as “SAP, [ ] Partner, Etc.”;
• Receipt issued by the Middleman to the Importer acknowledging receipt of the
purchase order and assigning a new purchase order number for a corresponding
purchase by the Middleman from the Manufacturer;
• Receipt issued by the Manufacturer within “[ ] Partner” system acknowledging
the Middleman’s purchase order. The Importer is listed as the eventual recipient.
• “Goods release Slip” memorializing transfer from the Manufacturer’s Country A
plant for an “outbound destination” at the Middleman’s Country A packaging facility;
• “Delivery Instruction Sheet” issued by the Middleman regarding delivery of the
components at its Country A packaging plant;
• “Goods Receipt Confirmation” issued by the Middleman’s Country A packaging
plant to the Manufacturer;
• Document titled “Materials Management>Receiving Information>Daily
InspectionInformation [sic]” (described in the request as an “Inventory Transfer
Record”). The document lists the Middleman as packing site and as customer;
• Tax invoice listing the Manufacturer as “seller” and Middleman as “buyer”;
• A shipping mark and photographs showing that merchandise received by the
Middleman from the Manufacturer is repackaged and labeled for shipment to the
Importer in the United States;
• Commercial invoice issued by the Middleman to Importer, providing terms of sale as
delivered duty unpaid (“DDU”) Montgomery, AL, USA;
• Marine Cargo Insurance Policy for shipment of merchandise from Country A to the
United States, referencing the invoice, and listing the Middleman as the insured party;
• Sea Waybill for a shipment of “vehicle parts” from Country A to Mobile, Alabama.
The document references the underlying invoice number and the Middleman as the
shipper and Importer as consignee;
• Packing List referencing the underlying invoice;
• CF-7501 Entry form dated March 24, 2025
• Deposit Slip from the Middleman, showing receipt of funds from the Importer with a
line item referencing the underlying purchase order.
2
The Parent has clarified that the Manufacturer is not selected as a vendor by the
Middleman or Importer, but rather by the Parent itself. Specifically, the Parent conducts a
“global competitive bidding process based on fair criteria such as price, production capacity,
R&D, and other relevant factors….” The Parent has provided an internally prepared “Bidding
Results Report” stating that the Manufacturer had been selected as the supplier for the subject
shaft propeller units over five other prospective manufacturers after having “submitted the lowest
quotation and achieved the highest overall score….”
In addition to the documentation described above, the Requestor has provided the Supply
Agreement governing the relationship between the Middleman and Manufacturer. This
agreement outlines the terms governing the pricing practices, transfer or merchandise, and
payment between the Manufacturer and Middleman. As outlined in the Supply Agreement, the
unit price is typically set by the Manufacturer and communicated to the Parent: “[t]he unit price
of parts shall be based on the price supplied by [the Manufacturer] to [the Parent], excluding the
ranking fee….” 1 The Supply Agreement also specifies that the Manufacturer shall deliver
merchandise to the Middleman and that title will transfer from the Manufacturer to the
Middleman upon the date the parts are deemed to be delivered (i.e., the date the parts pass
inspection). Accordingly, the agreement grants the Middleman authority to inspect components
produced by the Manufacturer within ten days of receiving the parts and to return any
components deemed defective. Finally, the agreement stipulates that the Middleman will pay the
Manufacturer via promissory note within 60 days of the issuance of a tax invoice.
The domestic shipping terms between the Manufacturer and Middleman are not specified
on the transaction documents presented. In response to U.S. Customs and Border Protection’s
(“CBP’s”) request for shipping documents between the Manufacturer and the Middleman, the
Parent responded that “it is not ordinarily required for parties to exchange or issue a
documentation demonstrating the transfer of title every time goods are transferred or moved.”
The Parent also presented a “Cargo Transportation Agreement” between the Manufacturer and a
local transportation company (the “Inland Carrier”). In relevant part, this agreement specifies
that “responsibility for products transferred by [the Manufacturer] to [the Inland Carrier] shall
rest with the [Inland Carrier] from the time of receipt until unloading at the designated
warehouse…” and, further, the Inland Carrier “shall be responsible for any damage or loss
occurring during this period.”
As provided in the Middleman’s invoice, the sale between the Middleman and Importer is
based on a DDU term of sale. The Country A port of shipment is [ ], and the U.S.
port of importation is Mobile, Alabama. The Parent has also provided an “Import Supply
Agreement” between the Middleman and Importer. The Import Supply Agreement grants the
Middleman exclusive rights to supply parts needed in automobile construction originating from
Country A to the Importer outside of parts directly produced by the Parent. Further, each
purchase order submitted by the Importer to Middleman shall “contain a firm order for
materials…to be supplied… for [Importer’s] one-week manufacturing requirements” and broken
down by types of components, quantities, and place of delivery. The prices between the parties
“will be fixed and applied and be adjusted by mutual consent of both parties.”
1
We note that the contract provided by the requestor is in the Country A language. The English translation was
generated by an artificial intelligence translator. No official translation was provided.
3
The Parent submits that the transaction at issue should be appraised using the transaction
value between the Manufacturer and Middleman as a bona fide sale for export to the United
States, and would like us to confirm whether this understanding is correct.
ISSUE:
Whether the sale between the Manufacturer and Middleman is a bona fide sale for export
to the United States that may be used for appraisement purposes under transaction value.
LAW AND ANALYSIS:
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, codified at 19
U.S.C. § 1401a. The preferred method of appraisement is transaction value. For purposes of this
ruling, we accept that transaction value is the proper method of appraisement for the imported
merchandise. Transaction value is the “price actually paid or payable for the merchandise when
sold for exportation to the United States” plus certain statutorily enumerated additions. 2 Unless
there is a bona fide (good faith) sale of merchandise for exportation to the United States, the
transaction value method cannot be used.
The Parent seeks to utilize the “first sale” transaction value of the sale between the
Manufacturer and Middleman occurring in Country A. In Nissho Iwai American Corp. v United
States, 982 F.2d 505 (Fed. Cir. 1992), the court reviewed the standard for determining
transaction value in a multi-tiered transaction. The case involved a foreign manufacturer, a
middleman, and a U.S. purchaser. The court held that the price paid by the middleman to the
foreign manufacturer was the proper basis for transaction value. The court stated that in order
for the foreign manufacturer’s price to be a valid transaction value, the transaction between the
foreign manufacturer and the middleman needed to be a sale negotiated at “arm’s length” that
was free from any non-market influences, and involved goods clearly destined for exportation to
the United States.
In accordance with the Nissho Iwai court decision and our own precedent, we presume
that transaction value is based on the price paid by the importer. An importer may request
appraisement based on the price paid by the middleman to the foreign manufacturer in situations
where the middleman is not the importer. It is the importer’s responsibility to show that the
“first sale” price is acceptable under the standard set forth in Nissho Iwai. The U.S. importer
must present sufficient evidence that the alleged sale was a bona fide “arm’s length sale” and that
it was “a sale for export to the United States” within the meaning of 19 U.S.C. § 1401a.
In Treasury Decision (“T.D.”) 96-87, dated January 2, 1997, the Customs Service (now
CBP) advised that the importer must describe in detail the roles of the parties involved and must
2
The additions include: the packing costs and any selling commissions incurred by the buyer with respect to the
imported merchandise; the value, apportioned as appropriate, of any assist; any royalty or license fee related to the
imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the
imported merchandise for exportation to the United States; and, the proceeds of any subsequent resale, disposal, or
use of the imported merchandise that accrue, directly or indirectly, to the seller. 19 U.S.C. § 1401a(b)(1)(A)-(E).
4
supply relevant documentation addressing each transaction that was involved in the exportation
of the merchandise to the United States (e.g., the alleged sale between the importer and
middleman, and the alleged sale between the middleman and the manufacturer). Relevant
documents include, but are not limited to purchase orders, invoices, proof of payments, contracts,
and any additional documents (i.e. correspondence) that establishes how the parties deal with one
another. CBP is looking for “a complete paper trail of the imported merchandise showing the
structure of the entire transaction.” T.D. 96-87 further provides that the importer must also
inform CBP of any statutory additions and their amounts. If unable to do so, the sale between
the middleman and the manufacturer cannot form the basis of transaction value.
In sum, CBP presumes that transaction value is based on the price paid by the importer
and in order to rebut this presumption and prove that transaction value should be based on some
other price, complete details of all the relevant transactions and documentation (including
purchase orders, invoices, evidence of payment, contracts and other relevant documents) must be
provided, including the relationship of the parties and sufficient information regarding the
statutory additions.
To use a “first sale” price as the basis of appraisement under transaction value, the court
in Nissho Iwai required the transaction between the foreign manufacturer and the middleman to
be a bona fide sale. “Sale” means a transfer of property from one party to another for
consideration. See J.L. Wood v. United States, 62 C.C.P.A. 25, 33, 505 F.2d 1400, 1406 (1974).
CBP considers whether the potential buyer has assumed the risk of loss and acquired title to the
imported merchandise. In addition, CBP may examine whether the purported buyer paid for the
goods, and whether, in general, the roles of the parties and circumstances of the transaction
indicate that the parties are functioning as buyer and seller.
In this case, the issue is whether there is a bona fide sale for export between the unrelated
Manufacturer and Middleman. As the Manufacturer is not related to the Middleman, there is a
presumption that transactions between these parties are at arm’s length. Based on the
documentation presented to support the claim, the manufacturers were aware that the
merchandise was destined for the United States. Although the Manufacturer delivered the
merchandise to the Middleman’s facility in Country A, the “purchase order receipt” related to the
exemplary order from the Manufacturer lists the U.S. Importer as the destination factory for the
order. As such, we are satisfied that the sale between the Manufacturer and Middleman would
be a sale for exportation to the United States.
The remaining issue, therefore, is whether the transaction is a bona fide sale, and that
requires determining whether the Middleman is an independent buyer/seller or is acting as an
agent for either the Importer or the unrelated manufacturer. A seller “acts in his own name and
receives the title to the property which he thereafter is to transfer.” Rosenthal-Netter, Inc. v.
United States, 12 CIT 77, 81, 679 F. Supp. 21, 25 (1988), quoting Restatement (Second) of
Agency § 14K, comment a(2) (1958). As the court pointed out in Rosenthal-Netter, 12 CIT at
83, 679 F. Supp. at 26, citing New Trends, Inc. v. United States, 10 CIT 637, 640, 645 F. Supp.
957, 962 (1986), it “is uncharacteristic of an agency relationship to allow the intermediary to
bear the risk for damaged, lost, or defective merchandise.”
5
In this case, based on the documentation provided, the Middleman assumes title and risk
of loss for the subject merchandise. In its communication to CBP, the Parent notes that there is
no individual shipment documentation between the Manufacturer and Middleman. However, the
Cargo Transportation Agreement between the Manufacturer and Country A Inland Carrier states
that “responsibility for the products” is transferred from the Manufacturer to Inland Carrier, and
that the Inland Carrier becomes liable for any damage or loss occurring during transportation to
the Middleman’s facility. Further, the terms of the Supply Agreement between the Manufacturer
and Middlemen demonstrate that title and possession pass to the Middleman at its warehouse.
For instance, the Supply Agreement states that, upon delivery, the Middleman will inspect the
merchandise within ten days and is empowered to return nonconforming deliveries or seek other
remedies. Once the goods have been inspected, furthermore, the Supply Agreement provides
that “[t]itle of the ordered parts shall transfer to [the Middlemen].” The Agreement also
obligates the Middleman to make payment for the merchandise within 60 days of the
Manufacturer issuing a tax invoice. Next, the Requester has provided documentation (e.g.,
delivery instructions and goods receipt confirmation) and photographic evidence showing that
the Middleman takes physical possession of the merchandise at its warehouse facility and
packages the merchandise for exportation to the United States. Upon shipment to the United
States, furthermore, the marine cargo insurance policy identifies the Middleman as the insured
party, which further indicates that the Middleman assumes the risk of loss for the merchandise.
Taken together, the documentation demonstrates that the Middleman assumes title and risk of
loss for the merchandise from the Manufacturer before exportation to the United States. As
such, for the subject merchandise, the Middleman acts as a buyer/seller and not as an agent for
the Manufacturer or Importer.
Based on the foregoing, we determine the subject merchandise is clearly destined to the
United States, there is a presumption that the Manufacturer and Middleman operate at arm’s
length because they are unrelated, and the Middleman acts as a bona fide buyer/seller who
assumes title and risk of loss for the merchandise. As a result, we agree that appraisement of the
subject shaft assembly propeller may be based upon the “first sale” from the Manufacturer to the
Middleman.
HOLDING:
Based on the information this office reviewed, “first sale” transaction value appraisement
may be utilized by the Requestor for the transaction described herein. The Importer may be
asked to present additional information to the ports for specific entries to support its use of “first
sale” appraisement and should be prepared to present such information.
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 Customs Service 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.”
6
A copy of this ruling letter should be attached to the entry documents filed at the time this
merchandise is entered. If the documents have been filed without a copy, this ruling should be
brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch
7