OT:RR:CTF:VS H350905 AMW
Jaime De La Cruz
[ ]
[ ]
[ ]
RE: Transaction Value; Transaction Value of Identical or Similar Merchandise; Imported
Aircraft Engine Parts; No Sale
Dear Mr. De La Cruz:
This is in response to your letter, dated July 28, 2025, in your capacity as an employee of
[ ] (the “Requestor”) for a prospective ruling on the valuation of
certain aircraft engine components imported into the United States.
You have requested confidential treatment for certain information contained in your
submission, which includes certain identifying information. Inasmuch as the request conforms to
the requirements of 19 CFR §177.2(b)(7), the Requestor’s application 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 July 28, 2025, ruling request and follow-up
information provided to this office on January 30, 2026. The Requestor is a U.S. corporate
affiliate of [ ] (“the Manufacturer”), a producer of aircraft engines
used by large commercial airliners, regional jets, and business aviation. The Manufacturer
exports engine parts to [ ], an unrelated Maintenance, Repair, and
Overhaul shop (the “MRO”) in the United States, which uses the parts to service and repair
aircraft engines produced by the Manufacturer.
Under the scenario described in your request, the MRO may import and install aircraft
parts under two different transaction structures, which you describe as the (1) customer care
contract process, and (2) time and materials (“T&M”) maintenance. These processes differ
based on the contractual relationship between the Manufacturer and the engine operator, all of
whom are similarly unrelated to the Manufacturer, Requester, and MRO.
The customer care process relates to repairs performed by the MRO for engine operators
who have entered a “customer care contract” with the Manufacturer. In so doing, the operator
(typically an airline, shipping company, or other aircraft operator) pays a monthly fee to the
Manufacturer in exchange for certain maintenance and overhaul services of its engines. The
Manufacturer, in turn, subcontracts with the U.S.-based MRO to perform maintenance and
overhaul work as needed under the customer care contracts. The MRO will be paid by the
Manufacturer for all services performed under this arrangement and will not engage with or
receive payment from engine operators. If parts are needed to repair or maintain the engine, the
MRO will issue a purchase order to the Manufacturer. The Manufacturer will then pick and pack
the ordered parts at its Aftermarket Centre in the United Kingdom and ship the items to the
MRO. The MRO will then use the parts to repair or service the engine, which will be returned to
the operator after services are complete. After purchasing the engine parts, the MRO will carry
the parts in its inventory for the duration of the repair process. However, the service contract
between the MRO and Manufacturer requires the MRO to consult the Manufacturer prior to any
disposition decision (e.g., scrap, refurbishment) and that all repair activities be aligned with the
Manufacturer. The agreement between the Manufacturer and MRO further states that the MRO
will not profit from the purchase or sale of parts back to the Manufacturer, but rather from
services and expertise provided by the MRO. Once the repairs are complete and the parts have
been incorporated into the engine that has been serviced or repaired, the MRO will sell the
engine parts back to the Manufacturer. Accordingly, while the operator will gain physical
possession of the engine and incorporated parts after repair/overhaul, the newly incorporated
parts will have been sold back to the Manufacturer by the MRO and will continue to be owned
by the Manufacturer.
Based on this arrangement, the MRO “purchases” repair or service parts from the
Manufacturer but is required to “sell” the parts back to the Manufacturer after repairs/service is
complete without making a profit. Essentially, the Manufacturer reimburses the MRO for its
“purchase” of the repair parts. The Manufacturer then pays the MRO for the repair and expertise
services it performs pursuant to the customer care contract. The request states that the customer
care arrangement is intended to resemble the Manufacturer “moving its own parts around to
service its customer care contracts.”
Under the customer care arrangement, MRO will purchase engine parts at the
Manufacturer’s World List Price (“WLP”) minus an 85% discount. The WLP is described in the
request as “the aspirational, best possible, price that [the Manufacturer] could get for the
aftermarket parts if they were sold directly to operators.” Meanwhile, the request describes the
85% discount as follows:
To account for the sub-contracting of services arrangement, [the Manufacturer] is
selling to the MRO as if it were moving its own goods into the United States.
Accordingly, the pricing of the customer care parts is allocated as it would be
should [the Manufacturer] be moving its own goods without a sale. The WLP –
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85% reflects all costs plus [the Manufacturer’s] producer’s profit, as if [the
Manufacturer] were using a computed value.
The second repair scenario relates to the time and maintenance repairs. T&M repairs are
provided by the MRO to operators of the Manufacturer’s engines who have not entered a
customer care contract with the Manufacturer. In this scenario, an operator contracts directly
with the MRO for repair and overhaul services. After receiving an engine, the MRO will again
examine the engine, identify repairs and maintenance needed, and purchase the necessary parts
from the Manufacturer. The Manufacturer will then pick, pull, and export the parts from the
same U.K. Aftermarket Centre. Unlike parts purchased under the customer care process,
however, the Manufacturer will sell parts to the MRO at WLP with no discount. Further, the
Manufacturer will impose no conditions on the sale, the MRO is not required to consult the
Manufacturer regarding the disposition of the parts, and the MRO will not sell any of the
maintenance or repair parts back to the Manufacturer once repair/overhaul is complete.
The Requestor seeks a prospective ruling only in relation to the valuation of those parts
imported pursuant to a customer care contract. Repair and overhaul services performed under
both the customer care and T&M processes involve the same types of parts imported from the
same facility owned by the Manufacturer. However, the Requestor argues that those parts
imported pursuant to a customer care contract are not subject to a bona fide sale that can form the
basis of a transaction value appraisal. As such, the Requestor seeks to appraise the imported
customer care parts on the basis of the transaction value of identical or similar goods, which
would be those parts sold under the T&M arrangement. In so doing, however, the Requestor
also asserts that the customer care parts are purchased at a different “commercial level” than
those imported for T&M repairs, and that the 85% discount should be deducted for those parts
imported pursuant to a customer care contract.
ISSUE:
What is the correct method of appraisement for the subject aircraft parts imported by the
MRO pursuant to a customer care contract?
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 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 (e.g., royalties, assists, proceeds of subsequent resale that
accrue to the seller). See 19 U.S.C. § 1401a(b)(1). When transaction value cannot be applied,
then the appraised value is determined based on the alternative valuation methods in the order
specified in 19 U.S.C. § 1401a(a): the transaction value of identical or similar merchandise,
deductive value, computed value, and, if the preceding are not available, on the basis of a method
derived from the prior methods reasonably adjusted to the extent necessary to arrive at a value
(i.e., “fallback value”) . The valuation statute further enumerates certain prohibited bases of
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appraisement, including the selling price of merchandise produced in the United States,
minimum values, and arbitrary or fictitious values. 19 U.S.C. § 1401a(f)(2).
To use transaction value, there must be a bona fide sale for exportation to the United
States. In VWP of America, Inc. v. United States, 175 F.3d 1327 (Fed. Cir. 1999), the Court of
Appeals for the Federal Circuit found that the term “sold” for purposes of 19 U.S.C. §
1401a(b)(1) means a transfer of title from one party to another for consideration, (citing J.L.
Wood v. United States, 62 C.C.P.A. 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406 (1974)). In
determining whether property or ownership has been transferred, CBP considers whether the
potential buyer has assumed the risk of loss and acquired title to the imported merchandise. See
Headquarters Ruling (“HQ”) 548239, dated June 5, 2003. Contracts, distribution and other
agreements, invoices, purchase orders, bills of lading, proof of payment, correspondence
between the parties, and company reports all may serve as evidence that a party possesses title in
and assumes the risk of loss for the imported merchandise and functions as a buyer or a seller.
Such documentation should be consistent in its entirety and with the transaction. See, e.g., HQ
H326633, dated September 20, 2022. Other factors that CBP will consider in determining
whether a bona fide sale occurred include whether, in general, the roles of the parties and
circumstances of the transaction indicate that the parties were functioning as buyer and seller.
See HQ 548239, dated June 5, 2003. Specifically, CBP considers as evidence of a valid buyer-
seller relationship whether the buyer provided or could provide instructions to the seller, was free
to sell the transferred item at any price he or she desired, selected or could select its own
downstream customers without consulting with the seller, and could order the imported
merchandise and have it delivered for its own inventory. See HQ 545474. While several factors
may indicate that a bona fide sale occurred between the purported buyer and seller, no single
factor is determinative. See VWP, 175 F.3d at 1339 (“[A] determination that goods are being
sold or assembled for exportation to the United States is fact-specific and can only be made on a
case-by-case basis”)
In this matter, the Requestor asserts that transaction value is unavailable for imported
customer care parts because there is no bona fide sale between the MRO and Manufacturer. We
agree. As outlined above, the customer care transactions are subject to several terms which
demonstrate that the MRO does not act as a true buyer. For instance, the MRO is not free to
choose which engines it services, cannot dispose of imported parts as it sees fit, and is required
to “sell” back the parts to the Manufacturer once repairs or overhaul are completed. As such,
there is no bona fide sale upon which transaction value can be based. In contrast, parts
purchased by MROs to perform T&M services are subject to a bona fide sale. The MRO
purchases these parts at an arm’s length price, title transfers to the MRO, and the MRO is free to
use and dispose of the product in the manner of its choosing.
Because transaction value is unavailable for the customer care parts, we proceed to the
next basis of appraisal, which is the transaction value of identical or similar merchandise.
Specifically, 19 U.S.C. § 1401a(c) provides the following:
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(1)The transaction value of identical merchandise, or of similar merchandise, is
the transaction value (acceptable as the appraised value for purposes of this
chapter under subsection (b) but adjusted under paragraph (2) of this subsection)
of imported merchandise that is—
(A)with respect to the merchandise being appraised, either identical
merchandise or similar merchandise, as the case may be; and
(B)exported to the United States at or about the time that the merchandise
being appraised is exported to the United States.
(2)Transaction values determined under this subsection shall be based on sales of
identical merchandise or similar merchandise, as the case may be, at the same
commercial level and in substantially the same quantity as the sales of the
merchandise being appraised. If no such sale is found, sales of identical
merchandise or similar merchandise at either a different commercial level or in
different quantities, or both, shall be used, but adjusted to take account of any
such difference. Any adjustment made under this paragraph shall be based on
sufficient information. If in applying this paragraph with respect to any imported
merchandise, two or more transaction values for identical merchandise, or for
similar merchandise, are determined, such imported merchandise shall be
appraised on the basis of the lower or lowest of such values.
In the present matter, the Requestor asserts that the transaction value of identical or
similar merchandise is available because items imported pursuant to the T&M transactions are
typically identical or similar to those imported under the customer care contracts. Indeed, the
parts are produced by the same manufacturer and are picked, pulled, and exported from the same
foreign warehouse. As a result, we agree that the parts imported for use in customer care
services may be appraised pursuant to 19 U.S.C. § 1401a(c) based on the WLP transaction value
utilized in T&M sales.
The saliant question is, therefore, whether any adjustments may be made to the WLP for
the customer care parts. As excerpted above, 19 U.S.C. § 1401a(c)(2) permits adjustments to the
transaction value of identical or similar merchandise if the sales of such merchandise occurred at
a different “commercial level.” CBP has not previously considered what might constitute a
different “commercial level” in the application of the transaction value of similar or identical
merchandise. An examination of the legislative history of the TAA, however, indicates the term
“commercial level” references the role an importer or purchaser might play in the marketplace,
such as a distributor, wholesaler, or end user. A “question and answer” document issued by U.S.
Customs upon passage of the TAA specifies the following: “Adjustment would only be made
where such differences would effect [sic] a difference in value. For example if the merchandise
being appraised is sold at wholesale and the identical product is sold at all levels at the same
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price, an adjustment need not be made.” 1 Similarly, the Court of International Trade (“CIT”) has
considered the term “commercial level” while interpreting a separate regulation involving the
application of antidumping and countervailing duties administered by the Department of
Commerce. See 19 CFR § 353.58 (1992) (“The Secretary of Commerce normally will calculate
foreign market value on United State price based on sales at the same commercial level….”)
Although not binding, the CIT’s analysis of the plain language is instructive here. Similar to the
TAA legislative history, the CIT noted that, “the nature of the purchaser is a key element…as
demonstrated in this Court’s past statement that ‘wholesale, retail, and end-user sales…each
represent different levels of trade.” Ad Hoc Comm. v. United States, 808 F.Supp 841 (Ct. Int’l
Trade 1992) (citing NAR, S.p.A. v. United States, 13 CIT 82, 84, 707 F. Supp. 553, 556 (1989)).
In addition, where a sale of identical or similar merchandise occurs at a different
commercial level, the importer must also show that the difference in level warrants an
adjustment to the valuation. The relevant customs regulations at 19 CFR § 152.104 specify that
adjustments for the transaction value of identical or similar merchandise for different commercial
levels “will be made only on the basis of sufficient information; e.g., valid price lists containing
prices referring to different levels or quantities.”
In the present matter, the Requestor asserts that it is entitled to deduct 85% from the WLP
on the basis that the customer care and T&M transactions occur at different commercial levels.
The Requestor argues that in customer care contracts, the MRO functions as a “service provider”
whereas in T&M transactions the MRO functions as more of a “parts and materials
provider/distributor.” The Requestor is correct that sales to parties functioning as a “service
provider” and distributor might be considered different “commercial levels” as referenced in the
valuation statute. However, the available facts show that the MRO operates on the same
commercial level under both scenarios. Specifically, under both arrangements, the MRO imports
the underlying engine parts for the same purpose and uses the parts in the exact same way. In
both cases, the MRO receives an aircraft engine for repair, examines the engine, and determines
what repair or maintenance is necessary. The MRO then places an order with the Manufacturer
for the necessary parts. The Manufacturer obtains the parts from the same exact facility and
exports them to the MRO. The MRO then uses the parts to complete the required maintenance,
and the engine is returned to the operator and placed into service. The MRO will employ the
same staff, techniques, and operations in fulfilling both types of transactions. Contrary to the
Requestor’s characterization, the MRO does not perform different functions as a “service
provider” in one set of transactions and as a “parts and materials provider/distributor” in another.
As such, the transactions between the Manufacturer and MRO remain at the same commercial
level - one in which the MRO imports the merchandise for use in repair and overhaul services.
Assuming arguendo that the customer care and T&M transactions do represent different
commercial levels, the Requestor has not provided sufficient information to justify its proposed
85% downward adjustment. As noted in the regulations, sufficient information may include
“valid price lists containing prices referring to different levels or quantities.” See 19 CFR
152.104. Here, the Requestor states that purchases are made on the basis of a WLP, which
1
The relevant Q&A, along with the SAA and other legislative history pertaining to the TAA is publicly available on
CBP’s website at https://www.cbp.gov/sites/default/files/assets/documents/2018-
Oct/Cust%20Val%20under%20TAA%20%28003%29-signed.pdf.
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would constitute such a list price. However, the Requestor has not proffered the price list to
show that an 85% discount would constitute a standard discount for different commercial levels
or quantities. Instead, the Requestor’s argument is circular in nature. The Requestor states that
the 85% discount to the WLP is reflected in a signed letter of intent (“LOI”) between itself and
the MRO. Because sales of products at WLP would be given a deduction of 85%, the Requestor
argues, this amount is the proper deduction to account for the purported difference in commercial
level between the MRO operating under a commercial care agreement and the MRO operating
under a T&M arrangement. However, elsewhere in its submission, the Requestor also concedes
that a customer care sale, which includes the same 85% deduction, is not a true sale upon which
transaction value can be based. The Requestor’s argument, therefore, is essentially that a
customer care transaction (i.e., WLP minus 85%) cannot form the basis for transaction value
because the transaction is not a sale. Instead, the Requestor argues, the customs valuation should
be based on the transaction value of an identical or similar product sold at WLP pursuant to a
T&M transaction, but that an 85% deduction may still be made because that is what occurs in a
customer care transaction. Accepting this logic would essentially return the customs valuation to
the original transaction price, which the Requestor elsewhere concedes is unavailable because no
sale occurs and that the price is intended to approximate an intracompany transfer. We therefore
determine there is not sufficient information to support an 85% deduction.
Finally, the Requestor argues in the alternative that a valuation of WLP minus 85% is
acceptable as it approximates computed value. Specifically, the Requestor notes: “the WLP –
85% reflects all costs plus [the Manufacturer’s] producer’s profit, as if [the Manufacturer] were
using a computed value.” In response, we note that computed value is not available for two
reasons. First, other than stating the cost would be based on “all costs” plus the Manufacturer’s
“producer’s profits,” the Requestor provides no breakdown of what elements are factored into
the “costs” and “profits” to confirm whether computed value, as outlined in 19 U.S.C. §
1401a(e), would be available. Second, as outlined in HQ 547738, dated November 13, 2001: “if
appraisement to transaction value of identical or similar merchandise is available to Customs,
there is no authority to reject that method and continue sequentially through the remaining
methods of appraisement.”
Based on the foregoing, we agree with the Requestor’s proposal to appraise the value of
imported customer care parts based on the transaction value of identical and similar merchandise
imported for the T&M transactions. However, we do not agree with the corresponding proposal
to deduct 85% from the WLP value used in the T&M transactions. As such, the proper method
of valuation is the value of identical or similar merchandise without such an adjustment.
HOLDING:
Based on the above, the merchandise imported by the MRO in fulfillment of customer
care transactions should be appraised based on the transaction value of identical or similar
merchandise imported by the MRO in other purchase transactions with the Manufacturer without
adjustment.
Please note that 19 CFR § 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
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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.”
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
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