H330207

H330207 May 16, 2025 OT:RR:CTF:VS H330207 AMW CATEGORY: Valuation Michelle Schulz, Esq. Schulz Trade Law PLLC 4131 North Central Expressway Suite 900 Dallas, TX 75204 RE: Method of appraisement for intracompany transfers of company-owned material Dear Ms. Schulz: This is in response to your correspondence, dated January 26, 2023, requesting a binding ruling on behalf of your client, [ ] (“the Carrier”) regarding the method of appraisement for the importation of “company-owned materials” (“COMAT”) to be imported to the United States. You have requested confidential treatment for certain information contained in your submission submission and in the file. Pursuant to 19 CFR§ 177.2(b)(7), the identified information has been bracketed and will be redacted in the public version of this ruling. All attachments to the ruling request will also be considered confidential. FACTS: The facts are based on your January 26, 2023, ruling request as well as follow-up information submitted to this office on July 14, 2023, March 13, 2024, and December 12, 2024. In addition, a meeting was held between U.S. Customs and Border Protection (“CBP”) and the Carrier on December 11, 2024. The Carrier requests a ruling regarding its proposed use of what is described as a [ ] (“average unit price”) methodology to calculate the customs valuation of imported COMAT. The subject COMAT may include the following product types: aircraft parts; engine parts; interior aircraft parts, such as flight computers, communication units and panels, and navigational displays; ground support equipment; calibration apparatuses; shop consumables; and tools for aircraft maintenance. In addition, the COMAT will be imported in one of two ways: (1) intracompany transfers from one of the airline’s international facilities to a U.S.-based facility, or (2) items repaired abroad and returned to the United States. In both instances, the COMAT are incorporated into the Carrier’s aircraft or are otherwise dedicated to the airline’s internal use. The subject COMAT includes only merchandise that is already part of the airline’s inventory and is not purchased for importation nor is the merchandise sold after importation. The subject COMAT involves items that are initially purchased via arm’s-length, thirdparty transactions. After purchase, each item is entered into the Carrier’s [“ ”] system (the “inventory module”), which is the inventory management module within the Carrier’s Enterprise Resource Management system. Items are grouped in the inventory module based on their manufacturing and engineering (“M&E”) part number, which accounts for the item’s manufacturer, aircraft fleet type, Air Transport Association (“ATA”) code, and whether the item is tooling, expendable, repairable, tracking, or rotable. For each item, the inventory module calculates an average unit price, which the Carrier proposes to utilize as the customs valuation. To obtain the average unit price, the inventory module adds the purchase price of each item to the total value of the same items already in the Carrier’s inventory. The inventory module then divides the sum by the new, total quantity of items in stock to calculate an updated average unit price. Your request explains that the average unit price for each item incorporates the price paid for items in both new and refurbished condition. The average unit price is based on a weighted average that considers the pre-purchase and purchase value of the subject COMAT. As an illustration, the Carrier provided an exemplary spreadsheet showing the average unit price calculations utilized for five COMAT parts in the company’s inventory. The Carrier also provided a summary of the calculations used, stating: [For one line item], the total value (QTY 84 x [average unit price] $1,680.75) of the parts in inventory before the purchase was $141,183.00. The total value of the new purchase (QTY 49 x $1,710.00) was $83,790.00. [The inventory module] calculated the new [average unit price] by taking the sum of the pre-purchase and purchase values, $224,973.00, and dividing it by the new total on hand quantity, 133. The new [average unit price] was $1,691.52. If [the inventory module] had used a straight average formula, without regard for quantity, the [average unit price] would have been the average of the old [average unit price] ($1,680.75) and the new purchase price ($1,710.00), or $1,695.37. The Carrier has further clarified that the inventory module tracks items on a perpetual inventory basis, which is a continuous accounting practice that records inventory changes in real-time. In doing so, the average unit price factors in the purchase price for each item in the Carrier’s inventory. If the quantity of an item in inventory goes to zero, the average unit price will “restart” with a new purchase. In addition, the Carrier has also clarified that it is not possible to segregate new and refurbished items. Nevertheless, the Carrier has also clarified that, in theory, the average unit price might incorporate the purchase price of items purchased in 2010, 2000, or even 1990 if such items remain in inventory. In the exemplary spreadsheet, the oldest item in inventory was entered into inventory on December 3, 2014. Finally, the average unit price calculation does not include adjustments for depreciation, inflation, the condition of rotable 2 or repairable items, cost of repair, or any change in value for items returned to the Carrier’s inventory after repair. ISSUE: Whether the Carrier’s proposed use of a system average unit price is an acceptable method of appraisal for imports of company-owned material? 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 (“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 merchandise when sold for exportation to the United States,” plus five statutorily enumerated additions. 19 U.S.C. § 1401a(b)(1). When transaction value is not available as an appraisement method, such as in this case where the merchandise is not subject to a sale for export to the United States, the remaining methods of appraisement set forth in 19 U.S.C. § 1401a must be considered. The alternative methods of appraisement, in order of precedence, are: the transaction value of identical or similar merchandise (19 U.S.C. § 1401a(c)); deductive value (19 U.S.C. § 1401a(d)); computed value (19 U.S.C. § 1401a(e)); and the “fallback” method (19 U.S.C. § 1401a(f)). Due to the nature of the merchandise at issue, the methods of appraisement found in 19 U.S.C. § 1401a(b), (c), (d), and (e) are not available. Transaction value under 19 U.S.C. § 1401a(b) is not available because the internal transfers of COMAT are not subject to a sale between parties. In addition, the transaction value of identical or similar merchandise pursuant to 19 U.S.C. § 1401a(c) is not available because the Carrier does not have access to the transaction value of merchandise at the same commercial level and in substantially the same quantity as the subject COMAT. As explained in a supplemental submission, the COMAT imports may include a quantity of a specific part that can vary in use, history of repair, and age. Next, deductive value pursuant to 19 U.S.C. § 1401a(d) is not available because there is no subsequent sale of the COMAT in the United States from which to deduct the required elements. Finally, computed value pursuant to 19 U.S.C. § 1401a(e) is not available because the Carrier does not have access or insight to the manufacturing costs associated with the subject COMAT. Based on the above, we agree with the Carrier that the proper method of appraisement in this scenario is the fallback method. This method is set forth in 19 U.S.C. § 1401a(f) and allows for merchandise to be appraised on the basis of a value derived

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 merchandise when sold for exportation to the United States,” plus five statutorily enumerated additions. 19 U.S.C. § 1401a(b)(1). When transaction value is not available as an appraisement method, such as in this case where the merchandise is not subject to a sale for export to the United States, the remaining methods of appraisement set forth in 19 U.S.C. § 1401a must be considered. The alternative methods of appraisement, in order of precedence, are: the transaction value of identical or similar merchandise (19 U.S.C. § 1401a(c)); deductive value (19 U.S.C. § 1401a(d)); computed value (19 U.S.C. § 1401a(e)); and the “fallback” method (19 U.S.C. § 1401a(f)). Due to the nature of the merchandise at issue, the methods of appraisement found in 19 U.S.C. § 1401a(b), (c), (d), and (e) are not available. Transaction value under 19 U.S.C. § 1401a(b) is not available because the internal transfers of COMAT are not subject to a sale between parties. In addition, the transaction value of identical or similar merchandise pursuant to 19 U.S.C. § 1401a(c) is not available because the Carrier does not have access to the transaction value of merchandise at the same commercial level and in substantially the same quantity as the subject COMAT. As explained in a supplemental submission, the COMAT imports may include a quantity of a specific part that can vary in use, history of repair, and age. Next, deductive value pursuant to 19 U.S.C. § 1401a(d) is not available because there is no subsequent sale of the COMAT in the United States from which to deduct the required elements. Finally, computed value pursuant to 19 U.S.C. § 1401a(e) is not available because the Carrier does not h