H350676

HQ H350676 September 24, 2026 OT:RR:CTF:VS H350676 RMC CATEGORY: Valuation Conor McHugh ASK Supply Chain Consultants Ltd. Unit 4 Rath Lodge Ashbourne, Ireland RE: First Sale; Multi-Tiered Transactions; Related Parties; Beverage Equipment Dear Mr. McHugh: This is in response to your request of July 4, 2025, on behalf of your client, Marco Beverage Systems US (“MBUS”) for a prospective ruling on the use of “first sale” appraisement for imported merchandise. Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division for response. FACTS: The proposed multi-tier transaction involves three parties: (1) MBUS, the U.S. importer; (2) Marco Beverage Systems Ltd. (“MBS”), an Irish middleman; and (3) Marco Catering Equipment Ningbo (“Ningbo”), a Chinse manufacturer. All three entities are “related parties” for purposes of customs valuation. The sample transaction outlined in your submission involves a “countertop tap boiler,” which is designed for compact and energy-efficient hot water dispending in low-volume applications such as cafes, offices, and catering stations. The following documents were provided for our review: • A purchase order from MBUS to MBS for 24 units of the merchandise, along with a corresponding order confirmation, indicating shipment to MBUS in the United States; • A purchase order from MBS to Ningbo for 24 units of the merchandise, along with a corresponding order confirmation, indicating shipment from Ningbo to MBS in Ireland; • An invoice from MBS to MBUS, with a delivery location in the United States and the annotation that “[a]ll goods are sold on the understanding that the title of the goods does not pass to the purchaser until such time as any debt to Marco Beverage Systems by the 1 purchaser has been discharged in full, regardless of whether the debt is associated with the present transaction or otherwise”; • An invoice from Ningbo to MBS, with FOB Ningbo terms and shipment to the United States; • A bill of lading for the merchandise, indicating shipment by sea from Ningbo, China to Vancouver, Canada, with a place of delivery in the United States; • An invoice from the freight forwarder to MBUS corresponding to the bill of lading; • Proof of payment by MBUS for the goods and freight-forwarding services; and • Proof of payment by MBS for the goods. In response to our request for information establishing that the transactions were conducted at arm’s length, you provided a “memorandum for benchmarking study” that was prepared for Ningbo by an accounting firm. The document notes that: “according to the China transfer pricing laws and regulations, the [Transactional Net Margin Method] (“TNMM”) is the most appropriate method to validate the connected transactions between Marco Ningbo and its related parties” and cautions that the analysis “is not intended to be used for transfer pricing inspection in countries or regions outside China.” The document attempts to identify similar companies in the Asia-Pacific region; however, it states that “given it is difficult to locate exact comparable companies, we have 1 expanded the product type to the extent possible, such as commercial equipment.” The study then goes on to identify ten “comparables” and establish an average interquartile range of profits between fiscal years 2019 and 2021, concluding that “MTC of the 10 comparable companies yielded an interquartile range of 4.13% to 10.10%, with a median of 7.73% on a three-year weighted average basis” and that “the EBITDA margin of the 10 comparable companies yielded an interquartile range of 4.94% to 11.14%, with a median of 8.52% on a three-year weighted average basis.” ISSUE: Whether the merchandise will be eligible for appraisement based on the first sale between Ningbo and MBS. 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 the merchandise when sold for exportation to the United States” plus certain statutory additions. 19 U.S.C. § 1401a(b)(1). In Nissho Iwai American Corp. v. United States, 982 F. 2d 505 (Fed. Cir. 1992), the Court of Appeals for the Federal Circuit reviewed the standard for determining transaction value when there 1 We note that while one of the pages containing the list of comparables is missing from the document, it appears that they produce merchandise such as air conditioners, ice machines, gas stoves, heaters, sushi making machines, and rice cookers. 2 is more than one sale which may be considered as being a sale for exportation to the U.S. The case involved a foreign manufacturer, a middleman, and a U.S. purchaser. The court held that the price paid by the middleman/importer to the manufacturer was the proper basis for transaction value. The court further stated that in order for a transaction to be viable under the valuation statute, it must be a sale negotiated at arm’s length, free from any non-market influences, and involving goods clearly destined for the U.S. See also Synergy Sport International, Ltd. v. United States, 17 C.I.T. 18 (1993). In accordance with the Nissho Iwai decision and our own precedent, we presume that transaction value is based on the price paid by the importer. In further keeping with the court’s holding, we note that 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. However, it is the importer’s responsibility to show that the “first sale” price is acceptable under the standard set forth in Nissho Iwai. That is, the 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 U.S. Customs and Border Protection (“CBP”)) advised that the importer must provide a description of the roles of the parties involved and must supply relevant documentation addressing each transaction that was involved in the exportation of the merchandise to the U.S. The documents may include, but are not limited to purchase orders, invoices, proof of payments, contracts, and any additional documents (e.g., correspondences) that establishes how the parties deal with one another. The objective is to provide CBP with “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. The first issue in this case is therefore whether a bona fide, arm’s-length sale will occur between Ningbo and MBS. 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)). No single factor is decisive in determining whether a bona fide sale has occurred. See Headquarters Ruling Letter (“HQ”) 548239, dated June 5, 2003. CBP will consider such factors as to whether the purported buyer assumed the risk of loss for, and acquired title to, the imported merchandise. Evidence to establish that consideration has passed includes payment by check, bank transfer, or payment by any other commercially acceptable means. Payment must be made for the imported merchandise at issue; a general transfer of money from one corporate enti

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 certain statutory additions. 19 U.S.C. § 1401a(b)(1). In Nissho Iwai American Corp. v. United States, 982 F. 2d 505 (Fed. Cir. 1992), the Court of Appeals for the Federal Circuit reviewed the standard for determining transaction value when there 1 We note that while one of the pages containing the list of comparables is missing from the document, it appears that they produce merchandise such as air conditioners, ice machines, gas stoves, heaters, sushi making machines, and rice cookers. 2
is more than one sale which may be considered as being a sale for exportation to the U.S. The case involved a foreign manufacturer, a middleman, and a U.S. purchaser. The court held that the price paid by the middleman/importer to the manufacturer was the proper basis for transaction value. The court further stated that in order for a transaction to be viable under the valuation statute, it must be a sale negotiated at arm’s length, free from any non-market influences, and involving goods clearly destined for the U.S. See also Synergy Sport International, Ltd. v. United States, 17 C.I.T. 18 (1993). In accordance with the Nissho Iwai decision and our own precedent, we presume that transaction value is based on the price paid by the importer. In further keeping with the court’s holding, we note that 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. However, it is the importer’s responsibility to show that the “first sale” price is acceptable under the standard set forth in Nissho Iwai. That is, the importe