H354593

HQ H354593 August 26, 2026 OT:RR:CTF:VS H354593 RRB CATEGORY: Valuation Carmelita Santos, CTCS Consultant, Customs & Logistics Vehicle Logistics Toyota Canada Inc. 1 Toyota Place Toronto, ON M1H 1H9 Canada RE: Used, Damaged, or Defective Transaxle Cores; Valuation under 19 U.S.C. § 1401a(f); Fallback Method Dear Ms. Santos: This is in response to your September 11, 2025, request for a binding ruling, on behalf of Toyota Canada Inc. (“Toyota Canada” or “importer”) regarding the proper method of appraisement for prospective entries of used, damaged or defective transaxle cores. On August 18, 2026, our office held a teleconference with you to discuss this request. On August 20, 2026, you submitted a revised submission and supporting materials to explain the relationship and transactions between the relevant parties. Our response below takes into account all of the aforementioned documentation. FACTS: Toyota Canada imports used, damaged, or defective transaxle assemblies with torque converters (“returned cores”) into the United States under its Transaxle Core Program in conjunction with AISIN Aftermarket & Service of America, Inc. (“AASA”), located in Plymouth, Michigan. Toyota Canada explains that the Transaxle Core Program was designed to prevent after market access to its cores and to sustain its supply chain. Through this program, Toyota Canada initially purchases new or rebuilt transaxle assemblies from AASA and imports them into Canada. After use in Canada, Toyota Canada is the importer of record while AASA is the U.S. consignee and remanufacturer, as explained in further detail below. Toyota Canada states that Toyota Canada and AASA are independent and unrelated. Under the Transaxle Core Program, when Toyota Canada purchases a new or rebuilt transaxle, a $1,000 core deposit is charged per unit at the time of purchase, separate from the product price. Toyota Canada may recover that $1,000 core deposit by returning any used transaxle cores under this program. Under the parameters of the Transaxle Core Program, Toyota Canada collects used, damaged or defective transaxle cores from its dealer network across Canada and exports them to the United States through the Port of Detroit, where they are consigned to AASA in Michigan. For these shipments, Toyota Canada acts as the importer of record in the United States and declares a customs value for the returned cores at entry even though they are not sold for export to the United States. Toyota Canada explains that it does not track or match returned transaxle cores to specific units previously purchased or to subsequent U.S. resale of rebuilt units, including the timing of any such resale. It is also unable to determine at the time of entry which returned cores AASA will later be remanufactured, and which units may later be disposed of through excess core sale channels. To further illustrate the parameters of the Transaxle Core Program, Toyota Canada provided two representative invoices involving the purchase of a rebuilt transaxle. As part of this transaction, AASA issued these invoices, both dated August 17, 2026, to Toyota Canada. These invoices identify the purchase price for the remanufactured transaxle core assembly plus a separately identified refundable core deposit. Toyota Canada also provided one representative invoice, reflecting Toyota Canada’s recovery of the pre-existing core deposit under the Transaxle Core Program when it exports returned cores from Canada, and consigns them to AASA. Toyota Canada issued this invoice, dated February 19, 2026, to AASA. After importation of the returned cores, AASA determines whether particular units will be remanufactured into rebuilt transaxles or disposed of through excess core sale channels in the United States. Some units are remanufactured into rebuilt transaxles for sale to customers in North America. For other units, however, AASA may elect not to remanufacture the used, damaged, or defective core for business reasons such as excess inventory, reduced demand, storage limitations, capacity constraints, inventory management considerations, or operational efficiencies. In these circumstances, such units may be sold as used, damaged, or defective cores to third-party core buyers. To reflect this scenario, Toyota Canada provided supporting documentation from AASA for one representative transaction involving excess returned cores that AASA has elected not to remanufacture, but instead to sell as used, damaged, or defective cores to third- party core buyers. This transaction is reflected in an invoice issued by AASA to an independent U.S. third-party core buyer for sale of a used, defective, or damaged 2 transaxle core at $100 per unit. According to Toyota Canada, it relies on that transaction as the best available objective evidence in the record of the U.S. market value of returned cores in used condition when not sold for export. Toyota Canada proposes to appraise the used, defective, or damaged cores that it imports into the United States and consigns to AASA for remanufacture under the “fallback” method set forth in 19 U.S.C. § 1401a(f). Accordingly, Toyota Canada proposes appraising each of the subject cores at $100 per unit based on the sale price of used, defective, or damaged cores to U.S. third-party core buyers. Toyota Canada asserts that this amount reflects the current U.S. market value for identical or similar used, damaged, or defective cores when not sold for export. Toyota Canada explains that supporting documentation for the proposed fallback value will be maintained and updated as needed. It further asserts that for entry documentation, invoices may be annotated as follows to indicate that the declared value is determined under the fallback method and that the returned cores were not sold for export: “Value declared for CBP purposes only under 19 U.S.C. § 1401a(f), returned cores not sold for export.” ISSUE: What is the proper method of appraisement for used, damaged or defective transaxle cores imported into the United States? LAW AND ANALYSIS: The preferred method of appraising merchandise imported into the United States is the transaction value method as set forth in section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (“TAA”), codified at 19 U.S.C. § 1401a. The transaction value of imported merchandise is the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus amounts for five enumerated statutory additions. See 19 U.S.C. § 1401a(b). In order for imported merchandise to be appraised under the transaction value method, it must be the subject of a bona fide sale between a buyer and seller, and it must be a sale for exportation to the United States. The U.S. Court of Appeals for the Federal Circuit has defined a “sale” as a “transfer of title from one party to another for consideration.” See VWP of America, Inc. v. United States, 175 F.3d 1327 (Fed. Cir. 1999) citing J.L. Wood v. United States, 62 C.C.P.A. 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406 (1974)). U.S. Customs and Border Protection (“CBP”) has held that the return of a core deposit is not a “sale” for purposes of customs valuation. In Headquarters Ruling Letter (“HQ”) W548697 dated June 13, 2006, the importer obtained used auto parts for remanufacturing from retailers and warehouse distributors by providing a refund of a core deposit that the customers paid when the parts were originally purchased. CBP agreed that “it would be inappropriate to use a value for the used alternators and starters that incorporates the Core Charge Value.” As a result, we concluded that the refund of the core charge was not a viable sale for purposes of transaction value. Because none of the more preferred methods of valuation were available, we 3 authorized appraisal under the fallback method, using the “fair market value” method prescribed in IRS Revenue Ruling 2003-20, 2003-6 CB 445, issued January 22, 2003. Si

The preferred method of appraising merchandise imported into the United States is the transaction value method as set forth in section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (“TAA”), codified at 19 U.S.C. § 1401a. The transaction value of imported merchandise is the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus amounts for five enumerated statutory additions. See 19 U.S.C. § 1401a(b). In order for imported merchandise to be appraised under the transaction value method, it must be the subject of a bona fide sale between a buyer and seller, and it must be a sale for exportation to the United States. The U.S. Court of Appeals for the Federal Circuit has defined a “sale” as a “transfer of title from one party to another for consideration.” See VWP of America, Inc. v. United States, 175 F.3d 1327 (Fed. Cir. 1999) citing J.L. Wood v. United States, 62 C.C.P.A. 25, 33, C.A.D. 1139, 505 F.2d 1400, 1406 (1974)). U.S. Customs and Border Protection (“CBP”) has held that the return of a core deposit is not a “sale” for purposes of customs valuation. In Headquarters Ruling Letter (“HQ”) W548697 dated June 13, 2006, the importer obtained used auto parts for remanufacturing from retailers and warehouse distributors by providing a refund of a core deposit that the customers paid when the parts were originally purchased. CBP agreed that “it would be inappropriate to use a value for the used alternators and starters that incorporates the Core Charge Value.” As a result, we concluded that the refund of the core charge was not a viable sale for purposes of transaction value. Because none of the more preferred methods of valuation were available, we 3
authorized appraisal under the fallback method, using the “fair market value” method prescribed in IRS Revenue Ruling 2003-20, 2003-6 CB 445, issued January 22, 2003. Similarly, in HQ H320981, dated September 29, 2022, the importer’s paymen