CBP Says Seller's Retrieval Dates Didn't Bar Use of Transaction Method of Valuation

CBP said in a customs ruling earlier this month that luxury goods sold between a related European exporter and U.S. importer weren't subject to restrictions on their use that barred the use of the transaction method. In addition, CBP excluded service fees between the companies from the actual price of the goods since the fees didn't pertain to the goods' importation, and the agency found that the relationship between the parties didn't preclude the use of the transaction value method to appraise the value of the goods.

The European seller provides "retrieval dates" for its goods, which the importer claimed are recommendations on when certain goods should be removed from the shelves in retail stores. The unnamed importer said these dates are mere suggestions and not enforceable requirements.

The importer acknowledged a prior CBP ruling that said that "transaction value was inapplicable because the foreign seller retained a right to withdraw and stop the sale of certain merchandise." The agency agreed with the importer, however, that this decision is distinguishable from the present case due in part to "the lack of a binding distribution agreement containing contractual clauses allowing the seller an unqualified right to control the resale of the goods in the United States."

The retrieval dates are mere recommendations on when the goods should be removed from shelves, and these notices are "consistent with the Seller's interests in optimizing the stores' sales and clearing space for launches of new, upcoming products," the agency said. An example of a restriction on the use of the good which doesn't substantially affect the value of the good is a requirement of an automobile seller on a buyer to not sell or exhibit the vehicle before a set date, representing the beginning of a model year, CBP said.

The ruling added that a "restriction which could have a substantial effect on the value of the imported goods is one that is not usual in the trade concerned." But here, the practice of retailers returning all unsold goods to the importer, including a small percentage sold to employees, is "usual in the trade concerned," CBP said.

The agency also found that the service fees paid by retailers to the seller shouldn't be included in the goods' valuation price. The importer argued that they shouldn't be, since the fees came from an agreement between the retailers and the seller, and not with the importer.

CBP said its rulings on similar issues look at the "nature of the additional payments, whether the amount of the payments varies according to the value or quantity of merchandise, the timing and frequency of the payments, and whether the payments add value to the imported goods." Conducting a similar analysis here, since the fees cover "merchandising, advertising, sales and marketing, supply chain and logistics, information systems, human resources, financial assistance, and administrative and risk management services," they are unrelated to the production of the imports. As a result, they were excluded from the transaction value.

The agency lastly turned to the question of whether the agency could use the transaction value method at all, due to the relationship between the buyer and seller. To prove that the transactions were conducted fairly, the importer submitted three pieces of evidence, each of which was individually found to be insufficient: a description of the importers' sales process and price negotiations, a bilateral advanced pricing agreement approved by the IRS and a paper that gave details on the pricing practices in the automotive industry.

However, CBP said, taken together, the evidence showed that the transaction was conducted at arm's length. The decision was based in part on the "way in which the Importer and the Seller organize their commercial relations and the way in which the price in question was arrived at."