Internal Advice; Transaction Value; Bona Fide Sale

H343576
February 26, 2025
OT:RR:CTF:VS H343576 EE
CATEGORY: Valuation Center Director Machinery Center of Excellence and Expertise U.S. Customs and Border Protection 109 Shiloh Drive, Suite 300 Laredo, TX 78045 RE: Internal Advice; Transaction Value; Bona Fide Sale Dear Center Director: This is in response to a letter by Mr. Paul Fitzpatrick, Esq., dated November 25, 2024, and supplemental submissions, dated January 23, 2025, and February 12, 2025, on behalf of his client, Edge Zero, PTY LTD (“Edge Zero”), a non-resident importer, requesting a prospective ruling concerning the valuation of a certain Compact Smart Grid Data Logger (Model EE-405). On January 22, 2025, during a meeting with our office, Mr. Fitzpatrick notified us that the merchandise entered the United States. Accordingly, this prospective ruling request will be processed as an internal advice decision. The importer requested that certain information submitted in connection with this request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets and all attachments to this request will not be released to the public and will be withheld from published versions of this decision. FACTS: Edge Zero is an Australian-based energy technology company. Edge Zero scales proprietary, cloud-based grid monitoring platforms that provide real-time visibility of the low voltage electricity grid through a network of transformer monitoring devices. The merchandise at issue is the Compact Smart Grid Data Logger (Model EE-405). Edge Zero outsources the manufacturing of the merchandise to an unrelated contract manufacturer in [X] Country A.

After taking possession of the products, Edge Zero will arrange shipment directly from Country A to the United States. After entry, the merchandise will be stored in a third-party warehouse in the Chicago area and shipped to U.S. destinations when orders are received. Edge Zero will retain ownership while the products are in a warehouse. It is claimed that the sale between the contract manufacturer in Country A and the non-resident importer is a bona fide sale for export to the United States. The importer provided the following documents: Compact Smart Grid Data Logger (Model EE-405) product data sheet; Federal Communications Commission Supplier Declaration of Conformity; Material Safety Data Sheet; quotation from the contract manufacturer, dated August 5, 2024, listing the per unit price for the merchandise, payment terms, and a penalty fee for contract inactivity; order note from the importer to the contract manufacturer, dated August 5, 2024, confirming the price for the merchandise; contract manufacturer’s invoice to the importer for the merchandise, dated November 29, 2024, listing the quantity, unit price, total price for the merchandise, and noting that a tooling assist is supplied by the importer to the contract manufacturer 1; contract manufacturer’s packing list to the importer, dated November 29, 2024; an Air Waybill, issued on November 30, 2024, listing the contract manufacturer as the shipper and the importer as the consignee; and an international payment report from the importer to the contract manufacturer, dated August 21, 2024. ISSUE: Whether the sale between the contract manufacturer and the importer is a bona fide sale for export to the United States which may be used for appraisement purposes under transaction value. 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 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. See 19 U.S.C. § 1401a(b)(1). In order for transaction value to be used as a method of appraisement, there must exist a bona fide sale between the buyer and the seller. 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)). 1 The tooling assist consists of stamping dies used to form the metal parts. 2

No single factor is decisive in determining whether a bona fide sale has occurred. See Headquarters Ruling Letter (“HQ”) 548239, dated June 5, 2003. U.S. Customs and Border Protection (“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 entity to another, which cannot be linked to a specific import transaction, does not demonstrate passage of consideration. See HQ 545705, dated January 27, 1995. In addition, CBP may examine whether the purported buyer paid for the goods, and whether, in general, the roles of the parties and the circumstances of the transaction indicate that the parties are functioning as buyer and seller. See HQ 547197, dated August 22, 2000; and HQ 546602, dated January 29, 1997. The documents submitted by the importer support the existence of a bona fide sale. The importer submitted a quotation from the contract manufacturer to the importer which lists EXW [X] term of delivery. The commercial invoice and packing list from the contract manufacturer to the importer correspond to the quotation from the contract manufacturer, also listing EXW term of delivery. EXW means that the seller fulfills its obligation to deliver when it has made the goods available at its premises to the buyer or at another named place. Without a contract or other document containing terms of sale between the parties, CBP presumes the parties intended title and risk of loss to pass in accordance with the Incoterms contained in the purchase order and invoice documents. See HQ H310403, dated September 23, 2020. Accordingly, the importer assumes title and bears risk of loss at the contract manufacturer’s premises in Country A [X]. Additionally, the air waybill lists the contract manufacturer as the shipper and the importer as the consignee which corresponds to the commercial documents provided. The airport of departure is [X] and the airport of destination is JFK airport. Lastly, the international payment report for payment from the importer to the contract manufacturer includes an amount that corresponds to 15% of the contracted price as agreed upon and noted on the quotation from the contract manufacturer to the importer2. Based on the documents submitted, we find that there is a bona fide sale between the contract manufacturer and the importer. As previously noted, the contract manufacturer’s invoice to the importer notes that a tooling assist is supplied by the importer to the contract manufacturer. The importer states that the tooling assist consists of stamping dies used to form the metal parts. While the question of whether the tooling supplied by the importer to the contract manufacturer is considered an assist that must be added to the price actually paid or payable is not at issue in this internal advice decision, we note that CBP has authority to accept a method of apportionment of assists that is “[m]ade in a reasonable manner appropriate to the circumstances and in accordance with generally accepted accounting 2 As noted in the quotation from the contract manufacturer, payment is staggered based upon quantity shipped and at the contracted price. 3

principles.” See 19 C.F.R. § 152.103(e)(1). The total value of the assist may be apportioned over the first shipment (if the importer wishes to pay duty on the entire value at once), the number of units produced up to the time of the first shipment, or the entire anticipated production. In addition to these three methods, the importer may request some other method of apportionment in accordance with generally accepted accounting principles. Lastly, as previously noted, the quotation from the contract manufacturer to the importer lists a contingent liability if new purchase orders are not issued within 12 months. This fee is in the nature of a contractual penalty. If such a payment is triggered, it would not be considered part of the price actually paid or payable for the imported merchandise. See Chrysler Corporation v. United States, 17 CIT 1049 (1993). HOLDING: Based on the information presented, the appraisement of the merchandise should be based upon the price paid by the importer. This decision should be mailed to the internal advice applicant no later than sixty days from the date of this letter. On that date, Regulations and Rulings of the Office of International Trade will make the decision available to CBP personnel and to the public via the CBP Home Page on the World Wide Web at www.cbp.gov, through the Freedom of Information Act, and by other methods of public distribution.
Sincerely,
Monika R. Brenner, Chief Valuation and Special Programs Branch 4