CBP Issues Revised ICP on Bona Fide Sales and Sales for Exportation to the U.S.

The following are "highlights" of this ICP:

Introduction. CBP explains that when goods are imported into the customs territory of the U.S. (the fifty states, the District of Columbia, and Puerto Rico) they are subject to certain formalities involving CBP. In almost all cases, the goods are required to be "entered," that is, declared to CBP, and are subject to detention and examination by CBP officers to insure compliance with all laws and regulations enforced and administered by CBP. As part of the entry process, goods must be classified in the HTS and their customs value must be determined.

CBP states that this ICP concentrates on ascertaining whether there has been a bona fide sale of merchandise for exportation to the U.S. for purposes of applying the transaction value method of appraisement.

Questions and answers. In this ICP, CBP provides responses to 23 questions, such as (partial list):

What is transaction value? CBP explains that under the Trade Agreements Act of 1979, the transaction value of imported merchandise is the primary or preferred method for determining the value of imported merchandise. Generally, transaction value is the price actually paid or payable for merchandise when sold for exportation to the U.S., plus certain statutorily enumerated additions. Unless there is a bona fide sale of the merchandise for exportation to the U.S., the transaction value method cannot be used. An alternative method of appraisement must then be used.

What is the relevance of a "bona fide sale" and a "sale for exportation to the U.S."? CBP states that by definition, the transaction value requires that a sale of merchandise for exportation to the U.S. occur. This concept has two parts: (1) "bona fide" or "good faith" sales, and (2) sales of the merchandise for exportation to the U.S. If it is shown that both (1) a bona fide sale, and (2) a sale for exportation of the merchandise to the U.S. occurred, this component of transaction value is satisfied.

What factors are determinative of a bona fide sale? According to CBP, although several factors may indicate whether a bona fide sale has taken place between a potential buyer and seller of imported merchandise, no single factor is determinative. Rather, the relationship of the parties involved in the transaction is to be evaluated by an overall view of the entire situation, with the result in each case governed by the facts and circumstances of the individual case - and not by the labels that the parties may attach to the relationship.

How does an importer exercise reasonable care when declaring a value based on a transaction to which it is not the buyer? CBP explains that under 19 USC 1484, as amended, an importer shall, using reasonable care, complete an entry by filing with CBP the declared value, classification and rate of duty applicable to the merchandise, and such other documentation or, pursuant to an electronic data interchange system, such other information as is necessary to enable CBP to, among other things, properly assess duties on the merchandise.

CBP states that this would include sufficient information to enable the CBP to determine in a multi-tiered transaction which of the various sales is the sale of the merchandise for exportation to the U.S. upon which transaction value should be properly based. Accordingly, before an importer declares a transaction value based on a transaction to which it is not the buyer the importer should be sure that such a transaction satisfies the criteria discussed above and be prepared to submit supporting evidence as described in Treasury Decision (T.D.) 96-87, upon request by CBP.

CBP adds that an importer who declares a value to CBP without the necessary supporting documentation would not be exercising reasonable care and may be subject to a penalty or other enforcement compliance action.

Determining transaction value in multi-tiered transactions. In this ICP, CBP has reprinted T.D. 96-87, which clarifies some of the issues that arise in multi-tiered transactions in determining which is the sale for exportation to the U.S. for the purposes of determining transaction value. T.D. 96-87 also sets forth the documentation and information needed to support a ruling request that transaction value should be based on a sale involving a middleman and the manufacturer or other seller rather than on the sale in which the importer is a party. (See ITT's Online Archives or 02/22/00 news, 00021800, for BP summary of T.D. 96-87.)

CBP's ICP also provides a list of resources for additional information on this topic. According to CBP, the information provided in this publication is for general information purposes only and reliance solely on the general information in this publication may not be considered reasonable care.

(See ITT's Online Archives or 02/22/00 news, 00021830, for BP summary of the January 2000 revised version of this ICP. See ITT's 12/21/96 news, (Ref:96122020), for BP summary of the original November 1996 version of this ICP.)

CBP's ICP (Revised July 2005) available athttp://www.cbp.gov/linkhandler/cgov/toolbox/legal/informed_compliance_pubs/value/icp010r2.ctt/icp010r2.pdf