October 2019 — Question 50

Auto Parts USA, located in Michigan, is a subsidiary of Auto Parts International, located in Germany. Auto Parts USA buys and imports thousands of brake pads from Auto Parts International each year. Auto Parts USA purchases each brake pad from Auto Parts International for exactly $10 per brake pad. Auto Parts USA would like to apply transaction value to its importations of brake pads. In order to establish that the relationship between Auto Parts USA and Auto Parts International did not affect the price actually paid or payable, Auto Parts USA has submitted to CBP the two parties’ relevant bills, invoices and financial statements. In fiscal year 2018, the manufacturing bills and invoices showed that after recovering all costs, Auto Parts International made a profit of approximately 6 percent on each sale of its brake pads to Auto Parts USA. The financial statements reflected that Auto Parts International captured a firm-wide profit of approximately 6.3 percent on total brake pad sales in fiscal year 2018. On what basis has Auto Parts USA demonstrated that the relationship between the two parties did not affect the price actually paid or payable?

• AThe two parties settled the price in a manner consistent with the normal pricing practices of the auto parts industry.
• BThe two parties showed that the price closely approximates a test value.
• CThe two parties showed that the price closely approximates the transaction value of similar merchandise in sales to unrelated buyers in the United States.
• DThe two parties showed that CBP has previously examined the relationship.
• EThe two parties showed that the price is adequate to ensure recovery of all costs plus a profit which is equivalent to the firm’s overall profit realized over a representative period of time in sales of merchandise of the same class or kind.✓ CBP's answer