October 2022 — Question 31

123 Import Company, a US importer, is seeking guidance on valuation methods for its various contracts with overseas vendors from whom it has imported or intends to import merchandise from a duly licensed broker. Which one of the following contracts would the broker advise 123 Import Company that transaction value cannot be the basis of appraisement on importation as the regulatory requirements for using transaction value are not met?

• A123 Import Company has contracted with Y Toy Company abroad to purchase toys. The Y Toy company owes money to its creditor Z Factor Company. The Y Toy Company contract with 123 Import Company provides that 123 Import Company will pay Z Factor Company one-third of the purchase price and pay the remaining two-thirds to Y Toy Company. The contract price is for both payments.
• B123 Import Company has contracted with Y Toy Company abroad to manufacture toys. 123 Import Company has contracted with, and will directly pay, Tiny’s Beads, a foreign manufacturer, to ship the plastic beads to Y Toy Company that it needs to manufacture the toys. The contract price is for Y Toy Company’s costs and profit.
• C123 Import Company has contracted with 123 Export Company, an unrelated company abroad to import National Football League (NFL)-branded jerseys. 123 Import Company has an NFL license and pays a royalty to the NFL for every NFL-branded jersey it imports. The contract price is as determined by 123 Export Company in the signed contract.
• D123 Import Company has contracted with X-treme Company abroad to import office chairs on consignment. 123 Import Company will offer the office chairs for sale in the US and pay X-treme Company within 10 days of the sale. The contract price is for 40% of the usual retail price of the chairs with payment due within 10 days of each sale.✓ CBP's answer
• E123 Import Company (importer) has contracted with New Company (seller) abroad to import 1000 units of a brand-new product for which the market in the US is uncertain. Importer agrees to pay seller $10.00 per unit immediately with an additional $10.00 upon the sale of each unit in the US. Seller will buy back any unsold merchandise in 180 days. The contract price is $10,000.00, plus $10 per unit due after sale.