A foreign subsidiary sells ore to its U.S. parent company. The price of the ore charged by the subsidiary to its parent is the price of ore on the New York Mercantile Exchange on the date the ore arrives in the United States. Select the statement that is TRUE regarding this price.
How to get there
19 CFR 152.103(a)(1): Price actually paid or payableIn determining transaction value, the price actually paid or payable will be considered without regard to its method of derivation. It may be the result of discounts, increases, or negotiations, or may be arrived at by the application of a formula, such as the price in effect on the date of export in the London Commodity Market. …
A price tied to the New York Mercantile Exchange price on a set date is exactly that kind of formula. Neither the subsidiary nor the parent controls the exchange price, which also shows the relationship didn't influence it. The answer is A.
Why the other choices are wrong
B) Not acceptable because it isn't known at shipment: the regulation allows formula prices. "Payable" covers prices agreed on but not yet paid, and the formula (the NYMEX price on the arrival date) fixes the amount objectively.
C) Not acceptable because the parties are related: being related doesn't disqualify transaction value by itself. It's acceptable if the relationship didn't influence the price (§ 152.103(j)(2)(i); see Q71). An exchange price is about as uninfluenced as a price gets.
D) Acceptable under deductive value: deductive value is a different, later method based on U.S. resale prices of the imported goods. You only reach it if transaction value fails, and here transaction value works.
Tip
Commodity pricing (exchange price on a set date, published index, formula) is fine for transaction value. The regulation's own example is the London Commodity Market. What matters is that a sale exists and the price can be determined objectively.
Sources: 19 CFR 152.103(a)(1), (j)(2) (eCFR).
CBP answer key: Answer A · 19 CFR 152.103(a)(1)Source: CBP past exams ↗