The basic rule is that rebates paid to an importer by a foreign supplier are not considered in determining the transaction value of imported merchandise. This relatively inflexible rule is clearly illustrated in HQ H042055 (April 17, 2009).

In that ruling, the importer and supplier had agreed to a rebate schedule. Basically, the supplier agreed to rebates as the quantity purchased increased, essentially, a volume discount. The agreement was effective prior to importation but all of the rebates were paid subsequent to importation.

The ruling reconfirmed the basic rule that a discounted price must be agreed to and effected prior to importation before it can constitute the price actually paid or payable. This is based upon a provision in the value statute, which states that any rebate, or decrease in the price affected after importation, shall be disregarded in determining transaction value.

Here, the importer argued that the parties agreed to a formula for determining the price, which formula was established prior to importation. The importer went on to argue that as such, the timing of the payment (post-importation) was not irrelevant. The Headquarters Office disagreed stating that although the parties agreed to the price adjustments in a written agreement executed prior to importation, the rebates themselves were not paid until after importation. Consequently, according to the Headquarters Office, because they were not made until after importation the rebates must be disregarded.

CBP has allowed volume discounts only where the discount was taken prior to importation. In all cases where the discount was not paid until after importation, the rebate or discount has been disregarded.