Two Headquarters rulings issued by U.S. Customs and Border Protection (CBP) in May 2026 carry practical lessons for importers operating across very different industries — leather goods and aviation. Together, they reinforce two foundational principles of U.S. customs law: how country of origin is determined when goods are processed abroad, and what actually constitutes a “sale” for customs valuation purposes. Here is what you need to know.
H358368: U.S.-Origin Leather Processed in Italy Keeps Its American Roots
Issued on May 15, 2026, this ruling was requested on behalf of Leather Trends Inc. (d/b/a Optima Leathers) and addresses a question that comes up frequently in the textile and materials industries: if you send a U.S.-origin product abroad for further processing, does it come back as a foreign product?
In this case, American cattle hides were processed in the United States into “wet blue” — a chrome-tanned, flexible intermediate hide that is water-resistant and ready for finishing. Those wet blue hides were then shipped to Mima Leathers SRL in Italy, where they underwent a significant series of operations: splitting into top grain and split leather, shaving to uniform thickness, re-tanning, dyeing to buyer specifications, drying, buffing, embossing, coating, and polishing. The finished leather was then exported back to the United States and sold into industries including residential furnishings, hospitality, aviation, and motor coach.
CBP’s conclusion was clear: the country of origin remains the United States.
The agency applied the “substantial transformation” test — the legal standard used to determine whether processing in a foreign country is significant enough to change a product’s origin. Under this test, an article must emerge from the foreign process with a new name, character, or use that is fundamentally different from what it was before.
CBP found that the Italian operations, while extensive, did not meet that bar. The wet blue hide was already leather before it left the United States. The finishing work performed in Italy- however skilled and value-adding — was treated as a continuation of that same product’s development, not a transformation into something new. CBP pointed to its own prior rulings, including HQ W559969, which reached the same conclusion for similar operations performed in Mexico.
What this means for importers: If your business exports U.S.-origin semi-finished goods for overseas processing and then reimports the finished product, do not assume that foreign processing automatically changes the country of origin. CBP will look at whether the core identity of the product changed — not just whether significant work was done abroad.
Importantly, retaining U.S. origin can be advantageous: goods qualifying as American-origin products may be eligible for duty treatment under HTSUS Chapter 98, which provides relief for U.S. articles returned after processing abroad.
H350905: Aircraft Engine Parts Under a Customer Care Contract Are Not “Sold” for Customs Purposes
Issued on May 13, 2026, this valuation ruling tackles a more complex scenario involving aircraft engine maintenance and the question of what counts as a bona fide sale under U.S. customs law.
The case involves a U.S.-based Maintenance, Repair, and Overhaul (MRO) shop that services aircraft engines for airline operators. Under a “customer care contract” arrangement, the engine manufacturer — based in the United Kingdom — ships parts to the MRO so it can perform repairs. The MRO issues a purchase order and technically “buys” the parts at a heavily discounted price (85% off the World List Price). However, once the repair is complete, the MRO is contractually required to sell those same parts back to the manufacturer at no profit. The manufacturer, in effect, is simply moving its own inventory to get a job done.
CBP ruled that this arrangement does not constitute a sale for exportation to the United States. The transaction value method of appraisement — the primary and most commonly used customs valuation method — requires a genuine transfer of title and risk between a buyer and seller. Here, the MRO had no freedom to sell the parts elsewhere, could not set its own price, and was required to return them. CBP concluded the MRO was functioning more as a service provider than a true buyer.
As a result, the correct appraisement method is the transaction value of identical or similar merchandise — specifically, the price paid for the same parts under the manufacturer’s separate “time and materials” contracts, where a real arm’s-length sale does occur.
What this means for importers: Customs valuation is not simply about what appears on an invoice. If the underlying commercial arrangement does not reflect a genuine buyer-seller relationship — with real transfer of title, risk of loss, and pricing freedom — CBP may reject transaction value entirely. Companies operating under complex service or subcontracting models should seek advance rulings to confirm how their imports will be appraised before shipments begin.
Both rulings are publicly available through the CBP CROSS database. If you have questions about how these decisions might affect your imports, contact the eezyImport team for guidance.
