First Sale Treatment – Custom Made Holsters

H353788 December 19, 2025 OT:RR:TCF:ME H353788 ME CATEGORY: Valuation Robert Kovac, CEO FALCO SK, s.r.o. Spitalska 1325/4, Banska Stiavnica, 96901 Slovakia RE: First Sale Treatment – Custom Made Holsters Dear Mr. Kovac, This is in response to your ruling request submitted on September 8, 2025, on behalf of your company FALCO SK, s.r.o. (“FALCO SK”), requesting first sale treatment for transactions where FALCO SK acts as a middlemen between it related party FALCO MANUFACTURING s.r.o. (“FALCO Manufacturing”) and its U.S. based customers. Your request was submitted to U.S. Customs and Border Protection’s (CBP’s) National Commodity Specialist Division, who then forwarded it to the Valuation and Special Programs Branch on September 23, 2025. FACTS: FALCO SK operates the website https://www.falcoholsters.com/, where it sells gun holsters, tactical gear, and other firearms accessories produced by FALCO Manufacturing in Slovakia. Both companies are wholly owned subsidiaries of the holding company FALCO HOLDING, a.s. All FALCO entities are based in Slovakia. FALCO SK is requesting first sale treatment for custom gun holsters produced by FALCO Manufacturing, transferred to FALCO SK, and then sold to U.S. customers. FALCO SK states that “[t]he subject of trade are usually HTS codes 4202.91.90.90 Gun holster made of cow leather, 4202.92.91.00 Gun holster made of synthetic nylon textile, and 4202.92.97 .00 Gun holster made of sheeting of plastic.” FALCO SK describes the transaction structure as follows: • “[FALCO SK] operates the e-shop www.falcoholsters.com and receives individual orders for 2 custom-made holsters from U.S. customers at a retail price. • Upon receiving an order [FALCO SK] places a corresponding order with [FALCO Manufacturing] for the production of the custom made holster at a wholesale price. • The holsters are shipped directly from Slovakia to the U.S. end customer via courier (e.g., FedEx) under DDP (Delivered Duty Paid) terms. Always shipping each order individually.” FALCO SK argues that a bona fide sale takes place at each level of the transaction. As evidence of this, FALCO SK provides a sample transaction with the following documents to demonstrate how a typical sale takes place: • An order receipt issued by FALCO SK to a U.S. customer, listing their name and address as the intended receiver for a “C105-SAHRDP-LH-BL:Bart.sk - PREMIUM Pancake style open top OWB leather 1 pcs 119,95 119,95 holster LH BLK,” priced at $119.95, plus $19.95 shipping, dated July 16, 2025. • A production order issued by FALCO Manufacturing for the same product, priced at $36.00, listing FALCO SK as the customer and the U.S. purchaser as the “Receiver,” dated July 17, 2025. • An invoice issued by FALCO Manufacturing to FALCO SK for the product, dated August 8, 2025, requesting payment of $36.00 by August 19, 2025. • An invoice issued by FALCO SK to the U.S. end customer, dated August 12, 2025, requesting immediate payment of $139.90 for the product and shipping cost, and listing the U.S. customer’s address under “Ship to.” The invoice also lists the product under HTS Code 4202.91.90.90. • A PayPal transaction confirmation, dated August 12, 2025, indicating that FALCO SK received a payment of $139.90 from the U.S. customer, minus a $7.84 transaction fee. • A wire transfer of $36.00 sent by FALCO SK to FALCO Manufacturing dated August 19, 2025. FALCO SK also argues that although FALCO Manufacturing and FALCO SK are related parties, the transactions nonetheless take place at arm’s length. To demonstrate this, FALCO SK submitted a “Market Price Analysis,” with supporting documentation. In its analysis FALCO SK states that the relationship between FALCO SK and FALCO Manufacturing does not affect the price actually payable as shown by: “[i]dentical pricing to unrelated wholesale customers, [] [c]onsistency with our global wholesale price list, [and] [a]lignment with industry-standard wholesale prices for comparable custom-made holsters under HTS codes 4202.91.90.90, 4202.92.91.00, and 4202.92.97.00.” With its submission FALCO SK provided a “Wholesale price list” from FALCO Manufacturing, listing all the holsters they make, along with its wholesale price, retail price, and HTS Code. The product “C105 PREMIUM Pancake style open top OWB leather holster” is listed at a wholesale price of $36.00 and a retail price of $119.95. FALCO SK also provided sample invoices for products sold by FALCO Manufacturing to unrelated parties. The parties appear to be retailers located in Sweden, Saudi Arabia, and the United States. None of the invoices included the “C105 PREMIUM Pancake style open top OWB leather holster,” but did list other leather holsters sold at between $21.00 and $67.00, as well as nylon holsters sold at between $10.80 and $15.00. All product prices appear to match FALCO Manufacturing’s listed wholesale price. FALCO SK further claims that the wholesale price of the gun holsters sold by FALCO Manufacturing is consistent with industry standard wholesale pricing for comparable products: 3 • “HTS 4202.91.90.90 (Cow leather gun holsters): USD 20-50 per unit for comparable quality products (e.g., sources like DeSantis GunHide and Aker Leather indicate wholesale ranges starting at USD 25-40 for leather holsters). Common discount from retail price is at 70% for reseller. • HTS 4202.92.91.00 (Synthetic nylon gun holsters): USD 10-30 per unit (e.g., Alibaba and MM Wholesale listings show wholesale prices from USD 2.62-25.98 for nylon tactical holsters, with custom options around USD 20-30). Common discount from retail price is at 70% for reseller.” FALCO SK states that they buy a “high quantity of products annually” at a “70% discount from retail price [which] falls within the mid-range for custom-made holsters across these HTS codes, confirming its alignment with market standards.” However, FALCO SK did not provide any documentation showing the prices of these comparable products. ISSUE: Whether the transactions between FALCO Manufacturing, FALCO SK, and the U.S. based customers qualify for First Sale treatment. LAW AND ANALYSIS: The preferred method of appraising merchandise imported into the United States is the transaction value method as set forth in section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (“TAA”), codified at 19 U.S.C. § 1401a. Transaction value of imported merchandise is the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus amounts for five enumerated statutory additions. 19 U.S.C. § 1401a(b). In order for imported merchandise to be appraised under the transaction value method, it must be the subject of a bona fide sale between a buyer and seller, and it must be a sale for exportation to the United States. In Nissho Iwai American Corp. v. United States, 982 F.2d 505 (Fed. Cir. 1992) and Synergy Sport International, Ltd. v. United States, 17 CIT 18 (1993), the Court of Appeals for the Federal Circuit and the U.S. Court of International Trade (“CIT”), respectively, reviewed the standard for determining transaction value when there is more than one sale which may be considered as being a sale for exportation to the United States. Both cases involved a foreign manufacturer, a middleman, and a United States purchaser. In each case, the court held that the price paid by the middleman/importer to the manufacturer was the proper basis for transaction value. Each court further stated that in order for a transaction to be viable under the valuation statute, it must be a sale conducted at arm’s length, free from any non-market influences, and involving merchandise clearly destined for export to the United States at the time of the first sale. In accordance with the Nissho Iwai and Synergy decisions, we presume that transaction value is based on the price paid by the importer. In further keeping with the courts’ holdings, we note that an importer may request appraisement based on the price paid by the middleman to the foreign manufacturer in situations where the middleman is not the importer. However, it will be the importer’s responsibility to show that the “first sale” price is acceptable under the standard set forth in Nissho Iwai and Synergy. That is, the importer must present sufficient evidence that the alleged sale was a bona fide 4 “arm’s length sale,” and that it was “a sale for export to the United States,” within the meaning of 19 U.S.C. § 1401a. In Treasury Decision (T.D.) 96-87, dated January 2, 1997, the Customs Service (now CBP) advised that the importer must provide a description of the roles of the parties involved and must supply relevant documentation addressing each transaction that was involved in the exportation of the merchandise to the United States. The documents may include, but are not limited to purchase orders, invoices, proof of payments, contracts, and any additional documents (e.g. correspondence) that establishes how the parties deal with one another. The objective is to provide CBP with “a complete paper trail of the imported merchandise showing the structure of the entire transaction.” T.D. 96-87 further provides that the importer must also inform CBP of any statutory additions and their amounts. If unable to do so, the sale between the middleman and the manufacturer cannot form the basis of transaction value. Additionally, according to Nissho Iwai, in order for a transaction to be viable for transaction value purposes, it must be a sale negotiated at arm’s length, free from any non-market influences. There is a presumption that a transaction will meet this standard if the buyer and seller are unrelated. See T.D. 96-87, supra. If the parties are related, then “it is necessary to provide Customs with information which demonstrates that transaction value may be based on the related party sale as provided in 19 U.S.C. § 1401a(b)(2)(B) (stating that the circumstances of the sale indicate that the relationship did not influence the price or that the transaction value closely approximates certain test values). See T.D. 96-87, supra. “Test values” refer to values previously determined pursuant to actual appraisements of imported merchandise. Furthermore, transaction value between a related buyer and seller may be acceptable if an examination of the circumstances of the sale indicates that although related, their relationship did not influence the price actually paid or payable. The CBP Regulations specified in 19 CFR Part 152 set forth illustrative examples of how to determine if the relationship between the buyer and the seller influences the price. See also HRL 029658, dated December 8, 2009; H037375, dated December 11, 2009; and, HRL H032883, dated March 31, 2010. In this respect, CBP will examine the manner in which the buyer and seller organize their commercial relations and the way in which the price in question was derived in order to determine whether the relationship influenced the price. If it can be shown that the price was settled in a manner consistent with the normal pricing practices of the industry in question, or with the way in which the seller settles prices with unrelated buyers, this will demonstrate that the price has not been influenced by the relationship. See 19 CFR § 152.103(l)(1)(i)-(ii). In addition, CBP will consider the price not to have been influenced if the price was adequate to ensure recovery of all costs plus a profit equivalent to the firm’s overall profit realized over a representative period of time. 19 CFR § 152.103(l)(1)(iii). These are examples to illustrate that the relationship has not influenced the price, but other factors may be relevant as well. In this case, FALCO SK has met their burden. The documentation submitted supports the existence of a bona fide sale of the merchandise, at each level of the transaction. The submitted purchase orders, invoices, and proof of payment indicate that FALCO Manufacturing sells the holsters to FALCO SK for consideration, who in turn sells it to the U.S. customer. In the sample transaction, the U.S. customer summitted an order for a holster priced at $119.95 to FALCO Sales on July 16, 2025, who in turn placed an order with FALCO Manufacturing the next day for $36.00. FALCO Manufacturing invoiced FALCO SK for the purchase on August 8, 2025, who then invoiced the U.S. customer on August 12. The proof of payments demonstrates that the U.S. customer paid FALCO SK for the product 5 on August 12, 2025, and that FALCO SK sent a wire transfer to pay FALCO Manufacturing on August 19, 2025. Order numbers included in all of the documents indicate that this was all for the same transaction. This is sufficient to show the existence of a bona fide sale. Furthermore, although FALCO SK and FALCO Manufacturing are related parties, FALCO SK has shown that the transactions were conducted at arm’s length, because it demonstrated that their relationship did not affect the price actually payable. The submitted “Wholesale price list” and invoices to unrelated parties show that FALCO Manufacturing has a consistent pricing scheme for all holsters. Furthermore, comparing the price actually paid by FALCO SK to the “Wholesale price list” shows that the transactions between FALCO SK and FALCO Manufacturing adhere to this standard wholesale and retail pricing practice. Additionally, based on publicly available listings, the market price of wholesale gun holsters appears to be largely consistent with the wholesale pricing of FALCO Manufacturing’s products.1 Finally, the holster was “clearly destined for the United States” when it was sold by FALCO Manufacturing to FALCO SK. In every single purchase order and invoice between the parties, the U.S. customer and their address was listed as “Receiver” or “Ship to.” FALCO SK follows a direct to consumer business model, and there was no other possible shipping location indicated on any of the documents. Accordingly, we find that the sample transaction between the FALCO SK and FALCO Manufacturing will meet the requirement of being a bona fide arm’s length sale of goods clearly destined for the United States, and the proposed methodology will be an acceptable basis for appraisement of the holsters. HOLDING: Based on the information the office reviewed in the sample transaction, “first sale” transaction value appraisement may be utilized by FALCO SK for the gun holsters. However, FALCO may be asked to present additional information to the ports for specific entries to support its use of “first sale” appraisement of those entries and should be prepared to present such information. Sincerely, Monika R. Brenner, Chief Valuation and Special Programs Branch 1 See M&M Merchandisers (https://mmwholesale.com/search?type=product&q=holster*) (accessed Dec. 12, 2025)