HQ 545505LE - Internal Advice 34/93; price actually paid or payable; computed value - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1995 HQ Rulings > HQ 545500 - HQ 545716 > HQ 545505LE

HQ 545505
August 9, 1994

VAL CO:R:C:V 545505 ILK

CATEGORY: VALUATION

Area Director
Minneapolis, Minnesota

RE: Internal Advice 34/93; price actually paid or payable; computed value

Dear Sir:

This is in response to your request for Internal Advice which was initiated on behalf of xxxxxxxx xxxxxxxxx xxxx xxxxx xxxxxxxxxxx (hereinafter referred to as "the importer"). We regret the delay in responding.

FACTS:

The importer entered into a contract with xxxxxxxxx xxxxxxxxxxxx, Inc. (hereinafter referred to as "FSB"), a U.S. company, pursuant to which FSB agreed to provide to the importer technical information needed to create a beet sugar molasses processing plant, as well as chromatographic separation resin (hereinafter referred to as "CSR") for use in the process of desugarization of beet sugar molasses. FSB is a wholly owned subsidiary of xxxxxx Ltd. (hereinafter referred to as "the supplier"), a Finnish company, which is the owner of the patented process of the desugarization separation system, and the supplier of the CSR. The CSR is imported from Finland. The importer is not related to FSB or the supplier.

Pursuant to the contract, FSB is to furnish to the importer production technology, engineering services, documents and CSR, and is to supervise the erection and start-up of the licensed process. The contract sets forth one price for the foregoing, with no itemization. The contract price was to be paid in four installments. The first 25% was to be paid upon the signing of the contract, 25% was to be paid upon the delivery of engineering documentation, 30% was to be paid upon delivery of analytical and operational manuals for the separation system and the final 20% was to be paid upon delivery of the CSR. The entry of the CSR was accompanied by an invoice, however the invoice was made for Customs purposes only.

You initially took the position that the contract price was for services and proprietary information not related to the imported merchandise, and that such portion is not included in the price actually paid or payable for the imported merchandise. However, you also considered that the license fee paid for the right to use technology and licensed products was related to the imported merchandise and was a condition of the sale of the imported merchandise.

The National Import Specialist Division takes the position that the price actually paid or payable for the imported merchandise cannot be established and that the computed value method of appraisement should be considered as the appropriate basis of appraisement.

The importer takes the position that the imported merchandise cannot be appraised on the basis of transaction value because restrictions upon the importer's use of the CSR exist, and the price of the imported merchandise is subject to a consideration for which a value cannot be determined. The importer is unaware of importations of identical or similar resins and is unable to obtain or supply the transaction values of identical or similar merchandise. There is also no resale of the CSR, nor is it incorporated into products which are sold in the U.S., therefore the deductive value method of appraisement cannot be used. The importer states that FSB is able to supply information from the supplier so that the computed value of the imported merchandise can be determined, and takes the position that the merchandise should be appraised on the basis of computed value.

ISSUE:

Whether under the circumstances presented a quantifiable price actually paid or payable for the imported merchandise exists.

LAW AND ANALYSIS:

Transaction value is the preferred method of appraisement pursuant to ?402(a) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (19 U.S.C. 1401a(a); TAA). However, appraisement on the basis of transaction value requires that the price actually paid or payable for the imported merchandise be ascertainable. In C.S.D. 84-62 (Headquarters Ruling Letter 543226 dated January 3, 1984), Customs ruled that the price actually paid or payable, with respect to Canadian manufactured components sold under a single contract price for a system to be installed complete, was not quantifiable. In C.S.D. 84-62, there was no purchase order specifically covering the Canadian manufactured components, payment was made to the seller by means of progress payments in a certain percentage of the contract total, and no payment specifically covered only the Canadian components.

Similarly, in the instant case, the importer is purchasing a complete system under a single contract price. There is no purchase order specifically for the CSR, payment is made to the seller by means of progress payments that are based on a specified percentage of the entire contract price and no one payment is specifically for the CSR. Based on the foregoing facts we find that the price actually paid or payable for the CSR is not quantifiable, therefore the imported merchandise cannot be appraised on the basis of transaction value.

Under the TAA it is necessary to proceed sequentially through the remaining bases of appraisement to determine the appropriate valuation method. The next basis of appraisement is transaction value of identical or similar merchandise determined under ?402(c) of the TAA. This basis refers to a previously accepted transaction value of identical or similar merchandise which was exported at or about the same time as the merchandise being valued. There is no indication in this case that merchandise identical or similar to the CSR was exported at or about the same time as the CSR at issue, and appraised in the U.S. on the basis of transaction value. Therefore, the imported merchandise cannot be appraised on the basis of the transaction value of identical or similar merchandise.

The next basis of appraisement is deductive value determined under ?402(d) of the TAA. Deductive value involves appraising the imported merchandise on the basis of whichever of the price of the merchandise upon its sale in the U.S., adjusted as provided in ?402(d)(3) of the TAA. According to the importer, the imported CSR is not sold by the importer, nor is the imported CSR sold after processing. Therefore, the imported merchandise cannot be appraised on the basis of deductive value.

The next basis of appraisement is computed value determined under ?402(e) of the TAA. The computed value of the imported merchandise is the sum of the cost or value of the materials and fabrication, an amount for profit and general expenses equal to that usually reflected in sales of merchandise of the same class or kind, any assists and the packing costs. See, Customs Regulations 19 CFR ?152.106. According to the importer, the foregoing information can be obtained from the supplier of the CSR for the determination of the computed value of the imported merchandise. Therefore, computed value is the appropriate basis for appraisement of the imported CSR, provided the importer is able to provide Customs with the appropriate information.

HOLDING:

Under the facts presented, as no quantifiable price actually paid or payable exists, appraisement under transaction value would not be appropriate and the merchandise should be appraised under computed value.

This decision should be mailed by your office to the internal advice requester no later than 60 days from the date of this letter. On that date the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director
Commercial Rulings Division

Previous Ruling Next Ruling