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HQ 548128

July 15, 2002

RR:IT:VA 548128 CC


Port Director
U.S. Customs Service
526 Water St.
Port Huron, MI 48060

RE: Internal Advice; taxes paid in the country of exportation; Caterpillar, Inc., v. United States

Dear Sir or Madam:

This is in response to your request for internal advice of April 4, 2002 (your file APP-6-07:FO:PH:APD:KT), concerning the valuation of an automobile purchased in Canada and imported into the United States.


You describe the facts as follows. On January 29, 2002, a resident of Minnesota purchased a 2002 Infiniti QX4 in Gueph, Ontario, Canada. You have submitted a bill of sale which lists the price of the automobile. Included in the total price of the vehicle were Provincial Sales Tax (PST), Goods and Services Tax (GST), Air Tax, and Fuel Tax. An amount for each of these taxes is separately listed on the bill of sale. On February 2, 2002, the purchaser of the vehicle imported it into the U.S., paying duty on the entire purchase price of the vehicle, including PST, GST, Air Tax, and Fuel Tax.

Sometime in February 2002, the importer of the vehicle petitioned Customs for a refund of the excess duty paid as a result of having paid duty on the PST, GST, Air Tax, and Fuel Tax. You indicate that these taxes are paid at the time of purchase and later refunded to the importer sometime after exportation. The importer’s claim was not granted. On March 18, 2002, a second claim was made. In support of this claim, the purchaser cites Caterpillar, Inc., v. United States, 20 CIT 1169, 941 F. Supp. 1241 (1996).

You state that you have forwarded this matter to us because there has been inconsistent treatment among ports concerning this issue. Some ports are applying duty to the purchase price inclusive of internal taxes in the country of exportation, while other ports are applying duty exclusive of such taxes.


Whether taxes paid in the country of exportation but refunded after exportation are included in the price actually paid or payable.


Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA: 19 U.S.C. § 1401a). The preferred method of appraisement is transaction valuation, which is defined as the “price actually paid or payable for merchandise when sold for exportation to the United States,” plus five statutorily enumerated additions. 19 U.S.C. § 1401a(b)(1).

In Caterpillar, Inc., v. United States, 20 CIT 1169, 941 F. Supp. 1241 (1996), Caterpillar purchased truck components from a British corporation. The British revenue authorities assessed VAT upon the sale of the merchandise. Therefore, the invoice the British corporation issued to Caterpillar included an amount for the merchandise and a separate amount for the VAT. Subsequently, the merchandise was exported to the United States, and the British government refunded the VAT paid to Caterpillar. Upon importation, Customs appraised the merchandise including the VAT taxes in transaction value.

The court noted that VAT taxes were not explicitly listed as one of the five statutory enumerated additions to transaction value, nor were they one of the listed exclusions to transaction value pursuant to 19 U.S.C. § 1401a(b)(3). Consequently, the court engaged in a comprehensive analysis of the statutory language, the legislative history, and the GATT. Based on this analysis, the court found that when VAT taxes are separately identified and are refunded, they may not be included in the transaction value of the merchandise pursuant to 19 U.S.C. § 1401a(b). Part of the reasoning for this result was the court’s finding that the drafters of Article VII of the GATT “did not intend for refunded internal taxes to be included in the definition of ‘the price actually paid or payable’ for purposes of determining transaction value.” Caterpillar, Inc., supra, at p. 1175.

You believe that the facts in this matter can be distinguished from Caterpillar, Inc., and therefore, it should not be followed. You argue that in this matter the Canadian taxes must be paid in order to take possession of the automobile, thus payment of the taxes is a condition of the sale. In Caterpillar, Inc., however, you state that the only reason VAT was applied to the goods is because they were not exported immediately. You state that the facts in this matter are more like those of Generra Sportswear Company v. United States, 905 F.2d 377 (Fed. Cir. 1990). In that case quota charges made to the seller for the merchandise sold for export to the United States were found to be part of the total payment made by the buyer to the seller includable in transaction value. In addition, you argue that Caterpillar, Inc., concerned refunded taxes, whereas in this matter the taxes had not been refunded at the time of importation of the automobile.

We are unable to distinguish Caterpillar, Inc., from the facts presented in this matter. Caterpillar, Inc., and this matter concern internal taxes paid in the country of exportation. Generra concerns quota charges. In Caterpillar, Inc., the taxes paid in the country of exportation were separately identified. There exist the same facts in this matter. In Caterpillar, Inc., the internal taxes were refunded to the importer. The court in that case distinguishes the facts from those in Generra, where the quota charges were not refunded. Assuming the taxes were refunded to the importer in this matter, the facts here are more like those of Caterpillar, Inc., than Generra. Also, in Generra quota must be obtained in order to export the goods to the U.S., thus any payment by the buyer to the seller for quota is properly part of the dutiable value. In this matter, there is no evidence that payment of Canadian taxes is required to export goods to the U.S. Finally, you state that in this matter Canadian taxes had not been refunded at the time of importation. We do not believe that this is material. In Caterpillar, Inc., the VAT had not been refunded at the time of exportation, and thus, it is possible that it had not been refunded at the time of importation. Consequently, we find that Caterpillar, Inc., should be followed in this matter, and, therefore, the Canadian taxes paid by the importer should not be included in dutiable value.

From the facts presented in the matter you forwarded to us, the importer paid internal Canadian taxes for the purchase of the automobile. These taxes were separately identified in the bill of sale submitted to us. Although we have no proof before us, you indicate that these taxes were refunded to the importer. Consequently, based on Caterpillar, Inc., and assuming that the Canadian taxes were indeed refunded to the importer, these taxes are not included as part of the price actually paid or payable.


Assuming the taxes paid in the country of exportation were refunded to the importer, they are not included in the price actually paid or payable.

You are to mail this decision to the internal advice applicant no later than 60 days from the date of this letter. On that date, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other methods of public distribution.


Virginia L. Brown

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