HQ 545505: Internal Advice 34/93; price actually paid or payable; computed value

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            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