VAL CO:R:C:V 545500 IOR
District Director
Detroit, Michigan
RE: Request for internal advice regarding payments made by
importer of automobiles to foreign manufacturer and third
parties; price actually paid or payable; assists;
apportionment
Dear Sir:
This is in response to your memorandum dated June 21, 1993
by which you forwarded an internal advice request initiated by an
automobile importer ("hereinafter referred to as "the importer").
Your request was followed by a September 8, 1993 memorandum from
the Special Agent In Charge. Our file contains the importer's
submission dated August 13, 1992, requesting internal advice, and
copies of several Reports of Investigation (ROI) from the SAC.
This response follows a January 5, 1995 meeting between counsel
for the importer and members of my staff in the Value Branch, and
a supplemental submission made by the importer dated March 2,
1995. The importer has requested that certain information
supplied in connection with the internal advice request be
treated as confidential. Any such information that appears in
this decision has been bracketed and will be deleted from any
published versions. We regret the delay in responding.
FACTS:
The merchandise at issue consists of 7,300 automobiles
imported from a foreign manufacturer (hereinafter referred to as
"the manufacturer"), between approximately January 1, 1986 and
December 31, 1989. The automobiles were assembled abroad under a
Vehicle Supply Agreement (VSA), entered into in [xxxx], between
the importer and the manufacturer and various companies related
to the manufacturer. Agreements between the importer and
manufacturer involved the importer's sale of parts and components
to the manufacturer for use in the assembly by the manufacturer
of the subject automobiles, as well as the importer's design and
development of certain components. According to the importer,
subsequent to entering into initial commercial agreements, and
prior to the importation of the automobiles, the importer and
manufacturer became related as defined in 402(g)(1)(F) of the
Tariff Act of 1930, as amended by the Trade Agreements Act of
1979 (19 U.S.C. 1401a(b); TAA).
The VSA provided for a minimum and maximum quantity of
automobiles that the importer would purchase and that the
manufacturer would supply to the importer. The VSA also provided
that the importer would pay a base price (excluding optional
equipment) of $14,303 each for the first 20,000 automobiles
delivered. This base price consists of 1) the cost of importer-supplied components originally sold to the manufacturer; 2) a
per-unit fee of $1250.00 ($25 million over 20,000 units), which
was later increased to $1875.00 ($37.5 million over 20,000 units)
and 3) all other items (including a net warranty allowance of
$158). Although the price was to be firm, subject only to
adjustment for indexation and currency fluctuation, the base
price was subsequently increased to $24,411. The total number of
automobiles imported was 7300.
The importer requests internal advice whether the value of
certain investments, payments, equipment transfers and
settlements that occurred between the importer and manufacturer,
and which have been identified as potentially dutiable by
Customs, are included in the transaction value of the imported
merchandise.
The amounts at issue are as follows:
1. Initial Technical Development Payment
Pursuant to a Technical Development Agreement (TDA) entered
into in [xxxx] by the importer and manufacturer, before
production of any automobiles began the importer paid the
manufacturer $2 million as consideration for the manufacturer's
[xxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxx xxx xxxxxxxxxx xxx xxxxxxx
xx] the manufacturer obtaining financing to support the entire
project. The importer states that this payment was made prior to
the importer's commitment or obligation to purchase any
automobiles, and that the importer was obligated to make the
payment even if no further progress was made toward the assembly
of the vehicles. However, [x xxxxxx xxxxxxxxx xxxxx xxxxxxx xx,
xxxx, xxxxxx xxxx xxx xxxx xx xxxxxxxxxxx, xxxxxxxxxxx xxx xxxxxx
xxxxxxxxxx xx xxx xxxxxxxxxx,xxxxxxxxxx xxx xxxx xx xxx
xxxxxxxxxxx,xxxxxxxxxxx,xxxxxxxxx xxxxxxx, xxxxxxxx xxxxxxxxxxxx,
xxxxxxxxxxxxx xxx xxxxxx xxxx xx xxxxxx xx xxx xxxxxxxx xx xxx
xxxxxx xx xxx xxxxxxx, xxxxxxxxx xxx xx xxxxxxx xxxxxxxxx xxxxxx
xxx xxx xxx xxxxxxx xxxxxxxxx xx xxxx x. Xxxxx.] Even though you
concur with the importer that this payment of $2 million is not
included in the appraised value of the imported merchandise, we
have reviewed this particular payment as well.
2. Tooling and Development Costs
Pursuant to the VSA and TDA the manufacturer was responsible
for obtaining financing for the cost of development, engineering
and volume production of the automobile, including the cost of
all engineering, prototypes, testing, tooling, facility
improvements, preproduction and launch up to a limit of $25
million. The $25 million limit was later increased to $37.46
million. The VSA provides that the $25 million (hereinafter
referred to as "tooling cost") will be recovered by the
manufacturer by inclusion of $1250.00 in the price of each
automobile, for the first 20,000 automobiles purchased by the
importer (upon the increase of the limit to $37.46 million, the
amount included in the price of each automobile was increased to
$1875.00). The VSA provides that after payment of $25 million
(by purchase of 20,000 automobiles) the $1875.00 amortized
tooling cost amount would no longer be included in the price of
the automobiles to the importer. In 1988, the importer made a
$5.3 million prepayment of the $25 million to the manufacturer,
with the understanding that the importer would recover the amount
on the first 4,000 automobiles shipped. According to the
importer's submission, duties were paid on the imported
automobiles based on the full amount of the sales price,
including the $1875.00 tooling cost included in the price.
According to the District's Report of Investigation (ROI)
No. 9, the importer's customs broker incorrectly deducted
$1250.00 from the entered value of various entries of those 4000
imported automobiles for which the $1250.00 or $1875.00 was to be
credited to the importer. As a result, duties were not paid on
the apportioned tooling cost for 4000 of the imported
automobiles.
3. Production Overrun
On December 18, 1988 the importer paid the manufacturer
$10,583,123 (hereinafter referred to as $10.6 million) for
unexpected launch costs including a portion for prototype and
preproduction vehicles. The importer states that the launch
costs were expenses incurred before production began. The $10.6
million was paid in settlement of a dispute between the importer
and manufacturer regarding delays allegedly caused by the
importer. The payment was allegedly made to prevent litigation
and to preserve the manufacturer's goodwill. The importer has
conceded that $327,500 of the $10.6 million was for tooling and
states that it has deposited appropriate duties with Customs. At
the January 5, 1995 meeting with this office, counsel asserted
that $901,639 was for prototypes some of which were not imported
into the U.S. However Customs has not been provided with any
further documentation regarding the prototypes which were
imported. The importer states that because the price for the
imported vehicles was set prior to the time the price was set for
the prototypes, the payment for the prototypes could not have
been a payment for the imported vehicles, and that the payment is
neither an assist nor an indirect payment. The importer takes
the position that the remainder of the $10.6 million is not
dutiable because it consists of administrative, overhead, and
other expenses incurred by the manufacturer prior to the
manufacture and export of the automobiles.
4. Launch Delay Settlement
In response to delays in the production launch, the
manufacturer claimed $3.5 million in damages from the importer.
The importer paid this amount to the manufacturer in complete
settlement of the manufacturer's claims.
5. Facilities and Test Equipment
The importer loaned to the manufacturer various equipment
valued at approximately $937,000. The purpose of the equipment
was to insure that the imported merchandise and other products
would meet world class quality standards and protect the
importer's equity investment. The equipment is divided into six
categories: testing apparatus used before final assembly, testing
apparatus used after final assembly, office equipment, factory
equipment and fixtures, assembly tool fixtures and tools. The
assembly tool fixtures consist of pulley pushers, fuel door
centering fixtures, pressure rollers and door closing gauges.
The fuel door centering fixtures and door closing gauges are
measuring devices which do not work any physical change on the
vehicles under production. The pulley pushers and pressure
rollers move the vehicle or equipment along the assembly line.
The importer takes the position that testing equipment is
not an assist because it does not form anything or "work" the
merchandise and thus is not similar to "tools, dies and molds,"
and alternatively, even if testing equipment is an assist,
testing equipment used after final assembly is not an assist
because it is not used in the production of the imported
merchandise, but to check, test or adjust the final product, and
that testing equipment used before final assembly is not an
assist because it does not work a change on the imported
merchandise, although it may make adjustments. Finally, the
importer takes the position that the testing equipment is not
dutiable because the "loan" of the equipment was undertaken for
the importer's own benefit. With respect to some of the factory
equipment and fixtures the importer takes the position that the
items are not assists because they were not supplied free or at
reduced charge by the importer, and in general because the
importer did not relinquish title to the items until after
production of the vehicles ceased. You take the position that
the testing equipment used before final assembly, tools and some
of the assembly tool fixtures (the fuel door centering fixtures
and door closing gauges) are assists and that the testing
equipment used after final assembly, office equipment and factory
equipment and fixtures and the remaining assembly tool fixtures
are not assists.
6. Off-line tooling
The importer paid a total of $4.348 million to various
suppliers unrelated to the manufacturer for tooling used by the
manufacturer in connection with the production of specified parts
for the imported automobiles. In the VSA the parties had agreed
that if the cost of specified tooling exceeded a certain amount,
the importer would pay the excess. The importer takes the
position that these amounts paid are not assists because the
importer did not directly provide the actual tooling to the
manufacturer. You take the position that the amount paid is an
assist and is the cost of acquisition of the assist.
7. 16-valve engine development
The importer paid the manufacturer $450,000 for design and
development costs associated with a particular engine developed
for the imported automobile. The importer takes the position
that this amount is an assist and should be allocated over the
entire quantity of vehicles contracted for. It is your position
that the payment is part of the price actually paid or payable
for the imported merchandise.
8. 16-valve engine tooling
The importer paid the manufacturer $2.1865 million for
tooling and launch costs. $1.37 million of this payment was for
general purpose machinery used in the production of the engines
as well as other manufacturer products unrelated to the imported
merchandise. The importer takes the position that this total
payment is not an assist, however if it is determined to be an
assist, the amount should be allocated to reflect the number of
vehicles imported by the importer versus the total number of
vehicles produced by the manufacturer with the equipment, and
over the entire quantity of vehicles contracted for. It is your
position that the amount paid is part of the price actually paid
or payable for the imported merchandise.
9. Purchase of capital stock
In 1986 the importer increased its equity in the
manufacturer with an investment of $33 million, in return for
shares of stock. The documentation submitted with the importer's
March 2, 1995 submission shows a payment of [xxxx xxxxxxxxxxxxxx]
from the importer to the manufacturer pursuant to the provisions
of the Stock Purchase Agreement dated May 23, 1986. The
documentation does not show any exchange rate, and we assume for
purposes of this decision that the payment in foreign currency is
equivalent to a payment of $33 million. The commercial terms of
the investment included an understanding that of the total
investment, $[x xxxxxxx] would be used for [xxxxxxxxxx xxxxxxx]
related to the subject automobiles and manufacturer's facility
improvements, and $[x xxxxxxx] would be used to [xxxxxxx xxx
xxxxxxxxxxxxxx xxxxx xxxx]. The manufacturer was also to agree
to increase the number of automobiles supplied to the importer
under the VSA. The manufacturer did use the capital to improve
its production capacity. The importer takes the position that
the payment is neither an assist nor a payment for the
merchandise. You take the position that the payment is not an
assist.
10. Allocation of assists and amounts paid by the importer
In the event that any of the foregoing items are determined
to be assists or amounts included in the price actually paid or
payable for the imported merchandise, in its August 13, 1992
submission, the importer takes the position that the cost or
value of the assists and amounts paid must be allocated over the
20,000 units contracted for under the agreement between the
manufacturer and the importer. In its March 2, 1995 submission
the importer asserts that a maximum of 34,000 units were
contracted for by the parties.
ISSUE:
1. Whether the foregoing costs and expenses are included in
the transaction value of the imported merchandise.
2. How should any assists and amounts included in the price
actually paid or payable be apportioned.
LAW AND ANALYSIS:
Transaction value is defined by 402(b)(1) of the Tariff Act
of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19
U.S.C. 1401a(b)) as "the price actually paid or payable for the
merchandise when sold for exportation to the United States..."
plus certain additions specified in 402(b)(1)(A) through (E).
The term "price actually paid or payable" is defined in TAA
402(b)(4)(A) as:
...the total payment (whether direct or indirect, and
exclusive of any costs, charges, or expenses incurred for
transportation, insurance, and related services incident to
the international shipment of the merchandise from the
country of exportation to the place of importation in the
United States) made, or to be made, for imported merchandise
by the buyer to, or for the benefit of, the seller.
Two court cases have addressed the meaning of this term. In
Generra Sportswear Co. v. United States, 905 F.2d 377 (Fed. Cir.
1990), the issue before the court was whether quota charges paid
to the seller on behalf of the buyer were part of the price
actually paid or payable for the imported goods. In reversing
the decision of the lower court, the appeals court held that the
term "total payment" is all-inclusive and that "as long as the
quota payment was made to the seller in exchange for merchandise
sold for export to the United States, the payment properly may be
included in transaction value, even if the payment represents
something other than the per se value of the goods." The court
also stated:
Congress did not intend for the Customs Service to
engage in extensive fact-finding to determine whether
separate charges, all resulting in payments to the
seller in connection with the purchase of imported
merchandise, are for the merchandise or for something
else. As we said in Moss Mfg. Co. V. United States,
896 F.2d 535, 539 (Fed. Cir.1990), the "straightforward
approach [of section 1401a(b)] is no doubt intended to
enhance the efficiency of Customs' appraisal procedure;
it would be frustrated were we to parse the statutory
language in the manner, and require Customs to engage
in the formidable fact-finding task, envisioned by
[appellant].
Id. At 380.
In Chrysler Corporation v. United States, Slip Op. 93-186
(Ct. Int'l Trade September 22, 1993), the Court of International
Trade applied the standard in Generra and determined that certain
shortfall and Special Application fees which the buyer paid to
the seller were not a component of the price actually paid or
payable for the imported merchandise. The court found that the
evidence established that these fees were independent and
unrelated costs assessed because the buyer failed to purchase
other products from the seller and not a component of the price
of the imported engines.
Based on Generra, there is a presumption that all payments
made by a buyer to a seller are part of the price actually paid
or payable for the imported merchandise. However, this
presumption may be rebutted by evidence which clearly establishes
that the payments, like those in Chrysler, are totally unrelated
to the imported merchandise.
The parties are related, therefore pursuant to 402(b)(2)(B)
of the TAA, transaction value is acceptable only if an
examination of the circumstances of the sale indicates that the
relationship between the buyer and seller did not influence the
price actually paid or payable or if the transaction value of the
imported merchandise closely approximates the transaction value
of identical or similar merchandise in sales to unrelated buyers
in the U.S. or the deductive or computed value for identical or
similar merchandise. We do not have enough information to
determine whether transaction value is an acceptable basis of
appraisement in this case, however, for the purpose of this
response, we are assuming that transaction value is the
appropriate basis of appraisement.
Of the ten items at issue, items 1,2,3,4,7,8 and 9 involve
payments made by the importer directly to the manufacturer. With
respect to item 1, the initial technical development payment, we
find that the payment is part of the price actually paid or
payable for the imported automobiles. Although the payment may
have been made prior to the production of any automobiles, or the
importer's commitment to purchase any automobiles, the payment
was for the development, engineering and volume production of the
imported automobiles.
With respect to item 2, the tooling and development cost,
the $5.3 million dollar payment is part of the price actually
paid or payable for the first 4,000 automobiles imported, just as
it would have been if the $1,250 or $1,875 amount had been paid
for each of the 4,000 automobiles separately.
With respect to item 3, production overrun costs, whether
the amount is for tooling, administrative and overhead expenses
or prototypes and preproduction vehicles, the amount paid is part
of the price actually paid or payable for the imported
automobiles. It is immaterial that the "price" for the imported
automobiles was set prior to the determination of the cost of the
prototypes. The fact that an amount paid by a buyer to a seller
is over and above a "price" for merchandise, does not preclude
that amount from being included in the price actually paid or
payable for the imported merchandise. The importer cites HRL
544516 dated January 9, 1991, HRL 543376 dated November 13, 1984
and HRL 543324 dated August 8, 1984 in support of its position
that this payment is neither an assist nor an indirect payment.
In HRL 544516, supra, Customs found that prototypes developed by
the seller were a necessary step in the design and development of
the subsequently imported merchandise, and that the importer's
R&D payment for the development of the prototypes was therefore
part of the price actually paid or payable for the subsequently
imported merchandise based on the prototypes. These prototypes
in HRL 544516 were never imported into the United States. The
cited rulings support our determination that an importer's
payment to a manufacturer for costs incurred in the production of
imported merchandise, including the development of prototypes, is
not an assist, but part of the price actually paid or payable.
Similarly, item 4, a launch delay settlement is a payment by the
importer to the manufacturer, and is included in the price
actually paid or payable for the imported merchandise.
With respect to item 7, the 16-valve engine development and
item 8, the 16-valve engine tooling, the amounts paid are not
assists. Customs has consistently taken the position that a
buyer's payment to the manufacturer does not come within the
statutory definition of an assist. See e.g. HRL 543376 dated
November 13, 1984, HRL 543324 dated August 8, 1984, C.S.D. 83-3.
This position has recently been upheld by the Court of
International Trade in Chrysler Corporation v. United States,
supra, slip op. at 17-18. These amounts paid to the manufacturer
are part of the price actually paid or payable for the imported
merchandise.
The amount paid under item 9, for the purchase of capital
stock, represents a transaction independent and unrelated to the
imported merchandise. In TAA 52 (HRL 542831 dated September 21,
1982), and HRL 543768 dated July 23, 1986, Customs ruled that
payments to a foreign seller for services unrelated to purchases
from that seller, and not associated with the sale of any
specific merchandise for exportation to the U.S., are not
included in the price actually paid or payable for imported
merchandise. In TAA 45 (HRL 542666 dated January 26, 1982), the
buyer agreed to fund certain capital requirements for facilities
and equipment expansion. The facilities and equipment expansion
was necessary in order for the manufacturer to produce the
merchandise to be imported. Per the terms of the contract the
importer agreed that no part of the money advanced would be "set
off" against the contractual sales price of the merchandise to
be imported. Customs concluded that the cash advance was not
tied to the payment for the imported merchandise but represented
a separate undertaking or transaction from the payment for the
imported merchandise. Accordingly, the advance did not
constitute part of the price actually paid or payable for the
imported merchandise. As in TAA 45, in the instant case,
although [xxx xxxxxxx xx xxx xxx xxxxxxx xxx xxxxxxxx xxx xxxxxxx
xxxxxxx, xxxxxxxxxx xxxxxxx xxx xxxxxxxx xxxxxxxxxxxx] related to
the subject automobiles, we do not find that the payment of $33
million was made "in exchange for merchandise sold for export to
the United States." We conclude that the $33 million paid for
capital stock is not part of the price actually paid or payable
for the imported merchandise.
The remaining items 5, facilities and test equipment, and 6,
off-line tooling, do not consist of payments made by the importer
to the manufacturer. Item 5 consists of equipment loaned to the
manufacturer and item 6 consists of either payments or a mold
provided by the importer to unrelated suppliers, for tooling sold
to the manufacturer by the suppliers.
One of the five statutory additions to be added to the price
actually paid or payable is "the value, apportioned as
appropriate, of any assist." TAA 402(b)(1)(C). An assist is
defined in TAA 402(h) as:
...any of the following if supplied directly or
indirectly, and free of charge or at reduced cost, by
the buyer of imported merchandise for use in connection
with the production or the sale for export to the
United States of the merchandise:
(I) Materials, components, parts, and similar items
incorporated in the imported merchandise.
(ii) Tools, dies, molds, and similar items used in the
production of the imported merchandise.
(iii) Merchandise consumed in the production of the
imported merchandise.
(iv) Engineering, development, artwork, design work,
and plans and sketches that are undertaken elsewhere
than in the United States and are necessary for the
production of the imported merchandise.
The fact that the subject items were loaned to the seller,
or supplied to a third party by the importer, does not change the
fact that they were supplied "directly or indirectly" free of
charge. In HRL 543439 dated May 6, 1985, we ruled that material
supplied to a seller by an unrelated third party is an assist as
defined by the TAA. In order to determine whether the subject
equipment items are assists, we must find that the equipment was
"used in the production of the imported merchandise." With
respect to testing equipment, in C.S.D. 89-127 Customs held that
test equipment provided by the U.S. importer, free of charge, to
the foreign manufacturer and used for testing the integrity of
finished instruments before such instruments were shipped to the
U.S., did not constitute an assist within the meaning of TAA
402(h)(1)(A). In C.S.D. 89-127 the testing equipment was used
on the finished instruments and was not used in the production of
the merchandise within the meaning of TAA 402(h)(1)(A)(ii).
In HRL 544508 dated June 19, 1990, which was a
reconsideration of C.S.D. 89-127, Customs held that testing
equipment provided free of charge to the foreign manufacturer by
the U.S. importer may constitute an assist within the meaning of
TAA 402(h)(1)(A) if it can be shown that the equipment was used
for testing performed during the production process and that such
testing, due to the nature of the finished product, was essential
to production of the product. The facts in HRL 544508 concerned
testing of the individual components to be assembled, prior to
production, and testing throughout the assembly and manufacturing
process. The testing equipment was found to be an assist within
the meaning of TAA 402(h)(1)(A)(ii).
In HRL 545170 dated October 27, 1994, testing equipment used
for testing assembled products was found to be an assist within
the meaning of TAA 402(h)(1)(A)(ii). In that case the testing
was performed on fully assembled products, the nature of which
requires such testing, as the integrity of the product could not
otherwise be determined. We found that the testing equipment was
used during the production process and was essential to the
"production of the imported merchandise."
In this case, we find that all of the testing equipment was
used for testing performed during the production process and that
the testing is essential to the "production of the imported
merchandise." We also find that the tools, fuel door centering
fixtures, door closing gauges and off-line tooling are used in
the production of the merchandise.
With respect to the testing equipment and the fuel door
centering fixtures and door closing gauges, it is our opinion
that the language "similar items used in the production of the
imported merchandise," as that language is used in category (ii)
of the assist provision, was intended to include as assists
equipment that, like tools, dies and molds, directly contributes
to the final product. In Texas Apparel Co. v. United States, 12
CIT 1002 at 1008, 698 F.Supp. 932 (1988), the Court of
International Trade stated that a "tool" may be defined broadly
as "an implement or object used in performing an operation or
carrying on work of any kind," citing Websters Third New
International Dictionary. Clearly, the testing equipment, fuel
door centering fixtures and door closing gauges "perform an
operation" and "carry on work." In HRL 544147 dated July 5,
1988, we determined that it was insignificant that transferring a
photomask image onto a wafer was done by projection rather than
by actual physical contact. We determined that the photomask was
still used directly in the manufacture of the article.
Consistent with our prior decisions, we do not find it necessary
for a tool to come into physical contact with the merchandise to
be imported in order to find that it is an assist within the
meaning of TAA 402(h)(1)(A)(ii). Therefore, these items are
assists within the meaning of TAA 402(h)(1)(A)(ii) and the cost
of the equipment is included in the transaction value of the
imported merchandise.
The tools and off-line tooling fit expressly within category
(ii) of the assist provision, therefore the cost of these items
is also included in the transaction value of the imported
merchandise. The value of the off-line tooling assist is the
importer's cost of its acquisition, which would be the amount
paid to the third party supplier in this case. As stated
previously, the pulley pushers and pressure rollers move the
vehicles or equipment along the assembly line. We have
previously found that fork lifts and a conveyor system, used to
transport raw materials to the plant and to move the article
being produced from one point in the manufacturing process to
another, is not used in the actual production of the imported
merchandise within the meaning of TAA 402(h)(1)(A)(ii). See HRL
544261 dated February 28, 1989; HRL 544083 dated August 16, 1988.
Therefore the pulley pushers and pressure rollers, in addition to
the factory equipment and fixtures and office equipment are not
included within any of the assist categories and the cost of
these items is not included in the transaction value of the
imported merchandise.
The cost of the assists is to be apportioned pursuant to the
TAA. The Customs Regulations 19 C.F.R. 152.103(e), provide for
methods of apportionment, including apportionment over the entire
anticipated production. The Customs Regulations provide that if
the anticipated production is only partially for exportation to
the United States, the method of apportionment will depend on the
documentation submitted by the importer.
The importer states that item 5, facilities and test
equipment, is for the imported merchandise and "other products."
The importer has not provided Customs with any information
regarding the "other products." There is no indication that item
6, off-line tooling, was for anything but the imported
automobiles. In HRL 543806 dated March 12, 1987, we found it
reasonable to apportion an assist over the number of units
expected to be produced for sale to the U.S. according to
available forecasts. In Chrysler Corporation v. United States,
supra, at pp.18-21, the Court discussed the number of engines
over which elements of the price actually paid or payable should
be apportioned. In Chrysler, the Court determined that the
amounts in question should be apportioned over the minimum number
of engines for which the parties had contracted, although a
significantly smaller amount was actually imported. In this
case, according to the VSA, a minimum quantity of 4,000
automobiles was to be produced for each of the model years 1988-1990, and 5,000 in the model years 1991 and 1992. The VSA
provides for a maximum quantity of 4,000 for the model year 1987,
and no minimum quantity. Therefore, the number of automobiles
anticipated to be produced from 1987 through 1992 was 26,000
automobiles. Consequently, the assists are properly allocated
over 26,000 automobiles.
Based on the decision in Chrysler v. United States, the
remaining amounts in items 1,2,3,4,7,8 and 9, which are part of
the price actually paid or payable are also properly allocated
over 26,000 automobiles. If the importer provides evidence
satisfactory to you that some of the amounts paid were for other
products not for sale to the U.S., the allocation may be adjusted
accordingly.
HOLDING:
1. The amounts paid for the initial technical development
payment, tooling and development costs, production overrun,
launch delay settlement, 16-valve engine development and 16-valve
engine tooling are part of the price actually paid or payable for
the imported merchandise and are included in the transaction
value of the imported merchandise. The testing apparatus, tools,
fuel door centering fixtures, door closing gauges and off-line
tooling are assists within the meaning of the statute, and their
cost or value is to be included in the transaction value of the
imported merchandise. The amount paid for the purchase of
capital stock is not part of the price actually paid or payable
for the imported merchandise.
2. The amounts included in the price actually paid or
payable for the imported merchandise and the cost or value of the
assists are to be apportioned over the 26,000 automobiles that
were anticipated to be produced. Provided that the importer
supplies Customs with information that satisfactorily establishes
that the facilities and test equipment assist was for other
merchandise, in addition to that anticipated to be sold to the
U.S., the allocation for that amount may be adjusted accordingly.
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, Freedom
of Information Act and other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division
cc: Special Agent In Charge
Detroit, Michigan