HQ 0545086 - Transaction value; price actually paid or payable; cost of acquisition of an assist calculated on a quarterly basis. - United States International Trade Commision Rulings

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HQ 545086

April 1, 1993

VAL CO:R:C:V 545086 CRS

CATEGORY: VALUATION

Margaret S. Solinger, Esq.
Du Pont Corporation
3525 Silverside Road
Concord Plaza
Read Building
Wilmington, DE 19898

RE: Transaction value; price actually paid or payable; cost of acquisition of an assist calculated on a quarterly basis.

Dear Ms. Solinger:

This is in reply to your letter dated August 27, 1992, in which you requested a binding ruling on the valuation of certain pharmaceutical products. This matter was also discussed at a meeting with members of my staff on February 11, 1993. Your request for confidentiality with regard to costs, product names, and the identity of other parties concerned has been granted pursuant to 177.2(b)(7), Customs Regulations (19 CFR

FACTS:

Injection ampules will be manufactured for Du Pont by an unrelated party in England. The active ingredient for the ampules will be purchased by Du Pont in bulk form from another unrelated party at a price equal to 20 percent of the average net selling price of the ampules in the U.S. This price will cover all royalties and license fees, including those for the finished product.

The active ingredient, still in bulk form, will be imported into the U.S. under TIB for quality control testing. After having been tested the bulk material will be sent to England where it will be manufactured into injection ampules. Du Pont will supply the active ingredient free of charge to the English manufacturer. In addition, Du Pont will pay the manufacturer a fixed amount per ampule for its services. It is anticipated that the merchandise in question will be imported through the port of Atlanta.

ISSUE:

The issue presented is whether the merchandise in question can be appraised on the basis of transaction value when the cost of acquisition of an ingredient incorporated into the merchandise is not determined until after the time of importation.

LAW AND ANALYSIS:

As a general matter, 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 value, defined as "the price actually paid or payable for merchandise when sold for exportation to the United States," plus five enumerated additions, including the value, apportioned as appropriate, of any assist. 19 U.S.C. 1401a(b)(1)(C).

Pursuant to section 402(b)(4)(A) of the TAA, the term "price actually paid or payable" is defined as:

[T]he 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.

19 U.S.C. 1401a(b)(4)(A). In this instance, the total payment for the imported merchandise is the amount paid by Du Pont to the U.K. manufacturer for producing the ampules.

In order to determine the transaction value of the imported merchandise, the value of any assist provided by Du Pont to the U.K. manufacturer must be added to the price actually paid or payable. The term "assist" includes any materials incorporated in imported merchandise that are supplied directly or indirectly, and free of charge or at reduced cost, by the buyer of imported merchandise, for use in the production of the merchandise. 19 U.S.C. 1401a(h)(1)(A).

Du Pont provides the U.K. manufacturer with the active ingredient used in the imported ampules, i.e., with an assist. However, since the value of the assist is based on the average net selling price of the imported ampules, calculated on a quarterly basis, the value of the assist will be undetermined at the time of importation.

Accordingly, transaction value will be an acceptable basis of appraisement for the merchandise in question only if, at the discretion of the port of entry, liquidation can be withheld in order to permit a determination of the cost of acquisition of the assist to be made.

HOLDING:

The basis of appraisement is transaction value pursuant to 19 U.S.C. 1401a(b) provided liquidation can be withheld until such time as the value of the assist can be determined.

If the port determines that liquidation cannot be withheld, the merchandise shall be appraised in accordance with the first applicable method arrived at through a sequential application of the statutorily enumerated methods.

Sincerely,

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