HQ 545500 - Request for internal advice regarding payments made by importer of automobiles to foreign manufacturer and third parties; price actually paid or payable; assists; apportionment - United States International Trade Commision Rulings

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HQ 545500

March 24, 1995

VAL CO:R:C:V 545500 IOR

CATEGORY: VALUATION

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

...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 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

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