Monday, May 18, 2009

Non-Dutiable Components of Valuation: Post Importation Charges

For the last few months, we have devoted Monday’s blog to issues related to valuation of imported merchandise. Last week the blog addressed packing, a dutiable component of valuation. The answer to last week’s multiple-choice question can be found at the end of this article. This week, we will look at post importation charges as non-dutiable components.

19 CFR 152.103(i) provides a list of items that should be excluded from transaction value. When occurring after importation, the following constitute items that are not part of transaction value; however, the costs of these items must be identified separately.
  • Construction
  • Erection
  • Assembly
  • Maintenance
  • Technical assistance
  • Transportation after importation
Tin Man Industries imports special metalworking machinery from Sammy Scarecrow for $500,000. In order to learn the proper methods of operating the complicated machinery, Tin Man’s employees require on-site training. The cost of this training, $25,000, is included in the value of the merchandise; however, if the cost is identified separately, then the training expenses will not be included in the transaction value. These fees are considered for "the construction, erection, assembly or maintenance of, or the technical assistance provided with respect to, the merchandise after its importation into the United States."

Assume the duty rate of the machine in the previous example is 5%. How much does the importer save by being able to deduct the cost of the training expenses?

The answer will be provided next Monday when we continue to discuss the topic of valuation.

Answer to Packing Example – Monday May 11, 2009

Answer B
The shipping cartons and individual boxes are packing and the value of $1,500 is dutiable. Since these cartons are sufficient for international transportation and vacuum packaging is not necessary, the costs of $2,000 are extra and do not need to be included in the dutiable value. It does not make any difference that the invoice was submitted separately.

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