Technical know-how fees are not added to import value when paid for post-import manufacturing assistance

Technical collaboration fees were examined for inclusion in the assessable value of an imported coating plant under Rule 9(1)(c) of the Customs Valuation Rules, 1988 read with section 14(1) of the Customs Act, 1962. The fee was held not includible because the import contract and the technical collaboration agreement were separate, and the payment related to technical know-how, designs, drawings, standards, specifications and manufacturing assistance for use in the importer's factory after import. As the agreement did not make the payment a condition of sale or link it to the imported goods, the know-how fee could not be added to the customs value.

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Issues: Whether the technical collaboration fee of US $ 2 million was includible in the assessable value of the imported coating plant as a royalty or licence fee under Rule 9(1)(c) of the Customs Valuation Rules, 1988 read with Section 14(1) of the Customs Act, 1962.

Analysis: The import of the coating plant and the technical collaboration agreement were separate arrangements. Rule 9(1)(c) permits addition only where the payment is related to the imported goods and is payable as a condition for sale of those goods. On a reading of the agreement, the amount was paid for technical know-how and assistance for manufacture in the respondent's factory, including designs, drawings, standards, specifications and other technical data. The agreement did not show that the payment was linked to the sale of the coating plant or that it was a condition precedent for such sale. The cited precedents also supported the view that technical know-how fees payable for post-import manufacturing assistance are not includible in the value of imported goods.

Conclusion: The technical know-how fee was not includible in the transaction value of the imported coating plant, and the Revenue's appeal failed.

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