Design and engineering fees excluded from assessable value where contract separated technical know-how from imported equipment

Design and engineering charges paid to a foreign collaborator were examined for inclusion in the assessable value of imported goods. The contract separately identified design, engineering and technical know-how services, and the record did not show that the payment related to the imported equipment itself. On that basis, the amount could not be apportioned to the value of the imported goods under Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988. The engineering fees were therefore excluded from assessable value, and the departmental appeal failed.

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Issues: Whether the amount paid towards design and engineering charges to the foreign collaborator was includible in the assessable value of the imported goods.

Analysis: The payment was specifically earmarked in the contract for design and engineering and for technical know-how relating to the plant. The imported equipment and the know-how charges were dealt with separately, and the record did not show that the amount represented any charge relatable to the imported goods themselves. On the contract terms and the nature of the services, the amount could not be apportioned to the value of the imported equipment under Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988.

Conclusion: The engineering fees were not includible in the assessable value of the imported goods, and the departmental appeal failed.

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