Customs valuation includes know-how fees when foreign design and technical inputs form part of imported equipment pricing.

Know-how fee paid to a foreign collaborator was treated as part of the assessable value of imported proprietary equipment where the goods were manufactured abroad on the basis of drawings, designs, technical specifications and related engineering inputs supplied under the arrangement. Rule 9(1)(b)(iv) required inclusion of the value of such abroad-based design and development inputs when that value was not already reflected in the import price. Because the importer effectively bore the cost through a lump-sum know-how payment, the fee was regarded as an indirect supply of technical inputs to the foreign manufacturer and was includible in valuation.

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Issues: Whether the know-how fee paid to the foreign collaborator was includible in the assessable value of the imported proprietary equipment under Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988.

Analysis: Rule 9(1)(b)(iv) requires inclusion in the price of imported goods of the value of engineering, development, design, plans and sketches undertaken abroad and necessary for production of the imported goods, where such value is not already included in the price. The agreement and related clauses showed that the proprietary equipment was manufactured according to drawings, designs and technical specifications supplied abroad, that those materials formed part of the know-how package, and that the importer had effectively borne their cost through the lump sum know-how payment. The payment therefore represented an indirect supply of design and related technical inputs to the foreign manufacturer, bringing the amount within the rule.

Conclusion: The know-how fee was correctly added to the assessable value and the assessee's challenge failed.

Ratio Decidendi: Where imported goods are manufactured abroad on the basis of design, engineering and technical inputs supplied through a know-how arrangement, and the importer has borne their cost, such value is includible in the assessable value if not already reflected in the import price.

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