H357218

H357218 April 27, 2026 OT:RR:CTF:VS H357218 AP CATEGORY: Valuation [X] S. Manager [X] [X] [X] [X] [X] RE: Dutiability of License Fees for Software as a Service in Imported Vehicles Dear Mr. [X]: This is in response to your ruling request dated November 7, 2025, which you submitted on behalf of [X] (the “foreign manufacturer” and “requester”) with respect to the dutiability of license fees for software as a service (“SAAS”) in vehicles imported into the United States from [X] (“Country A”). The requester has asked that certain information submitted in connection with this ruling be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets in italics in this ruling or in the attachments to the ruling request, forwarded to our office, will not be released to the public and will be withheld from published versions of this ruling. FACTS: The U.S. importer, [X], purchases finished vehicles from the foreign manufacturer, [X], for sale to its authorized dealers in the United States. The finished vehicles are classified in heading 8703, Harmonized Tariff Schedule of the United States (“HTSUS”). Each vehicle utilizes a connected car navigation cockpit (“CCNC”) located in the central dashboard to perform functions such as checking traffic information on maps and providing destination guidance and voice recognition. The SAAS component of the CCNC receives and uses data in real-time from a cloud server via the vehicle’s wireless communication. The SAAS content includes: (1) server-based route guidance and real-time information services; (2) traffic information and server-local search; (3) weather; (4) sports; (5) parking lot information; (6) generative artificial intelligence; and (7) Google search Applications Programming Interfaces (“API”) content. The SAAS content will be provided on a subscription basis from a cloud environment via the vehicle’s wireless communication. The SAAS can be used immediately through a web browser or application without an installation process. The SAAS content will be provided to the U.S. consumer via a server, typically as a subscription for 10 years for [X] vehicles and 5 years for [X] vehicles. After this initial subscription period, consumers may extend the service on a yearly basis. The distribution agreement between the foreign manufacturer and the U.S. importer for the imported vehicles does not contain any provisions regarding license fees for the SAAS. [X], a Country A-based affiliate (“Country A affiliate”) specializing in software and information technology for the foreign manufacturer has individually executed license agreements with U.S.-based SAAS content providers (“CPs”). The U.S. importer, the foreign manufacturer, and the Country A affiliate are all related parties. In its capacity as a licensee, the Country A affiliate is granted the non-exclusive and non-transferable right to use the content provided by the CPs in vehicles imported into the United States from Country A. The license agreements with the CPs do not contain a condition stating that the finished vehicle distribution agreement can be terminated if the license fees are not paid. The Country A affiliate pays the license fees quarterly or as otherwise stipulated by the agreements with the CPs. The Country A affiliate is considering entering into a license agreement for the provision of the SAAS content with the U.S. importer. The U.S. importer will pay license fees for the use of the SAAS to the Country A affiliate who will then pay licensee fees to the CPs. The U.S. importer is seeking this ruling to determine the dutiability of the license fees paid by the U.S. importer to the CPs via the Country A affiliate. Under the contemplated structure, the U.S. importer will be granted the right to store, upload, install, execute, or display the software, including the SAAS license, on the imported vehicles. This right will be non-transferable, non- exclusive, and non-sublicensable. The U.S. importer will pay the license fees to the Company A affiliate as a lump sum at the time when the imported vehicles are sold locally to U.S. consumers after importation. The U.S. importer will recognize the SAAS license fees paid to the Country A affiliate as Selling, General, and Administrative Expenses. The Country A affiliate will pay the license fees to the CPs 1 in the United States except for server-based route guidance and real-time information services. ISSUES: 1. Whether the license fees that will be paid by the U.S. importer to the Country A affiliate, which then pays the CPs for SAAS, are part of the price actually paid or payable for the finished vehicles imported into the United States from the foreign manufacturer. 2. Whether the license fees should be included in the transaction value of the imported merchandise as either license fees or proceeds of subsequent resale under 19 U.S.C. §§ 1401a(b)(1)(D) and (E). 1 With respect to server-based route guidance and real-time information services, the Country A affiliate will not pay a separate license fee to the CPs because it will process and refine the content received from the CPs through a Model Context Protocol (“MCP”) cloud server before providing the service. 2 LAW AND ANALYSIS: Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (“TAA”) and codified at 19 U.S.C. § 1401a. The preferred method of appraisement under the TAA is transaction value, defined as “the price actually paid or payable for the merchandise when sold for exportation to the United States,” plus certain enumerated additions, including “any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States; and the proceeds of any subsequent resale, disposal, or use of the imported merchandise that accrue, directly or indirectly, to the seller.” 19 U.S.C. §§ 1401a(b)(1)(D) and (E). These additions apply only if they are not already included in the price actually paid or payable for the merchandise. In order for imported merchandise to be appraised under the transaction value method, there must be a bona fide sale between a buyer and seller, and the sale must be a sale for exportation to the United States. Pursuant to 19 U.S.C. § 1401a(b)(2)(A)(iv), transaction value is acceptable only where the buyer and seller are not related, or where related, the relationship does not influence the price actually paid or payable. In the instant matter, the buyer/U.S. importer is related to the foreign seller/manufacturer. No information regarding the acceptability of the transaction value has been submitted. Thus, for purposes of this ruling, we assume that transaction value is the appropriate method of appraisement and the applicable requirements with respect to the bona fide sale and sale for export between the related parties are satisfied. No ruling is being issued in regard to these issues. 1. Whether the license fees that will be paid by the U.S. importer to the Country A affiliate, which then pays the CPs for SAAS, are part of the price actually paid or payable for the finished vehicles imported into the United States from the foreign manufacturer. The “price actually paid or payable” means the total payment (whether direct or indirect, and exclusive of any charges, costs, 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.” 19 U.S.C. § 1401a(b)(4)(A). It is U.S. Customs and Border Protection’s (“CBP”) position that

Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (“TAA”) and codified at 19 U.S.C. § 1401a. The preferred method of appraisement under the TAA is transaction value, defined as “the price actually paid or payable for the merchandise when sold for exportation to the United States,” plus certain enumerated additions, including “any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States; and the proceeds of any subsequent resale, disposal, or use of the imported merchandise that accrue, directly or indirectly, to the seller.” 19 U.S.C. §§ 1401a(b)(1)(D) and (E). These additions apply only if they are not already included in the price actually paid or payable for the merchandise. In order for imported merchandise to be appraised under the transaction value method, there must be a bona fide sale between a buyer and seller, and the sale must be a sale for exportation to the United States. Pursuant to 19 U.S.C. § 1401a(b)(2)(A)(iv), transaction value is acceptable only where the buyer and seller are not related, or where related, the relationship does not influence the price actually paid or payable. In the instant matter, the buyer/U.S. importer is related to the foreign seller/manufacturer. No information regarding the acceptability of the transaction value has been submitted. Thus, for purposes of this ruling, we assume that transaction value is the appropriate method of appraisement and the applicable requirements with respect to the bona fide sale and sale for export between the related parties are satisfied. No ruling is being issued in regard to these issues. 1. Whether the license fees that will be paid by the U.S. importer to the Country A affiliate, which then pays the CPs for SAAS, are part of the pr