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Sign inApril 2026 · Q78 · Valuation & Duty
A later U.S. manufacturing royalty is not added
Explain why, when a Japanese resin producer sells resin to an unrelated U.S. manufacturer for $20,000 and the buyer later pays Disney a $2,000 royalty for the right to manufacture and sell Disney-branded phone cases in the United States made from that resin, the royalty is not added and the transaction value of the imported resin is $20,000, provided the other transaction-value requirements are met. Under 19 CFR 152.103(b)(1)(iv) a royalty or license fee is added only if it is related to the imported merchandise AND the buyer is required to pay it, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States; 152.103(f) makes the dutiable status a case-by-case question of that condition and of to whom and under what circumstances the fee is paid, and its example treats a third-party royalty for the right to manufacture and sell a further-manufactured U.S. product as not a condition of the import sale. Recognize the boundaries: a payment to a third party is not excluded merely because the payee is a third party, and not every post-importation royalty is automatically excluded; the facts of each case govern.
What you will learn
Explain why, when a Japanese resin producer sells resin to an unrelated U.S. manufacturer for $20,000 and the buyer later pays Disney a $2,000 royalty for the right to manufacture and sell Disney-branded phone cases in the United States made from that resin, the royalty is not added and the transaction value of the imported resin is $20,000, provided the other transaction-value requirements are met. Under 19 CFR 152.103(b)(1)(iv) a royalty or license fee is added only if it is related to the imported merchandise AND the buyer is required to pay it, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States; 152.103(f) makes the dutiable status a case-by-case question of that condition and of to whom and under what circumstances the fee is paid, and its example treats a third-party royalty for the right to manufacture and sell a further-manufactured U.S. product as not a condition of the import sale. Recognize the boundaries: a payment to a third party is not excluded merely because the payee is a third party, and not every post-importation royalty is automatically excluded; the facts of each case govern.
19 CFR 152.103(f) Royalties or license fees, with Example; 19 CFR 152.103(b)(1)(iv), (b)(2) Additions to price actually paid or payable; 19 CFR 152.103(j)(1) Limitations on use of transaction value · Exam cover: HTSUS 2025 Basic Edition, no supplements; 19 CFR cover 'Revised as of January 1, 2024'. Actual GovInfo annual edition files used here are revised as of April 1, 2024 (2024-04-01); disclosed, not relabeled as January 1.
Explained using the historical edition for this exam.