United States v. Alfred Dunhill of London, Inc.

CONCURRING OPINION

Cole, Judge:

There is no dispute concerning the issue. Conced-edly, it is confined to the question whether a tax imposed by the British Government is an item to be included in cost of production, section 402 (f) of the Tariff Act of 1930 (19 U. S. C. 1940 ed. § 1402 (f)), admittedly the proper basis for appraisement of the pipes in question. Appellant contends that the tax comes within the category “usual general expenses” provided for in paragraph (2) of said section 402 (f). For the purposes of this case, we are concerned only with the imposition of the tax and its relationship to cost of production.

The language of the four paragraphs, comprising the statutory definition of such basis for appraisement as set forth in section 402 (f), sufra, is clear and unambiguous. Paragraph (2) thereof expressly provides that the minimum amount of “usual general expenses” shall not be “less than 10 per centum of such cost,” obviously referring to the “cost of materials of, and of fabrication, manipulation, or other process employed in manufacturing or producing such or similar merchandise,” as provided in the immediately preceding paragraph

*412(1). The provisions of paragraph (1) form a basis for the “usual general expenses” chargeable in paragraph (2). In other words, if the minimum amount is based on the costs provided for in the preceding paragraph, it is a logical sequence that the only amounts to be included as “usual general expenses” are the expenses related to the items covered by paragraph (1). I cannot conceive that Congress intended to include in “usual general expenses,” as applied to statutory cost of production, every item of usual business expense, however remote to any “process employed hi manufacturing or producing such or similar merchandise.”

Section 402 of the Tariff Act of 1930 (19 U. S. C. 1940 ed. § 1402), in its entirety, presents a painstaking effort on the part of Congress to set forth in detail numerous items and considerations to-be included in arriving at the various values discussed therein. Taxes, like the one in question, are not uncommon impositions. The 'particular tax under consideration, being as high as 33% per centum of the sales price, assumes too much importance to be regarded as an item Congress intended to include in cost of production for appraisement purposes without being mentioned. If it were the legislative intent to have this tax embraced within the several items comprising statutory cost of production, it is fair to assume that specific appropriate language would have been used, rather than leaving it to be a matter within the realm of speculation. It was not specifically included; should it not therefore, because of its prominence, be excluded?

The above reasoning definitely excludes the tax in question from the statutory designation “usual general expenses” in finding dutiable cost of production. It in no way relates to a cost for obtaining materials or for the fabrication, manipulation, or any other process employed in the manufacture of the articles in question or similar merchandise, and is not a factor, making .the pipes available as such, but attaches to the finished product, and then only when sold for home consumption or to unregistered dealers.

The construction hereinabove outlined is supported by cases dealing with cost of production and cited herein. The gist of the decision in United States v. Henry Maier, 21 C. C. P. A. 41, T. D. 46378, is that dutiable cost of production is a constructive foreign-market value and to give effect to such legislative intent the costs to the individual manufacturer of the imported merchandise are not to be the “sole v criterion in the application of the statute,” but reference should also be had, if the evidence is available, to the costs of other manufacturers and producers of such or similar merchandise in the foreign market. The court referred specifically to “usual general expenses,” saying that in determining dutiable cost of production they contemplated *413“the usual general expenses incurred in the production of 'such or similar merchandise’ ” [italics mine], a conclusion directly in line with that heretofore set forth.

In the case of Lionel Trading Co., Inc. v. United States (24 C. C. P. A. 432, T. D. 48900) the court was required to determine whether the dutiable cost of production of the exporter and manufacturer, Par-fums Corday of Paris, should include its price to subcontractors who made boxes and bottles for the sole use of said manufacturer from designs and molds furnished and exclusively owned by the latter. It was contended by the importer that since Parfums Corday of Paris did not actually produce the boxes and bottles, the manufacturing costs therefor should not be included in their cost of production for tariff purposes. In holding such contention to be without merit, the court said:

* * *. It seems obvious that a part of the cost of production of the bottles was in the making, producing, and furnishing the designs and moulds, and that a part of the cost of producing the boxes was the cost connected with the designs. These items clearly go into the cost of production of the merchandise under consideration. The term “in manufacturing or producing such or similar merchandise”- in paragraph (1) of section 402 (f), supra, must be read in connection with the whole provision concerning cost of production.
As was suggested in the opinion by Judge Browm, speaking for the appellate division- of the Customs Court, and as has been held by this court, the determination of the cost of production is an effort to arrive at a substitute for a foreign-market value. United States v. Henry Maier, 21 C. C. P. A. (Customs) 41, T. D. 46378. It is difficult to see how a purported cost of production which did not include essential elements of expenses for material and labor which went into the cost of producing the articles exported would properly reflect a substitute foreign-market value therefor.

Of like tenor are the cases of Ravenna Mosaics, Inc. v. United States (49 Treas. Dec. 699, T. D. 41503) and Carey & Skinner v. United States (3 Cust. Ct. 600, R. D. 4663) also cited by appellant. In the Ravenna Mosaics, Inc., case, the costs of plans and sketches, made in this country for use of the German manufacturer in producing mosaic pictures and windows, were held to be part of the cost of production for appraisement purposes of the imported merchandise. The Carey & Skinner case cited with approval the Lionel case, supra, in holding, as part of dutiable cost of production of imported paper-mill machinery, blueprints furnished by the inventor and exporter - of the machinery outlining installation thereof. In all of the last three cited cases, the items, which the court held to be part of statutory cost of production, related to the fabrication, manipulation, or a [process connected with the manufacture of the imported merchandise. Clearly, they support the judicial construction announced in this opinion.