CBP Ruling Clarifies Price Paid or Payable

Tweet

May 26, 2026
By: Chaney A. Finn

U.S. Customs and Border Protection (CBP) ruled in HQ H357218 (April 27, 2026) that software-as-a-service (SaaS) license fees tied to vehicle navigation systems do not count as dutiable charges for imported vehicles. CBP concluded that the fees neither form part of the “price actually paid or payable” for the vehicles, nor qualify as additions to customs value.

The ruling involved an unnamed U.S. importer that buys vehicles from a foreign manufacturer and distributes them through authorized dealers in the United States. Each vehicle includes a connected navigation system that provides maps and real-time navigation support through cloud-based software. The system relies on wireless communication to receive updated data from external servers. Consumers access the software through subscription arrangements, while a separate affiliate company executes the license agreements with the software content providers.

CBP focused first on whether the license fees formed part of the vehicles’ purchase price. Under customs law, the “price paid or payable” refers to the total payment the buyer makes to the seller for imported merchandise. CBP determined that the SaaS license fees fall outside that definition because the importer pays them after importation and only for optional software services. Consumers choose whether to use the service, which means the fees relate to post-importation functionality rather than to the vehicles themselves.

In its assessment, CBP emphasized that the importer pays the fees to the affiliate and content providers, not to the foreign vehicle manufacturer. Because the manufacturer does not receive or benefit from the payments, CBP found no basis to treat the fees as part of the transaction value of the imported vehicles.

Then CBP examined whether the fees qualified as dutiable royalties or license fees. Customs rules permit the addition of certain royalties or license payments to transaction value when a buyer must pay them as a condition of purchasing imported goods. CBP applies a three-part test in these situations:

1. whether the imported product involves patented technology;
2. whether the fee relates to the production or sale of the imported merchandise; and
3. whether the buyer could purchase the product without paying the fee.

CBP found that the SaaS fees failed all three elements of that test. The arrangement did not involve patents, and the software service played no role in producing the imported vehicles. The importer also paid the fees only after importation. In addition, the distribution agreement between the importer and the foreign manufacturer contained no provisions requiring payment of the SaaS fees.

Most importantly, buyers could purchase the vehicles without subscribing to the navigation service. Consumers even received free access to the SaaS platform for the first five or ten years after purchase. After that promotional period, users could either continue the subscription or discontinue the service entirely. CBP viewed this flexibility as strong evidence that the fees did not constitute a condition of sale for the imported vehicles.

Finally, CBP rejected the argument that the payments represented dutiable proceeds from a subsequent resale or use of the imported merchandise. CBP cited prior rulings which established that such proceeds must directly relate to the resale of the imported goods and must benefit the seller. Here, the payments flowed only to the affiliate and software content providers and had no connection to the resale value of the vehicles. As a result, CBP concluded that the license fees remain outside the scope of dutiable value under U.S. customs law.

Should you have any questions about transaction value, dutiable charges, or any other trade-related questions, do not hesitate to contact any attorney at Barnes, Richardson & Colburn, LLP.