From the Rolls-Royce experimental archive: a quarter of a million communications from Rolls-Royce, 1906 to 1960's. Documents from the Sir Henry Royce Memorial Foundation (SHRMF).
Definition and breakdown of 'cost of material' and 'cost of labour/fabrication' for valuation purposes.
| Identifier | ExFiles\Box 19\4\ Scan255 | |
| Date | 9th September 1930 guessed | |
| -3- In arriving at this value the first element to be considered is that of cost of material. This means the price paid by the manufacturer for the raw material used by him to produce the articles imported, and it matters not how far advanced his raw material may be. If, for example, in producing the finished axle, the factory purchases steel in the shape of a billet or bloom the cost of the billet or bloom would be the cost of the material. Everything done to convert the billet or bloom into the axle would be considered as labour unless some other material were added to the bloom or billet. On the other hand if the manufacturer of the finished axle purchased his material in the form of a rough axle, his cost of material would be the price paid by him for the rough axle. Of course, every piece of material used in making any of the articles goes in as part of the cost of the material. The second element to be considered is the cost of labour, or, as it is defined in the law, "fabrication, manipulation, or other process employed in manufacturing or producing such or similar merchandise". You will observe in this paragraph of Section 402 that the cost is to be taken "at a time preceding the date of exportation of the particular merchandise under consideration which would ordinarily permit the manufacture or production of the particular merchandise under consideration in the usual course of business". You can see that this might sometimes be a very important point. As a matter of fact, under the old law the cost of labour and material was taken by the customs officials as of the date of exportation and frequently it worked an injustice where material had been bought when the market was lower. This cost of fabrication does not include overhead expenses or profit. I direct your attention to this point because it is sometimes the practice of different departments in a factory to add a profit, so that when an automobile, for example, is finally assembled there is already included in the cost of labour and material a profit on the labour and material. All overhead expenses and profit should be excluded in arriving at the cost of material and labour so that in the final analysis the cost of material and of "fabrication, manipulation or other process" really means the bare cost of material and labour. Of course, if there be a process such as plating the cost of the plating material must be included in the | ||