HQ 0544368 - Application for Further Review of Protest No. 1001-9-000183; Dutiability of Warranty Costs - United States International Trade Commision Rulings

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HQ 544368

October 9, 1990

VAL 2-05 CO:R:C:V 544368 pmh

CATEGORY: VALUATION

Area Director
New York Seaport, NY

RE: Application for Further Review of Protest No. 1001-9-000183; Dutiability of Warranty Costs

Dear Madam:

The above referenced protest and application for further review is against your decision regarding the appraised value of certain merchandise imported by Emerson Radio Corporation (the importer).

According to a memorandum submitted in support of the protest, the merchandise being imported consists of televisions, radios, video cassette recorders and other electronic articles. The importer sells this merchandise to U.S. consumers along with a limited warranty that the products are free from latent defects in material and workmanship. Initial returns of latently defective merchandise are repaired by the importer and resold as second quality merchandise at a discounted price. The importer also contracts with unrelated service facilities to repair latently defective marchandise in use. These facilities invoice the importer for total cost of repair, including parts and labor. The importer maintains, and has submitted for our review, records showing the amount of repair costs incurred and the losses on resale of second quality merchandise that are related to the warranty.

The importer asserts that the costs associated with the warranty should be reflected in the appraised value of the imported merchandise. That is, that the costs should be deductible from the price actually paid or payable for the imported merchandise. Customs addressed this issue in HRL 544394, of this date (copy enclosed), and determined that such costs are not deductible from the transaction value. Accordingly, you are directed to deny this protest. A copy of this letter and of HRL 544394 should be attached to Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

John Durant, Director
Commercial Rulings Division

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