HQ 0544746 - Application for Further Review of Protest No. 5501-4-000141; Appraisement of Heavy Machine Gun Parts; - United States International Trade Commision Rulings

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HQ 544746

November 12, 1991

VAL CO:R:C:V 544746 DPS

CATEGORY: VALUATION

District Director
U.S. Customs Service
P.O. Box 619050
1205 Royal Lane
Dallas/Ft. Worth, Texas 75261

RE: Application for Further Review of Protest No. 5501-4-000141; Appraisement of Heavy Machine Gun Parts;

Dear Sir:

The subject protest and application for further review concerns the appraisement of parts to a Russian DSHK 38 heavy machine gun imported into the U.S. by John R. Black III ("Mr. Black" or the "importer"), who states he is a gun collector. Mr. Black protests Customs value advance in a notice dated August 9, 1984, from $100.00 to $4500.00. We note that while the entries and protest were filed in 1984, this Application for Further Review was not received by Headquarters until June, 1991.

FACTS:

On or about February 29, 1984, the importer caused to be imported into the U.S., a complete group of parts and accessories, less the receiver or frame, for a Russian DSHK 38 heavy machine gun. Submitted with the protest were the following documents: (1) an executed permit from the Bureau of Alcohol, Tobacco and Firearms, approving the importation of the group of parts less the receiver or frame the protestant imported; (2) a packing list of the parts imported, indicating that the parts were packed in four containers; and (3) a copy of an invoice from Fire-Power International Limited, the seller, indicating that the complete group of parts and accessories for the Russian DSHK 38 heavy machine gun (no receiver or frame) were priced at $100.00.

One other piece of relevant documentation in the file was a letter from the Mr. Black to the responsible import specialist in Dallas/Ft. Worth at the time, explaining his disagreement with Customs value advance action. The information presented in that letter indicates that Mr. Black paid $100.00 for the parts along with $1,250.00 to an individual named Richard Wray, who is stated to have made all of the necessary arrangements in obtaining the imported set of gun parts.

Customs officials at the port of Dallas/Ft. Worth questioned the extremely low invoice value of $100.00, stating that the "invoice value appears subject to a condition or consideration for which a value cannot be determined" in accordance with the section 152.103(J)(1)(ii), Customs Regulations (19 CFR 152.103(J)(1)(ii)).

In rejecting the $100.00 declared value, Dallas Customs found price information in a gun publication about a similar, but smaller gun, an M2 .50 caliber machine gun. The published price for that gun in the U.S. was $3,550.00. Because the subject DSHK 38 machine gun is somewhat similar to the gun priced at $3,550.00, but larger, Dallas Customs appraised the complete set of gun parts less the frame at $4500.00, under 402(f) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (19 U.S.C. 1401a(f); TAA).

LAW & ANALYSIS:

Transaction value, the preferred method of appraisement is defined in section 402(b)(1) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (19 U.S.C. 1401a(b); TAA) as the "price actually paid or payable for the merchandise" plus five enumerated statutory additions. One of the statutory additions, 402(b)(1)(B) of the TAA is: "any selling commission incurred by the buyer with respect to the imported merchandise."

Here, the information provided by the importer indicates that he paid $100.00 for the gun parts, and $1250.00 for the services rendered in obtaining the gun parts. While we recognize that the declared value of the parts may have been too low for merchandise of this kind, the information relied upon by Dallas Customs does not meet the standards of appraisement under 402(f) of the TAA. The chosen method of appraisement by Dallas Customs is inconsistent with the language set forth in 402(f)(2)(g). That provision precludes Customs use of arbitrary and fictitious values. Here, the merchandise imported is a complete set of gun parts minus a frame. Thus, the imported merchandise is not a complete gun. To appraise it as a gun, and determine its value based on a comparison to an entirely different model and caliber of gun with an unknown country of origin appears to be exactly the type of situation prohibited by 402(f)(2)(g) of the TAA.

Under these circumstances, where it is impossible to determine a true transaction value, we must proceed through the methods of appraisement in the statute. Since sufficient information about the value of similar or identical merchandise has not been presented, we are unable to appraise the merchandise under 402(c), which provides for the transaction value of similar or identical merchandise. Because we have no accurate cost and sales information about the product imported, we are unable to appraise under the deductive value method of appraisement, 402(d), or the computed value method of appraisement, 402(e). Accordingly, we must rely on 402(f), which provides, in part:

(1) If the value of imported merchandise cannot be determined, or otherwise used for the purposes of this Act, under subsections (b) through (e), the merchandise shall be appraised for the purposes of this Act on the basis of a value that is derived from the methods set forth in such subsections, with such methods being reasonably adjusted to the extent necessary to arrive at a value.

Appraising the imported gun parts in accordance with 402(f), we take the stated price of $100.00 paid for the parts, plus the $1250.00 paid as what we would consider selling commissions, and reach a total appraised value for the imported gun parts of $1350.00.

HOLDING:

Consistent with the decision set forth above, you are directed to grant the protest and reliquidate the entry. The subject merchandise should be appraised at $1350.00. The protestant is entitled to a refund of duties paid on the appraised value over and above $1350.00, plus interest calculated at the statutory rate, from the date of payment of duties. A copy of this decision should be attached to the Customs Form 19, Notice of Action, sent to the protestant.

Sincerely,

John Durant, Director
Commercial Rulings Division

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