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HQ 545153


December 21, 1993

VAL CO:R:C:V 545153 CRS

CATEGORY: VALUATION

District Director
U.S. Customs Service
P.O. Box 37260
Milwaukee, WI 53237-0260

RE: AFR of Protest No. 3701-92-100045; extended warranty; C.S.D. 82-104; HRL 544394

Dear Sir:

This is in reply to your memorandum dated November 12, 1992, under cover of which you forwarded an application for further review of Protest No. 3701-92-100045, filed by Gibney, Anthony & Flaherty, counsel for protestant WMW Machinery, Inc. This matter was also discussed at a meeting between a member of my staff and counsel for protestant on November 23, 1993. We regret the delay in responding.

FACTS:

The protested merchandise consists of a switch gear cabinet and control panel designed for grinding high precision spur and helical gears up to a diameter of 100 inches. The invoice value of the machinery includes an amount for an extended two year warranty. Protestant contends the cost of the warranty is not part of the price actually paid or payable for the machinery and is therefore not dutiable under transaction value.

ISSUE:

The issue presented is whether the warranty in question is part of the price actually paid or payable for the protested merchandise.

LAW AND ANALYSIS:

Merchandise imported into the United States is appraised in accordance with section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401a). The preferred method of appraisement under the TAA is transaction value, defined as "the price actually paid or payable for merchandise when sold for exportation to the United States," plus certain statutorily enumerated amounts not here relevant. 19 U.S.C. 1401a(b)(1). The term "price actually paid or payable" is defined as the total payment...made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller. 19 U.S.C. 1401a(b)(4)(A).

Protestant contends the payment for the extended warranty should not be part of the price actually paid or payable for the imported merchandise. In support of this view, counsel for protestant cites section 402(b)(3) of the TAA, which provides in pertinent part:

The transaction value of imported merchandise does not include any of the following, if identified separately from the price actually paid or payable...

(A) Any reasonable cost or charge that is incurred for-

(i) the construction, erection, assembly, or maintenance of, or the technical assistance provided with respect to, the merchandise after its importation into the United States....

19 U.S.C. 1401a(b)(3)(A)(i). In addition, counsel cites Headquarters Ruling Letter (HRL) 544394 dated October 9, 1990, as further support for protestant's contention that the warranty payment at issue should not be part of the price actually paid or payable.

In C.S.D. 82-104, this office addressed the issue of whether an extended warranty was dutiable under transaction value. There we stated in pertinent part:

[W]e find that the warranty costs...attach to, and are an integral part of, the merchandise upon its importation. Thus it follows that the consideration paid for the merchandise, i.e., the "price actually paid or payable", must include all charges paid for any warranty which is a guarantee that the merchandise will be free from defects....

Under the circumstances, we find that the involved warranty attaches to and is an integral part of the imported merchandise, and that the payment made for this warranty is part of the consideration paid for this merchandise. Thus, such charge is part of the "price actually paid or payable" and is dutiable under the transaction value basis of appraisement.

16 Cust. B. & Dec. 870, 872; HRL 542699 dated March 10, 1982. In the instant case, the commercial invoice attached to the CF 7501 indicates that the warranty payment was included in the total price for the protested merchandise. It is therefore Customs' position that the warranty costs in question formed an integral part of the merchandise upon importation. Consequently, the cost of the warranty is part of the price actually paid or payable and is dutiable under transaction value.

Moreover, contrary to counsel's assertion, HRL 544394 does not provide support for protestant's claim. In that ruling an amount for warranty considerations that was included in the total payment from the buyer to the seller for imported merchandise was deemed to be part of the price actually paid or payable and therefore not deductible under section 402(b)(3)(A)(i) of the TAA.

HOLDING:

You are instructed to deny the protest in full. A copy of this decision should be sent to the protestant together with the Form 19 Notice of Action.

In accordance with section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, this decision should be mailed by your office to the protestant no later than sixty days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to the mailing of the decision. Sixty days from the date of this decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Lexis, the Freedom of Information Act and other public information channels.

Sincerely,


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