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HQ 957205




February 15, 1995

CLA-2 CO:R:C:M 957205 LTO

CATEGORY: CLASSIFICATION

TARIFF NO.: 8466.93.70

District Director
U.S. Customs Service
P.O. Box 1490
Room 218
St. Albans, Vermont 05478

RE: Protest 0201-94-100232; Vertical Boring and Turning Lathe United States v. Baldt Anchor; HQ 950034; 19 CFR 141.1(a); 19 CFR 141.82; subheading 8458.99.10; transaction value

Dear District Director:

The following is our decision regarding Protest 0201-94- 100232, which concerns the appraisement and classification of the "CKD BLANSKO" Vertical Boring and Turning Lathe under the Harmonized Tariff Schedule of the United States (HTSUS). The subject merchandise was entered on February 24, February 25 and March 2, 1993, and the entries were liquidated on April 8, 1994. The protest was timely filed on June 2, 1994.

FACTS:

The article in question is the "CKD BLANSKO" Vertical Boring and Turning Lathe (Model SKJ 32-63B). The lathe, made in Czechoslovakia, was sold for export to the U.S. by CHR Tarampouskas Industrieanlagen GMBH to Shub Machinery of Marietta, Georgia. Shub sold the machine to the importer of record, Ranor, Inc. Entry was made at the price from Shub to Ranor, although the invoice did not include a downpayment and a final payment. You have proposed a value advance to include these payments.

Although the machine was clearly destined to the U.S., and never entered the commerce of Canada, it was unladen in Montreal and trucked into the U.S. on five separate vehicles, the merchandise entered the U.S. on three separate days--February 24, February 25 and March 2, 1993. Thus, while the lathe was entered under subheading 8458.99.10, HTSUS, which provides for other vertical turret lathes for removing metal, the five entries were - 2 -
classified upon liquidation under subheading 8466.93.70, HTSUS, which provides for other parts and accessories suitable for use solely or principally with the lathes of heading 8458, HTSUS.

ISSUE:

1. Whether the Vertical Boring and Turning Lathe, when unladen in Montreal and trucked into the U.S. on five separate vehicles, and on entered on three separate days, is classifiable as a lathe for removing metal under heading 8458, HTSUS, or as parts thereof under heading 8466, HTSUS.

2. Whether the price actually paid or payable should be comprised of the initial $25,000 deposit, the $645,000 letter of credit, and the final $15,000 paid to the seller.

LAW AND ANALYSIS:

1. Classification

The General Rules of Interpretation (GRI's) to the HTSUS govern the classification of goods in the tariff schedule. GRI 1 states in pertinent part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes . . . ."

Pursuant to section 141.1(a) of the Customs Regulations (19 CFR 141.1(a)), "[d]uties and the liability for their payment accrue upon imported merchandise on arrival of the importing vessel within a Customs port with the intent then and there to unlade, or at the time of arrival within the customs territory of the United States if the merchandise arrives otherwise than by vessel . . . ." Thus, in United States v. Baldt Anchor, 59 CCPA 122 (1972), the Court of Customs and Patent Appeals (CCPA) separately classified six machines designed to be used and operated together, but which were imported in two shipments on different days (one in the first shipment and five in the second). The importer claimed classification of the two shipments as an "entirety." The court cited to the long- established principle that articles which are not imported together are precluded from being classified as an "entirety." Id. at 126. Therefore, the court held that since one machine was imported in a shipment separate from the five machines imported in the second shipment, it cannot be considered together with the second shipment to form an "entirety." Id.

In the instant case, although the lathe was clearly destined to the U.S., and never entered the commerce of Canada, it was unladen in Montreal and trucked into the U.S. on five separate vehicles, and on three separate days. Thus, based on - 3 -

Baldt Anchor, the article in question cannot be classified as a "lathe," and the components must be classified separately. See also HQ 950034, dated February 3, 1992 (Customs classified the components of an off-highway dump hauler separately because the components, while shipped aboard the same vessel, were off-loaded at different ports). Accordingly, based on the information in the protest, the components of the lathe are classifiable under subheading 8466.93.70, HTSUS, which provides for parts of lathes.

The protestant argues that these shipments could have been allowed entry under section 141.82(a) of the Customs Regulations (19 CFR 141.82(a)). Section 141.82(a) provides that "[i]nstallments of a shipment covered by a single order or contract and shipped from one consignor to one consignee may be included in one invoice if the installments arrive at a port of entry by any means of transportation within a period of not to exceed 10 consecutive days." While this provision permits the inclusion of installment shipments on a single invoice, it does not affect the classification of merchandise. As stated above, the components of the lathe were correctly classified under subheading 8466.93.70, HTSUS.

2. Appraisement

The imported merchandise was appraised pursuant to transaction value, section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA). Transaction value is defined as "the price actually paid or payable for the merchandise when sold for exportation to the United States," section 402(b). In a purchase order dated December 28, 1992, the initial "price" agreed to between the parties was $705,000. The terms included an initial deposit of $25,000, a letter of credit for $645,000, and upon final assembly of the machine, the buyer agreed to pay the seller the remaining $35,000. The merchandise was subsequently entered in February and March, 1993. However, a dispute between the parties arose in connection with the payment of the balance of the purchase price, i.e., the $35,000. In February, 1994, due to a defect in the machine, the parties mutually agreed that the buyer would pay the seller $15,000 rather than the $35,000 owed under the original agreement.

The commercial invoice submitted to Customs at the time of entry did not include the initial $25,000 deposit. The importer agrees that this amount is clearly part of the price actually paid or payable and should be included in determining transaction value.

With regard to the balance that the buyer owed to the seller, it is our conclusion that in determining the price actually paid or payable for the imported merchandise, the price - 4 -
adjustment agreed to between the parties should in fact be considered. Sufficient evidence has been submitted by the importer to indicate that the machine was defective and that the seller agreed to an adjustment in the price. In a letter dated February 10, 1994, the buyer wrote to the seller indicating that the sum of $15,000 would be paid in settlement of the dispute. The seller signed the letter and returned it to the buyer, consenting to the price adjustment. The buyer never paid the seller $35,000. The total payment made by the buyer to the seller did not include the $20,000 reduction (due to a defect in the merchandise) and should not be considered in determining transaction value.

The fact that the reduction was not agreed to prior to the importation of the goods is not a bar to the use of transaction value in this case. Where it is discovered subsequent to importation that the merchandise appraised was defective, an allowance in value may be made. In this case, the price actually paid or payable should be comprised of the initial $25,000 deposit, the $645,000 letter of credit, and the final $15,000 paid to the seller.

HOLDING:

1. The components of the "CKD BLANSKO" Vertical Boring and Turning Lathe are classifiable separately under subheading 8466.93.70, HTSUS, which provides for other parts and accessories suitable for use solely or principally with the lathes of heading 8458, HTSUS.

2. The price actually paid or payable should be comprised of the initial $25,000 deposit, the $645,000 letter of credit, and the final $15,000 paid to the seller.

The protest should be DENIED with regard to the classification issue, but should be GRANTED with regard to the appraisement issue. In accordance with section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision, together with the Customs Form 19, should be mailed by your office to the protestant no later than 60 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 the 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, Freedom of Information Act
and other public access channels.

Sincerely,

John Durant, Director

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