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HQ 546057




March 14, 1996

VAL RR:IT:VA 546057 LPF

CATEGORY: VALUATION ENTRY CLASSIFICATION

Port Director
U.S. Customs Service
9 North Grand Avenue
Nogales, AZ 85621

RE: A pplication for Further Review of Protest No. 2608-95-100001; Transaction Value of Identi cal and Similar Merchandise and Computed Value; 19 U.S.C. 1401a(c) and (e); Filing of Protest under 19 U.S.C. 1514(c)(3); Extension of Liquidation under 19 U.S.C. 1504(b); Obligation of Surety for Payment Against Bond; Proper Duty Rate for Asparagus under Subheading 0709.20.9000, HTSUS

Dear Director:

This is a decision on an application for further review of a protest filed by the importer of record's surety on January 31, 1995, against the decision of the former district director concerning the entry, appraisement, and classification of asparagus. The entry at issue was liquidated on July 29, 1994. Customs made formal demand on the surety for payment on November 2, 1994.

FACTS:

Fresh asparagus produced in Mexico by Costa Del Sol (producer/ seller) was imported and entered through the Nogales District by Warren Brock DBA Campo Costa Del Sol (importer/buyer). It is our understanding that the buyer and seller are related pursuant to section 402(g) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA), codified at 19 U.S.C. ?1401a. You explain that you did not appraise the merchandise based on transaction value (section 402(b)), since the relationship between the parties was found to influence the price actually paid or payable. You add that since no transaction value of identical or similar merchandise (section 402(c)) applied to these importations and since the importer exercised his option to utilize computed value (section 402(e)) rather than deductive value (section 402(d)), you appraised the merchandise under computed value. The protestant claims that the final appraised value was unreasonable, unsupported, and contrary to the guidelines set forth in 19 U.S.C.

You explain that the importer's merchandise had been appraised under computed value for several years prior to this protest. For the entry at issue, the actual cost for the asparagus was filed on August 30, 1993. Additional information was requested via Customs Form (CF) 29 on November 11, 1993, to verify some of the figures submitted by the importer and a follow up request was made via CF 29 on February 22, 1994. Part of the requested information was received March 23, 1994, with a request from the importer for an explanation of part of the CF 29 request. The additional information was presented to your office at the end of March, 1994. At this point, final liquidation could be completed. The final CF 29, with the billing amount, was issued on July 12, 1994. You explain that the bill issued for the period in question is less than the amount of the continuous bond for the importer and that a portion of the bill has already been paid through a payment plan approved by the Finance Center. The protestant submits that the liquidation of the entries was untimely and extension of the time period for liquidation was improper pursuant to 19 U.S.C. ?1501 and ?1504. Further, the protestant provides that it is not obligated for the default of the bond principal in any amounts in excess of the principal amount of that bond.

You classified the asparagus under subheading 0709.20.9000, Harmonized Tariff Schedule of the United States Annotated (HTSUSA) as other vegetables, fresh or chilled, asparagus, other, at a general column one rate of 25% ad valorem. The protestant submits that this classification and assessment of duty at a general column one rate as opposed to a free, special column one rate is improper.

ISSUES:

1. Whether the time period for liquidation was properly extended pursuant to 19 U.S.C. ?1501 and ?1504 and whether the protestant is obligated for the default of the bond principal in excess of the principal amount of that bond.

2. Whether the merchandise was appropriately appraised under computed value.

3. Whether the merchandise is classifiable within heading 0709 as fresh asparagus and carries a general column one rate of duty.

LAW AND ANALYSIS:

1. Liquidation pursuant to 19 U.S.C. ?1501 and ?1504

Initially, we note that this protest was timely filed pursuant to 19 U.S.C. ?1514(c)(2)(A). The entry was liquidated on July 29, 1994, formal demand for payments was made on the surety on November 2, 1994, and the surety filed its protest on January 31, 1995. See 19 U.S.C. unsatisfied legal claim under its bond may be filed within 90 days from the date of mailing of notice of demand for payment against its bond.

Liquidation has been defined as "the final computation by the Customs Service of all duties (including any antidumping or countervailing duties) accruing on that entry." American Permac, Inc. v. United States, 10 CIT 535, 537 (1986). Generally, an entry of merchandise not liquidated within one year from the date of entry of such merchandise, "shall be deemed liquidated at the rate of duty, value, quantity, and amount of duties asserted at the time of entry by the importer of record." 19 U.S.C. ?1504(a). However, pursuant to 19 U.S.C. ?1504(b) Customs may extend this period if: 1) information needed for the proper appraisement or classification of the merchandise is not available to the appropriate customs officer; 2) liquidation is suspended as required by statute or court order; or 3) the importer, consignee, or his agent requests such extension and shows good cause therefor.

In the present matter, Customs had the authority to extend the initial one year time period for liquidation. From the Customs "ACS entry archive" records for entry 264-XXXX925-2, liquidation was extended one time and the notice of extension was given to the importer of record. It appears, in this case, that the extension was done under "EXT CDE 01" which meant that "information needed for the proper appraisement or classification of the merchandise is not available to the appropriate customs officer." See 19 U.S.C. ?1504(b)(1); 19 CFR States, 799 F. Supp. 120 (CIT 1992), rev'd, 6 F3d 763 (Fed. Cir. 1993). According to documents in the file, in particular the CF 29s, the extensions of liquidation were proper because there was a question as to the classification and valuation of the merchandise at issue.

As it is our understanding from the "ACS entry archive" that the merchandise only was liquidated once on July 29, 1994, we find 19 U.S.C.

Insofar as the protestant's obligation for the default of the bond principal is concerned, we agree that the protestant is only bound for the amount, each year, equal to the principal amount of that bond. In this regard, we note that the language found on the Customs Bond, CF 301, provides that the principal and surety bind themselves in the amounts as set forth on the bond. However, it is our understanding that the bill submitted from Customs for the amount at issue is less than the principal amount of the bond, rendering this a moot issue.

2. Appraisement under computed value

As you are aware, the preferred method of appraising merchandise imported into the United States is transaction value pursuant to section 402(b) of the TAA. Section 402(b)(1) of the TAA provides, in pertinent part, that the transaction value of imported merchandise is the "price actually paid or payable for the merchandise when sold for exportation to the United States" plus amounts for the enumerated statutory additions. However, imported merchandise is appraised under transaction value only if the buyer and seller are not related, or if related, the transaction value is deemed to be acceptable.

In this case, it is our understanding that the parties are related pursuant to section 402(g). Section 402(b)(2)(B) provides that a transaction value between related parties will be deemed acceptable if an examination of the circumstances of sale indicates that the relationship between the parties did not influence the price actually paid or payable or where the transaction value closely approximated certain "test" values. Insofar as no evidence has been presented in this regard which supports the acceptability of transaction value, we proceed sequentially through the subsequent provisions of section 402 of the TAA for an alternative method of appraisement.

The first alternative basis of appraisement is the transaction value of identical or similar merchandise. Section 402(c) of the TAA provides that the transaction value of identical or similar merchandise is the transaction value, accepted as the appraised value under section 402(b), of merchandise identical or similar to the merchandise currently being appraised which was exported to the U.S. at or about the time that the merchandise currently being appraised was exported to the U.S.

In accordance with T.D. 91-15, 25 Cust. Bull. 31 (1991), it must be demonstrated that the transaction value of the merchandise under consideration is fully acceptable under section 402(b), in order to be applied as the transaction value of identical or similar goods under section 402(c). The determination concerning the acceptability of the transaction value may be based on information provided by the importer or already available to Customs.

In Headquarters Ruling Letter (HRL) 545755, issued May 18, 1995, involving the appraisement of asparagus, our office determined that several acceptable transaction values under section 402(b) apparently existed at or about the time of exportation of the merchandise at issue. Accordingly, the subject merchandise was to be appraised, pursuant to section 402(c), based on the lowest of these values. Customs emphasized that the previously appraised merchandise must be examined to determine if it could serve as the basis of appraisement for the merchandise at issue.

However, in the event the transaction value of identical or similar merchandise is not available for appraisement in this case, you may proceed to the next alternative method of appraisement, computed value (section 402(e)), as requested by the importer.

Specifically, section 402(e) provides that the computed value of imported merchandise is the sum of:

(A) the cost or value of the materials and the fabrication and other processing of any kind employed in the production of the imported merchandise;

(B) an amount for profit and general expenses equal to that usually reflected in sales of merchandise of the same class or kind as the imported merchandise that are made by the producers in the country of exportation for export to the United States;

(C) any assist, if its value is not included under subparagraph (A) or (B); and

(D) the packing costs.

The Statement of Administrative Action (SAA), adopted by Congress with the passage of the TAA, further explains that the cost or value of the materials and the fabrication and other processing employed in the production of the imported merchandise as well as the amount for profit and general expenses will be determined on the basis of information supplied by, or on behalf of, the producer and will be based upon the commercial accounts of the producer provided such accounts are consistent with the generally accepted accounting principles (GAAP) applied in the country where the goods are produced. See Statement of Administrative Action, H.R. Doc. No. 153, Pt. II, 96th Cong., 1st Sess. (1979), reprinted in Department of the Treasury, Customs Valuation under the Trade Agreements Act of 1979 at 62 (1981).

Insofar as computed value is utilized for appraisement, the protestant has not submitted evidence demonstrating that the computed value established by your office in accordance with the above, based on the costs of production, profit, and general expenses provided by the producer, was "unreasonable, unsupported, and contrary to the guidelines set forth in 19 U.S.C. ?1401(a) and 19 U.S.C. ?1500."

3. Classification under the HTSUS

The General Rules of Interpretation (GRIs) taken in their appropriate order provide a framework for classification of merchandise under the HTSUS. Most imported goods are classified by application of GRI 1, that is, according to the terms of the headings of the tariff schedule and any relative section or chapter notes.

It is our understanding that the parties agree that the merchandise is classifiable, according to GRI 1, within heading 0709, HTSUS, as other vegetables, fresh or chilled. Because the merchandise was entered in January, 1993, the appropriate subheading is 0709.20.90, HTSUS, providing for other vegetables, fresh or chilled, asparagus, entered other than during the period from September 15 to November 15. Merchandise imported from Mexico and classifiable in subheading 0709.20.90, HTSUS, which was entered during 1993, carried a general column one rate of duty of 25% ad valorem and was not eligible for special column one tariff treatment.

HOLDING:

Based on the information provided, we hold as follows:

1. The time period for liquidation was properly extended pursuant to 19 U.S.C. ?1504. However, with regard to the protestant's obligation for the default of the bond principal, although apparently a moot issue, we would agree that the protestant only is bound for the amount, each year, equal to the principal amount of the bond.

2. Insofar as it is determined, as provided above, that the merchandise cannot be appraised under transaction value of identical or similar merchandise, the merchandise was appropriately appraised under computed value.

3. The merchandise is classifiable in subheading 0709.20.9000, HTSUS, as other vegetables, fresh or chilled, asparagus, entered other than during the period from September 15 to November 15, at a general column one rate of duty of 25% ad valorem.

The protest is denied in accordance with the foregoing. A copy of this decision with the Form 19 should be sent to the protestant.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision 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 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 to the public via the Diskette Subscription Service, the Freedom of Information Act and other public access channels.

Sincerely,

Acting Director

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