VAL CO:R:C:V 545153 CRS
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,
John Durant, Director