HQ 545575: Application for Further Review of Protest No. 3004-94-10018;Transaction Value; Price Actually Paid or Payable.

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 545575

                         August 31, 1994
VAL CO:R:C:V  545575 

CATEGORY:   Valuation

District Director
Seattle, Washington

RE:  Application for Further Review of Protest No. 3004-94-10018;
Transaction Value; Price Actually Paid or Payable.


Dear Sir:

     This is in response to your memorandum dated February 24,
1994, forwarding the above-referenced protest and request for
further review, dated January 10, 1994, which was filed by Arthur
J. Humphreys Division on behalf of its client, Diceabed
Distributors Ltd. ("Diceabed").  We regret the delay in
responding.

FACTS:

     The imported merchandise is a Dicemaster 3 machine which is
used to shred and bale newspaper.  The merchandise was sold by
Diceabed, located in Canada, to Mike Flodstrom in Aberdeen,
Washington, pursuant to a contract signed by the parties on
December 5, 1992.  A copy of that contract was submitted with
this request.
     
     The entry was liquidated on November 5, 1993 at an appraised
value of $26,000.  This value was arrived at by adding together
$11,200 for the machine, $11,200 for certain rights to sell the
machine within a designated territory and $3,600 representing the
value of 2400 bales of Diceabed product, supplied to the seller
by the buyer free of charge.  Protestant claims that the value
should be $14,800 and that the amount paid for the marketing
rights is separate from the purchase price of the imported
merchandise.
     
ISSUE:

     Whether the subject merchandise was properly appraised under
transaction value by including in the price actually paid or
payable those amounts remitted to the seller in return for the
right to market the merchandise within a designated territory.

LAW AND ANALYSIS:

     Transaction value, the preferred method of appraisement, is
defined in section 402(b) of the Tariff Act of 1930, as amended
by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. 1401a). 
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 five enumerated statutory
additions. 

     The "price actually paid or payable" is defined in section
402(b)(4)(A) of the TAA as the "total payment ...(whether direct
or indirect, and exclusive of any costs, charges, or expenses
incurred for transportation, insurance, and related services
incident to the international shipment of the merchandise . . .) 
made, or to be made, for the imported merchandise by the buyer
to, or for the benefit of, the seller."  

     The sale between the buyer and seller took place subject to
the terms of the sales contract signed by both parties on
December 5, 1992.  That contract provides that title to the
Dicemaster passes to the buyer upon the buyer completing the
following purchase terms:

          a.)  Payment of $11,200 U.S. Funds for one
          Dicemaster 3 machine;

          b.)  Payment of 11,200 U.S. Funds for the
          right to supply the British Columbia Market
          with Diceabed Product ...

          c.)  Supplying to the Seller ... 2400 bales
          of Diceabed Product, free of charge and with
          pre-paid delivery to the Seller ...

          d.)  Purchasing all remaining Diceabed stock
          consisting of:

               i.)  500 Diceabed sales bales at a
               price of $1.50 U.S. Funds per bale
               totalling $750 U.S. Funds, to be
               kept and sold in British Columbia:

               ii.) 3800 Packaging bags at a price
               of $.30 U.S. Funds per bag
               totalling $1140 U.S. Funds.

          e.)  Payment of $210 U.S. Funds for one
          balance beam scale.

     It is evident from a reading of the contract that the price
actually paid or payable for the imported Dicemaster is made up
of elements "a" through "e", quoted above.  These elements
constitute the form of payment, the consideration, in exchange
for which for which title to the Dicemaster passes.  In light of
the fact that Customs has no authority to make deductions from
the price actually paid or payable, the elements must be regarded
as a whole when determining the purchase price of the
merchandise.  (See, HRL 544800 dated May 17, 1994 (royalty
payments are part of the price actually paid or payable where
description of compensation for imported merchandise in agreement
between buyer and seller includes such royalty payments.))
Accordingly, no deductions should be made from the $26,000 value
at which the merchandise was originally appraised.  Moreover, in
the future, it would be appropriate to include the amounts
identified under subparagraphs "d" and "e" in the price actually
paid or payable.  

     Because the contract has the effect of including each of the
six elements in the price actually paid or payable, instead of
making each element separate from an otherwise established
purchase price, the limitation on the use of transaction value,
as set forth under section 402(b)(2)(A)(ii) of the TAA, is not
applicable.  

HOLDING:

     The purchase terms in the contract describe the form of
payment for the imported merchandise, making up the price
actually paid or payable for the merchandise.  You are instructed
to deny the protest in full.

     In accordance with section 3A(11) 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 the public
via the Diskette Subscription Service, Lexis, Freedom of
Information Act and other public access channels.

                                   Sincerely,



                                   John Durant, Director
                                   Commercial Rulings Division