HQ 545843: AFR of Protest No. 0401-94-100379; transaction value; sale; J.L. Wood; selling commissions;warranty payments; installation charges; charges incurred for construction, erection, assembly; priceactually paid or payable; Generra; notice of liquidation properly given in accordance with 19 U.S.C. 1504(b)

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 545843

                           May 11, 1995



VAL CO:R:C:V 545843 CRS

CATEGORY:  Valuation

District Director
U.S. Customs Service
10 Causeway Street
Room 603
Boston, MA  02222-1059

RE:  AFR of Protest No. 0401-94-100379; transaction value; sale; J.L. Wood; selling commissions;
warranty payments; installation charges; charges incurred for construction, erection, assembly; price
actually paid or payable; Generra; notice of liquidation properly given in accordance with 19 U.S.C.
 1504(b)

Dear Sir:

     This is in reply to an application for further review of the above referenced protest, dated July
13, 1994, and filed by Paul E. Linet, Esq., on behalf of Amchem Company, Inc., concerning the
appropriate basis of appraisement of electro-chemical machines imported from England.

FACTS:

     Amchem (the "protestant"), a Massachusetts company and the importer of record of the
protested merchandise, is a wholly-owned subsidiary of Amchem Company, Ltd. ("ACL"), a U.K.
corporation.  In 1993, General Electric Aircraft Engines ("General Electric") placed an order with
the protestant for three custom-built, Twin Ram, electro-chemical machines.  The protestant, in turn,
placed the order with ACL.

     The imported merchandise was appraised under transaction value on the basis of the contract
price paid by General Electric to ACL.  The protestant contends that the appropriate basis of
appraisement is deductive value; but in the event transaction value is determined to be correct, asserts
that certain charges relating to the installation of the machines should not be included in the appraised
value.

     According to a commercial invoice submitted at time of entry, which were marked "total value
for customs purposes only," the value of a single machine was $*****.  However, according to a
second invoice from ACL to the protestant (no. 16789, dated 31st December 1991), the total
contract price per machine was $*****, of which 85 percent was due upon receipt of the machine
by General Electric.  The amount due on receipt was posted to protestant's accounts payable ledger
on December 12, 1991.  The amount of the total contract price was subsequently confirmed in letters
from the protestant dated May 12, 1993, and August 25, 1993.  The second letter also explained how
the contract price was derived.  According to this information, the difference between the "customs"
invoice and invoice no. 16789 represents warranty expense, installation and administration charges,
a selling commission, and estimated amounts for duties and international freight.

     The protestant, which maintains no inventory of its own, takes orders on behalf of ACL's U.S.
customers.  Instead, all of ACL's U.S. sales are conducted through the protestant.  Furthermore, the
protestant has advised that it never took title to the merchandise; instead, per its agreement with
General Electric, title passed from ACL to General Electric, upon acceptance, after the machine was
installed.

     Counsel also alleges that the protested entries should be deemed liquidated by operation of
law because the period for liquidating the entries was not properly extended in that the protestant was
not provided with the requisite notices of extension.

ISSUE:

     The issues presented are:  (1) whether transaction value is the appropriate basis of
appraisement; (2) whether commissions and amounts relating to warranty payments and installation
charges are included in transaction value; and (3) whether the liquidation period was properly
extended.

LAW AND ANALYSIS:

     Initially, we note that the protest and application for further review was timely filed under the
statutory and regulatory provisions for protests (19 U.S.C.  1514; 19 C.F.R. part 174).  We also
note that the issues protested are protestable issues (19 U.S.C.  1514).

     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 basis of appraisement under the TAA is transaction value, defined as "the price actually
paid or payable for the merchandise when sold for exportation to the United States," plus certain
enumerated additions, including any selling commissions incurred by the buyer with respect to the
imported merchandise.  19 U.S.C.  1401a(b)(1).  However, transaction value does not include, inter
alia, any reason able cost or charge incurred for the construction, erection, assembly or maintenance
of, or the technical assistance provided with respect to, the merchandise after its importation into the
United States, provided the costs or charges are separately identified from the price actually paid or
payable.  19 U.S.C.  1401a(b)(3)(A).

     For Customs purposes, the word "sale" has been defined as a transfer of ownership in
property from one party to another for a consideration.  J.L. Wood v. United States, 62 CCPA 25,
33; C.A.D. 1139 (1974).  While J.L. Wood was decided under the prior appraisement statute,
Customs adheres to this definition under the TAA.  The primary factors to consider in determining
whether there has been a transfer of property or ownership are whether the alleged buyer has acquired
title and assumed the risk of loss.  E.g., Headquarters Ruling Letter (HRL) 543708 dated April 21,
1988.  Protestant has acknowledged that it never acquired title to the imported machines and that title
passed directly from ACL to General Electric.  Consequently, it is our position that there was no sale
between ACL and the protestant for purposes of determining transaction value.  Instead, only one
sale occurred, viz., between ACL and General Electric.

     The term "price actually paid or payable" is defined 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 from the country of
exportation to the place of importation in the United States) made, or to be made, by the buyer for
imported merchandise to, or for the benefit of, the seller.  19 U.S.C.  1401a(b)(4)(A).  In Generra
Sportswear Co. v. United States, 905 F.2d 377, 380 (1990), the Court of Appeals for the Federal
Circuit stated that provided a "payment was made to the seller in exchange for the merchandise sold
for export to the United States, the payment may be included in transaction value, even if the payment
represents something other than the per se value of the goods."  Thus, as a general matter, all
payments to the seller are part of the price actually paid or payable for imported merchandise. 
Moreover, in regard to warranties, Customs had held that such payments are an integral part of the
merchandise and, therefore, properly part of the price actually paid or payable.  Headquarters Ruling
Letter (HRL) 542699 dated March 10, 1982.

     In the instant protest, the total contract price paid by General Electric included amounts for
warranties, installation and administration costs, and selling commissions.  Protestant contends that
the costs associated with installation and administration are not included in transaction value pursuant
to 19 U.S.C.  1401a(b)(3)(A).  However, these amounts were not separately identified from the
price actually paid or payable for the imported machines; consequently, they constitute part of the
price actually paid or payable.  See also, HRL 542611 dated September 22, 1981.  The warrant and
commission expenses were also included in the total contract price.  Accordingly, under Generra, they
are properly part of the price actually paid or payable.

     Finally, protestant has contends that the total contract price included amounts for estimated
amounts for estimated duty and international freight.  The price actually paid or payable does not
include charges incurred for transportation, insurance and related services incident to the international
shipment of the merchandise from the country of exportation to the place of importation in the United
States.  19 U.S.C.  1401a(b)(4)(A).  However, only actual duties and transportation costs are to be
excluded from the price actually paid or payable.  E.g., HRL 542524 dated July 15, 1981 (TAA No.
34); HRL 542206 dated March 23, 1981.  The price actually paid or payable should therefore be
adjusted accordingly.

     Section 504(a), Tariff Act of 1930, as amended (19 U.S.C.  1504(a) Supp. 1993), provides
that if Customs fails to liquidate an entry within one year from the date of entry or final withdrawal 
from warehouse, that entry is deemed liquidated at the rate of duty, value, quantity, and amount of
duties asserted at the time of entry by the importer.  See, American Permac, Inc. v. United States, 10
CIT 535, 642 F.Supp. 1187, 1195 n. 12 (1986) ("The amount of duties  asserted at the time of entry
by the importer', within the meaning of section 1504(a) and (d), is not what the importer desires to
assert upon entry, but what the importer is required by Customs officers to assert when filing the
entry summary.).  See also, 19 C.F.R.  159.11(a) and  159.12(f); Detroit Zoological Society v.
United States, 10 CIT 133, 630 F.Supp. 1350, 1355 n.9 (1986).

     However, under 19 U.S.C.  1504(b) (as amended by Pub. L. 103-182, 107 Stat. 2057),
Customs may extend the one-year liquidation period by providing notice to the importer and the
surety on one of the following two grounds: (1) if "information needed for the proper appraisement
or classification of the merchandise, or for insuring compliance with applicable law, is not available
to the Customs Service"; or (2) if "the importer of record requests such extension and shows good
cause therefor."  Pursuant to section 159.12(e), Customs Regulations (19 C.F.R.  159.12(e)), the
District Director may extend liquidation for a period not to exceed three years.

     Counsel for protestant alleges that the entries deemed liquidated by operation of law because
Customs failed to extend the one-year liquidation period.  The protested entries are dated March 12,
1993, and April 8, 1993.  According to your office, extension notices were issued in respect of both
entries on October 16, 1993, because Customs determined that additional information was necessary
in order properly to appraise the merchandise.  The entries were liquidated on April 15, 1994; the
instant protest was filed on July 13, 1994.  Based on the information presented, the liquidation period
was properly extended in accordance with 19 U.S.C.  1504(b).  Accordingly, we find protestant's
argument to be without merit.

HOLDING:

     In conformity with the foregoing, the protest should be denied in full.  The appropriate basis
of appraisement is transaction value.  Amounts for warranties, installation and administration charges
and selling commissions were properly included in transaction value.  The transaction value of the
merchandise does not include amounts for actual duties and international freight.  The liquidation
period was properly extended.

     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 this decision must be
accomplished prior to the mailing of the decision.  Sixty days from the date of this letter 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,






                         John Durant, Director
                         Commercial Rulings Division