CLA-2 CO:R:C:M 957205 LTO
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
- 5 -
and other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division