HQ 544368: Application for Further Review of Protest No. 1001-9-000183; Dutiability of Warranty Costs

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 544368

                         October 9, 1990

VAL 2-05 CO:R:C:V  544368 pmh

CATEGORY:  Valuation

Area Director
New York Seaport, NY

RE: Application for Further Review of Protest
    No. 1001-9-000183; Dutiability of Warranty Costs

Dear Madam:

     The above referenced protest and application for further
review is against your decision regarding the appraised value of
certain merchandise imported by Emerson Radio Corporation (the
importer).

     According to a memorandum submitted in support of the
protest, the merchandise being imported consists of televisions,
radios, video cassette recorders and other electronic articles.
The importer sells this merchandise to U.S. consumers along with
a limited warranty that the products are free from latent defects
in material and workmanship.  Initial returns of latently
defective merchandise are repaired by the importer and resold as
second quality merchandise at a discounted price.  The importer
also contracts with unrelated service facilities to repair
latently defective marchandise in use.  These facilities invoice
the importer for total cost of repair, including parts and labor.
The importer maintains, and has submitted for our review, records
showing the amount of repair costs incurred and the losses on
resale of second quality merchandise that are related to the
warranty.

     The importer asserts that the costs associated with the
warranty should be reflected in the appraised value of the
imported merchandise.  That is, that the costs should be
deductible from the price actually paid or payable for the
imported merchandise.  Customs addressed this issue in HRL
544394, of this date (copy enclosed), and determined that such
costs are not deductible from the transaction value.
Accordingly, you are directed to deny this protest.  A copy of
this letter and of HRL 544394 should be attached to Form 19,
Notice of Action, to be sent to the protestant.

                           Sincerely,



                           John Durant, Director
                           Commercial Rulings Division