HQ 546012

May 6, 1996

VAL RR:IT:VA 546012 LPF

CATEGORY: Valuation/Entry/Classification

Port Director

U.S. Customs Service

55 Erieview Plaza

Plaza Nine Building

Cleveland, OH 44114

RE: Application for Further Review of Protest No. 4101-93-100013; Price
Actually Paid or Payable; 19 U.S.C. 1401a(b)(4)(A); Technical Assistance

Provided for Merchandise after Importation into the U.S.; 19 U.S.C.
1401a(b)(3)(A)(i); Apportionment of Value Between Liquidated and
Unliquidated Entries; Extension of Liquidation under 19 U.S.C. 1504(b)

Dear Sir:

This is a decision on an application for further review (AFR) of a

protest filed on January 19, 1993, against a decision made by the former

District Director (DD) concerning the entry, appraisement, and
classification

of various parts, components, and equipment imported for the
construction of a

ladle metallurgy facility. The 21 entries at issue were liquidated on
October

23, 1992.

FACTS:

MAN GHH Corporation (MAN), of Pittsburgh, PA, is a wholly owned

subsidiary of MAN Gutehoffnungshutte AG (MAN-AG), of Oberhausen,
Germany.

These parties are related pursuant to section 402(g) of the Tariff Act
of

1930, as amended by the Trade Agreements Act of 1979 (TAA), codified at
19

U.S.C. §1401a. MAN, who employs approximately 30 people, is the
marketing and

service organization of MAN-AG for the United States. The various
agreements

between MAN and the several companies comprising the MAN Group consist
of

annual budgets agreed to between the parties. MAN-AG primarily is
engaged in

the design, engineering and sale of industrial plants and machinery.

MAN served as importer of record for the parts, components, and

equipment imported for the construction of a ladle metallurgy facility
bought

by LTV Steel Company (LTV) of Cleveland, OH. During the period of March,
1990

through December, 1991 and in January, 1992, MAN filed approximately 64

consumption entries for the metallurgy plant project. Forty-three of the

entries were liquidated as entered, for which no protests were filed.

The DD appraised the merchandise under transaction value, based on the

entire MAN-AG contract price. However, counsel asserts that appraisement

appropriately is based only on the portion of that price relating to the

imported merchandise, thus excluding amounts for engineering and similar

services concerning goods sourced and manufactured in the U.S. and, in
some

instances, construction, assembly, and technical assistance pertaining
to the

imported merchandise after its importation into the U.S. The course of
events

ultimately leading to this AFR is summarized chronologically as follows.

In December, 1988, MAN and LTV entered into an agreement (MAN-LTV

contract) for the former to provide the latter, on a turnkey basis, a
ladle

metallurgy facility. The facility would be incorporated as a station in
a

existing steel mill and would improve the quality of the finished
product by

de-gassing molten steel under vacuum conditions. Counsel provided a copy
of

the \"Minutes of Closing Meeting\" (Minutes) which reflects the
agreement

between these parties. Therein it states that MAN\'s undertaking to LTV
is to

furnish \"on a turn key\' basis, all engineering, design, scheduling,

procurement, supervision, labor, materials, supplies, services, tools,

equipment, utilities, transportation, and plant, and do and perform all
things

necessary in order to design, construct, start-up and make operable the
Ladle

Metallurgy Facility.\" Section 1, Minutes. The MAN-LTV contract also

described the equipment, materials, labor and other services,
collectively

referred to as \"work,\" which MAN was to provide for LTV. In general,
\"work\"

included all facility design and engineering, project management, labor,

construction, and erection; testing and supervision of the facility\'s
start-up; and instruction of LTV\'s personnel in the operation and
maintenance of the

facility. Section 1, Minutes.

The MAN-LTV contract did not separately break out the various costs,

such as those for equipment, engineering, and design. Because MAN was

providing LTV with a turn key operation, counsel explains that the
MAN-LTV

contract set forth a payment schedule whereby a specified percentage of
the

total contract price would be invoiced by MAN to be paid by LTV by
certain

dates. Thus, MAN was not paid for specific components but for the
completion

of certain phases or milestones within a predetermined schedule. Counsel

explains that, in essence, the LTV contract required MAN to provide a
complete

package including the physical and tangible components of the facility,

together with any design, engineering, and labor enabling these
components to

operate as a unit, along with any other necessary services.

Accordingly, in February, 1990, MAN and MAN-AG signed an Internal

Consortium Agreement (MAN-AG Contract). In the MAN-AG Contract, it was

acknowledged that MAN was contractually obligated to LTV under their

contractual agreement. Annex 1 to the MAN-AG Contract identifies and

describes the engineering services which MAN-AG provided to MAN. These

include: project management; conceptual engineering; engineering for

mechanical equipment, utilities supply, electrical energy supply,

instrumentation, and process computer system; basic engineering for
steel

structures and civil part; documentation; and submission of technical

documents for approval. In addition, Annex 1 describes the supplies
which

MAN-AG provided to MAN. These include: swivel joints, vacuum gate,
vessel

lifting equipment, steel ropes for vessel lifting equipment, vessel
exchange

frame, clamping screws, exchange compensator, TV monitoring system for
VCP

vessel, sight glasses, refractories, check valves for vacuum pump,
vacuum

measuring equipment, T&S lance equipment, snorkel clamping device,
slag-free

tapping device, discharge feeders and vacuum feeders, system and
standard

software, application software, and spare parts.

Annex 2 to the MAN-AG Contract specifies a payment schedule whereby

payments were not associated with the provision of any particular
component or

service but rather with certain milestones tied into a predetermined
time

schedule. Counsel explains that this was due to the fact that MAN was
paid by

LTV on a similar schedule and did not have the funds to advance to its
largest

subcontractors. The contract price agreed upon by the parties is
described as

a \"firm, fixed and a lump sum price.\"

On April 24, 1991 and February 4, 1992 Customs issued MAN Requests for

Information, Customs Form (CF) 28, including questions impacting on the

valuation and classification of the merchandise at issue. Subsequently,
on

April 17, 1992, Customs issued MAN a Notice of Action, CF 29, proposing
both

rate and value advances. With regard to value, Customs determined that

section 402(b) transaction value, based on the price agreed to by the
parties

in the MAN-AG contract, was the appropriate basis for appraisement.
However,

when providing a value for the merchandise upon entry, MAN declared a
figure

amounting to about 1/3 of this contract price. A meeting between
officials

from your office and MAN, followed by an exchange of correspondence,

culminated with MAN\'s submission detailing and documenting the disputed
costs

and values.

On October 1, 1992, Customs issued a second CF 29 wherein Customs

adhered to its original appraisement determination. From the remaining
amount

in dispute, undeclared at the time of entry, the DD allowed deductions
for

software provided by MAN-AG, transportation costs and costs associated
with

installation of the imported merchandise. After allowing these
deductions the

DD assessed duty on the remaining amount by prorating this value over
the

unliquidated entries.

Counsel disputes Customs\' appraisement of the merchandise and asserts

that the majority of the contract price paid by MAN to MAN-AG does not
pertain

to the imported merchandise. Instead, counsel explains that such amounts
were

paid for engineering services and the like, relating to portions of the
MAN-LTV contract which either were performed entirely in the U.S. or
pertained to

goods sourced and manufactured in the U.S. Accordingly, counsel submits
that

in order to arrive at the proper transaction value, the portion of the

contract payments unrelated to the imported goods first should be
deducted

from the total payments made to MAN-AG under the contract. From this
amount

counsel states that further deductions should be made for construction,

erection, technical assistance, transportation, Customs duties and
related

fees pursuant to section 402(b)(3). The remainder then would constitute
the

transaction value of the imported merchandise because it represents the
sum

total of all payments to the seller for the imported merchandise.
Counsel

acknowledges, however, that it is appropriate to add an amount for
foreign

engineering assists to the net entered value for the merchandise. Your
office

questions the accuracy of counsel\'s figures for engineering insofar as,

according to counsel, such figures accurately are reflected by the value
\"left

over\" after deductions are made from the contract price.

Counsel has submitted various documentation in support of their

position. A \"Summary Report\" has been made available describing and
itemizing

the cost of engineering and other services which MAN-AG performed with
respect

to the \"U.S. component\" of the contract between MAN and LTV. The
enumerated

services include: Time Scheduling, Technical Documentation, Reporting,
Basic

Engineering, Detail Engineering, Software, and Supervision and Technical

Assistance. Counsel also has presented a cost breakdown reflecting each

invoice generated in connection with the MAN-LTV contract for services

rendered and parts and equipment provided by all sub-contractors of the
LTV

contract. From the submitted documents counsel provides examples of

engineering services included on the MAN-AG Summary Report and ties them
into

MAN\'s vendor purchase order list and actual purchase orders between MAN
and

U.S. vendors of U.S. sourced equipment. Counsel therefore posits that
these

documents demonstrate that pursuant to the MAN-AG contract, MAN-AG was
paid

for engineering services which pertain to goods and services acquired
from

U.S. based sources. In one case, counsel has tied MAN-AG\'s services
into an

internal consortium agreement entered into between MAN and a domestic

corporation. Furthermore, a master list of drawings prepared for the
project

by MAN-AG has been submitted which counsel traces to the U.S. vendors
who used

the drawings in furnishing the domestically sourced goods and services.

Insofar as the \"Summary Report\" and correlations between the various

types of merchandise and engineering services are concerned, your office

agrees that some of the engineering is related to equipment built in the
U.S.

and unrelated to the imported merchandise. However, your office presents

various instances where correlations likewise can be made between
certain

engineering services enumerated on the Summary Report and the imported

merchandise.

In addition, counsel has submitted a project report containing MAN-AG\'s

budgeted and anticipated costs for obtaining equipment which it provided
to

MAN. Counsel stresses that the amount MAN-AG budgeted and anticipated
for

equipment in conjunction with the contract approximates the entered
value for

the merchandise. According to counsel, this indicates that such an
amount

(that is, the entered value, as opposed to the full contract price)

appropriately represents transaction value.

Furthermore, counsel takes issue with Customs\' increase in value and
its

application solely to the 21 entries at issue, rather than its
apportionment

to the 64 entries concerning the entire metallurgy project.

With regard to the classification of the merchandise, the protestant

entered the merchandise under subheading 8454.90.0080, Harmonized Tariff

Schedules of the United States Annotated (HTSUSA), providing for
\"Converters,

ladles, ingot molds and casting machines, of a kind used in metallurgy
or in

metal foundries, and parts thereof: Parts, Other,\" at a free rate of
duty. It

was the DD\'s position that pursuant to General Rule of Interpretation
(GRI) 1,

in applying Note 2(a) to Section XVI, HTSUS, that the goods
appropriately were

classified in their applicable, respective tariff provisions providing
for the

goods, as opposed to being classified in heading 8454.

Finally, counsel submits that the entries at issue were, pursuant to 19

U.S.C. §1504(b), liquidated by operation of law at the rate and value
asserted

by the protestant at the time of entry. Specifically, it is counsel\'s

position that since the Notices of Extension, CF 4333A, issued by
Customs do

not state a proper basis for extending liquidation, they are defective
and the

entries at issue are deemed liquidated as entered.

ISSUES:

1\. Whether the time period for liquidation properly was extended

pursuant to 19 U.S.C. §1504.

2\. Whether the merchandise was appropriately appraised under
transaction

value based on the entire MAN-AG contract price or on a portion of that
price,

excluding amounts for engineering and similar services not connected to
the

imported merchandise.

3\. Whether the merchandise is classifiable within heading 8454, HTSUSA,

providing for converters, ladles, ingot molds and casting machines, of a
kind

used in metallurgy or in metal foundries, and parts thereof, or within
the

individual, respective headings providing for such merchandise.

LAW AND ANALYSIS:

1\. Liquidation pursuant to 19 U.S.C. §1504

Initially, we note that this protest was timely filed pursuant to 19

U.S.C. §1514(c)(2)(A), insofar as the entries were liquidated on October
23,

1992 and the protest filed January 19, 1993. See 19 U.S.C. §1514(c)(3)

providing that a protest shall be filed within ninety days after notice
of

liquidation.

Liquidation has been defined as \"the final computation by the Customs

Service of all duties (including any antidumping or countervailing
duties)

accruing on that entry.\" American Permac, Inc. v. United States, 10 CIT
535,

537 (1986). Generally, an entry of merchandise not liquidated within one
year

from the date of entry of such merchandise, \"shall be deemed liquidated
at the

rate of duty, value, quantity, and amount of duties asserted at the time
of

entry by the importer of record.\" 19 U.S.C. §1504(a). However, pursuant
to

19 U.S.C. §1504(b) Customs may extend this period if: 1) information
needed

for the proper appraisement or classification of the merchandise is not

available to the appropriate customs officer; 2) liquidation is
suspended as

required by statute or court order; or 3) the importer, consignee, or
his

agent requests such extension and shows good cause therefor.

In the present matter, Customs had the authority to extend the initial

one year time period for liquidation. The Customs \"ACS entry archive\"
records

for the entries at issue indicate that liquidation was extended one or
two

times, as appropriate, and the notices of extension were given to the
importer

of record. It appears, in this case, that the extensions were made under
\"EXT

CDE 01\" which meant that \"information needed for the proper
appraisement or

classification of the merchandise is not available to the appropriate
customs

officer.\" See 19 U.S.C. §1504(b)(1); 19 CFR §159.12(a)(1)(i); St. Paul
Fire &

Marine Ins. Co. \[Carreon\] v. United States, 799 F. Supp. 120 (CIT
1992),

rev\'d, 6 F3d 763 (Fed. Cir. 1993). According to documents in the file,
in

particular the CF 28s, 29s and correspondence between the DD and MAN,
the

extensions of liquidation were proper because there were numerous
questions

posed to the protestant concerning the classification and valuation of
the

merchandise at issue.

Furthermore, we do not agree with counsel\'s contention that the Notices

of Extension were defective insofar as they did not state a proper basis
for

extending liquidation. In this regard, section 159.12(b), Customs
Regulations

(19 CFR 159.12(b)) provides that if the district director extends the
time for

liquidation as provided above, he is required to promptly notify the
importer

or the consignee and his agent and surety that the time has been
extended and

the reasons for doing so.

In this case, the evidence provided sufficiently creates the presumption

that proper notice of extension was given. See, e.g., International
Cargo &

Surety Insurance Co. (Data Memory Corp.) v. United States, 15 CIT 541,
779 F.

Supp. 174 (1991). Based on the submitted evidence, the protestant has
failed

to rebut that presumption. We note that the case of Intercargo Insurance
Co.

f/k/a International Cargo & Surety Co. (Genauer) v. United States, Slip
Op.

95-37 (Ct. Int\'l Trade, decided March 9, 1995), has been appealed and

currently is before the U.S. Court of Appeals for the Federal Circuit.

2\. Appraisement pursuant to 19 U.S.C. §1401a

The preferred method of appraising merchandise imported into the U.S.

is transaction value pursuant to section 402(b) of the Tariff Act of
1930, as

amended by the Trade Agreements Act of 1979 (TAA), codified at 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 the enumerated statutory additions. For purposes of this decision,
we

have assumed the relationship between the parties did not influence the
price

actually paid payable and that transaction value is the appropriate
method of

appraisement.

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.\"

Two recent court cases have addressed the meaning of the term \"price

actually paid or payable.\" In Generra Sportswear Co. v. United States,
8 CAFC

132, 905 F.2d 377 (1990), the court considered whether quota charges
paid to

the seller on behalf of the buyer were part of the price actually paid
or

payable for the imported goods. In reversing the decision of the lower
court,

the appellate court held that the term \"total payment\" is
all-inclusive and

that \"as long as the quota payment was made to the seller in exchange
for

merchandise sold for export to the United States, the payment properly
may be

included in transaction value, even if the payment represents something
other

than the per se value of the goods.\" The court also explained that it
did not

intend that Customs engage in extensive fact-finding to determine
whether

separate charges, all resulting in payments to the seller in connection
with

the purchase of imported merchandise, were for the merchandise or
something

else.

In Chrysler Corporation v. United States, Slip Op. 93-186 (Ct. Int\'l

Trade, decided September 22, 1993), the Court of International Trade
applied

the Generra standard and determined that although tooling expenses
incurred

for the production of the merchandise were part of the price actually
paid or

payable for the imported merchandise, certain shortfall and special

application fees which the buyer paid to the seller were not a component
of

the price actually paid or payable. With regard to the latter fees, the
court

found that the evidence established that the fees were independent and

unrelated costs assessed because the buyer failed to purchase other
products

from the seller and not a component of the price of the imported
engines.

Accordingly, it has been our position that based on Generra, there is a

presumption that all payments made by a buyer to a seller are part of
the

price actually paid or payable for the imported merchandise. However,
this

presumption may be rebutted by evidence which clearly establishes that
the

payments, like those in Chrysler, are completely unrelated to the
imported

merchandise.

Furthermore, section 402(b)(3) provides that:

\[t\]he 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\....

By examining the evidence submitted concerning the various types of

engineering and services included in the Summary Report, we believe
counsel

has adequately shown that some of these payments are \"completely
unrelated\" to

the imported merchandise or pertain to construction, assembly, or
technical

assistance provided with respect to the merchandise after its
importation. To

an extent, this is supported by the language included in the MAN-LTV and
MAN-AG agreements referencing \"facility design and engineering,\"
\"construction and

erection,\" \"testing and supervision of the facility\'s start-up,\"
\"project

management,\" etc.

With regard to Time Scheduling (Item 1) we believe the nature of such

services, insofar as they are described as fabrication, transport to
site,

erection, etc., are unrelated to the imported merchandise or, more
accurately,

represent construction, erection or technical assistance provided after

importation of the merchandise. MAN\'s Internal Consortium Agreement
with a

U.S. corporation (Corporation) responsible for performing the erection
and

construction of the facility, along with the time-schedule prepared by
MAN-AG

relating to the Corporation\'s fulfillment of its contract, serves as

persuasive evidence in this regard.

With regard to the Technical Documentation (Item 2), counsel has tied

some of these services, provided by MAN-AG, to equipment such as the
ferro

alloy system, desulphurization system, lime system, and ladle transfer
car,

which evidently was sourced and purchased in the U.S. However, it is our

understanding that some of these services likewise pertain to imported

equipment such as the vacuum equipment, vessel heating equipment, and

hydraulic system and control apparatus both incorporated in the ladle
furnace.

Since we can correlate the technical documentation to the U.S. sourced
as well

as foreign manufactured and subsequently imported merchandise, it was

appropriate for the appraising officer to find these services not
\"completely

unrelated\" to the imported merchandise nor pertaining to construction,

assembly, or technical assistance concerning the merchandise after its

importation.

With regard to Reporting (Item 3) we believe that such services, which

are described as consisting of monthly status reports, updates and
amendments

to the detailed time schedule and drawing progress and status reports,
are

unrelated to the imported merchandise or may represent technical
assistance

provided after importation of the merchandise. We are not aware of any

connection between the Reporting services and the imported merchandise.

Likewise, the Basic Engineering services (Item 4) consisting of the

integration of the equipment; investigation of detail situations;
definition

of the arrangement of stairs, platforms and heat protections; and main
pipe

and cable routes for the new equipment, all appear unrelated to the
imported

merchandise and, more specifically, represent assembly or technical
assistance

provided after importation. This is confirmed, in part, by our
understanding

that in accordance with the drawings provided by MAN-AG, these services

largely relate to the layout or arrangement of the merchandise at the
U.S.

facility.

With regard to the Detail Engineering (Item 5) we do not find that

counsel adequately has demonstrated that such services are completely

unrelated to the imported merchandise, or constitute construction,
erection or

technical assistance provided with respect to the merchandise after its

importation. First, we understand that the mechanical engineering
services

include calculation and definition of the equipment components, utility

consumptions including specific characteristic data and definition of

connection points, and power requirement for various electric drives.
Some of

these services appear to relate to imported merchandise, particularly
the

ladle furnace, nozzle for the ejector, template for the refractory
lining, and

connection parts for the VCP vessel.

Second, the electrical engineering services include control diagrams,

control concept, signal exchange lists, circuit and terminal diagrams,
list of

input and outputs, and control system flow charts. In our opinion, a
relation

exists between these services and the imported merchandise including the

controllers; transformers; PLC cubicles holding electronic (I/O) cards
which

are connected to different types of switches, relays, valves, and lights
and

which transmit information to operate equipment; power strip (to which
the I/O

cards are plugged into) which when connected to the power supply of the
plant,

provides the electrical power; and other small electronic units which
are used

to transfer signals to control valves.

Third, with regard to the instrumentation, the engineering includes

instrumentation diagrams, equipment specification, description of all

measuring equipment, arrangement drawings, circuit diagrams, data sheets
for

all instruments and valves, and an instrument list. Insofar as MAN\'s

importations include a video camera monitoring system, television
monitoring

equipment, and a host of measuring equipment such as laboratory devices
for

chemical composition analysis and electronic measuring devices, we
similarly

find a relation between these services and the imported merchandise.

Fourth, we find that the imported control apparatus, vacuum pumps,

piping and valves relate to the utility supply services. These services

include the definition of process related requirements for valves,
pumps, etc.

as well as bills of material for piping, valves, etc. Fifth, a nexus

apparently exists between the imported computer equipment and computer

engineering services insofar as the services include development of the

process control computer system, hardware specification and system
analysis

for application functions. Finally, because it is our understanding that
some

of the German subcontracted engineering relates to the vacuum pump unit,
we

find that a connection exists between some of these services and the
imported

merchandise.

With regard to the Software (Item 6), insofar as it is classifiable

within heading 8524 as other recorded media and subject to a specific
rate of

duty, such merchandise is not appraised for purposes of assessing an ad

valorem duty rate. Hence, amounts for engineering provided in connection
with

the software have no relevance in this regard. See T.D. 85-124, issued
August

7, 1985. However, we note for purposes of assessing any user fees, the
value

of the merchandise would include the amounts attributed to the software.
In

our opinion, the evidence presented indicates that a connection existed

between at least some of these services and the imported merchandise.

Specifically, we note that several of the purchase orders from MAN
indicate

shipping to MAN-AG and \"installation and training of the system at MAN
GHH,

Oberhausen.\" It also is our understanding that software was imported by
MAN

into the U.S.

Furthermore, all concerned parties agree that the services provided in

connection with the Supervision and Technical Assistance (Item 7) are
not

included in the value of the imported merchandise since they pertain to

installation and erection concerning the merchandise after its
importation.

As it is our understanding that evidence does not point contrary to this

position, we uphold this determination.

Finally, we agree with counsel\'s position concerning the

inappropriateness of Customs\' application of the entire value increase
to the

21 entries at issue, rather than its apportionment to the 64 entries

concerning the entire project. In the case of Alyeska Pipeline Service
Co. v.

United States, 10 CIT 510, 643 F. Supp. 1128 (1986) and in C.S.D. 83-39,
17

Cust. Bull. 794 (1983) it was explained that Customs was required by law
to

separately appraise multiple entries of merchandise because the only

statutorily valid appraisement is one which reflects the value of the

merchandise covered only by that entry.

Specifically, in C.S.D. 83-39 Customs addressed the appraisement of a

single protested entry, remaining from a number of entries already
liquidated

at their entered values. The entries covered merchandise imported over a

period of time pursuant to a purchase agreement between the foreign

manufacturer and the U.S. purchaser. However, because the total contract

amount for the merchandise significantly exceeded the total entered
value for

all the entries, the appraising officer adjusted the value of the
protested

entry to compensate for the difference between the two amounts. In
effect,

the appraisement resulted in an increase equal to the total amount of

additional duty due on the entire contract.

Customs, in citing 19 U.S.C. §1514(a), explained that because valuation

decisions made by the appropriate customs officer are final and
conclusive

unless protested, the values as liquidated of the units covered by the
non-protested entries represented the final appraised values for that
merchandise.

As a result, Customs limited the value increase to the difference
between the

entered value of the merchandise covered by the protested entry and the
pro

rata share of the total contract price represented by that merchandise.

Accordingly, in the present matter, we likewise find the value increase
to be

limited in this manner.

3\. Classification under the HTSUS

The General Rules of Interpretation (GRIs) taken in their appropriate

order provide a framework for classification of merchandise under the
HTSUS.

Most imported goods are classified by application of GRI 1, that is,
according

to the terms of the headings of the tariff schedule and any relative
section

or chapter notes.

The subject merchandise is classifiable by applying GRI 1. However,

while the protestant submits that the merchandise is classifiable within

heading 8454 which provides for converters, ladles, ingot molds and
casting

machines, used in metallurgy or in metal foundries, and parts thereof,
you

classified the merchandise in the individual, respective headings
providing

for the goods in accordance with Note 2(a) to Section XVI.

In pertinent part, Note 2(a) provides that parts which are goods

included in any of the headings of chapters 84 and 85 are in all cases
to be

classified in their respective headings. As a section note to the HTS,
Note

2(a) is applied at the GRI 1 level. Because we find Note 2(a) applicable
in

this case and since the protestant has submitted no evidence or
arguments

contrary to the position espoused by your port, we find it appropriate
to

classify the goods in their respective headings.

HOLDING:

Based on the information provided, we hold as follows:

1\. The time period for liquidation properly was extended pursuant to 19

U.S.C. §1504.

2\. The merchandise was appropriately appraised under transaction value

based on the price paid pursuant to the MAN-AG contract, excluding
amounts for

time scheduling, reporting, basic engineering, and supervision and
technical

assistance. However, based on the evidence submitted, amounts for
technical

documentation and detail engineering appropriately are included as part
of the

price of the merchandise. While not relevant for purposes of assessing
an ad

valorem duty rate, the amounts in connection with the software would
comprise

part of the value on which user fees would be assessed. Furthermore, the

value increase is limited to the difference between the entered value of
the

merchandise covered by the protested entries and the pro rata share of
the

total contract represented by that merchandise.

3\. The merchandise was appropriately classified in the individual,

respective headings providing for the goods in accordance with Note 2(a)
to

Section XVI.

The protest is to be disposed of in accordance with the foregoing. A

copy of this decision with the Form 19 should be sent to the protestant.

In accordance with Section 3A(11)(b) 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 to the public via the Diskette Subscription

Service, the Freedom of Information Act and other public access
channels.

Sincerely,

Acting Director

International Trade Compliance Division