HQ 0221473 - Application for Further Review of Protest No. 1001-6- 018412, protesting the refusal to reliquidate Entry Nos. 85- 466160-8 and 85-466864-3, dated August 6, 1985, and September 13, 1985, respectively, under 19 U.S.C. 1520(c)(1). - United States International Trade Commision Rulings

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HQ 221473

August 11, 1989

PRO-1-CO:R:C:E 221473 TG

CATEGORY: ENTRY LIQUIDATION

Regional Commissioner of Customs
New York Region
6 World Trade Center
New York, New York 10048-0945

RE: Application for Further Review of Protest No. 1001-6- 018412, protesting the refusal to reliquidate Entry Nos. 85- 466160-8 and 85-466864-3, dated August 6, 1985, and September 13, 1985, respectively, under 19 U.S.C. 1520(c)(1).

Dear Sir:

The above-referenced protest was forwarded to our office for further review. We have considered the points raised by your office and the importer. Our decision follows:

FACTS:

The protestant entered two shipments of merchandise into the United States on August 6, 1985, and September 13, 1985. Each shipment contained two styles of women's grain leather "Bean" boots designated by the protestant as Style Nos. 21610A and 21615K. Both styles of the boots were entered under item 700.57, Tariff Schedules of the United States (TSUS). The entries were liquidated on October 11, 1985, and October 25, 1985, with no change in the tariff classification of either style of boot.

On February 11, 1986, Customs received letters from the protestant requesting reliquidation and refund of duties under section 520(c)(1), Tariff Act of 1930, as amended (19 U.S.C. 1520(c)(1)). Customs determined that substantiating documentation had not been submitted to show a clerical error, mistake of fact, or other inadvertence correctable under 19 U.S.C. 1520(c)(1) and denied the reliquidation requests on October 31 and November 7, 1986. On November 25, 1986, protestant filed the subject protest against these refusals to reliquidate. On May 1, 1989, Customs received a request from the protestant asking that it be afforded an opportunity to provide additional documentary evidence in support of its claim for relief under section 1520(c)(1). Subsequently, on May 16, 1989, copies of affidavits were received from Mr. Fortunato Diaz of H.W. Robinson & Co., Inc., and Mr. Jaime Salazar of Jimlar Corporation.

An affidavit of the protestant's employee, the Import

Traffic Manager (Hereafter, the "Manager" or "importer's employee") was submitted with the original protest. From that affidavit and subsequent information provided by the protestant, we find that the circumstances which led to entry of the Style 21615K boots under item 700.57, TSUS, were as follows: The Manager began as the protestant's import traffic manager in May 1985. Prior to that, he had no experience relating specifically to the classification of footwear under TSUS. In the short time that he worked for the protestant prior to the making of the subject entries, he processed documents for other entries which collectively involved several styles of "Bean" boots which he had been advised were dutiable at 37.5% ad valorem. When he received the shipping and invoice documents pertaining to the two entries in question, the Manager, noting that the merchandise was described as "Bean" boots, and assuming that they were the same "Bean" boots as previously entered, instructed the protestant's broker to enter the merchandise under item 700.57, TSUS, and at its duty rate of 37.5% ad valorem. He did not refer to the CF 5523, "Invoice for Details for Footwear" which specifically described the leather composition. He later learned that the Style 21615K boots were entitled to entry under item 700.45, TSUS, at a duty rate of 10% ad valorem by virtue of the leather content of their uppers.

Protestant claims that there were several errors or mistakes on the basis of which the protestant's entries should be reliquidated under 19 U.S.C. 1520(c)(1). First, it alleges that the Manager inadvertently overlooked the documented fact that style 21615K had uppers of 60% grain leather and 40% rubber, and therefore should have been entered and classified under item 700.45, TSUS, at a 10% ad valorem duty rate, rather than under item 700.57, TSUS, at 37.5% ad valorem. The protestant also states that the Manager was not aware of the fact that the company intended to enter the boots at a duty rate of 10%, and claims this intent is "evident by examining the purchase orders and confirmation, by which it may be determined that if duty at 10% was added to the importer's purchase price of the Style 21615K boots, the boots' sale price would have a similar markup corresponding to the 31% markup on the other boots involved in the transaction. In contrast, if 37.5% duty was added to the purchase price, the resale price would include only a 5% markup from the protestant's resale price, which when combined with administrative and other costs of the transaction, the total cost would exceed the resale price of the merchandise, and "obviously not be profitable."

Protestant alleges the broker's clerk was not aware of the true facts regarding the leather content of the boots' uppers or the importer's intention to enter the merchandise at the lower rate due to a mistake of fact and "possibly inadvertence."

Protestant contends that the broker's clerk who made the entries, followed the Manager's instructions and made a mistake of fact in thinking that the protestant wanted the Style 21615K boots to be entered dutiable at 37.5% ad valorem when, in fact, the protestant wanted those boots to be entered dutiable at 10% ad valorem.

Protestant also claims that a mistake of fact occurred on the part of the Customs officer who processed the entries in question. Protestant states that it may reasonably be assumed that the appropriate Customs officer was aware of the legal consequence of the leather content of the upper surface area of the Style 21615K boots and therefore, the Customs officer must have also made a mistake of fact when he liquidated the merchandise at 37.5% ad valorem.

ISSUES:

Whether, within the context of 19 U.S.C. 1520(c)(1):

(1) When an importer's employee who is responsible for advising how his employer's merchandise should be entered, fails to take note of a material fact in classifying merchandise under the TSUS, such failure constitutes a mistake of fact, inadvertence or clerical error.;

(2) A Customs broker who enters a client's merchandise under an incorrect classification, as instructed by the importer, commits a mistake of fact or inadvertence by not having ascertained all material facts regarding the classification determination by his client when all correct and supporting documentation was provided to the broker;

(3) A mistake of fact or inadvertance can be inferred on the part of a Customs officer who liquidates duties on merchandise based on the wrong tariff provision, when all correct and relevant information has been provided at this time of entry.

LAW AND ANALYSIS:

19 U.S.C. 1520(c)(1) provides that Customs may reliquidate an entry to correct:
a clerical error, mistake of fact, or other inadvertence not amounting to an error in the construction of a law, adverse to the importer and manifest from the record or established by documentary evidence, in any entry, liquidation, or other customs transaction, when the error, mistake, or inadvertence is brought to the attention of the appropriate customs officer within one year after the
date of liquidation or exaction;

The alleged clerical errors and mistakes of fact made in connection with the two entries were timely brought to the attention of Customs under 19 U.S.C. 1520(c)(1). Customs refusal to reliquidate the entries under this provision was timely protested within 90 days, in accordance with 19 U.S.C. 1514.

The importer's first claim for relief under 19 U.S.C. 1520(c)(1) is that the Manager made a mistake of fact, inadvertence or clerical error by failing to recognize that the Style 21615K boots have uppers of which 60% of the exterior surface area is leather. T.D. 54848 describes and distinguishes correctable errors under section 1520(c)(1). Mistake of fact occurs when a person believes the facts to be other than what they really are and takes action based on that erroneous belief. The reason for the belief may be that a fact exists but is unknown to the person or he may believe that something is a fact when in reality it is not. Inadvertence connotes inattention, oversight, negligence, or lack of care while clerical error occurs when a person intends to do one thing but does something else, including mistakes of arithmetic and the failure to associate all the papers in a record under the consideration. These errors are not necessarily mutually exclusive. However, errors in the construction of a law are not correctable under section 1520(c). Those occur when a person knows the true facts of a case but has a mistaken belief of the legal consequences of those facts and acts on that mistaken belief. 94 Trea. Dec. 244, 245-246 (1959).

These entries do not concern a clerical error, since such an error is made by one in a clerical capacity who has no duty to exercise original thought or judgment. PPG Industries Inc. v. United States 7 CIT 118, 124(1984). The importer's traffic manager had responsibility to review the documents and determine the appropriate tariff item number for each entry. Although the manager had originally been advised that the entries of similar merchandise were dutiable at 37.5%, he had an ongoing responsibility to evaluate and process entry documents. There is no indication that any other employee directed him to designate the entries in question under a particular tariff item or duty rate or that his mistake was in the nature of a transcription error.

We do not believe that the importer's employee's actions amounted to negligent inaction, which is not within the scope of section 1520(c). See C.S.D. 80-250. Negligent inaction cases usually are the result of the submission of incorrect or incomplete documentation, intentionally or not, and the failure to submit or late submission of "correct" documentation. This ruling states that the failure to act may be correctable under 19

U.S.C. 1520(c), when coupled with another significant factor, such as a misunderstanding of the facts.

There is evidence that the importer's business employee made a less than thorough review of the entry documents and therefore was unaware of a material fact. In the Manager's affidavit, he states that when he received the invoice and shipping documents, he assumed the merchandise was the same type of boots as previously entered, and instructed the broker to enter them at 37.5% (corresponding to TSUS item 700.57). He states that because of his mistake and inadvertence in not carefully checking the CF 5523, and the importer's purchase orders, he mistakenly advised the broker as to the duty rate.

Some official at the importer's business knew the correct composition of the boots before entry, since a correct CF 5523, apparently prepared by the importer, detailed the correct composition. The CF 5523 provides evidence that the boots' were composed of 60% leather uppers. The Manager did not review this form but based his classification decision on prior experience of boots by the same name. Therefore, due to inattention, carelessness or other inadvertence, the Manager was unaware of the boots' composition, a material fact needed to determine the classification of the merchandise. However, the mistake of fact by the importer's employee does not provide direct correlation to a mistake of fact made in the entry of the merchandise as required under section 1520(c)(1), since the broker, not the importer or its employee filed the entry.

We reject the protestant's argument that the purchase orders and confirmation provide proof that the boots were intended to be entered at the lower rate of duty. Disparate profit margins provide some indication that the merchandise was intended to be entered by the importer at the lower rate, but it is not conclusive. Customs will not evaluate the reasonableness of business decisions regarding this kind of difference in profit margin to determine the importer's classification intent. However, the underlying basis of the importer's intent to use the lower duty rate, the composition of the boots, is established by the CF 5523, submitted with the entry.

The record does not establish that any mistake of fact, inadvertence or clerical error was made by the Customs Service or the broker. The Protestant argues that the enclosed affidavits of Mr. Diaz and Mr. Salazar "suffice to reflect at least the probability that the entry clerk did, as a matter of fact, classify the merchandise on the entries as instructed by Jimlar, without receiving, analyzing and being guided by the CF 5523, thus making the same mistake of fact, in the entries as did Mr. Salazar in his instructions." We disagree. We cannot rely on the assumptions and assertions of the protestant without any
facts. As we recently ruled in C.S.D. 89-29, mistakes of fact cannot be presumed from circumstances that do not necessarily support such a finding. Inferences are not sufficient proof. The requirement in section 1520(c)(1) that mistakes of fact be manifest from the record or established by documentary evidence necessitates something more than assertions of logical inference. When it is alleged that merchandise has been wrongly classified due to a mistake of fact, it is incumbent on the protestant to show by sufficient evidence the nature of the mistake of fact. PPG Industries, Inc. v. United States, 4 CIT 143, 147(1982).

Customs also rejects the protestant's argument that since 37.5% was one of the highest rates of duty applicable to footwear in 1985, "where the payer of duty seems willing to have merchandise assessed at a higher rate, there is little pressure on either the broker or Customs to expend much effort to independently determine classification and rate of duty in the interest of 'protecting revenue.' We [The Protestant] submit that this factor may well have played a significant role in the broker's entering as instructed and Customs' liquidation as entered."

The fact that the broker was advised to enter the merchandise under the incorrect tariff item number by the importer, and that the broker did enter the merchandise accordingly, does not provide sufficient proof that a mistake of fact occurred in the entry, since accurate documents describing the composition entry, were available to the broker and submitted with the entry. The broker has an independent obligation to determine the correct tariff classification and duty rate for entries it files for a client. No evidence is provided to refute the possibility that the broker considered all relevant facts as to the true nature of the imported merchandise and incorrectly determined the classification, which would be a mistake of law.

A Customs broker is licensed to transact Customs business on behalf of others. As defined in the Customs Regulations, section 111.1, Customs business includes transactions involving entry, classification, value and payment of duty. Furthermore, under 19 U.S.C. 1641, a broker is required to exercise responsible supervision and control over the Customs business it conducts. There is no evidence in the record that the broker was not aware of all material facts, since the CF 5523 was part of the entry documents which were submitted to Customs through the broker. The fact that an importer advised the broker of how it wished merchandise to be entered does not presume that the broker, with expertise and experience in Customs matters, would evaluate the evidence in the same manner as the importer. See PPG Industries, Inc. v. United States, 7 CIT 118, 121, 126 (1984).

The protestant argues that it is Customs' responsibility and not Jimlar's to show by the record or affidavits or other
statements that Customs also made a mistake of fact in not perceiving from the CF 5523 and other entry documents that some of the footwear involved, Style No. 21615K, differed from the rest. The protestant asks Customs to find out if the Customs Officer who processed the entries actually noted the physical composition of Style 21615K as reflected by the CF 5523, and despite the fact that those shoes were shown to be over 50% leather upper surface, conclude that they were properly dutiable at 37.5%, thus making a mistake of law. The protestant also argues that "before you deny our client the relief it seeks on the grounds that the Import Specialist made a mistake of law rather than a mistake of fact in failing to give due effect to the CF 5523, you should seek to ascertain from the Import Specialist what actually happened, or at least what is most likely to have happened."

Since the CF 5523 was included in the file, it was also available to the Customs officials who reviewed the form, and liquidated the entry. There is no evidence that Customs officials were unaware of the true composition and erroneously applied the incorrect tariff classification. It is well established that a determination that merchandise is covered by a certain tariff item is a conclusion of law. An error of judgment on the part of a Customs officer who was aware of the pertinent facts but entered the merchandise under the wrong tariff item number is a mistake in the construction of law, not correctable under section 520(c)(1). See Mattel, Inc. v. United States, 72 Cust. Ct. 257, 262-264, C.D. 4547 (1974); Computime, Inc. v. United States, 9 CIT 553 (1985).

Recently, in Universal Cooperatives, Inc. v. United States, Slip Op. 89-89 (June 27, 1989), the International Court of Trade distinguished between the types of factual mistakes. It stated: "There is the decisional mistake in which a party may make the wrong choice between two known, alternative set of facts. There is also the ignorant mistake in which a party is unaware of the existence of the correct alternative set of facts. The decisional mistake must be challenged under section 514. The ignorant mistake must be remedied under section 520." Thus, if there was any mistake here, it would be a decisional mistake.

A protest under section 514, Tariff Act of 1930, (19 U.S.C. 1514) filed within 90 days of liquidation, is the remedy to correct erroneous classifications caused by the misinterpretation of law. No such protest was filed. Section 1520(c)(1) is not remedial for every conceivable form of mistake or inadvertence adverse to an importer, but offers limited relief. Concentric Pumps, LTD. v. United States, 643 F. Supp. 623, 626, 10 CIT 505 (1986).

HOLDING:

(1) The importer's employee did not thoroughly review the entry documents and was unaware of a material fact contained in the entry documents when it advised the broker of the classification of merchandise for entry. This error did not amount to a mistake of fact in the entry under 19 U.S.C. 1520(c)(1) since the broker, not the employee, had responsibility for filing the entry.

(2) The broker had all documentation necessary to file a correct entry. Notwithstanding the erroneous instructions it received from the importer, the record does not establish that the broker made a mistake of fact, inadvertence or clerical error in filing the entry under the wrong classification, rather than a mistake of law by improperly classifying the merchandise.

(3) The record provides no evidence that Customs made a mistake of fact, clerical error or inadvertence in classifying the merchandise when all documentation was included in the entry and was available before liquidation.

Since a clerical error, mistake of fact or inadvertence in the entry or liquidation is not manifest from the record or established by documentary evidence, you are advised to deny the protest.

Sincerely,

John Durant, Director
Commercial Rulings Division

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