HQ 0220397 - Application for Further Review of Protest No. 3901-6-001298; 19 U.S.C. 1520(c)(1); mistake of fact; Canadian crude petroleum. - United States International Trade Commision Rulings

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HQ 220397

March 12, 1991

PRO-2-05-CO:R:C:E 220397 JR

CATEGORY: ENTRY LIQUIDATION

Deputy Assistant Regional Commissioner of Customs (C&V) North Central Region
55 East Monroe Street, Suite 1501
Chicago, Illinois 60603

RE: Application for Further Review of Protest No. 3901-6-001298; 19 U.S.C. 1520(c)(1); mistake of fact; Canadian crude petroleum.

Dear Sir:

The above-referenced protest was forwarded to our office for further review. We have considered the facts and the issues raised. Our decision follows.

FACTS:

On October 11, 1985, the protestant, a large U.S. petroleum company, imported 94,430 barrels of Canadian crude petroleum and entered it pursuant to Headnote 4, Part 10, Schedule 4 of the Tariff Schedules of the United States (item 475.1010, TSUS), providing for the duty-free entry of Canadian petroleum received in exchange for domestic or duty-paid imported petroleum exported from the United States to Canada by U.S. refiners.

Customs issued a "Notice of Action" (Customs Form 29) on March 26, 1986, which indicated a proposed rate advance due to lack of required documentation referencing Headnote 4(b), TSUS. The importer's broker responded to the CF 29 on April 3, 1986, by submitting the exchange contract with the Canadian refiner and the following documents covering the exports and imports of October 1985: (I) U.S. Customs Form 7501 and Lakehead Pipe Line delivery ticket, and (II) U.S. Department of Commerce Form 7525- V (with the referenced Office of Export Administration's license number) and Interprovincial Pipe Line delivery tickets. We note that no license from the Secretary of Energy was included with these documents.

Accordingly, the entry was liquidated on May 16, 1986, with an assessment of 0.25 cents per gallon under item 475.1010 ($9915.15) and the free claim under Headnote 4, TSUS, was denied for lack of required documentation.

On May 28, 1986, the broker for the protestant, by letter, timely petitioned Customs to reliquidate the entry under 19 U.S.C. 1520(c)(1); the broker believed that the documents sent to Customs on April 3, 1986, in response to the CF 29, had not been received or associated with the entry and therefore resubmitted the documents previously sent.

The District Director, Chicago, refused to reliquidate under section 1520(c)(1) on August 19, 1986. The reasons given for this refusal were that an import certificate (license) from the Secretary of Energy had not been filed with Customs, see 19 CFR 10.179(a), and it was not filed within 180 days from the date of entry, see 19 CFR 10.179(b).

On November 5, 1986, the broker for the protestant, within 90 days of the August 19, 1986, refusal, filed a timely protest under 19 U.S.C. 1514(a)(7) against Customs' refusal to reliquidate the entry free of duty under 19 U.S.C. 1520(c)(1). The broker contends that (1) "a petition under section 1520(c)(1) was filed rather than a protest under 19 U.S.C. 1514 because it was understood that the rate increase was due solely to the fact that the missing documents had not been associated with the entry;" (2) conversations with the import specialist did not at any time reveal that he was looking for a Department of Energy certificate; and (3) it has been impossible since December 22, 1983, to obtain a license from the Department of Energy relating to the oil exchange program citing to the Presidential Proclamation 5141, which revoked the system of licensing of imports of petroleum and petroleum products by the Secretary of Energy.

ISSUE:

The issue is whether relief may be granted under 19 U.S.C. 1520(c)(1) when the Customs official is unaware at the time of liquidation that a required import license from the Secretary of Energy is no longer issued due to the instructions of Presidential Proclamation 5141 of December 22, 1983.

LAW AND ANALYSIS:

Headnote 4, Part 10, Schedule 4, Tariff Schedules of the United States, TSUS (now found in Additional U.S. Note 1, Chapter 27, Harmonized Tariff Schedule of the United States, HTSUS), provides, in part:

(b) Petroleum shall, if a product of Canada, be admitted free of duty and any entry therefor shall be liquidated or reliquidated accordingly if, on or before the 180th day after the date of the entry, documentation is filed with the customs officer concerned establishing that, pursuant to a commercial exchange agreement between the United States and Canadian refiners which has been approved by the Secretary of Energy--
(i) an import license for the petroleum covered by such entry has been issued by the Secretary; and
(ii) an equivalent amount of domestic petroleum or duty-paid foreign petroleum has, pursuant to such commercial exchange agreement and to an export license issued by the Secretary of Commerce, been exported from the United States to Canada and has not previously been used to effect the duty-free entry of like Canadian products under this headnote.
(c) The Secretary of the Treasury, after consulting with the Secretary of Commerce and the Secretary of Energy, shall issue such rules or regulations as may be necessary governing the admission of Canadian products pursuant to the provisions of this headnote.

Headnote 4, Part 10, Schedule 4, Tariff Schedules of the United States, TSUS. Please note that section 10.179, Customs Regulations essentially repeats the requirements listed above in Headnote 4. See 19 CFR 10.179.

Section 520(c)(1) of the Tariff Act of 1930, as amended (19 U.S.C. 1520(c)(1), provides that Customs may correct certain errors, if adverse to the importer, within one year of the date of liquidation. A petition under 19 U.S.C. 1520(c)(1) was designed to permit Customs to correct a clerical error, a mistake of fact or inadvertence not amounting to an error in the construction of a law which had caused an error in liquidation; however, it may not be used to rectify allegedly incorrect interpretations of the law, such as the tariff classification of merchandise. See Computime, Inc. v. United States, 9 CIT 553, 555, 622 F. Supp 1083, 1085 (1985); see, eg., Hambro Automotive Corp., v. United States, 66 CCPA 113, 120, C.A.D. 1231, 603 F.2d 850, 855 (1979).

A mistake of fact has been defined as "a mistake which takes place when some fact which indeed exists is unknown, or a fact which is thought to exist, in reality does not exist." C.J. Tower & Sons of Buffalo, Inc. v. United States, 68 Cust. Ct. 17, 22, C.D. 4327, 336 F. Supp. 1395, 1399 (1972), aff'd, 61 CCPA 90, C.A.D. 1129, 499 F.2d 1277 (1974). Mistakes of fact occur when a person believes the facts to be other than what they really are and takes action based on that erroneous belief. See T.D. 54848 (1959).

In Universal Cooperatives, Inc. v. United States, 13 Ct. Int'l Trade ___, 23 Cust. B. & Dec., No. 29, p. 38 (June 27, 1989), the court distinguished between some factual mistakes: "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 [19 U.S.C. 1514]. The ignorant mistake must be remedied under Section 520 [19 U.S.C. 1520(c)(1)]."

For purposes of this discussion, we assume that the Customs official did not know, at the time when the entry was liquidated, the fact that import licenses were no longer issued by the Department of Energy by virtue of the Presidential Proclamation 5141 of December 22, 1983 (48 Fed. Reg. 56929, No. 249, December 27, 1983) which revoked the licensing system by the Secretary of Energy for imported petroleum products. Our file lacks any reference, by Customs, to Presidential Proclamation 5141. It was not until the broker cited the Presidential Proclamation in his protest, can we say with any certainty, that Customs was aware of the unavailability of import licenses.

In this case, the Customs official denied the duty-free entry due to lack of required documentation. It is clear that Customs' refusal to reliquidate the entry under section 1520(c)(1) was based on the importer's failure to submit all the documents required by Headnote 4 of the TSUS. We find that a mistake of fact was the underlying cause for the assessment of duties on liquidation and not an error in the construction of law. The Customs official's belief concerning the existence of an Energy license is a mistake of fact; but for the missing import license, the entry would have been liquidated by Customs as free of duty. The impossibility of obtaining such a license is the very reason for the importer's noncompliance with the headnote and regulations.

Although the Presidential Proclamation renders the requirement for an import license under the Customs Regulations, 19 CFR 10.179, and the Tariff Schedules a nullity, it did not change or affect the law which grants duty-free treatment under an exchange program between domestic and Canadian refiners. Presidential Proclamation 5141 specifically stated that "the presently applicable tariff rates for imports of petroleum and petroleum products, as reflected in the Tariff Schedules of the United States, Schedule 4, Part 10" (presently Additional U.S. Note 1, Chapter 27, HTSUS) shall not be affected by the revocation of the existing system of licensing. See section 6 of Pres. Proc. 5141. The Proclamation waives the import license, but the law for duty-free entry is still in force and effect. Notwithstanding the outdated requirement for an import license listed in Headnote 4 and section 10.179, CR, the protestant has complied with all other requirements.

HOLDING:

Relief may be granted under 19 U.S.C. 1520(c)(1) when the Customs' official is unaware at the time of liquidation that a required license from the Secretary of Energy to substantiate free entry was waived by a Presidential Proclamation.

You are directed to allow the protest in full. The merchandise is entitled to duty-free treatment. A copy of this decision should be furnished to the protestant.

EFFECT ON OTHER RULINGS:

T.D. 78-370 is modified by deleting the requirement for an import license from the Energy Department, and the Customs Regulation, section 10.179, will be amended in conformity with Presidential Proclamation 5141 of December 22, 1983.

Sincerely,

John A. Durant, Director

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