HQ 0221273 - Further review of protest no. 2002-7-000204; application of the duty refund provision of 19 U.S.C. 1558(a)(2) and 19 C.F.R. 158.41; finality of liquidation which precedes notice of inadmissibility issued by Food and Drug Administration - United States International Trade Commision Rulings

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HQ 221273

March 1, 1991

LIQ-8-CO:R:C:E 221273 C

CATEGORY: ENTRY LIQUIDATION

District Director of Customs
U.S. Customs Service
Suite 244
423 Canal Street
New Orleans, Louisiana 70130-2341

RE: Further review of protest no. 2002-7-000204; application of the duty refund provision of 19 U.S.C. 1558(a)(2) and 19 C.F.R. 158.41; finality of liquidation which precedes notice of inadmissibility issued by Food and Drug Administration

Dear Sir/Madam:

This responds to the referenced protest submitted to Customs Headquarters for further review.

FACTS:

PROTESTANT imported 2000 cases of sardines on September 28, 1984. The merchandise was entered on October 11, 1984, at New Orleans (entry no. 85-XXXXXX-X), duty paid. The entry was liquidated on December 14, 1984. Although it does not appear in the record, it is clear that upon entry, or about that time, samples of the merchandise were submitted to the Food and Drug Administration (FDA) for testing. On June 4, 1986, eighteen months after liquidation, the FDA determined that the merchandise was inadmissible. There is no appearance in the record that Customs issued a demand for redelivery. On November 14, 1986, PROTESTANT requested a refund of duty. According to an October 1, 1987, letter to Customs from PROTESTANT's counsel, this request was made under 19 U.S.C. 1558 and 19 C.F.R. 158.41. Customs treated this request as a request for reliquidation under 19 U.S.C. 1520(c)(1). The request was denied on November 19, 1986. PROTESTANT filed a timely protest of the denial on January 20, 1987, under 19 U.S.C. 1514, and requested further review under 19 U.S.C. 1515(a) and 19 C.F.R. 174.23. The relevant provisions are as follows:

19 U.S.C. 1558(a)(2): No remission, abatement, or drawback of estimated or liquidated duty shall be allowed because of the exportation or destruction of any merchandise after its release from the custody of the Government, except in the following cases: . . . (2) When prohibited articles have been regularly entered in good faith and are subsequently exported or destroyed pursuant to a law of the United States and under such regulations as the
Secretary of the Treasury may prescribe . . .

19 C.F.R. 158.41: Merchandise regularly entered or withdrawn for consumption in good faith and denied admission into the United States by any Government agency after its release from Customs custody, pursuant to a law or regulation in force on the date of entry or withdrawal . . . , may be destroyed under Government supervision. In such case, the destroyed merchandise is exempt from duty and any duties collected thereon shall be refunded. In lieu of destruction, the merchandise may be exported under Customs supervision in accordance with section
158.45(c).

ISSUES:

1.) Was PROTESTANT's request for reliquidation under 19 U.S.C. 1520(c)(1) properly denied?

2.) What are the time limitations on petitions for duty refunds made under 19 U.S.C. 1558(a)(2) and 19 C.F.R. 158.41?

LAW AND ANALYSIS:

Issue 1

In the case of merchandise that is to be tested for admissibility by the FDA, Customs routinely suspends liquidation under 19 C.F.R. 159.55(a) until the FDA makes its determination. If merchandise is determined to be inadmissible, Customs issues a notice and demand for redelivery and liquidates the entry accordingly. The liquidation, and therein the admissibility question, can be protested under proper procedures, specifically 19 U.S.C. 1514(a)(4).

In the instant case, Customs did not follow routine procedure. The entry was liquidated eighteen months prior to the FDA determination. Consequently, by the time PROTESTANT learned of the FDA decision, the time period for filing a protest had expired. The legal significance of this is that the liquidation became final, which means that it became binding on all parties including the government.

Under 19 U.S.C. 1520(c)(1), the finality of a liquidation can be disturbed after the period for filing a protest has passed. Thereunder, a liquidated entry can be reliquidated to correct a clerical error, mistake of fact, or other inadvertence in, inter alia, the liquidation of an entry. The request under 1520(c)(1) must be filed within one year of the liquidation. If a request for reliquidation is denied, that denial can be protested under 19 U.S.C. 1514(a)(7). Such a protest is limited to consideration of the 1520(c)(1) denial.

In the instant case, PROTESTANT filed a request for refund of duties on November 14, 1986, such request having been treated by Customs as a 1520(c)(1) request. Customs denied the request on November 19, 1986, presumably, because it was not timely filed - within one year of the date of liquidation. (Neither the request nor the denial is in the file.) PROTESTANT now protests this denial, presumably, under 19 U.S.C. 1514(a)(7).

Customs denial of PROTESTANT's 1520(c)(1) request was proper. The request was filed nearly two years after liquidation, the only Customs decision/act subject to 1520(c)(1) review on the known facts of this case. The request therefore was untimely.

PROTESTANT urges that the request was timely because it was made within one year of the FDA's inadmissibility determination. On this point, the Court of International Trade's opinion in United States v. Utex International, Inc., 857 F. 2d 1408 (Fed. Cir. 1988), is applicable. There, merchandise was entered on February 1, 1980, the entry was liquidated on February 29, 1980, and the FDA inadmissibility determination was issued on March 12, 1980. As in the instant case, the liquidation was not protested (nor was a 1520(c)(1) request timely filed). The court recognized the impropriety of Customs premature liquidation under the statutory and regulatory scheme, but stated that "absent timely reliquidation [1520(c)(1)] or protest [1514] it [the liquidation] was final as to all aspects of the entry. The importer, the surety, and the government are bound by and have the right to rely on the finality of liquidation." Id. at 1412. The court also stated that an "erroneous liquidation could be corrected only by following the statutory procedures [1514 and/or 1520(c)(1)], and . . . failure to do so within the period set by statute leaves the liquidation final." Id. at 1411 (citing Omni U.S.A. v. United States, 840 F. 2d 912 (Fed. Cir. 1988), reh'g denied 109 S. Ct. 405 (1988), and United States v. A.N. Deringer, 593 F. 2d 1015, 66 CCPA 50 (1979)).

On the facts of the instant case, the liquidation had become final long before PROTESTANT filed its request for refund. Whether the request, treated as a 1520(c)(1) request, was meant to be tethered to the liquidation on December 14, 1984, or to the FDA inadmissibility determination of June 4, 1986 - or even to a redelivery notice issued by Customs proximate to the FDA determination - the request was untimely because the finality of liquidation, on the facts here, had become inviolable.

An importer in a situation similar to that presented here should protest an improper liquidation in a timely manner. Where Customs liquidates an entry covering merchandise subject to an FDA determination yet to be made, that liquidation should be protested, within 90 days, as not in conformance with the regulatory scheme which calls for a suspension of liquidation (19 C.F.R. 159.55). If a correctable error under 1520(c)(1) can be identified as responsible for the improper liquidation, an importer would have a year from the date of liquidation to act. Failure to follow these procedures will leave the liquidation final and binding.

Issue 2

PROTESTANT appears to urge that its request for a refund of duty under 19 U.S.C. 1558(a)(2) and 19 C.F.R. 158.41 should be granted since the requirements of those provisions have been complied with; specifically, the merchandise in question was determined to be inadmissible under a law of the United States and it was destroyed under government supervision. We conclude that this proposition misapplies the pertinent law and regulations.

Customs position has been that the provision for duty refund under 1558(a)(2) must be construed within the broader statutory scheme governing liquidation and the finality of liquidation, as above (Issue 1). In short, refund of duty under 1558(a)(2) is possible only if such request is filed in conjunction with a timely protest or request for reliquidation under 19 U.S.C. 1514 and 1520(c)(1), respectively. (If a request under 1558 is filed without specifying that it is a protest or a request for reliquidation, Customs should nonetheless treat it as one or the other according to its timeliness.) (See Customs Headquarters determinations, attached: 305419, dated January 25, 1978, and 222443, dated July 30, 1990.) If filed in conjunction with a timely protest, or in time to be considered a timely protest, recovery of duty is a likely result. If filed with a 1520(c)(1) request, or in time to be so considered, a petitioner must identify an error correctable under the statute. This is a more difficult burden. (It is noted that Customs could voluntarily reliquidate under 19 U.S.C. 1501 on the basis of 19 U.S.C. 1558 in appropriate circumstances.)

Consequently, since PROTESTANT failed to file its request for refund under 1558(a)(2) in a timely manner, as above, it must be denied. The duty refund provision of section 1558 is not a limitless option, nor should it be, considering the appropriate, and indeed necessary, emphasis on strict timeliness evident in the statutory liquidation scheme and the court interpretations.

HOLDING:

1.) PROTESTANT's request for reliquidation under 19 U.S.C. 1520(c)(1) was properly denied as untimely.

2.) A request for a refund under 19 U.S.C. 1558(a)(2) and 19 C.F.R 158.41 must be filed within the statutory time frame governing liquidation and the finality of liquidation, 19 U.S.C. 1514 and 1520(c)(1). PROTESTANT's request for refund under 19 U.S.C. 1558(a)(2) and 19 C.F.R. 158.41 was untimely.

Based on the foregoing, you are directed to deny the protest and furnish a copy, with attachments, to PROTESTANT. Also, provide notification of the right to appeal in accordance with 19 U.S.C. 1515(a) and 19 C.F.R 174.31.

Sincerely,

John Durant, Director

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