HQ 0221603 - Protest number 1401-4-000032; request for further review; 19 U.S.C. 1520(c)(1); failure to supply documentation supporting reduced duty entry; 19 CFR 10.24; 19 CFR 10.112 - United States International Trade Commision Rulings

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HQ 221603

April 30, 1991

PRO-2-06-CO:R:C:E 221603 GG

CATEGORY: ENTRY LIQUIDATION

Director, Customs Information Exchange
U.S. Customs Service
Room 437
6 World Trade Center
New York, New York 10048

RE: Protest number 1401-4-000032; request for further review; 19 U.S.C. 1520(c)(1); failure to supply documentation supporting reduced duty entry; 19 CFR 10.24; 19 CFR 10.112

Dear Sir:

This is response to your request for further review of the protest referenced above.

FACTS:

Protestant filed 7 entries on automobiles it imported during October and November, 1982. The automobiles were made in part with American components, whose value or cost could have been deducted from the full value of the finished automobiles under item 807, Tariff Schedules of the United States (TSUS). However, at the time of entry the protestant's broker did not have the necessary information concerning the value of the American components, and the automobiles were entered under the dutiable item numbers 692.1010 and 692.1015, TSUS. The protestant explains that the entries were made early in the model year, after the item 807, TSUS data had been compiled by the protestant, but before it had been made available to the broker.

At the time of entry, the import specialist asked the broker to post a bond for the missing item 807, TSUS, documents; apparently this was not done. Neither the importer nor the broker requested that Customs withhold appraisement and liquidation pending submission of the necessary information, and the entries were liquidated, without benefit of item 807, TSUS, duty deductions, during the period November 1982 through February 1983. On July 5, 1983, protestant filed a 19 U.S.C. 1520(c)(1) request for reliquidation, with the missing information on the value of the American components attached. Protestant's argument was that the failure of its broker to present, at the time of entry, documentation which would have proven that it was entitled to a duty reduction, was a mistake of fact. Customs denied the reliquidation request on January 17, 1984, on the grounds that the failure to supply supporting documentation was due to negligent inaction on the part of the importer and could only have been protested under the provisions of 19 U.S.C. 1514. The protestant filed the protest currently at issue on February 21, 1984, against Customs' refusal to reliquidate the entries under 19 U.S.C. 1520(c)(1).

ISSUE:

Whether the failure by the importer's broker to supply, at entry, documents that were required to substantiate a reduction of duties under item 807, TSUS, was an error that would permit reliquidation under 19 U.S.C. 1520(c)(1)?

LAW AND ANALYSIS:

The protestant was required to file, in connection with its entries, documents that would have established the eligibility of its merchandise for a duty reduction under item 807, TSUS. See 19 CFR 10.24. Since the protestant did not file the necessary documents at the time of entry, but submitted them approximately 5 months after the last entry was liquidated, the question arises as to whether the documents' submission was "in connection with the entries". The timeliness of filing is governed by 19 CFR 10.112, which provides that if the importer fails to file the documents either at the time of entry or within the period for which a bond has been posted for their production, but failure to file was not due to willful negligence or fraudulent intent, then they may be filed at any time prior to liquidation of the entry, or if the entry has been liquidated, before the liquidation becomes final.

As noted above, the documents were filed neither at the time of entry nor prior to liquidation. It also appears that no bond was filed which would have set the time for their production. Therefore, under 19 CFR 10.112, the importer had the option of filing the documents before the various liquidations became final, if his earlier failure to file was not due to willful negligence or fraudulent intent.

There is no evidence to show that the filing delay was caused by either of those two factors. However, Customs in its Protest and Summons Information Report dated November 6, 1984, stated that "there is no indication that failure to make the claim and supply supporting documentation for 807 treatment was not due to negligent inaction (willful negligence)". The agency appears to be confusing two different concepts: negligent inaction and willful negligence. The relevancy of the former will be discussed later. However, 19 CFR 10.112 makes reference only to willful negligence. This type of negligence implies that there was a deliberate determination not to perform a known duty, or a reckless disregard of the safety or the rights of others, as manifested by the conscious and intentional omission of the care proper under the circumstances. See, e.g., Tyndall v. Rippon, 44 Del. 458, 61 A.2d 422 (1948); Wolters v. Venhaus, 350 Ill.App. 322, 112 N.E.2d 747 (1953). The protestant's explanation that the documents were not filed at entry because the importations occurred early in the model year before the documents had been sent to the broker, argues against a finding that the protestant's failure to file the documents was willful. Absent specific proof showing that the failure to file the documents at the time of entry was deliberate, it would be erroneous for Customs to conclude that the protestant's failure was due to willful negligence.

Since there is no evidence that either fraudulent intent or willful negligence caused the filing delay, the protestant had the option under 19 CFR 10.112 of submitting the documents required to substantiate item 807, TSUS eligibility before the liquidations of the entries became final. Generally, a liquidation becomes final 90 days after the date of liquidation unless a timely protest is filed. See 19 U.S.C. 1514(a); 19 CFR 159.9(c)(iii); Occidental Oil & Gas Co. v. United States, Slip Op. 89-40 (CIT 1989). Under this rule, since no protest against the liquidations was filed, all of the liquidations would have been final by late May, 1983, which preceded the filing of the missing documents by approximately one-and-one-half months. A liquidation is not considered final, however, if a timely and meritorious request for reliquidation is filed under Section 520(c)(1) of the Tariff Act of 1930, as amended (19 U.S.C. 1520(c)(1)). See Customs Service Decision (C.S.D.) 84-42.

19 U.S.C. 1520(c)(1)) permits the reliquidation of 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, 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. The protestant filed a timely request under this provision, whose denial by Customs prompted the filing of the 19 U.S.C. 1514 protest currently under consideration. The protest challenges the decision to deny and asserts that the 19 U.S.C. 1520(c)(1) reliquidation request had merit.

The protestant argued in its reliquidation request dated June 27, 1983, that the failure to supply the necessary documentation was a mistake of fact. In attempting to compare its situation to that in C.J. Tower & Sons of Buffalo, Inc. v. United States, 68 Cust.Ct. 17, C.D. 4327, 336 F.Supp 1395 (1972), aff'd. 61 CCPA 90, C.A.D. 1129, 499 F.2d 1277 (1974), where relief under 19 U.S.C. 1520(c)(1) was granted, the protestant implied that reliquidation was allowed in C.J. Tower because "the importer made a mistake of fact when it failed to present documentation to Customs at the time of entry which would have proven that the imported merchandise was entitled to duty free entry". However, this is an oversimplification of the court's rationale; a careful reading of the case reveals that the ignorance of both the importer and Customs, until after liquidation became final, of the fact that the merchandise involved was emergency war material and was therefore eligible for duty-free entry, constituted the mistake of fact. The court defined a mistake of fact as "a mistake of fact 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, 336 F.Supp at 1399. In contrast to the circumstances in C.J. Tower, there was no mistake of fact in the current case because both Customs and the protestant knew at the time of entry that, but for the missing documents, the automobiles were eligible for reduced-duty treatment under item 807, TSUS. Customs' request that the importer post a bond for the missing documents, and the protestant's practice in prior years of claiming the duty reduction, are evidence that both parties were aware of the situation.

Customs denied the protestant's reliquidation request on January 17, 1984, stating that "there is no indication that the failure to make claim [sic] and supply supporting documentation for 807.00 treatment was not due to negligent inaction (willful negligence)". As we will discuss, the implicit finding of "negligent inaction" means that Customs denied the request because it determined that there was no clerical error, mistake of fact, or other inadvertence in the entries or liquidations of the protestant's merchandise.

In its current protest of Customs' denial of its 19 U.S.C. 1520(c)(1) reliquidation request, the protestant reiterates its argument that "the inability to submit this documentation constitutes a mistake of fact". In addition to referencing its earlier submission on the applicability of the C.J. Tower case, the protestant now cites Customs Service Decision (C.S.D.) 80-250, both to support its position that there was a mistake of fact, and to refute the charge of negligent inaction.

C.S.D. 80-250 states that a failure to act may be correctable under 19 U.S.C. 1520(c)(1), when it is coupled with another significant factor, such as a misunderstanding of the facts, or the inability of the importer to obtain proper documentation to establish a claim. In that case, the importer failed to respond to two notices sent by Customs, which requested information concerning the use of assists. Apparently, the information was available but was never submitted to Customs because an employee of the importer had filed the requests instead of responding to them. Customs liquidated the entries based on an appraised value which included the assists. The importer filed a 19 U.S.C. 1520(c)(1) reliquidation request, which Customs denied for the reason that the protestant did have the ability to obtain the proper documentation, and the only significant factor present was his failure to perform a required act, i.e., submitting information on the value of the assists. This failure, concluded Customs, amounted to negligent inaction on the part of the importer, and therefore, did not involve a clerical error, mistake of fact, or inadvertence. The current protestant attempts to distinguish its situation from that of the importer in C.S.D. 80-250, by arguing that its case does not involve a failure to respond to inquiries or requests from Customs, but rather is simply one in which at the time of entry "the importer was unable to obtain the documentation necessary to establish its claim under item 807, TSUS."

Protestant's argument is not persuasive. The entry summaries list the protestant, not its broker, as importer of record. In its memorandum in support of its protest, the protestant indicates that the 1983 item 807, TSUS data had been compiled by the protestant but had not been made available to its broker. This was not a case of the importer being unable to obtain proper documentation to establish a claim; the importer had this information, but had failed to supply it to Customs through its own agent, the customhouse broker, in time to make entry. The facts here are analogous to those in C.S.D. 80-250: the protestant did have the ability to obtain the required documents, indeed, it actually had them, and its failure to submit them in a timely manner to Customs amounted to negligent inaction, thereby ruling out the possibility that the filing delay was caused by a clerical error, mistake of fact, or other inadvertence.

On account of the lack of a clerical error, mistake of fact, or other inadvertence, the liquidations at issue became final 90 days after the notices of such were posted. 19 U.S.C. 1514; see also Goldhofer Fahrzeugwerk GmbH & Co. v. United States, 13 CIT , 706 F.Supp. 892, 895 (1989), aff'd, 885 F.2d 858 (Fed Cir. 1989). The protestant has failed to satisfy the requirement, set down in 19 CFR 10.112, that reduced duty documents must be filed before the liquidations became final. Customs' original decision to deny the protestant's reliquidation request was correct, since the liquidation of an entry at a higher rate when the importer fails to document a reduced duty claim in a timely manner, is not an arbitrary action on the part of Customs or a violation of the law, but is a legal determination not subject to reliquidation under 19 U.S.C. 1520(c)(1). See Occidental Oil, Slip Op. 89-40 at 45 (CIT 1989). Accordingly, the protest at issue must be DENIED.

HOLDING:

The importer's failure at the time of entry to submit to Customs through its broker the documents that were necessary to substantiate a duty reduction claim under item 807, TSUS, was not a clerical error, mistake of fact, or other inadvertence which would permit reliquidation under 19 U.S.C. 1520(c)(1), because the importer did have the ability to obtain the proper documents therefore its failure to file them with Customs constituted negligent inaction.

Sincerely,

John Durant
Director, Commercial

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