HQ 0221669 - Application for further review of protest No. 3004-5-000318; entry denied due to mislabelling pursuant to FDA regulations; restricted vs. prohibited merchandise; 19 CFR 158.45(c). - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1993 HQ Rulings > HQ 0221393 - HQ 0222782 > HQ 0221669

HQ 221669

September 3, 1991

LIQ-8-CO:R:C:E 221669 TLS

CATEGORY: ENTRY LIQUIDATION

District Director
U.S. Customs Service
900 First Avenue
Seattle, Washington 98174

RE: Application for further review of protest No. 3004-5-000318; entry denied due to mislabelling pursuant to FDA regulations; restricted vs. prohibited merchandise; 19 CFR 158.45(c).

Dear Sir:

We have received your memorandum of December 23, 1985, forwarded to us from the Pacific regional office requesting further review of the above-referenced protest. Upon review of your position and the protestant's arguments, we have reached a decision that is discussed in detail below.

FACTS:

The protestant made a successful entry of peanut butter through the Sumas Customs port on August 30, 1985. On September 13, 1985, The Food & Drug Administration (FDA) issued a Notice of Sampling to the importer which entitled the agency to make a spot inspection of the merchandise at the port of entry. That same month, the FDA conducted a hearing in conjunction with a Notice of Detention which authorized the agency to hold the merchandise in lieu of determining its admissibility.

The entry was liquidated on October 11, 1985; FDA issued a Notice of Refusal of Admission on the same day. The peanut butter was deemed violative of FDA regulations because it is fabricated from two or more ingredients and the labeling does not bear a list of ingredients by their common or usual name in order of descending predominance by weight. On October 25, 1985, the merchandise was exported to Canada under a CF-7512. Three days later, Customs issued a Notice of Redelivery to the importer. Among the information contained therein is a statement under the "REMARKS" section of the notice which states, "Goods have been refused by Food [and] Drug [Administration] on 10-11-85. Please export or destroy under Customs [s]upervision. If exported, drawback form must be executed if duty refund is wanted."

A request for refund of duties paid on the rejected merchandise was made on November 7, 1985. Customs responded by stating that the rejected merchandise was not prohibited from being admitted, only restricted. Customs reasoned that since only the labelling was incorrect, it could have been corrected and resubmitted for entry. Customs concluded that in restricted goods cases, drawback must be applied for since the merchandise could have been brought into conformity but was not. This protest was subsequently filed on December 23, 1985.

ISSUE:

Whether merchandise that has been rejected because of a correctable violation of FDA regulations is eligible for refund of duties paid pursuant to 19 CFR 158.45(c) even if no attempt has been made to bring the goods into conformity.

LAW AND ANALYSIS:

Various Customs regulations provide guidelines for situations where merchandise has been denied entry after an attempt to enter goods has been made in good faith. Under Part 158 of the regulations, the following is provided:

158.45 Exportation of merchandise.
(c) Prohibited merchandise. If merchandise has been regularly entered or withdrawn for consumption in good faith and is thereafter found to be prohibited entry under any law of the United States, it may be exported under Customs supervision in accordance with 18.25- 18.27 of this chapter, with refund of any duties that have been paid. In lieu of exportation, the merchandise may be destroyed in accordance with 158.41.

The importer in this case questions Customs interpretation of the term "prohibited." It contends that the goods became prohibited once the Notice of Refusal of Admission was issued and Customs released them from custody. The protestant contends that prohibited in this case means denied admission by any Government agency; thus, once the Notice was issued, the goods became prohibited. In reaching this conclusion, the importer acknowledges a Customs letter (HQ 707935, August 1, 1977) finding that prohibited status applies only to articles that cannot be brought into conformity. Otherwise, the article is deemed only to be restricted. The protestant responds to the finding by arguing that prohibited means "prevented" or "forbidden."

HQ 707935 cites to Customs ruling HQ 720450 (December 19, 1972) which holds that a request for refund of duties paid on an entry denied admission due to a defect shall be denied if the goods could have been brought into conformity and then re- entered but were not.

The Customs Court has decided this issue as well. In A.N. Deringer, Inc. v. United States, 84 Cust. Ct. 196, C.D. 4858 (1980), similar facts were at issue. The importer had requested a refund of duties paid on merchandise that was refused admission because of mislabelling pursuant to FDA regulations, as is the case here. The request was denied and the importer brought action against Customs claiming that the refusal of admission was tantamount to a prohibition. The court disagreed, holding that the refusal was only conditional upon the importer correcting the problem noted.

In the present case, the merchandise, jars of peanut butter, was denied entry because it was not labeled correctly in accordance with FDA regulations. Upon Notice of Refusal, the merchandise was exported back to the original importer with instructions. Nothing contained in the notice indicated that the merchandise could not be entered if they were subsequently found to be conforming. In fact, Customs notified the protestant of its policy soon after the merchandise was exported and in the importer's custody. The protestant had the opportunity to bring the goods into conformity and re-enter them afterwards. In this case in particular, doing so would not have been an overly arduous task, since all that was required was a change in labeling to accurately reflect the contents of the merchandise. If something was found to be defective about the peanut butter itself, to correct that might have been too difficult an endeavor to complete. Such is not the case here, however.

While the protestant has expressed his disagreement with the stated policy, it is not contrary to relevant law as it is suggested. On the contrary, it is consistent with the regulations. Whether the situation requires exportation or destruction, only prohibited merchandise qualifies the importer for a refund of duties collected. For the reasons expressed above, the subject merchandise does not qualify as prohibited, only restricted. Therefore, the importer's options at this point are to either bring the goods into conformity and re-import them, or destroy the merchandise and apply for drawback.

We do not disagree with the contention that merchandise prohibited due to any government law or regulation entitles the importer to a refund of duties paid; Customs regulation 158.45(c) clearly allows for such. We simply do not find the subject merchandise to be prohibited, as the term has been defined in A.N. Deringer and HQ 720450. Therefore, we conclude that the protestant does not have a valid claim for refund of duties paid on the peanut butter that was refused admittance pursuant to FDA regulations.

HOLDING:

The subject merchandise was only "restricted", not "prohibited" as the term applies under 19 CFR 158.45(c) when a Notice of Refusal of Admission was issued. Prohibited status does not accrue until it has been shown that the merchandise cannot be brought into conformity through any reasonable means. The protestant is not entitled to a refund of duties pursuant to 19 CFR 158.45(c).

Sincerely,

John Durant, Director

Previous Ruling Next Ruling