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HQ 223320


October 15, 1991

LIQ-11-CO:R:C:E 223320 PH

CATEGORY: LIQUIDATION

District Director of Customs
Baltimore, Maryland 21202

RE: Protest 1303-90-000224; Suspension of Liquidation by Law; Item 851.60, TSUS (Subheading 9810.00.60, HTSUSA); 19 U.S.C. 1504; 19 U.S.C. 1514

Dear Sir:

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

FACTS:

On April 17, 1983, the protestant imported certain merchandise, described in the entry as "dental research articles". The date of the entry was April 20, 1983. The merchandise was entered under the duty-free provision for certain articles for scientific or educational purposes in item 851.60, Tariff Schedules of the United States (TSUS) (the corresponding tariff provision in the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) is subheading 9810.00.60).

On April 4, 1983, an application for duty-free entry of the merchandise under consideration, under item 851.60, TSUS, was filed with Customs by the Dental School of the University of Maryland at Baltimore. On July 29, 1985, the Customs office with which this application had been filed forwarded the application to the Department of Commerce for its review. On the same date, Customs advised the person who had signed the application for the University of Maryland at Baltimore of this transmittal and that, in the opinion of Customs, only four of the 29 articles for which duty-free entry had been sought would qualify under item 851.60, TSUS. On August 1, 1985, the Department of Commerce returned the application to Customs because the appropriate Customs official had not signed the application form to indicate that the application had been "accepted for transmittal to the Department of Commerce."

On September 22, 1988, Customs wrote to the University of Maryland to advise that the processing of the application had not been completed and the application had been inadvertently filed. Customs asked the University to advise whether it was still interested in pursuing the application and, if so, to provide additional information about the entry. Customs stated in this letter that if no response was received within 30 days, no further action would be taken on the application. No response was received and the file was closed by Customs on November 4, 1988.

According to information in the file, Customs had suspended liquidation of the entry. On September 21, 1989, a Notice of Rate Advance was sent to the importer. In this Notice, Customs stated "[i]n the absence of application number and approval from the Dept. of Commerce for duty free entry, the merchandise will be dutiable at column 1 rate." The entry was so liquidated on March 9, 1990.

On June 7, 1990, the subject protest was filed on behalf of the importer. In the protest, the protestant recounts the background to the application for duty-free treatment by the University of Maryland at Baltimore and states that the University is resubmitting its application for approval and requesting an extension to obtain the approved application from Customs. Alternatively, if this cannot be done, the protestant requests that the entry be reliquidated as entered as a "deemed liquidation" under 19 CFR 159.12(f).

ISSUES:

(1) When entry of merchandise is made under the duty-free provisions of item 851.60, TSUS, and a properly stamped application form for treatment under that provision is not provided to the appropriate Customs port; is the entry "deemed liquidated" as entered if Customs suspends liquidation of the entry and takes no action to liquidate the entry until more than six years after the entry when the entry is liquidated dutiable, without regard to item 851.60?

(2) In the situation described in ISSUE (1), if the entry is not "deemed liquidated" as entered, may the protestant be given an extension of time to obtain an approved application for treatment of the merchandise under item 851.60, TSUS, and may the liquidation be reliquidated accordingly, if duty-free treatment is approved for part or all of the merchandise covered by the application?

LAW AND ANALYSIS:

Initially, we note that the protest, with application for further review, was timely filed under the statutory and regulatory provisions for protests (see 19 U.S.C. 1514 and 19 CFR Part 174).

Item 851.60, TSUS, provided for the duty-free entry of certain instruments and apparatus, under certain conditions (included among these conditions are requirements that the articles must be exclusively for use of the institution involved, and not for distribution, sale, or other commercial use within 5 years after being entered), if entered for the use of a nonprofit institution established for educational or scientific purposes. The Headnotes of Part 4, Schedule 8 of the TSUS (which contains item 851.60), set forth comprehensive rules for the application for, and approval of, duty-free treatment under the provision. Basically, applications were filed with Customs and forwarded by Customs to the Department of Commerce for a finding. The Headnotes provided that the Departments of the Treasury (in which Customs is located) and of Commerce could prescribe joint regulations to carry out their functions under the Headnotes.

The authorized joint regulations were, and are, found in 15 CFR Part 301. Under 15 CFR 301.8(a)(4):

If a claim for duty-free entry under tariff item 851.60 is made but is not accompanied by a copy of the properly stamped form, a deposit of the estimated duty is required. Liquidation of the entry shall be suspended for a period of 180 days from the date of entry. On or before the end of this suspension period the applicant must file with the Customs Port a properly stamped copy of the form. In the event that the Customs Port does not receive a copy of the properly stamped form within 180 days the instrument shall be classified and liquidated in the ordinary course, without regard to tariff item 851.60.

Under 15 CFR 301.8(c):

Notwithstanding the preceding provisions of section 301.8 any document, form, or statement required by regulations in this section to be filed in connection with the entry may be filed at any time before liquidation of the entry becomes final, provided that failure to file at the time of entry or within the period for which a bond was filed for its production was not due to willful negligence or fraudulent intent.

The statute governing Customs liquidation of entries is found in 19 U.S.C. 1504. Under this provision, an entry of merchandise not liquidated within one year of the date of entry of the merchandise is required to be deemed liquidated as entered, unless the period for liquidation is extended (when requested by Customs because of the absence of required information or when requested by the importer of record for good cause) or suspended (when required by statute or court order) and notice of the extension or suspension is given to the importer of record (in the case of a suspension of liquidation, notice must also be given to any authorized agent and surety of the importer of record). Also under this provision, any entry not liquidated within four years from the date of entry is required to be deemed liquidated as entered unless liquidation continues to be suspended as required by statute or court order. When such a suspension of liquidation (i.e., a suspension continuing more than four years after entry) is removed, the entry is required to be liquidated within 90 days.

The statutory provision relating to protests of Customs decisions, including liquidations, is found in 19 U.S.C. 1514. Under this provision, the liquidation or reliquidation of an entry is final and conclusive as to all persons unless a protest is filed as provided in the provision. Such a protest must be filed within 90 days after but not before notice of liquidation or reliquidation (19 U.S.C. 1514(c)(2)).

In the case under consideration, a claim for duty-free treatment under item 851.60, TSUS, was made at the time of the entry of the merchandise but the entry was not accompanied by a copy of the properly stamped form applying for such treatment. Pursuant to 15 CFR 301.8(a)(4), liquidation was suspended. Under that regulation, liquidation was supposed to be suspended for 180 days after which the entry was supposed to be liquidated, without regard to item 851.60, if Customs did not receive a properly stamped application form. More than six years after the entry, Customs sent the importer a Notice of Rate Advance and, more than five months later, Customs liquidated the entry dutiable, without benefit of item 851.60.

As stated above, Customs should have liquidated the entry under consideration, without benefit of item 851.60, TSUS, at the expiration of the 180 day period for which liquidation was supposed to be suspended under 15 CFR 301.8(a)(4). However, Customs did not liquidate the entry at that time on that basis. It is the position of Customs, in the case of an entry under a tariff item granting conditionally free entry, that liquidation is suspended until those conditions are breached or satisfied (see 19 CFR 159.53). In the case of entries under item 851.60, liquidation is suspended for the five year period after entry in which use of the entered article must be exclusively for the institution involved, and the article may not be distributed, sold, or otherwise used commercially (see Headnote 1, Part 4, Schedule 8, TSUS).

In the absence of evidence to the contrary in the file and any such claim by the protestant, we assume that proper notice of suspension of liquidation was given in this case (in this regard, note the "presumption of regularity" that public officials have discharged their duties in accordance with the applicable laws and regulations (see Tropicana Products, Inc. v. United States, 713 F. Supp. 413, 418 (CIT 1989); aff'd, 909 F. 2d 504 (Fed. Cir. 1990)). Although 19 U.S.C. 1504(d) provides that when liquidation has been suspended for more than four years after entry the entry must be liquidated within 90 days after removal of the suspension, this provision has been held to be directory only (Canadian Fur Trappers Corp. v. United States 884 F. 2d 563 (Fed. Cir. 1989)). Therefore, Customs failure to liquidate an entry within 90 days of removal of the suspension of liquidation when liquidation was suspended more than four years after entry does not result in a "deemed liquidation" of the entry. The protest is denied, with regard to this issue.

The protestant timely protested the liquidation in this case (i.e., the protestant protested the liquidation before the liquidation became final). A liquidation cannot become final during the pendency of a timely and properly filed protest of the liquidation (see United States v. New Drinks, 14 Ct. Cust. App. 16, T.D. 41530 (1926); see also, discussion of the finality of liquidation in C.S.D. 86-21). Under the regulations governing entries under item 851.60, TSUS, any document, form, or statement required to be submitted in connection with such entries may be filed at any time before liquidation of such entries becomes final (15 CFR 301.8(c); see also, 19 CFR 10.112).

Because the liquidation of this entry has not become final and the regulations governing entries under item 851.60, TSUS, permit the filing of any document, form, or statement required in connection with such entries at any time before liquidation of the entries become final, the application for duty-free entry under item 851.60, TSUS, is being forwarded to the appropriate office in Customs for appropriate handling as a late filing of a required document under 15 CFR 301.8(c). The protest is granted, with regard to that part of the protest requesting resubmission of the application for duty-free entry under item 851.60.

HOLDINGS:

(1) When entry of merchandise is made under the duty-free provisions of item 851.60, TSUS, and a properly stamped application form for treatment under that provision is not provided to the appropriate Customs port; the entry may not be "deemed liquidated" as entered if Customs suspends liquidation of the entry and takes no action to liquidate the entry until more than six years after the entry when the entry is liquidated dutiable, without regard to item 851.60 (see, Canadian Fur Trappers Corp. v. United States 884 F. 2d 563 (Fed. Cir. 1989)).

(2) In the situation described in ISSUE (1), the protestant may be given, and is being given, an extension of time to obtain an approved application for treatment of the merchandise under item 851.60, TSUS. The file is being transferred to the appropriate Customs office for handling as a late filing of a required document under 15 CFR 301.8(c). Final action on the protest should be suspended, pending action on the application. If duty-free treatment is approved for part or all of the merchandise covered by the application, the liquidation will be reliquidated appropriately.

The protest is GRANTED, in part, and DENIED, in part. A copy of this decision may be sent to the protestant, but final action on the protest should be delayed pending action on the application for duty-free treatment under item 851.60, TSUS. When action on the application is completed, notice of the decision on the protest should be given to the protestant on the Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

John Durant, Director

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