HQ 0734151 - Application for Further Review of Protest No. 1001-0-009702 Concerning Country of Origin Marking of Imported Leather Apparel; Marking Duties; False Certification; 19 U.S.C. 1304(f) - United States International Trade Commision Rulings

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HQ 734151

April 6, 1992

MAR-2-05 CO:R:C:V 734151 AT

CATEGORY: MARKING

Area Director, JFK Airport
Building 178
Jamaica, New York 11430

RE: Application for Further Review of Protest No. 1001-0-009702 Concerning Country of Origin Marking of Imported Leather Apparel; Marking Duties; False Certification; 19 U.S.C. 1304(f)

Dear Sir:

This is in response to Protest no. 1001-0-009702 and the Application for Further Review dated December 20, 1990, submitted by Follick & Bessich, P.C. (counsel), on behalf of Club De France, Ltd., Inc., the importer, against your decision to assess marking duties in connection with an entry of imported leather apparel.

FACTS:

Entry for 196 men's suede leather garments (137 jackets and 59 vests) imported from Turkey was made on June 21, 1990. On June 26, 1990, a notice of marking/ redelivery (CF 4647) was issued because there was no country of origin marking permanently affixed to the imported garments as required by 19 U.S.C. 1304. The importer signed the CF 4647 on July 6, 1990 and returned it to Customs certifying that the merchandise had been properly marked. However, on July 18, 1990, when Customs officers visited the importer's warehouse to examine the subject merchandise, examination revealed that the leather garments had not been marked with the country of origin. Accordingly, the merchandise was constructively seized on July 19, 1990, under authority of 19 U.S.C. 1595a(c) as having been introduced contrary to law (by means of the false certification) for violation of 19 U.S.C. 1304. The record indicates that on August 18, 1990, the Trade Enforcement Team examined the seized merchandise and determined that it had now been properly marked with the country of origin and was eligible for release. The merchandise was released on August 31, 1990, upon payment of $2,190. The record indicates that the entry in question was liquidated on September 28, 1990 with 10 percent marking duties.
Counsel claims that the assessment of marking duties was improper because the merchandise in question was properly marked with the country of origin after importation under Customs supervision prior to liquidation of the entry, and therefore the requirements provided in 19 U.S.C. 1304(f) were satisfied. Counsel also claims that in submitting the certified marking notice on July 6, 1990, Club De France incorrectly believed that the certification could properly be issued while the marking of the leather garments, which was to commence on that same day, remained actively in process. Counsel states that on July 9, 1990, the assigned contract worker did not report to Club De France's premises to continue marking the leather garments due to the fact that she had severely fractured her leg in an accident and could not return for several weeks. As a result, the garments were not properly marked when Customs inspectional personnel arrived at Club De France's premises on July 18, 1990, to examine the merchandise resulting in the instant seizure. Counsel further contends that after the seizure Club De France immediately secured a second contract worker to complete the marking process which was completed during the week of July 23, 1990 and verified by Customs by letter dated August 30, 1990.

ISSUES:

Whether the assessment of marking duties is proper in this case.

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304, provides that, unless excepted, every article of foreign origin imported in to the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. 19 U.S.C. 1304(f) provides that 10 percent marking duties shall be levied, collected and paid if an imported article is not properly marked with the country of origin at the time of importation and such article is not exported, destroyed or properly marked under Customs supervision prior to liquidation. Under this provision, the importer whose goods are found to be not legally marked is afforded three choices. If he chooses not to correct marking deficiencies he must export or destroy the goods under Customs supervision. Otherwise, the goods must be marked in accordance with the requirements of section 1304 and Part 134, Customs Regulations (19 CFR Part 134), such marking to be accomplished under Customs supervision prior to liquidation of the entry. 19 CFR Part 134, implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.51, Customs Regulations (19 CFR 134.51), provides that when articles or containers are found upon examination not to be legally marked, the district director shall notify the importer on Customs Form 4647 to arrange with the district director's office to properly mark the article or container or to return all released articles to Customs custody for marking, exportation or destruction. This section further provides that the identity of the imported article shall be established to the satisfaction of the district director. Section 134.52, Customs Regulations (19 CFR 134.52), allows a district director to accept a certification of marking supported by samples from the importer or actual owner in lieu of marking under Customs supervision if specified conditions are satisfied.

Here, by executing the certificate on the CF 4647 that the merchandise had been properly marked, Club De France indicated to Customs that its choice was to mark. While the choice between exportation, destruction, and marking after importation is not in all cases irrevocable, section 1304(f) provides that if one of these three is not accomplished under Customs supervision prior to liquidation of the entry covering the article the marking duty shall be deemed to have accrued at the time of importation and shall not be remitted in whole or in part nor shall payment be avoidable for any cause. Therefore, as applied here, section 1304(f) would require Customs to collect marking duties upon the failure of Club De France to mark the merchandise under Customs supervision, such duties having accrued when Club De France made entry and secured their release from Customs custody.

The record in this case indicates that Customs constructively seized the merchandise on July 19, 1990, because Club De France submitted a false certification in that the merchandise was not properly marked with the country of origin in accordance with the signed CF 4647. The record further indicates that while the merchandise was under Customs custody as a result of the constructive seizure, Club De France properly marked the seized merchandise with the country of origin as certified by a Customs inspection on August 15, 1990, prior to liquidation of the entry on September 28, 1990. Thus, the question presented in this case is whether it is proper to assess marking duties under section 1304(f) if merchandise that is constructively seized due to the submission of a false certification by the importer, is later marked while the merchandise is still under constructive seizure but prior to liquidation of the entry.
In order to resolve this question a brief review of the legislative history behind the enactment of section 1304(f) (previously codified as section 304(b) of the Tariff Act of 1930, and later amended in the Customs Administrative Act of 1938, as section 304(c)), is in order.

Section 304(b) of the Tariff Act of 1930 provided for the assessment of marking duties against an importer if at the time of liquidation any article or its container was not properly marked with the country of origin unless exported under Customs supervision. Section 304(b) provided in part that:
if at the time of liquidation any article or its container is not marked, stamped, branded, or labeled in accordance with the requirements of this section, there shall be levied, collected, and paid on such article, unless exported under Customs supervision a duty of 10 percent of the value of such article... (emphasis added)

Therefore, under the existing law an importer only had two choices to avoid liability for marking duties which were either to properly mark the merchandise with the country of origin or export the merchandise under Customs supervision, prior to liquidation.

However, when Congress enacted the Customs Administrative Act of 1938, changes were made to section 304(b) in which additional choices were provided to the importer for avoiding the liability of marking duties. These additional choices were written in section 304(c) of the 1938 Act and are emphasized by the underlined portions below. As written, section 304(c) provides in part that:
if at the time of importation of any article (or its container, as provided in section (b)) is not marked) in accordance with the requirements of this section, and if such article is not exported or destroyed or the article (or its container, as provided in section (b) marked after importation in accordance with the require- ments of this section (such exportation, destruction, or marking to be accomplished under Customs supervision prior to liquidation of the entry covering the article, and to be allowed whether or not the article has remained in continuous customs custody) there shall be levied, collected, and paid upon such article a duty of 10 percent ad valorem, which shall be deemed to have accrued at the time of importation, shall not be construed to be penal, and shall not be remitted wholly or in part nor shall payment thereof be avoidable for any cause... Section 304(c) of the 1938 Act contains identical language to the present statute section 304(f) of the Tariff Act of 1930, as amended. Congress' intent in making the above modifications was to provide an importer additional choices to avoid liability for marking duties and to limit the application of the additional duty to those articles which go into the commerce of the U.S. This is illustrated in a conversation between Senator David L. Walsh (Chairman, Senate Subcommittee on Finance) and Stephen J. Spingarn (Office of General Counsel, Department of the Treasury) on Tuesday 25, 1938, during the Senate hearing on H.R. 8099 (House of Representative Bill to amend certain administrative provisions of the Tariff Act of 1930) stated in part below:

Mr. Spingarn. Existing law provides for an additional duty of 10 percent ad valorem on all articles when the articles or their immediate containers are not marked at the time of importation, unless the articles are exported.

Senator Walsh. What is the additional duty now?

Mr. Spingarn. Ten percent ad valorem.

Senator Walsh. That is exactly the same?

Mr. Spingarn. This is exactly the same, with the exception that it limits the application of the additional duty to those articles which go into channels of trade in the United States without being marked as required by law either before or after importation. In other words, at present the article has got to be exported in order to avoid the payment. Under the bill, if the goods are not marked on arrival, in order to avoid the payment of the 10 percent extra duty this marking may be performed under Customs supervision at the expense of the importer. The goods can then go into commerce without the payment of that 10 percent additional marking duty. (Emphasis added).

Congress also intended that marking duties should not be construed as penal. This is shown by the supplementary language "which shall be deemed to have accrued at the time of importation, shall not be construed to be penal, and shall not be remitted wholly or in part nor shall payment thereof be avoidable for any cause" which was added in section 304(c).

The United States Customs Court stated in A.N. Deringer, Inc. v. United States, 51 Cust. Ct. 21, C.D. 2408 (1963), that the conditions to impose liability for marking duties under section 304(c) are two: First, that the article is not at the time of importation marked as the statute requires; and second, that if not so marked when imported, it has not prior to liquidation been (a) marked properly under Customs supervision, or (b) exported under Customs supervision, or (c) destroyed under Customs supervision. When these two events concur, the marking duty is imposed by section 304(c), and it shall not be remitted wholly or in part nor shall payment thereof be avoidable for any cause. The court stated that "those who import goods into the United States accept certain responsibilities that have been laid on them by Congress. One such responsibility, and an important one, is to see that imported merchandise of foreign origin is properly marked to show the country of origin, before it enters into the commerce of the United States." (Emphasis added).

Customs also follows this construction with respect to the assessment of marking duties. In HQ 731775 (November 3, 1988), Customs ruled that two prerequisites must be present in order for it to be proper to assess marking duties under 19 U.S.C. 1304(f). These two prerequisites are:

1. the merchandise was not legally marked at the time of importation, and

2. the merchandise was not subsequently exported, destroyed or marked under Customs supervision prior to liquidation. (Emphasis added).

In this case, the assessment of marking duties is not proper due to the fact that the merchandise was properly marked under Customs supervision (albeit under constructive seizure by Customs) prior to liquidation of the entry. The record indicates that the constructively seized merchandise was released from Customs custody on August 31, 1990 properly marked with the country of origin. The record also indicates that the entry for this merchandise was liquidated on September 28, 1990 almost a month after release of the merchandise. Therefore, the merchandise entered the commerce of the U.S. properly marked with the country of origin prior to liquidation of the entry. Although the merchandise was properly marked while under constructive seizure by Customs, we find that this still satisfies the requisite of being marked under Customs supervision. If we were to assess marking duties in this case, we would be in conflict of Congress' intent for enacting section 304(c) which was to impose such duties only when not legally marked merchandise entered the commerce of the U.S.

HOLDING:

The assessment of marking duties in this case was not proper due to the fact that the constructively seized merchandise was properly marked under Customs supervision with the country of origin prior to liquidation of the entry. Accordingly, you are directed to grant the protest. A copy of this decision should be attached to the Customs Form 19, to be sent to the protestant.

Sincerely,

John Durant, Director

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