HQ 0734386 - Application for Further Review of Protest No. 1001-91- 001275 concerning country of origin marking of imported wool rugs; marking duties, false certification 19 U.S.C. 1304(f) - United States International Trade Commision Rulings

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HQ 734386

June 29, 1992

MAR-2-05 CO:R:C:V 734386 RSD

CATEGORY: MARKING

Area Director
U.S. Customs Service
J.F.K. Airport
Building 178
Jamaica, New York 11430

RE: Application for Further Review of Protest No. 1001-91- 001275 concerning country of origin marking of imported wool rugs; marking duties, false certification 19 U.S.C. 1304(f)

Dear Sir:

This is in response to the memorandum dated October 15, 1991, concerning the Application for further review of protest 1001-91-001275 filed on behalf of Middle East Rug Corp. by Nevill, Peterson & Williams on February 13, 1991, against your decision to assess marking duties in connection with an entry of imported wool rugs.

FACTS:

Middle East Rug Corporation imported a shipment of wool rugs with a value of $45,952 on October 5, 1989, through JFK Airport. The merchandise was released to the importer's warehouse. On October, 10, 1989, Customs issued a notice of marking/redelivery (CF 4647) indicating that the merchandise was not legally marked with respect to its country of origin and its fiber content. The importer indicated that it would remark the merchandise. The importer certified on October 16, 1989, that the marking had been completed. On October 25, 1989, the Customs Trade Enforcement Team visited the importer's warehouse to inspect the merchandise. Representatives of the importer informed the Customs officials that half of the shipment was sent to North Carolina for a trade- show. These officials determined that the portion of the shipment presented to Customs was legally marked. Because the entire shipment was not available for inspection, Customs did not approve the marking. A second Customs inspection team visited the importer's warehouse on November 20, 1989. Again, part of the shipment was missing, as it had been sent to the importer's customers. Customs again would not approve the marking. The entry was liquidated on December 7, 1990, with marking duties being assessed at the rate of 10 percent on the entire shipment. In addition, a claim for liquidated damages was assessed for failure to redeliver the not legally marked merchandise. Customs mitigated the claim for liquidated damages to $7500 on July 11, 1990. On February 4, 1991, Customs concluded that the liquidated damages should be based only on that portion of the merchandise which was uninspected, and further mitigated the liquidated damages claim to $3,261.78.

ISSUE:

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 into 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 a 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, such duties shall not be remitted wholly or in part nor shall payment thereof be avoidable for any cause.

Part 134, Customs Regulations (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 articles or containers, 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. 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

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

The importer contends that all the merchandise was legally marked after importation but prior to liquidation. In support of its claims, the importer submitted an affidavit from Paul D. Vessey, President of the Middle East Rug Corporation. In the affidavit it is alleged that from October 10, 1989, to October 16, 1989, Middle East Rug's personnel marked the goods to bring them into compliance with the requirements of the Notice Marking/Redelivery. The affidavit also states that half the shipment was shipped to a market in High Point, North Carolina, from October 19 to October 27. It further alleges that a Customs inspector visited the importer's warehouse and had no objection to the way the goods were marked, but wanted to see the entire shipment before he would approve the marking. The inspector was informed that the remainder of the merchandise was still in Middle East Rug's possession but would return from High Point, North Carolina, within 10 to 14 days. This portion of the shipment returned from North Carolina on November 19, 1989. The affidavit further states that after receiving the claim for liquidated damages, Mr. Vessey contacted Customs about the situation and was told that it was all right to ship the merchandise. A second Customs inspection was conducted on or about November 20, 1989, but some of the merchandise was missing and Customs again refused to approve the marking.

The importer maintains that the shipment was available to be inspected by Customs. Moreover, it claims that more than half the shipment was actually inspected by Customs. Alternatively, the importer also argues that if any marking duties are assessed they should not be assessed on that part of the shipment which Customs examined and found to be legally marked.

A review of the record indicates that the importer has failed to produce any evidence to establish that the entire shipment was legally marked under Customs supervision prior to liquidation of the entry. After the importer certified that the shipment was marked, on two occasions Customs attempted to inspect the shipment to verify the marking. On both occasions, a large portion of the shipment was not available for inspection and there was no way for Customs to verify that the missing portion of the shipment was legally marked prior to liquidation. After an importer has certified on the marking notice that the merchandise has been legally marked, it is his/her obligation to make sure that all the merchandise is available for a Customs inspection so that the marking can be verified. If Customs is not able to inspect the merchandise, then the merchandise cannot be considered legally marked under Customs supervision and marking duties should be assessed. Here, Customs did not have an opportunity to verify the marking on the rugs. When Customs conducted an inspection of the merchandise at the importer's premises, half the shipment was sent to North Carolina for a trade-show. Customs made a second attempt to inspect the merchandise and again a large portion of the merchandise was missing. Without an opportunity to inspect the entire shipment, Customs could not confirm that the entire shipment was legally marked. Accordingly, marking duties were properly assessed.

However, when it conducted the inspection of the merchandise, Customs was able to determine that a portion of the merchandise was legally marked prior to liquidation. Under these circumstances, we find that marking duties should not be assessed on that portion of the shipment. The decision on liquidated damages concluded that the value of the undelivered merchandise, which was the merchandise that was not available for inspection, was $28,259.48. Accordingly, marking duties should be based on this amount. Therefore, the marking duties should be assessed in the amount of 10 percent of $28,259.48. The difference between this amount and the amount collected based on the entire shipment should be refunded to the protestant.

HOLDING:

The assessment of marking duties was proper in this case on that portion of the shipment which was not available for Customs inspection. The importer failed to establish that this portion of the shipment was legally marked under Customs supervision prior to liquidation. Marking duties should not be assessed on that portion of merchandise which Customs determined was legally marked prior to liquidation. Accordingly the protest should be denied in part and granted in part. A copy of this decision should be attached to the Customs Form 19, and mailed to the protestant as part of the notice of action on the protest.

Sincerely,

John Durant, Director

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