HQ 225048 - Application for Further Review Protest No. 5501-93-100213; Failure to file a transportation and exportation (T&E) entry at time of withdrawal from bonded warehouse; Release from Customs custody; 19 U.S.C. 1557; 19 CFR 144.37; 19 U.S.C. 1313(j); 19 U.S.C. 1520(c)(1); Ruling 725570 of March 18, 1986, distinguished; HQ 223755, dated October 13, 1992 - United States International Trade Commision Rulings

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HQ 225048

JUNE 28, 1994

ENT-7-01/ENT-7-07/LIQ-9-01-CO:R:C:E 225048 JRS

CATEGORY: WAREHOUSE ENTRY LIQUIDATION

Ms. Sue Ann Linneman
Assistant District Director (Commercial Operations) U.S. Customs Service P.O. Box 619050
Dallas/Fort Worth, TX 75261

RE: Application for Further Review Protest No. 5501-93-100213; Failure to file a transportation and exportation (T&E) entry at time of withdrawal from bonded warehouse; Release from Customs custody; 19 U.S.C. 1557; 19 CFR 144.37; 19 U.S.C. 1313(j); 19 U.S.C. 1520(c)(1); Ruling 725570 of March 18, 1986, distinguished; HQ 223755, dated October 13, 1992

Dear Madame:

This is in response to the above-referenced protest which your office forwarded to us for review. We have considered the issues raised and our decision follows.

FACTS:

The protestant, Summit Machine Tool Manufacturing Corporation, is in the business of purchasing and importing large machine tools, such as lathes, horizontal boring mills and vertical boring mills, which it may resell domestically or overseas.

The protestant entered the above-referenced merchandise into its bonded warehouse in Oklahoma City, Oklahoma, upon importation of the merchandise on August 10, August 30, and September 18, 1992. Subsequently, between November 25, 1992, and ending on December 21, 1992, the equipment was removed from the bonded warehouse in Oklahoma and was exported to foreign buyers in Saudi Arabia. At the time the equipment left the bonded warehouse, no withdrawal from warehouse for transportation and exportation (CF 7512) had been filed by its Customs broker; the merchandise was transported from the bonded warehouse, allegedly "in-bond", to the port of Houston, Texas, where it was exported.

Sometime between December 25, 1992 and December 31, 1992, after the merchandise had been exported, the protestant discovered that the transportation and exportation documents (CF 7512s) had not been filed by its broker. The protestant contacted the U.S. Customs Service and was advised that to avoid liquidated damages for failure to properly withdraw the
merchandise from warehouse for exportation, Summit should file a warehouse withdrawal for consumption and pay duties on the equipment, which amounted to $112,418.03. Summit, noting that it was paying such duties subject to protest, followed Customs' advice. Three warehouse withdrawals for consumption (CF 7505) were filed with Customs on February 18, 1993, noting the date of warehouse entry as of August 12, August 28 and September 8, 1992. As a result of the importer's payment of duties and filing the warehouse withdrawals for consumption for the missing merchandise on the CF 7505s, the district director waived the imposition of a claim for liquidated damages against the breach of the bond.

On June 16, 1993, the protestant, filed the instant protest against the March 19, 1993, liquidation of 2 warehouse withdrawals for consumption entries of equipment entered for warehouse on August 28 and September 8, 1992, and also against the April 30, 1993, liquidation of one warehouse withdrawal for consumption entry of equipment entered for warehouse on August 12, 1992. The protestant challenges the assessment of duties on these 3 entries and seeks a refund via the protest procedures.

ISSUES:

(1) Whether relief is warranted under 19 U.S.C. 1520(c)(1).

(2) Whether a refund of duties is permissible under 19 U.S.C. 1557 when merchandise had been improperly removed from a bonded warehouse for exportation without having had a T&E entry filed upon its removal.

LAW AND ANALYSIS:

We note that this protest is timely filed and is properly protestable under 19 U.S.C. 1514(a)(5).

Section 520(c)(1) of the Tariff Act of 1930, as amended (19 U.S.C. 1520(c)(1), mandates that the claimed clerical error, mistake of fact, or other inadvertence be manifest from the record or established by documentary evidence in order to be corrected; the error cannot be inferred from the circumstances. The alleged error must be specified with sufficient particularity to allow remedial action to be taken. The importer must describe the alleged error in detail and prove that the error was not the result of legal error rather than a factual error. Inadvertence has been defined as "an oversight or involuntary accident, or the result of inattention or carelessness, and even a type of mistake." C. J. Tower & Sons, Inc. of Buffalo v. United States, 68 Cust. Ct. 17, 22, 336 F. Supp. 1395, 1399 (1972), aff'd, 61 CCPA 90, C.A.D. 1129, 499 F.2d 1127 (1974).

The protestant contends that the fact that the T&E documentation had not been filed by the broker was a result of
inadvertent error and that the protestant would not have filed a withdrawal from warehouse for consumption and would not have paid the duties in question absent a suggestion by Customs that it do so. Protestant states that Customs has evidenced a willingness to refund duties under 19 U.S.C. 1520 where it can be demonstrated that the merchandise in question was actually exported, citing to a 1986 Headquarters ruling, 725570 dated March 18, 1986, wherein Customs allowed the substitution of a T&E entry for the consumption entry.

We do not find this 1986 ruling relevant to this protest, and the protestant's reliance on it for relief in this case is misplaced. In the 1986 ruling, the broker, acting as importer of record for the account of an export company, filed a consumption entry instead of a T&E entry at the time of entry when the merchandise was released from Customs custody and cleared by Customs. The carrier's employee mistakenly requested release against the broker's bond even though the proforma invoice, reviewed by the U.S. Customs inspecting officer, accompanying the merchandise at the time of release revealed that the shipment was immediately destined to Mexico and should have been entered under a T&E entry. Relief was justified under 19 U.S.C. 1520(c)(1) in that case because it was manifest from the documents in the record that a mistake of fact occurred in the filing of the consumption entry rather than the filing of a T&E entry and that a T&E entry was intended to be filed at the time of release instead of a consumption entry. The same cannot be said in the instant protest.

In this case, the protestant wants Customs to grant relief on the same basis as in Ruling 725570. Protestant argues that the fact that no such documents had been filed was a clerical error by the broker and the protestant should be refunded the duties pursuant to 19 U.S.C. 1520(c). We disagree. Protestant focuses on the district director's stated position on the CF 6445 that "failure to file a T&E entry at the time of release was an error on the part of the broker" as the basis for the grant of relief in 725570. The basis adopted by Headquarters in 725570 was to permit the substitution of a T&E entry for a consumption entry under 19 U.S.C. 1520(c) when a mistake of fact or inadvertence occurred in the actual filing of a consumption entry when the goods were intended to be entered under a T&E entry at the time the consumption entry was filed.

We do not find any factual similarities between the facts in Ruling 725570 and the instant protest in order for relief to be granted on the basis of 19 U.S.C. 1520(c)(1). No evidence is presented by the protestant that its broker mistakenly or inadvertently filed any kind of other Customs document instead of a T&E entry when the goods were removed from warehouse. All the protestant points to is the fact of its broker's failure to file a T&E entry at the time the merchandise was removed from the
private bonded warehouse. Protestant contends that it intended to file a withdrawal from warehouse for exportation, and in fact believed such documents had been filed by its broker. While this statement is probably true, it does not demonstrate any mistake or inadvertence on the part of its broker. For whatever reason, no Customs entry or permit of any type was initiated by the broker against the merchandise's release from the bonded warehouse for exportation. There was no mistake in the type of entry that should have been filed in the instant case at the time of the goods withdrawal, unlike such was demonstrated in Ruling 725570. This case is clearly distinguishable from previous cases where Customs permitted entry substitution under 19 U.S.C. 1520(c)(1) when a mistake of fact or inadvertence occurred in the filing of the consumption entry, such as where a broker misunderstands his client's instructions to file a warehouse entry instead of a consumption entry (ORR Ruling 75-0038 of January 31, 1975) or where a consumption entry is filed instead of a T&E entry because the broker could not discern the intended destination of the goods because the papers were written in Spanish (Bureau letter dated August 10, 1964). Here, no evidence is presented that the broker intended to file an entry or a reason given as to why it failed to do so, other than its general allegation of "inadvertence". Nor is an explanation given as to why the carrier accepted the merchandise and transported it without having the proper documentation (CF 7512) in its possession.

Moreover, section 520(c)(1) does not apply in this case because the inadvertence claimed, the lack of filing the required document for removal of merchandise from a warehouse by the broker, cannot be said to be an error in the completion or filing of a Customs document or "entry, liquidation, or other customs transaction" correctable within the ambit of 19 U.S.C. 1520(c)(1). See generally HQ 223755, dated October 13, 1992. The protestant's decision to make a belated "withdrawal from warehouse for consumption entry (CF 7505)" was a conscious decision on its part in order for Customs to cancel the liquidated damages case against it for failing to properly withdraw the merchandise from warehouse. The protestant knew that if he did not file the entry for the merchandise already exported, he would remain liable under his bond. Thus, there was no error involved in the protestant's filing of the CF 7505 consumption entry and, this action, is also not correctable within the scope of 19 U.S.C. 1520(c)(1).

Under section 557 of the Tariff Act of 1930, as amended (19 U.S.C. 1557(a)(2)), "... [m]erchandise upon which the duties have been paid and which shall have remained continuously in bonded warehouse or otherwise in the custody and under the control of customs officers, may be entered or withdrawn at any time within 5 years after the date of importation for exportation or for transportation and exportation to a foreign country, ... under
such regulations as the Secretary of the Treasury shall prescribe, and upon such entry or withdrawal, and exportation or shipment, the duties thereon shall be refunded."

The implementing regulations may be found in 19 CFR Part 144, Subpart D. No merchandise entered for warehouse shall be removed without a permit issued by the district director on the appropriate withdrawal form. The district director will review all withdrawals to determine whether a permit (CF 7512) may be given. Merchandise withdrawn for indirect exportation (transportation and exportation) shall be delivered to a bonded carrier and forwarded to the port of exportation in accordance with the general provisions for transportation in bond (19 CFR 18.1 - 18.8). See 19 CFR 144.36(h) and 144.37(b). Upon arrival at the destination, the merchandise may be exported in accordance with 19 CFR 144.36(h) under Customs supervision in the same manner as a withdrawal for indirect exportation. See 19 CFR 18.2(a) (3) and 19 CFR 19.6(b)(1).

From the facts related, it appears that the bonded warehouse is a Class 2 (importer's private bonded warehouse) used exclusively for the storage of merchandise. 19 CFR 19.1(a)(2). When the merchandise was removed from the private bonded warehouse without the proper withdrawal form (CF 7512), see 19 CFR 144.37(a) and 144.39, the effect of this improper withdrawal was that the merchandise was withdrawn from continuous Customs custody even if the merchandise had been in fact transported to Houston "in bond" (see 19 CFR 144.37(b). The warehouse proprietor's bond was breached at that time which subjected it to a claim for liquidated damages. 19 CFR 113.63(b)(2) and (c)(3). The importer remains liable under his importation bond to pay duties and taxes on merchandise which was unlawfully removed from the warehouse by the importer or other person. 19 CFR 113.62(a)(1) and (2).

The evidence indicates that the goods did not remain in the bonded warehouse or were otherwise in the custody of customs officers when the duties were paid. On the contrary, the removal of the goods from the protestant's warehouse was unknown to Customs. Consequently, based on the presented facts, there is no basis to apply the duty-refund provision of 19 U.S.C. 1557 noted above.

HOLDING:

(1) No relief under 19 U.S.C. 1520(c)(1) is appropriate in this case because no error exists, which is correctable under the statute, in either the protestant's broker's failure to file a T&E entry or in its subsequent filing of a consumption entry.

(2) A refund of the duties paid is not permissible under 19 U.S.C. 1557 when merchandise has been improperly withdrawn from a
bonded warehouse without having had a T&E entry filed upon its removal from the warehouse since it was no longer in continuous Customs custody at the time of exportation as required by the statute.

You are instructed to DENY the protest. In accordance with Section 3A(ll)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director
Commercial Rulings Division

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