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HQ 545417

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May 27, 1994

VAL CO:R:C:V 545417 AT

CATEGORY: VALUATION

Regional Director
Regulatory Audit Division
Pacific Region
Long Beach, California

RE: Internal advice request concerning whether Headquarters Ruling Letter 544525 is applicable for offsetting the overpayment of duties paid on mold charges used for international shipments after the entries have been liquidated and the protest period has expired.

Dir Sir:

This is in response to your request for internal advice dated August 18, 1993, concerning whether Headquarters Ruling Letter (HRL) 544525 is applicable for offsetting the overpayment of duties paid by Avia Group International, Inc. ("Avia") on mold charges used for international shipments after the entries have been liquidated and the protest period has expired. We regret the delay in responding.

FACTS:

Avia, a major importer of athletic shoes made payments for mold charges on various shoe styles. During the period 1985 through 1989, Avia paid to its foreign manufacturers (sellers), mold charges on various shoe styles. According to counsel, Avia would contract with a seller to share mold charges if production on a shoe style was halted prior to a predetermined quantity. For example, if Avia, having contracted with the seller for 200,000 shoes, halts production after 100,000, then Avia would share 50% of the mold charges. If the mold charges were $80,000, Avia would pay the seller $40,000. In some cases, shoes were shipped after payment of mold charges.

During the period 1985-1989, Avia tendered duty on some of the mold charges either at the time of entry, or at the time of disclosure. However, not all the mold charges were declared. For that reason, on May 19, 1992, Avia filed a disclosure covering mold charges from 1985 through 1989. This disclosure included a schedule that tabulated mold charges paid to its sellers. This schedule shows a total duty payable on those mold charges of $255,695.79, less the amount paid at the time of entry of $149, 190.15 for a net liability to Customs of $106,505.64.

In calculating the duty payment due for this disclosure, Avia offset their liability of $106,505.64 by $19,796.66. When asked to explain this offset, Avia said that it was to correct previous overpayments to Customs of duty due on mold charges. According to Avia, on certain previous declarations and disclosures of mold charges, the company had not adjusted the dutiable value by that portion of the mold expense attributable to international shipments (non-U.S.).

Counsel on behalf of Avia claims that the rationale of HRL 544525 is applicable in this case to allow the offset for that portion of the excess mold charges paid to Customs which were attributable to international shipments, even though all the entries have been liquidated and the protest period has expired.

ISSUE:

Whether the rationale in HRL 544525 is applicable in this case to allow the offset of excess duties paid by Avia to Customs for mold charges attributable to international shipments, if all the entries have been liquidated and the protest period has expired?

LAW AND ANALYSIS:

In HRL 544525 (January 31, 1991), Customs ruled that an importer had not forfeited the option to pro-rate the value of certain tooling payments due to its failure to declare the tooling payments at the time of importation, even though some of the entries had bee liquidated. In that case, the importer made tooling payments to the seller during the period 1986-1989. At the time of importation, certain of the merchandise was duty-free under the Generalized System of Preferences ("GSP"). The importer did not report the tooling payments to Customs until 1989, subsequent to importation. At that date, some of the countries from which the merchandise had been imported had been removed from the list of beneficiary developing countries under GSP. The field office contended that the importer should not be allowed to apportion the tooling payments to any entry which had been liquidated. This included all the entries to which GSP applied. Headquarters agreed with the importer and permitted the apportionment of the tooling payments over all relevant entries, including those which had been liquidated. Counsel argues that the rationale of HRL 544525 can be applied to the instant case allowing Avia to offset their liability by the amount of excess duties paid to Customs for mold charges attributable to international shipments, even though all the entries have been liquidated. We disagree because our review of HRL 544525 discloses that it has nothing to do with the facts presented here.

The fact remains that all the entries have been liquidated and the protest period has expired. Under these circumstances, we find that there is no legal authority to allow the requested offset by Avia for the mold charges. HRL 544525 is only limited to the circumstances of that case and can not be applied outside those circumstances to allow an offset of excess duties paid on entries which have been liquidated.

HOLDING:

HRL 544525 is not applicable to the facts of this case. Therefore, the offset by Avia of current duty based on a claim that excess duties were paid for mold charges which were attributable to international shipments on past entries which have all been liquidated is inappropriate.

This decision should be mailed by your office to the internal advice requestor no later than 60 days from the date of this letter. On that date 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, Lexis, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director

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