HQ 222877 - Further review of protests ##0201-90-000180 and 0201-90-000181 concerning the reliquidation of certain entries under 19 U.S.C. 1521; finding of probable cause by "appropriate Customs officer." - United States International Trade Commision Rulings

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HQ 222877

March 13, 1992

LIQ-1-CO:R:C:E 222877/223051 TLS

CATEGORY: ENTRY RELIQUIDATION

District Director
U.S. Customs Service
Main and Stebbins Streets, PO Building
P.O. Box 1490
St. Albans, Vermont 05478

RE: Further review of protests ##0201-90-000180 and 0201-90-000181 concerning the reliquidation of certain entries under 19 U.S.C. 1521; finding of probable cause by "appropriate Customs officer."

Dear Sir:

The above-referenced protests have been forwarded to this office for further review. The protests have been combined because they involve the same series of entries evolving from the same set of circumstances and the protestant's attorney filed essentially the same submission for each. We have considered the points raised by the protestant and your office. Our decision follows.

FACTS:

The protestant entered a total of five shipments of empty plastic watch boxes through the Norton, Vermont Customs port from November 17 to December 15, 1988. In October of 1988, Customs officers at Champlain, New York, pursuant to 19 CFR 133.22, had detained two shipments of 4,898 empty watch boxes, all of which were suspected of bearing the counterfeit "SEIKO" trademark. In accordance with this regulation and with 19 U.S.C. 1526(e), Impenco, the importer, was notified that it had 30 days to deny that the boxes bore a counterfeit trademark. Impenco was also advised that, following such a denial, a sample of the merchandise would be sent to the trademark owner for the owner's determination of a trademark violation.

By a letter dated October 24, 1988, Impenco responded by admitting that the trademark owner did not authorize Impenco's importation of the boxes. Impenco claimed, however, that genuine Seiko watches, imported under the so-called gray market, would be placed inside the boxes for retail sale. On October 27, 1988, counsel for Hattori Seiko Co., the owner of the trademark, advised Customs that Hattori had not authorized this importation and that the boxes "appear to be cheapened imitations" of "standard SEIKO timepiece boxes." Seiko is a subsidiary of Hattori. Hattori requested that Customs seize or deny entry to what Hattori considered to be "piratical copies or counterfeit copies of the SEIKO trademark." Having received these two letters, Customs officers, pursuant to the above-cited statute and regulation, seized the detained boxes on December 1, 1988. The boxes have an appraised domestic value of $6,898. Later that same month, the entries were liquidated and duty-paid.

Pursuant to the findings of an investigative report issued by Customs, the St. Alban's district notified Impenco on April 11, 1990 that a monetary penalty was being considered because of the series of transactions that took place with the watch boxes in the immediately preceding months. The pre-penalty notice was followed by a redelivery of the entries on April 12 and 13, 1990. On April 27, 1990, all five of the subject entries were reliquidated pursuant to section 521 of the Tariff Act of 1930. These protests were filed on June 28 and July 5, 1990, respectively.

ISSUE:

Whether the requirement under 19 U.S.C. 1521 that the "appropriate Customs officer" make the requisite finding of probable cause of fraud before reliquidation was met when the Customs Office of Investigations filed its investigative report.

LAW AND ANALYSIS:

Under 19 U.S.C. 1521, the following is provided for:

If the appropriate customs officer finds probable cause to believe there is fraud in the case, he may reliquidate an entry within two years (exclusive of the time during which a protest is pending) after the date of liquidation or last reliquidation. (emphasis added.)

Customs Regulations provide for the same as follows:

173.6 Review of entry for fraud.
The district director may review any entry in which fraud is suspected. Where probable cause to believe there is fraud in the case is found by the district director, he may reliquidate an entry within 2 years (exclusive of the time during which a protest is pending) after the date of liquidation or last reliquidation. (emphasis added.)

It is well settled that a regulation may add more specificity to the statutory provision that it interprets, as long as the regulation remains consistent with the primary statute. Section 521 requires only that the "appropriate customs officer" make the finding of probable cause sufficient to initiate reliquidation of an entry. Part 173.6, the Customs regulation interpreting that particular statute, goes further in requiring the "district director" to make the requisite finding. Referring specifically to the district director by title more than implies that not just any Customs official is authorized by the regulation to make the finding, in spite of the statute's ambiguous reference to "the appropriate customs officer." It appears to compel that the finding be made by the district director. Conversely, while the regulation expressly names only the director, we cannot contemplate that the drafters intended only the person holding the title of district director make such determinations. To require such would seem to unduly burden that person, given the vast number of tasks and responsibilities he or she must undertake in the normal course of business. Hence, we read the regulation to allow for those under the direct authority of the director to make the finding as well, to the extent that the director can oversee the activities leading to the finding.

The protestant has cited to case precedent to lend support to its argument that the district director is required to make the finding of probable cause necessary before reliquidation takes place. In Sweet Briar, Inc. v. United States, 73 Cust. Ct. 93, C.D. 4558 (1974), the court held that "where a statute requires a finding to be made by an official before an action can be authorized, the finding is sine qua non to the taking of the action" (emphasis in original), citing Power Comm'n v. Pipeline Co., 315 U.S. 575, 583 (1942). The court in Sweet Briar went on to find no evidence of even a delegation of authority from the director to drafters of the two reports upon which the actual finding of probable cause seemed to be based.

In the present case, a finding of probable cause was made pursuant to an investigation that was reported on March 26, 1990. The report was compiled by the Customs Office of Investigations, which operates outside of the St. Alban's, Vermont Customs district. The redeliveries were made as a result of the report's findings. The subject reliquidations were also initiated because of the probable cause finding of the report. The decisions to order redelivery and the subsequent reliquidations appear from the record to be predicated primarily on the report; the FP&F officer for the district made these decisions. She routinely makes such decisions for district and is under the authority of the district director in her capacity as FP&F officer. In fact, in her position description (the official job title is "supervisory paralegal specialist"), the following is stated: "The purpose of this position is to direct and administer the Fines, Penalties, and Forfeitures Program in the district where this position exists. The Supervisory Paralegal Specialist is delegated as the authorized official to act for District Director in all matters involving program operations." (Emphasis added.)

We find distinction between the Sweet Briar case and the present case. In Sweet Briar, the officer had acted outside of his official capacity in making the decision to reliquidate. There was no delegation of authority from the district director to the import specialist who had made the decision apparently without direction from the director. In this case, the paralegal specialist not only has written delegation from the district director to handle such matters, they are included in her responsibilities and duties. Thus, while no specific written delegation was given to the paralegal specialist, none was required because the finding of probable cause is consistent with her ordinary duties. Therefore, we find that Customs did meet all the requirements of section 521 and the reliquidations are valid as a result.

The importer also protests the reliquidations on the claim that they were done to penalize the importer for the alleged fraud that the report surfaced. The protestant cites to Zucca v. United States, 10 Cust. Ct. App. 133 (1920), which held that a reliquidation that occurs more than one year after the original liquidation is not a criminal proceeding that seeks to enforce a penalty but rather a vehicle by which to collect additional duties due. The importer claims that because no additional duties were assessed on the subject reliquidations, the purpose of reliquidating in this case was to reopen the entries in order to assess penalties.

Upon review of the pertinent documents, there appears to be no evidence of an intent to penalize the importer by reliquidating the entries. While it is true the reliquidations were done because of a finding of an alleged action that might lead to penalty claims, the reliquidations appear to have been done only to reascertain the correct duties on the entries. The fact that the reassessment matched the original assessment in amount does not necessarily indicate that the reliquidations were punitive in nature. Section 521 only requires that the reliquidations be done pursuant to a finding of probable cause that fraud exists in the case; additional duties are not required to be assessed, notwithstanding the holding in Zucca. Therefore, we do not find that Customs acted improperly with respect to the purpose of reliquidating the subject entries.

HOLDING:

The subject reliquidations are valid by virtue of Customs meeting the requirements to have the "appropriate Customs officer" make the requisite finding of probable cause of fraud pursuant to 19 U.S.C. 1521. The appropriate Customs officer is deemed to be the district director, as expressly provided for under 19 CFR 173.6, and those under his or her direct employ.

The reliquidations were proper in the respect they were done to reassess the duties on the entries and not as a punitive measure in light of the probable cause finding. An actual change in the reassessment of duties is not required by statute to sustain a valid reliquidation under 19 U.S.C. 1521. You are instructed to deny these protests in full. A Form 19, Notice of Action, should be attached to this ruling.

Sincerely,

John Durant, Director

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