HQ 225115 - Protest 1001-91-103867; prohibited versus restricted merchandise; 19 U.S.C. 1558(a); 19 CFR 11.13; 19 CFR Part 12; HQ 656981; A.N. Deringer, Inc. v. U.S.; Glazer's Wholesale Drug Co., Inc. v. U.S. - United States International Trade Commision Rulings

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HQ 225115

March 17, 1995

LIQ-8-CO:R:C:E 225115 AJS

CATEGORY: LIQUIDATION

Regional Commissioner of Customs
U.S. Customs Service c/o Protest and Control Section
6 World Trade Center, Room 762
New York, NY 10048-0945

RE: Protest 1001-91-103867; prohibited versus restricted merchandise; 19 U.S.C. 1558(a); 19 CFR 11.13; 19 CFR Part 12; HQ 656981; A.N. Deringer, Inc. v. U.S.; Glazer's Wholesale Drug Co., Inc. v. U.S.

Dear Sir or Madame:

This is our decision in protest 1001-91-103867, dated May 8, 1991, challenging the liquidation of an entry "as entered".

FACTS:

The subject entry consists of certain women's clothing having a value of U.S. $6,274.26 and a declared country of origin of Kuwait. On October 24, 1990, a redelivery demand was issued by Customs, stating that:

The merchandise has been determined to bear a false designation of Country of Origin, marked Kuwait, in violation of 15 U.S.C. 1124/1125 and is, therefore, ordered redelivered.

The merchandise was redelivered to Customs custody on November 7, 1990, and Customs subsequently issued a Notice of Seizure dated November 20, 1990. The notice cites 19 U.S.C. 1595a(c) for violation of 15 U.S.C. 1124/1125 as the basis for seizure.

A timely filed petition for remission from the seizure was decided by Headquarters Ruling Letter 656981 on March 31, 1991, remitting the forfeiture on payment of $4500 and allowing exportation of the merchandise after removal of the labels
bearing the false description of origin. At no time during the process was the petitioner's request regarding the refund of estimated duties on deposit addressed.

ISSUE:

Whether the subject merchandise is prohibited merchandise for which a refund of duties is permissible pursuant to 19 U.S.C. 1558(a)(2).

LAW AND ANALYSIS:

Initially, we note that this protest was timely filed pursuant to 19 U.S.C. 1514(c)(2)(A). The date of liquidation for the subject entry was February 8, 1991, and the protest was filed on May 8, 1991. We also note that the liquidation of an entry is a protestable matter pursuant to 19 U.S.C. 1514(a)(5).

19 U.S.C. 1558 provides that:

(a) No remission, abatement, refund or drawback shall be allowed because of the exportation or destruction of any merchandise after its release from the custody of the government, except in the following cases:

(2) When prohibited articles have been regularly entered in good faith and are subsequently exported or destroyed pursuant to a law of the United States and under such regulations as the Secretary of the Treasury may prescribe; . . .

19 CFR 11.13 provides that:

(a) Articles which bear . . . false designations of origin, including words or other symbols tending falsely to describe or represent the articles, are prohibited importation under 15 U.S.C. 294, 295, 1124, 1125 or 48 U.S.C. 1405q, and shall be detained.

19 CFR Part 12, Special Classes of Merchandise, provides that certain types of merchandise are "absolutely prohibited" while others are prohibited subject to certain "restrictions". If the restrictions can be met, the merchandise is not to be prohibited entry into the United States. Analogous groups of goods may be found in 19 CFR Part 11. For example, merchandise bearing false designations of origin may not be imported under 15 U.S.C. 1125, but having been imported may be allowed entry "upon the condition that the prohibited marking be removed or obliterated" and that the article is then properly marked (19 CFR

11.13(c)). This result is indicated by the language of the statute, since the objectionable element to merchandise bearing false designation(s) of origin is not the article(s) itself, but rather the marking or label, which is subject to physical alteration to resolve the statutory bar to importation. The subject merchandise bore a false designation of origin. There- fore, the subject merchandise is restricted merchandise and not absolutely prohibited.

In prior decisions, Customs has made a distinction between merchandise that is prohibited from that which is restricted. Refunds of duty were not allowed where the imported merchandise was found to be restricted. HQ 707935 0 (August 1, 1977), ORR 75-0159 (September 23, 1975), HQ 304477 K (September 2, 1977), ORR 74 0050 (January 22, 1974), ORR 72 0450 (December 19, 1972).

The Customs Court has previously interpreted 19 U.S.C. 1558(a)(2) in A.N. Deringer, Inc. v. United States, 84 Cust. Ct. 196, C.D. 4858 (1980). In Deringer, the issue presented was whether the requirements of the Food and Drug Administration (FDA) concerning nonconforming labeling placed merchandise in the category of prohibited articles. Id at 198. The plaintiff did not relabel the merchandise when given an opportunity by the FDA and if relabeled the merchandise could have been released into the commerce of the United States. Id. The plaintiff contended that the refusal of entry placed the importation in the prohibited merchandise category and, since it had entered the merchandise in good faith, it was entitled to a refund of duty as the merchandise was exported under Customs supervision. Id. The court concluded that the merchandise was conditionally refused admission based on the language used in the FDA notice. Id at 199. The court stated that had the party corrected the matters complained of by the FDA, it would have been permitted entry. Id. The court noted that merchandise such as adulterated food or food unfit for human consumption, narcotics, or immoral articles, to name a few, are prohibited. Id. The court further stated that the latter term is one which cannot be corrected. Id. Therefore, the court concluded that "[i]n view of the foregoing, it is unnecessary to consider the question of good faith since the merchandise was not prohibited within the statutory language." Id at 199-200.

In this case, the protestant did not re-mark the merchandise when given an opportunity. As in Deringer, the protestant asserts that the refusal of entry placed the importation in the prohibited merchandise category and, since it had entered the merchandise in good faith, it was entitled to a refund of duty as the merchandise was exported under Customs supervision. In this case, the merchandise was conditionally refused admission based
on the redelivery demand. If the protestant had corrected the marking problem referred to in the demand, the merchandise would have been permitted entry. In addition, the subject merchandise does not fall within the description of prohibited merchandise in Deringer because the prohibition can be corrected. Therefore, it is unnecessary to consider the question of good faith since the merchandise was not prohibited.

In order to recover under section 1558(a)(2), the protestant must establish by a preponderance of evidence that the merchandise constituted a prohibited article. Glazer's Wholesale Drug Co., Inc. v. United States, 51 Cust. Ct. 39, 41, C.D. 2411 (1963). The protestant argues that although a "prohibition" may be overcome by removal or obliteration of the offending designation, in this case alteration is impossible since the true country of origin is unknown and cannot be determined. Therefore, the protestant asserts that the "prohibition" against false designation of origin operates as an absolute prohibition as required by 19 U.S.C. 1558. The protestant claims it had an entirely reasonable belief that the subject merchandise was of Kuwaiti origin and that it does not know the true country of origin. Upon learning of the question raised concerning the country of origin, the protestant claims it sent a letter to the seller in Kuwait requesting information on the origin issue. No such letter was included in our files. The protestant states that no response was received and none was expected due to the occupation of Kuwait by Iraqi armed forces at that time. In HQ 656981, however, Customs questioned whether the protestant reasonably believed that the goods were of Kuwaiti origin based on the fact that there were only two legitimate manufacturers in Kuwait of the subject merchandise, neither of whom export to the U.S., and the fact that manufacturer of record had no capability to produce the subject merchandise in commercial quantities. In our view, the above information does not establish by a preponderance of the evidence that the true country of origin could not be determined.

HOLDING:

The protest is denied. The subject merchandise is "restricted" and not within the scope of the term "prohibited" as that term is used in 19 U.S.C. 1558(a)(2).

In accordance with Section 3A(11)(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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