HQ 225781 - Application for Further Review of Protest No. 3501-93-100300; 19 U.S.C. 1592 mitigation decision; Unliquidated entry; Potential loss of revenue - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1996 HQ Rulings > HQ 225368 - HQ 226074 > HQ 225781

Previous Ruling Next Ruling
HQ 225781

September 27, 1995

LIQ-4-01-R:C:E 225781 GOB

CATEGORY: LIQUIDATION

Area Director of Customs
110 S. Fourth Street
Minneapolis, MN 55401

RE: Application for Further Review of Protest No. 3501-93-100300; 19 U.S.C. 1592 mitigation decision; Unliquidated entry; Potential loss of revenue

Dear Sir:

The above-referenced protest was forwarded to this office for further review. We have considered the issues raised by your office and the protestant. Our decision follows.

FACTS:

International Business Machines Corporation ("IBM") protests the liquidation of Entry No. xx-xxxx17-7 ("the subject entry") dated August 8, 1986. It makes the following claims.

It contends that the actual loss of revenue stated in Minneapolis Area Penalty Case No. 91-3501-20000 is binding and that Customs cannot, after settlement of the case via a mitigation decision, claim and bill for a greater amount upon liquidation of one of the entries in that case. IBM maintains that Customs' calculation of the outstanding antidumping duties on the subject entry is incorrect based on a finding of the mitigation decision with respect to the dutiable value of the subject merchandise.

ISSUE:

Whether or not the subject entry was properly liquidated.

LAW AND ANALYSIS:

We note initially that the protest was timely filed under the statutory and regulatory provisions for protests, i.e., 19 U.S.C. 1514 and 19 CFR Part 174.

The evidence of record indicates the following. Minneapolis Area Case No. 91-3501-20000 involved two entries: the subject entry, which was unliquidated at the time of issuance of the Notice of Penalty, March 20, 1991, and at the time of the issuance of the mitigation decision on the supplemental petition, March 9, 1993; and Entry No. xxx-xxxx125 ("the second entry"), which had been liquidated at the time of the issuance of the Notice of Penalty. There was a potential loss of revenue of $76,688.15 with respect to the subject entry and an actual loss of revenue of $80,306.97 with respect to the second entry. During the course of the investigation with respect to the penalty case, IBM tendered $102,845.10 in duties. This amount was calculated using an incorrect dumping margin. IBM did not specify how this tendered amount was to be applied to the two entries.

In a decision dated March 9, 1993 ("the mitigation decision") in response to a supplemental petition submitted by IBM, the Director, International Trade Compliance Division of the Office of Regulations and Rulings remitted the penalty assessed against IBM in Minneapolis Area Case No. 91-3501-20000 "upon the payment of $98,956.83, an amount equal to the domestic value of the merchandise and payment of the unpaid actual loss of revenue." The amount of the actual loss of revenue was not stated in the mitigation decision. Subsequent to this decision, Customs applied the amount of $102,845.10 tendered by IBM during the investigation in the following manner: $80,306.97 was applied to the second entry; the remainder of the tendered amount, $22,538.13 was applied to the subject entry.

By letter dated April 8, 1993, IBM sent to Customs checks in the amounts of $98,956.83 and $33,154.46, for payment of penalty and payment of loss of duty, respectively. By letter dated April 16, 1993, the Area Director responded: "Attached is check number 049760 in the amount of 33154.46 which is being returned. The correct duties will be billed." Customs accepted and deposited the check in the amount of $98,956.83.

Subsequently, Customs liquidated the subject entry, billing IBM $54,150.02 in duties and $50,587.85 in interest. IBM has paid these amounts. The amount of $54,150.02 in duties was determined by subtracting the sum of $22,538.13 (the part of the tendered amount applied to the subject entry, as stated supra) from the potential loss of revenue of $76,688.15. In this protest, IBM contests this liquidation of the subject entry.

As stated supra, the penalty case involved a potential loss of revenue of $76,688.15 on the subject entry and an actual loss of revenue of $80,306.97 on the second entry. The Notice of Penalty contained the following incorrect statements with respect to the loss of revenue: "$54,150.02 - Total Actual Loss"; "ACTUAL LOSS OF REVENUE: $33,154.46"; and "POTENTIAL LOSS OF REVENUE: $123,840.66." These incorrect statements appear to have been made on the basis of an incorrect proration of the tendered amount of $102,845.10 made in the Notice of Penalty based upon the entered value of three invoices (two invoices for the subject entry and one invoice for the second entry). (In fact, there was no loss of revenue with respect to the first invoice listed in the Notice of Penalty for the subject entry.) However, the tendered amount of $102,845.10 was never applied in the manner stated in the Notice of Penalty. As stated supra, after the mitigation decision, Customs applied the amount of $102,845.10 tendered by IBM during the investigation in the following manner: $80,306.97 was applied to the second entry; the remainder of the tendered amount, $22,538.13 was applied to the subject entry. Prior to the mitigation decision, the tendered amount was in a suspense account.

IBM's primary claim is stated thus in its protest:

IBM believes Customs is precluded from initiating any further "collection" action on the entries which were the subject of the District's Penalty Notice and decision if that action is inconsistent with the terms of the Notice and decision.

We find that IBM's primary claim is not substantiated. Penalty cases under 19 U.S.C. 1592 involve liquidated entries and/or unliquidated entries. Stated otherwise, a 19 U.S.C. 1592 penalty case will typically involve: (a) entries where liquidation has become final prior to the commencement of the penalty case, in which case there is an actual loss or revenue; (b) entries where liquidation has not become final prior to the commencement of the penalty case, in which case there is an potential loss or revenue; or (c) certain entries where liquidation has become final prior to the commencement of the penalty case and certain entries where liquidation has not become final prior to the commencement of the penalty case, in which case there is an actual and potential loss of revenue. Actual loss of duties and potential loss of duties are defined in 19 CFR 162.71(a)(1) and (2). The penalty case at issue here falls into category (c) in that there was one liquidated entry ("the second entry") and one entry which was unliquidated at the commencement of the case ("the subject entry"). It is normal procedure for Customs to state that the collection of the actual loss of revenue is "a condition of mitigation" in its mitigation decisions because there is no other mechanism under which the government may collect this actual loss of revenue. Further, in a case where there is a potential loss of revenue, it is normal procedure for Customs to collect that potential loss of revenue in the liquidation process, as Customs has done with respect to the subject entry. Customs typically does not make a statement with respect to the collection of the potential loss of revenue in its mitigation decisions. Because Customs has the full legal ability to collect the potential loss of revenue by a correct liquidation of the entry, it is not necessary to make the collection of the potential loss of revenue a condition of mitigation, as it is with an actual loss of revenue and a liquidated entry. In the subject penalty case, after Customs applied the tendered amount of $102,845.10 as stated supra ($80,306.97 was applied to the second entry (the actual loss of revenue); the remainder of the tendered amount, $22,538.13 was applied to the subject entry (the potential loss of revenue)), the payment of the actual loss of revenue was deemed satisfied. Customs was left to collect the remainder of the potential loss of revenue, $54,150.02, through the liquidation process, as per normal procedure.

The second claim of the protest is that Customs' calculation of the dumping duties is incorrect. In this regard, IBM cites the Notice of Penalty to the effect that IBM had tendered $55,682.59 with respect to the subject entry. Further, IBM maintains that the actual value of the merchandise on the subject entry is not $217,001 but $48,375.88, based upon the statement in the mitigation decision that "the domestic value of the merchandise is the price offered in the second contract at $1.19 each."

We find that IBM's second claim is not substantiated. We have stated supra how the tendered amount of $102,845.10 was applied to the two entries at issue in the penalty case - $80,306.97 was applied to the second entry (the actual loss of revenue); the remainder of the tendered amount, $22,538.13 was applied to the subject entry (the potential loss of revenue), leaving a remaining potential loss of revenue of $54,150.02 to be collected in the liquidation process. As stated supra, the Notice of Penalty contained incorrect statements with respect to the actual and potential losses of revenue. Further, as stated supra, the tendered amount of $102,845.10 was never applied in the manner stated in the Notice of Penalty.

The fact that the Notice of Penalty contained incorrect statements with respect to the loss of revenue is not a basis for finding in IBM's favor on this protest.

The statement in the mitigation decision with respect to the domestic value of the merchandise is pertinent with respect to the mitigated penalty amount of $98,956.83, i.e., the mitigated penalty amount was equal to the domestic value of the merchandise. However, the loss of revenue is not calculated based on the domestic value. It is calculated based on the appraised value of the merchandise. Pursuant to 19 U.S.C. 1401a, the appraised value is the transaction value of the merchandise. The fact that the domestic value was reduced in the course of the consideration of the supplemental petition has no effect upon the transaction value of the merchandise. The domestic value was reduced based on United States market conditions during the pertinent time period. The transaction value, and the corresponding calculation of the loss of revenue, remains unchanged.

Based upon these findings, we determine that the subject entry was properly and correctly liquidated.

HOLDING:

As detailed supra, the protest is DENIED.

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, the Freedom of Information Act and other public access channels.

Sincerely,

John Durant
Director

Previous Ruling Next Ruling