HQ 546226 - Internal Advice 50/95; suspension of liquidation; 19 U.S.C. 1504(b); galvanized steel coils; 7225.90.00; Note 1(f), Chapter 72; titanium content; laboratory report; Customs Directive 099 3820-002; antidumping duty applicable at time of entry; A-427-808-000; transaction value; price actually paid or payable; terms of sale; freight costs; HRLs 544538, 543827, 542467 - United States International Trade Commision Rulings

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HQ 546226

March 25, 1996

RR:IT:VA 546226 KCC

CATEGORY: LIQUIDATION CLASSIFICATION VALUATION

TARIFF NO.: 7210.39.00

Port Director
U.S. Customs Service
610 S. Canal Street
Chicago, Illinois 60607

RE: Internal Advice 50/95; suspension of liquidation; 19 U.S.C. 1504(b); galvanized steel coils; 7225.90.00; Note 1(f), Chapter 72; titanium content; laboratory report; Customs Directive 099 3820-002; antidumping duty applicable at time of entry; A-427-808-000; transaction value; price actually paid or payable; terms of sale; freight costs; HRLs 544538, 543827, 542467

Dear Port Director:

This is in regard to your memorandum of October 11, 1995, under cover of which you forwarded a request for internal advice (IA 50/95), dated May 18, 1995, submitted by Ross and Hardies on behalf of Francosteel Corporation, concerning whether suspension of liquidation was proper, the tariff classification of galvanized steel coils, the proper application of antidumping duties to galvanized steel coils and the appraisement of the merchandise imported into the U.S. A memorandum from Chief, Machinery Branch, National Commodity Specialist Division, New York Seaport, dated December 18, 1995, was taken into consideration in rendering this decision.

FACTS:

On May 10, 1993, Francosteel Corporation, the importer, entered various steel products, including galvanized steel coils into the U.S. At entry, Francosteel classified the galvanized steel coils under subheading 7225.90.00, Harmonized Tariff Schedule of the United States (HTSUS), as other alloy galvanized steel coils based on the submitted mill analysis of the galvanized steel coils. On October 8, 1993, you issued a Notice of Action (Customs Form (CF) 29), stating that pursuant to the submitted mill analysis, the galvanized steel coils entered under subheading 7225.90.00, HTSUS, were properly classified under subheading 7210.39.00, HTSUS, as electrolytically galvanized carbon steel coils. Therefore, pursuant to the Notice of Preliminary Determination in Case No. A-427-808-000, the galvanized steel coils were subject to antidumping duties of 10.58%. Pursuant to the instructions in A-427-808-000 and ?504, Tariff Act of 1930, as amended (19 U.S.C. ?1504), you then suspended liquidation of this entry on October 12, 1993, and notified Francosteel of the suspension on October 16, 1993.

In a letter to you dated October 20, 1993, Francosteel stated that Customs mistakenly interpreted the mill analysis. The mill tests submitted to Customs placed the titanium content at levels greater than 0.05% and, therefore, the galvanized steel coils were classified, as entered, under subheading 7225.90.00, HTSUS. Thus, Francosteel stated the galvanized steel coils were not subject to antidumping duties pursuant to A-427-808-000. Francosteel requested that Customs withdraw the October 8, 1993 Notice of Action. On October 26, 1993, you issued a Request for Information (CF 28) which acknowledged Francosteel's letter of October 20, 1993, and stated that you overlooked the titanium content in the mill analysis. However, you requested a sample of the galvanized steel coils for Customs analysis. Francosteel submitted a sample, packing list and mill tests for the sample to Customs on November 11, 1993. Customs laboratory report 3-94-30311-001 dated December 28, 1993, found that the submitted sample, described as one piece 6" x 6" steel sheet, was "...an unalloyed galvanized steel sheet containing 0.045 percent titanium by weight." Thereafter, on April 27, 1995, you issued a Notice of Action (CF 29), stating that:

1. Based on Customs laboratory report 3-94-30311-001, the galvanized steel coils were classified under subheading 7210.39.00, HTSUS;
2. The galvanized steel coils were subject to antidumping duties of 39.40% pursuant to A-427-808-000; and 3. The merchandise was appraised at the invoiced total "FOB Amount"...for the lot, net, packed because no documentary evidence was available to deduct any charges from the FOB amount.

The galvanized steels coils were produced by Sollac S.A., France and sold to Francosteel by Daval S.A., France. The invoice from Daval to Francosteel dated April 15, 1993, states that the terms of sale and payment/invoicing condition are "C.F. LINER TERMS LANDED DUTY UNPAID"with the port of destination listed as "CHICAGO (USA GRANDS LACS)." Page 3 of the invoice lists a total FOB Amount with the addition of a Freight Amount for a total invoice amount. Francosteel asserts that the appraised value of the entry is the total invoice value with deductions for "Ocean Freight" and "Border-Antwerp." This additional break down of the total invoice price is also found on page 3 of the invoice. You appraised the entry at the "FOB Amount" for the lot, net, packed because no documentary evidence was available to deduct any charges from the FOB amount.

Francosteel contends that it is not required to deposit either increased duties or estimated antidumping duties for the galvanized steel coils because the subject entry was deemed liquidated as entered on its first anniversary pursuant to ?504 of the Tariff Act of 1930, as amended (19 U.S.C. ?1504). Francosteel states that there was no lawful extension or suspension of liquidation and, therefore, the entry was deemed liquidated at the rate of duty, value, quantity, and amount of duties asserted at the time of entry by Francosteel.

Francosteel does not deny that it received notification of the liquidation suspension on October 16, 1993. However, Francosteel asserts that there was no legal basis for suspension of the liquidation. Francosteel states that suspension of liquidation was based upon Customs belief that the galvanized steel coils were covered by the Notice of Preliminary Determination in Case No. A-427-808-000. See, CF 29, dated October 8, 1993. Francosteel states that the CF 29 change in classification was based on Customs error in interpreting the mill analysis submitted at entry. Francosteel states that Customs did not change classification of the galvanized steel coils until it issued another CF 29 dated April 27, 1995, after it requested the sample in the CF 28 and after the December 28, 1993, laboratory analysis of the submitted sample. Francosteel states that the CF 28 dated October 26, 1993, rescinded the CF 29 dated October 8, 1993. Therefore, Francosteel contends that Customs did not change the classification of the galvanized steel coils until April 27, 1995. Therefore, the change in classification did not occur until after the subject entry had been deemed liquidated, as entered, by operation of law.

ISSUE:

1. Whether liquidation of the entry was properly suspended or was the entry deemed liquidated by operation of law pursuant to 19 U.S.C. ?1504?

2. Are the galvanized steel coils classified under subheading 7210.39.00, HTSUS, as electrolytically galvanized carbon steel coils, or under subheading 7225.90.00, HTSUS, as other alloy galvanized steel coils?

3. Should the antidumping duty deposit be the 10.58% rate in effect when the merchandise was entered into the U.S.?

4. Whether the imported merchandise is appropriately appraised at the FOB Amount?

LAW AND ANALYSIS:

1. Suspension of Liquidation

Liquidation of an entry of merchandise constitutes the final computation by Customs of all duties accruing on that entry. As provided in ?504, Tariff Act of 1930, as amended (19 U.S.C. from the date of entry or final withdrawal from warehouse, that entry "shall be deemed liquidated at the rate of duty, value, quantity, and amount of duties asserted at the time of entry by the importer of record." Pursuant to 19 U.S. C. ?1504(b), Customs may extend this one year period if:

(1) information needed for the proper appraisement or classification of the merchandise is not available to the appropriate customs officer;

(2) liquidation is suspended as required by statute or court order; or

(3) the importer of record requests such extension and shows good cause therefore.

Customs must provide the importer with notice of extension. Any entry not liquidated at the expiration of four years from the date of entry or withdrawal from warehouse is deemed liquidated at the rate of duty, value, quantity, and amount of duty asserted at the time of entry by the importer, unless liquidation continues to be suspended.

Francosteel does not deny that it received notice of suspension of liquidation on October 16, 1993. Moreover, a search of Customs computer records indicates that liquidation of the subject entry was suspended on October 12, 1993, and notice of the suspension was issued on October 16, 1993. However, Francosteel asserts that there was no legal basis for suspension of the liquidation. Francosteel states that suspension of liquidation was based upon Customs belief that the galvanized steel coils were covered by the Notice of Preliminary Determination in Case No. A-427-808-000. See, CF 29, dated October 8, 1993. Francosteel states that the CF 29 notice of change in classification was based on Customs error in interpreting the mill analysis submitted at entry. Francosteel states that Customs did not change classification of the galvanized steel coils until it issued another CF 29 dated April 27, 1995, after it requested the sample in the CF 28 and after the December 28, 1993, laboratory analysis of the submitted sample. Francosteel states that the CF 28 dated October 26, 1993, rescinded the CF 29 dated October 8, 1993. Therefore, Francosteel contends that Customs did not change the classification of the galvanized steel coils until April 27, 1995. Therefore, the change in classification did not occur until after the subject entry had been deemed liquidated, as entered, by operation of law.

In this situation, Customs issued a CF 29 on October 8, 1993, notifying Francosteel that, based on the mill analysis, the galvanized steel coils were classified under subheading 7210.39.00, HTSUS, and, therefore, subject to antidumping duties pursuant to A-427-808-000. Thereafter, on October 16, 1993, Francosteel was notified that liquidation of the subject entry was suspended. It is our position that suspension of liquidation in this instance is proper.

Liquidation of the entry was suspended based on Customs position that the galvanized steel coils were subject to A-427-808-000. Even though Customs original interpretation of the mill analysis submitted at entry was incorrect, Customs laboratory report later determined that its classification of the galvanized steel coils as set forth in the October 8, 1993, CF 29 was correct. We know of no law or regulation which states that when a CF 28 Request for Information is issued any proceeding CF 29 Notice of Action is rescinded. Customs often issues various documents to ascertain the correct classification, value, duty, etc. Moreover, we note that Francosteel's October 20, 1993, letter to Customs, regarding the mill analysis, specifically requested Customs to withdrawal the CF 29 Notice of Action. Customs did not actively withdrawal the CF 29, but requested further information to ascertain the tariff classification of the galvanized steel coils. Although Customs initial basis for a change in classification was based on a misinterpretation of the submitted mill analysis, its basis for a change in classification was correct pursuant to the ensuing laboratory report. Thus, Customs basis for suspending liquidation of the entry was correct and lawful. It is our position that there is no grounds for declaring the suspension unlawful.

2. Classification

The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation (GRIs). GRI 1, HTSUS, states in part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes...." The competing subheadings are:

7210.39.00 Flat-rolled products of iron or nonalloy steel, of a width of 600 mm or more, clad, plated or coated...Electrolytically plated or coated with zinc...Other.

7225.90.00 Flat-rolled products of other alloy steel, of a width of 600 mm or more...Other.

Note 1(f), Chapter 72, HTSUS, defines "other alloy steel" as:

Steels not complying with the definition of stainless steel and containing by weight one or more of the following elements in the proportion shown:...

- 0.05 percent or more of titanium....

In this case there is no question, that if the galvanized steel coils containby weight 0.05% or more of titanium, they are classified under subheading 7225.90.00, HTSUS. However, if they contain by weight less than 0.05% titanium, the galvanized steel coils are classified under subheading 7210.39.00, HTSUS.

Francosteel has submitted the mill analysis showing that the galvanized steel coils contain over 0.05% titanium and a laboratory analysis no. 95-1306 from Stillwell & Gladding dated May 10, 1995, stating that a "STEEL SHEET", "FILE NO: S/S FEDERAL OTTAWA", "SAMPLE MARKED 'G 61988'", "RECEIVED ON MAY 2, 1995" contained "TITANIUM, Ti, by Wt. 0.052%." Francosteel states that the sample tested by Stillwell and Gladding is a parallel sample of that submitted to Customs on November 11, 1993. However, Customs laboratory report 3-94-30311-001 dated December 28, 1993, found that the submitted sample was "...an unalloyed galvanized steel sheet containing 0.045 percent titanium by weight."

In cases such as this, where the internal advice applicant submits independent reports that differ from the Customs laboratory report, the Customs laboratory report cannot be disregarded and, therefore, takes precedence over the independent reports. Customs Directive 099 3820-002 dated May 4, 1992. In administering the HTSUS, Customs must be consistent while classifying the same type of merchandise entering the U.S. In order to consistently classify steel products according to their chemical content, the same laboratory analysis must be used throughout Customs. Customs cannot rely on outside reports which may or may not utilize different testing methods and still remain consistent in its tariff classification. Thus, the galvanized steel coils are classified under subheading 7210.39.00, HTSUS, as electrolytically galvanized carbon steel coils.

Francosteel contends that the sample tested by Customs laboratory is not from the imported galvanized steel coils because the sample Francosteel provided was a one foot by one foot dimension piece. The sample tested by Customs is described on the laboratory report as "one piece 6" x 6" steel sheet." Francosteel admits that Customs could have cut the submitted sample into a smaller piece, but finds it hard to imagine how your office converted a one foot square sample into a six inch square piece. You state that the one foot square sample was cut into four quarters producing for 6" x 6" piece samples. You also state that you are still in possession of the remaining three 6" x 6" piece sample. Therefore, it appears that the sample tested is from the sample submitted by Francosteel.

3. Antidumping Duties

Francosteel states that should Customs find that the galvanized steel coils are classified under subheading 7210.39.00, HTSUS, and therefore, subject to antidumping duties pursuant to A-427-808-000, the antidumping duties should be 10.58% and not 39.40% as requested in the April 27, 1995, Notice of Action. Francosteel states that they should be allowed to deposit antidumping duties at the rate in effect at the time of entry. The entry at issue was made between the initiation of investigation and the issuance of a final order. Therefore, under the rules governing the deposit of estimated antidumping duties, entries made during this period are subject to a deposit rate of 10.58%.

You agreed that the rate of duty for the antidumping duties is the 10.58% pursuant to e-mail message 3043113 dated February 11, 1993. Therefore, Francosteel should deposit antidumping duties at 10.58% and not 39.40% as requested in the April 27, 1995 Notice of Action.

4. Appraisement

The preferred method of appraisement is transaction value which is defined by ?402(b)(1) of the TAA (19 U.S.C. ?1401a(b)) as "the price actually paid or payable for the merchandise when sold for exportation to the United States..." plus certain additions specified in ?402(b)(1) (A) through (E). The term "price actually paid or payable" is defined in ?402(b)(4)(A) of the TAA as:

...the total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller.

In this situation, the terms of sale as listed on the invoice are "C.F. LINER TERMS LANDED DUTY UNPAID"with the port of destination listed as "CHICAGO (USA GRANDS LACS)." C.F. or "Cost and Freight (...named port of destination)" term means that the seller must pay the costs and freight necessary to bring the goods to the named port of destination. See, International Chamber of Commerce, Incoterms, at 44 (1990). Thus, the total invoice price includes the costs for freight. The invoice does distinguish the freight costs from the total invoice price.

Freight costs pertaining to the international movement of merchandise from the country of exportation are, to the extent included in the price actually paid or payable, to be excluded from the total payment made for imported merchandise appraised under transaction value. The costs associated with freight are not the estimated costs, but the actual cost paid to the freight forwarder, transport company, etc.

In Headquarters Ruling Letter (HRL) 544538, issued December 17, 1992, Customs acknowledged that pursuant to ?402(b)(4)(A) the cost of international transportation is to be excluded from the price actually paid or payable for imported merchandise. However, Customs explained that in determining the cost of the international transportation or freight, it always looked to documentation from the freight company, as opposed to the documentation between the buyer and the seller which often contains estimated freight costs or charges. In essence, Customs requires documentation from the freight company because the actual cost, and not the estimated charges, for the freight is the amount that Customs excludes from the price actually paid or payable. See also HRL 543827, issued March 9, 1987, in which Customs determined that the proper deduction from the price actually paid or payable for marine insurance was the amount actually paid to the insurance company by the seller, as opposed to the amount paid by the related importer/buyer; and HRL 542467 dated August 13, 1981.

In this case, the freight costs are included in the price actually paid or payable for the imported merchandise. The actual freight costs, not the estimated freight costs, are to be excluded from the price actually paid or payable in determining transaction value. The file does not contain any documentation, such as contract between the seller and shipping company, an invoice from the shipping company and confirmation of payment of the actual freight cost. Provided that documentation is available which establishes the actual freight costs, these costs should be deducted from the total invoice price in determining transaction value.

It appears that Francosteel is also asserting that a deduction for a "Border-Antwerp" cost should be deducted from the total invoice price. However, Francosteel has not provided any evidence of, or stated what is the "Border-Antwerp" cost. Therefore, we find that insufficient evidence has been presented to deduct the "Border-Antwerp" cost from the price actually paid or payable in determining transaction value.

HOLDING:

There was a proper suspension of liquidation of the subject entries pursuant to 19 U.S.C. 1504(b).

The galvanized steel coils are classified under subheading 7210.39.00, HTSUS, as electrolytically galvanized carbon steel coils. Based on this classification, the galvanized steel coils are subject to 10.58% antidumping duties pursuant to A-427-808-000.

The actual cost for freight is to be excluded from the price actually paid or payable for the imported merchandise. Francosteel has proffered insufficient evidence to establish a deduction for the "Border-Antwerp" cost from the price actually paid or payable in determining transaction value.

This decision should be mailed by your office to the internal advice requester 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, Freedom of Informational Act and other public access channels.

Sincerely,

Acting Director
International Trade Compliance

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