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HQ 225832




June 6, 1996

ENT-1-03/BON-2-RR:IT:EC 225832 CC

CATEGORY: ENTRY

Port Director
U.S. Customs Service
477 Michigan Avenue
Detroit, MI 48226-2568

RE: Application for further review of Protest No. 3801-94- 103714; Notice of Redelivery; Pork bellies; U.S.D.A. inspection; Who is liable for failure to redeliver

Dear Sir or Madam:

The above-referenced protest was forwarded to this office for further review. We have considered the facts and issues raised, and our decision follows.

FACTS:

The merchandise the subject of this protest consists of pork bellies. The subject merchandise was shipped by vehicle from Canada. On April 13, 1994 the subject merchandise was entered by the protestant as the importer of record and released in Detroit; no United Stated Department of Agriculture (U.S.D.A.) inspection of the subject goods occurred. The protestant, as principal, executed a continuous bond securing the entry of the pork bellies. On May 31, 1994, Customs issued a Notice to Redeliver, Customs Form (CF) 4647, citing U.S.D.A. regulation 327.6 as the reason for the redelivery request. Also, remarks included in the redelivery notice state as a reason for the request, "Failed to report for U.S.D.A. Import Inspection."

The protest was filed on July 13, 1994. The protestant claims that the carrier it contracted with to transport the goods was responsible for ensuring that the goods were inspected by the U.S.D.A. The protestant claims that the carrier's failure to stop for U.S.D.A. inspection was an irregular delivery, in violation of section 18.8 of the Customs Regulations (19 CFR 18.8), making the carrier responsible for liquidated damages. The protestant, who was the importer of record, claims it gave clear, written instructions to the carrier to clear the shipment with both Customs and the U.S.D.A. In addition, the protestant claims that a Customs inspector told the carrier that the shipment did not require U.S.D.A. inspection. Consequently, the protestant claims that any liquidated damages for failure to redeliver are the responsibility of the carrier, not the protestant.

In lieu of a meeting, a further submission was made on May 3, 1996, on behalf of the protestant, which explained in more detail the protestant's position. The export procedures employed by the protestant were described in more detail in this submission. For example, it was stated that the protestant notifies the U.S.D.A. at Detroit of the impending arrival of its shipments. Included with the submission is a copy of the purported written notification to the U.S.D.A. In addition, this submission provided further information on how the protestant educates its carriers as to their responsibilities. The protestant states that it provides instruction sheets to drivers for entering merchandise into the U.S., which include instructions to stop at Customs and then at the Food Safety Inspection Service. The driver must read and sign these sheets. Included with the submission was a copy of the signed instruction sheet for the subject entry. In addition, the protestant argues in the submission that the notice to redeliver was improperly issued.

The protestant also protests "the classification, value and amount of duties" and claims "that a refund of the amounts deposited at the time of entry or as liquidated should issue for any merchandise ultimately refused admission."

ISSUE:

Whether the importer or the carrier is liable for damages for the failure to redeliver the subject merchandise?

LAW AND ANALYSIS:

Initially, we note that a demand for redelivery is a protestable matter pursuant to 19 U.S.C. 1514(a)(4). In addition, the subject protest was timely filed in accordance with 19 U.S.C. 1514(c)(3)(B).

The regulations concerning the redelivery of merchandise are contained in 19 CFR 141.113 and 113.62. Paragraph (c) of section 141.113 states the following:

If at any time after entry the port director finds that any merchandise contained in an importation is not entitled to admission into the commerce of the United States for any reason not enumerated in paragraph (a) [merchandise not legally marked] or (b) [textiles and textile products] of this section, he shall promptly demand the return to Customs custody of any such merchandise which has been released.

Section 113.62 of the Customs Regulations (19 CFR 113.62) contains the basic importation and entry bond conditions. Paragraph (d) of this provision states the following:

If merchandise is released conditionally from Customs custody to the principal before all required evidence is produced, before its quantity and value are determined, or before its right of admission into the United States is determined, the principal agrees to redeliver timely, on demand by Customs, the merchandise released if it:

(1) Fails to comply with the laws or regulations governing admission into the United States;

(2) Must be examined, inspected, or appraised as required by 19 U.S.C. 1499; ...

The protestant cites several statutes and regulations in its protest, e.g., 9 CFR 327.6, 9 CFR 327.7, and 21 U.S.C. 610. These regulations and statute provide for the inspection of certain merchandise, and as stated by protestant provide that "movement, or transportation, of the goods is prohibited unless domestic inspection of the products have been made."

Thus, the protestant's major argument is not that the goods were not subject to inspection and therefore the issuance of the notice of redelivery is invalid. Instead, the protestant claims that the carrier is the party who should be held liable for the failure to redeliver, since it was the carrier who was responsible for the merchandise not being examined by the U.S.D.A. In support of this claim, the protestant argues that it instructed the carrier to deliver the merchandise for inspection and the carrier failed to do so.

To protect the government from losses as a result of noncompliance with Customs regulations, Customs normally requires an importer to file a bond with Customs. As stated in T.D. 84-213:

As a part of the entry documentation the importer, consignee, or an authorized agent usually is required to file a bond with Customs. The bond, among other things, guarantees that proper entry summary with payment of estimated duties and taxes when due, will be made for imported merchandise and that any additional duties and taxes subsequently found to be due will be paid. The bond also guarantees redelivery of imported merchandise to Customs custody if found not to comply with applicable laws and regulations.

One consolidated bond is used for most purposes, including entry of merchandise: CF 301. The terms of the CF 301 bind the principal(s) and surety(ies) named on the bond to the government in the amounts set forth on the bond. In addition, the CF 301 incorporates part 113, subpart G, of the Customs Regulations. As stated above, those regulations require the principal to redeliver merchandise on demand by Customs. Also, they state that the principal and surety agree to pay any additional duties, taxes, and charges imposed. 19 CFR 113.62(a)(ii). In several court cases, it has been found that the principal and surety were jointly and severally liable for damages for breach of a Customs bond for the failure to redeliver merchandise upon a proper demand by Customs. See, e.g., United States v. Peerless Insurance Company, 12 CIT 1182, 703 F. Supp. 955 (1988), and United States v. Cocoa Berkau, Inc., 16 CIT 270, 789 F. Supp. 1160 (1992).

The issue here is who is liable for the failure to redeliver the subject merchandise. Since, as stated above, the principal and surety of the bond used to secure entry of the merchandise are liable, the question is who was the principal of the bond in this case.

A continuous bond secured entry of the subject merchandise. Customs records show that listed as the principal on the bond is the protestant, as the importer. Consequently, we find that the protestant is liable for the failure to redeliver the subject merchandise.

The protestant claims that the carrier is responsible for redelivery under section 18.8 of the Customs Regulations (19 CFR 18.8). The protestant also cites 50 FR 49037 (1985), T.D. 85-191, in support of its claim, which was the final rule amending Part 18 of the Customs Regulations at that time. Part 18 of the Customs Regulations provides for transportation in bond entries; section 18.8 provides for a bonded carrier's liability. Customs records do not show, nor has the protestant presented any evidence to show, that the carrier was a bonded carrier that made a transportation in bond entry for the subject merchandise. Consequently, the protestant's claim that the carrier is liable for any damages due to the failure to redeliver, in accordance with 19 CFR 18.8, is without merit.

Thus, this matter is similar to Henry Mast Greenhouses, Inc. v. United States, Slip Op. 95-198 (Ct. Int'l Trade Dec. 4, 1995). In that case the plaintiff argued it was not liable for the payment of duty because it was not the importer; instead, the plaintiff argued, its subsidiary was the importer. The court decided against the plaintiff, stating the following:

...[T]he official documents name Plaintiff as the importer of record and the consignee. Plaintiff is named as the principal on the bond, Plaintiff's importer number appears on the bond, and the merchandise was invoiced directly from the Dutch manufacturer to Plaintiff's place of business. More telling, the American subsidiary does not appear anywhere on the official documents. As ubiquitous as the Plaintiff is on the entry documents, the American subsidiary is conspicuously absent. Consequently, the American subsidiary cannot, under the facts of this case, be the importer for purposes of duty liability.

As shown above, the protestant is listed as the importer of record in the entry documents and in Customs records. The bond lists the protestant as liable for the failure to redeliver merchandise, among other things. We have no evidence before us that lists the carrier, in any entry documents or bond, as being liable for the failure to redeliver. Consequently, the protestant is liable for the failure to redeliver.

The protestant also argues that the notice to redeliver was invalid because the goods were not found to be ineligible for admission into domestic commerce. The reason the goods were not found to be ineligible for admission, the protestant argues, is that the Customs official at the port of entry waived the requirement that the goods be inspected.

Notice for redelivery was sent to the protestant because it failed to have the subject goods inspected by the U.S.D.A. pursuant to 9 CFR 327.6. Consequently, Customs could not waive the requirement for inspection; only U.S.D.A. could waive the requirement for inspection. Although the protestant has argued that it notifies the U.S.D.A. of the impending arrival of shipments, and has provided such a written notice to the U.S.D.A. for the subject entry, no evidence has been provided that the U.S.D.A. waived the inspection. The protestant's argument, therefore, that the inspection was waived and the notice of redelivery was invalid is without merit.

Finally, the protestant requests in the protest "a refund of the amounts deposited at the time of entry or as liquidated." The subject merchandise was entered under subheading 0203.19.40 of the Harmonized Tariff Schedule of the United States (HTSUS), a duty-free provision. Customs records show that no duties were deposited upon entry, nor were any duties due or paid at liquidation. Therefore, there can be no duties to refund, and this claim is denied.

HOLDING:

The protestant is liable for any damages for the failure to redeliver the subject merchandise upon demand by Customs. The carrier did not make a transportation in bond entry and was not bonded; therefore, the carrier has no liability for failure to redeliver. Therefore, the protest should be 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, Freedom of Information Act and other public access channels.

Sincerely,

Director, International Trade

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