HQ 226263 - Protest 4101-95-100206; Antidumping Duties; Interest; Protestability Under 19 U.S.C. 1514; Timken Co. v. United States, 15 CIT 526 (1991); 16 CIT 999 (1992); 37 F. 3d 1470 (Fed. Cir. 1994); American Hi-Fi International, Inc., v. United States, CIT Slip Op. 96-121; 19 U.S.C. 1514 - United States International Trade Commision Rulings

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HQ 226263

December 10, 1996

LIQ-4-01/ENT-1-01/PRO-2-02-RR:IT:EC 226263 PH

CATEGORY: LIQUIDATION

Port Director
U.S. Customs Service
6747 Eagle Road
Middleburg Heights, Ohio 44130

RE: Protest 4101-95-100206; Antidumping Duties; Interest; Protestability Under 19 U.S.C. 1514; Timken Co. v. United States, 15 CIT 526 (1991); 16 CIT 999 (1992); 37 F. 3d 1470 (Fed. Cir. 1994); American Hi-Fi International, Inc., v. United States, CIT Slip Op. 96-121; 19 U.S.C. 1514

Dear Sir or Madame:

The above-referenced protest was forwarded to this office for further review. Our decision follows.

FACTS:

According to the file and Customs records, on October 29 and December 3, 1981, the protestant entered certain merchandise (tapered roller bearings) from Japan. According to entry documentation in the file, the importer of record was Nissho-Iwai American Corporation, the seller/shipper (and exporter, insofar as the records indicate the identity of the exporter) was Nissho-Iwai Corporation in Tokyo, Japan, and the manufacturer was Kawasaki Heavy Industries, Ltd., in Tokyo. The protestant states that "the importer was not required to post a cash deposit for estimated duties with these entries ...." According to Customs records, antidumping duties were not deposited at the time of entry.

The merchandise under consideration was the subject of a finding of antidumping (Treasury Decision 76-227, 41 F.R. 34974, August 18, 1976) (for a "comprehensive history" (Timken Co. v. United States, 16 CIT 429, 430, 795 F. Supp. 439 (1992)) of this antidumping matter, see Koyo Seiko Co., Ltd. v. United States, 16 CIT 366, 796 F. Supp. 517 (1992), and NSK Ltd. v. United States, 16 CIT 401, 794 F. Supp. 1156 (1992)). In a Notice of Preliminary Results of Administrative Review and Tentative Revocation in Part of Antidumping Finding (46 F.R. 43864, September 1, 1981), the International Trade Administration, Department of Commerce, preliminarily determined that an antidumping margin of 16.92% existed for Nissho-Iwai Co., Ltd. for the period April 1979 through July 1980 and an antidumping margin of 0 (zero) existed for Kawasaki Heavy Industries, Ltd. For the period October 1977 through July 1980. Also, according to this notice, "... as required by ? 353.48(b) of the Commerce Regulations, a cash deposit based upon the most recent of the margins calculated above shall be required on all shipments of tapered roller bearings ... entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results ... Firms for which review is still pending will be subject to the existing bond requirements." In a Notice of Final Results of Administrative Review of Antidumping Finding (49 F.R. 8976, March 9, 1984, Case A-588-054), the Department of Commerce gave notice of the final results of its review. The same margins as were preliminary determined to exist for Nissho-Iwai Co., Ltd., and Kawasaki Heavy Industries, Ltd. were found to exist for the same periods listed in the September 1, 1981, notice, and a cash deposit of estimated antidumping duties based upon the margins was required on all shipments entered, or withdrawn from warehouse, for consumption on or after the date of the notice.

Subsequently, the Department of Commerce sent Customs instructions regarding the assessment of antidumping duties on the merchandise under consideration and liquidation of entries of the merchandise. These instructions were forwarded to Customs field offices by a telex dated October 28, 1986 (Antidumping Duties Ins 86-314). According to the instructions, "[t]his telex constitutes the immediate lifting of suspension of liquidation of entries for the merchandise and periods listed above [the list is of "manufacturer[s]/exporter[s]"; the period for Nissho Iwai is August 1980 through July 1985; Kawasaki is not listed] ...."

Also according to the instructions:

The assessment of antidumping duties is subject to the provisions of section 778 of the Tariff Act, which requires interest on overpayments or underpayments of amounts deposited as estimated antidumping duties. The rate at which such interest is payable for any period is the rate in effect under section 6621 of the Internal Revenue Code of 1954 for such periods. The interest shall be calculated from the date of payment of estimated duties through the date of liquidation only for those entries made after January 1, 1980.

On January 10, 1995, a Notice of Action (CF29) was issued for one of the entries under consideration. In the Notice of Action, Customs advised that liquidation instructions on the merchandise had been received but that no reimbursement certificate had been received for the entry and that unless one was received, the entry would be liquidated at double the antidumping duties plus interest from the date of December 16, 1981. By letter of January 23, 1995, a reimbursement certificate for both entries was sent to Customs.

According to Customs records, both protested entries were liquidated on February 17, 1995, with antidumping duties totaling (for both entries) $10,179.36 and interest totaling (for both entries) $31,565.35. According to Customs records, a bill was issued for this amount on the same date (February 17, 1995). The protest under consideration was filed with Customs on May 17, 1995. The protest is against the assessment of interest on the protested entries (the amount of duty assessed is not protested). The protestant cites a Federal Register notice (59 F.R. 56035, 56037, November 10, 1995), in which the Department of Commerce stated that "... because we required cash deposits for the first time on entries of merchandise manufactured by Koyo and NSK on June 1, 1990, interest will only be collected or refunded on under- or overpayments of cash deposits on entries after that date", and Timken Company v. United States, 15 CIT 526, 777 F. Supp. 20 (1991), affirmed, 37 F. 3d 1470 (Fed. Cir. 1994). On the basis of these cases, the protestant argues that Customs "... cannot assess interest on the two [protested] entries ... since the [Department of Commerce] did not require cash deposits of estimated duties for these entries."

Further review was requested and granted.

ISSUE:

May the protest in this case be granted?

LAW AND ANALYSIS:

Initially, we note that the protest was timely filed (i.e., within 90 days of the date of the bill for interest; see 19 U.S.C. 1514(c)(3) and New Zealand Lamb Co., Inc. v. United States, 40 F. 3d 377, 382 (Fed. Cir. 1994), "That decision [i.e., Customs billing of New Zealand Lamb for interest], by virtue of limitations period").

In regard to the protestability under 19 U.S.C. 1514 of this matter, subsection (c)(2) of section 1514 provides that protests may be filed with respect to merchandise which is the subject of a decision specified in subsection (a) of section 1514. The decisions specified in subsection (a) of section 1514 are "[with certain exceptions], decisions of the Customs Service, including the legality of all orders and findings entering into the same, as to [seven kinds of decisions are listed] ...." Thus, to be protestable under section 1514, a decision must be a "decision of the Customs Service."

Generally, we have held that the role of Customs in the antidumping process is "... simply to follow Commerce's instructions in collecting deposits of estimated duties and in assessing antidumping duties, together with interest, at the time of liquidation" (ruling HQ 225382, July 3, 1995; see also, Mitsubishi Electronic America Inc. v. United States, 44 F. 3d 973 (Fed. Cir. 1994); Nichimen America, Inc. v. United States, 9 Fed. Cir. (T) 103, 938 F. 2d 1286 (1991)). However, if Customs fails to follow the instructions of the Department of Commerce, that failure may be subject to protest under 19 U.S.C. 1514 (see, e.g., ABC International Traders, Inc., v. United States, CIT Slip Op. 95-97 (May 23, 1995) "... claims [that Customs erroneously liquidated certain entries and failed to follow Commerce's liquidation instructions] may be brought before the court under 28 U.S.C. ? 1581(a) (1988), after denial of protests by Customs" (vol. 29, no. 24, page 51, 54-55, Customs Bulletin and Decisions, June 14, 1995)). See also, in this regard, American Hi-Fi Inter- national, Inc., v. United States, CIT Slip Op. 96-121 (August 2, 1996) ("[j]urisdiction for actions challenging Customs' failure to follow Commerce's actual liquidation instructions ... is found under 28 U.S.C. 1581(a)" (vol. 30, no. 34, page 56, 62, Customs Bulletin and Decisions, August 21, 1996).

The liquidation instruction relating to interest is quoted in the FACTS portion of this ruling. The instruction, as the Court in American Hi-Fi stated about a similar instruction, "simply mirrors the statute ..." (ibid, at page 63).

In its review of the similar instruction regarding interest, the Court in American Hi-Fi asked the question: "... what did the liquidation instruction mean and what does 19 U.S.C. ? 1677g require" (ibid, at page 62). As stated above, the Court conclud- ed that the instruction "simply mirrors the statute [so that] the issue remains, does that statute [section 1677g] require interest if a dumping margin is not yet found for particular goods, but a duty order or its equivalent is outstanding" (ibid, at page 63). The Court stated that the statute can only be understood in the context of the entire statutory scheme, citing Timken Co. v. United States, 37 F. 3d 1470, 1474 (Fed. Cir. 1994), which affirmed the CIT's interpretation of section 1677g in Timken Co. v. United States, 15 CIT 526, 777 F. Supp. 20 (1991), and 16 CIT 999, 809 F. Supp. 121 (1992).

The Timken decisions, supra, make clear that the instructions of the Department of Commerce were that interest should only be assessed when cash deposits were required. See 15 CIT at 534, ("Plaintiff fails to note the crucial element in this case, i.e., that while section 1677g contemplates the existence of cash deposits, no actual deposits were made herein"). In the Court of Appeals decision, the Court notes that this was the determination of the Department of Commerce ("ITA determined that amounts deposited' in section 1677g(a) refers only to cash deposits of estimated antidumping duties, and not to securities such as posted bonds" (37 F. 3d at 1472)). The CIT decision and ITA determination were almost all with regard to entries before the enactment of section 1677g(a), and in the 1992 CIT Timken case (16 CIT 999), the plaintiff contended that entries after the enactment of section 1677g(a) (effective January 1, 1980 (section 107, Public Law 93-39)) should be subject to interest under the amended law. The CIT rejected this contention, stating that "... the statutory language is clear on its face that interest is collectable only on deposits and not on bonds" and that "... ITA's determination on this issue was reasonable, supported by substantial evidence and in accordance with law and, therefore, is affirmed" (16 CIT at 1001).

The Court of Appeals reviewed "... de novo the trial court's determination that amounts deposited' [in 19 U.S.C. 1677g] refers only to cash deposits, not to bond amounts" (37 F. 3d at 1474). After reviewing section 1677g in the context of the statutory scheme set forth in the 1979 Act, and noting the different treatment of cash deposits posted pursuant to 19 U.S.C. 1673b(d)(2) during the pre-antidumping order, investigative phase (19 U.S.C. 1673f(a) (interest not provided for)), as compared to the treatment of cash deposits required to be posted by an antidumping order (19 U.S.C. 1673f(b) (interest provided for)), the Court concluded that "'amounts deposited' in section 1677g(a) refers solely to cash deposits of estimated duties provided under sections 1671e(a)(4) and 1673e(a)(3)" (37 F. 3d at 1476). The Court went on to state that "... recent amendments to section 1677g(a) did not alter the limitation of amounts deposited' to cash payments" (37 F. 3d at 1476). The Court reviewed the treatment of entries of merchandise similar to the protested entries (merchandise subject to T.D. 76-227 and entered with a bond for security and not a cash deposit before final results were published by the Department of Commerce (not published until 1984 in for the protested entries and not published until 1990 for the similarly situated entries)). In regard to those similarly situated entries the Court stated:

[N]either Treasury nor Commerce required Koyo Seiko or NSK to make cash payments of estimated antidumping duties. Instead these importers posted bonds. The 1979 Act associates bonds with "security." Thus, the Act intended bonds to serve as a means of securing payment, not a method of payment. Therefore, when Treasury and ITA did not require cash deposits of estimated duties over the period of sixteen years, they relieved Koyo Seiko and NSK of the duty to make interest payments. Without an obligation to pay estimated duties, section 1677g(a) cannot apply. [37 F. 3d at 1477]

In summing up its decision, the Court stated:

In sum, the requirement to make cash deposits of estimated duties, under the duty order, triggers the interest provision. Without the duty order, the importer has no obligation to make a cash deposit and consequently no obligation to pay interest. [37 F. 3d at 1477]

The instructions of the Department of Commerce in regard to the protested entries were, in pertinent part:

The assessment of antidumping duties is subject to the provisions of section 778 of the Tariff Act, which requires interest on overpayments or underpayments of amounts deposited as estimated antidumping duties. *** The interest shall be calculated from the date of payment of estimated duties through the date of liquidation only for those entries made after January 1, 1980.

As the Court stated in American Hi-Fi (see above), such an instruction "simply mirrors the statute ...", which the Courts have conclusively held requires interest only when a cash deposit of estimated duties is required under an antidumping order. As the Timken cases make clear, at the time under consideration it was the position of the Department of Commerce not to require interest under 19 U.S.C. 1677g when there was no requirement for a cash deposit under an antidumping order (15 CIT at 532; 16 CIT at 1001; 37 F. 3d at 1472, 1473). Following the analysis of the Court in American Hi-Fi (i.e., considering the instruction in the context of section 1677g and section 1677g in the context of the entire statutory scheme), we conclude, in answer to the question posed by the Court in American Hi-Fi (i.e., "... what did the liquidation instruction mean and what does 19 U.S.C. ? 1677g require"), that the instruction was that interest should only be required on overpayments or underpayments of amounts deposited as estimated antidumping duties when an antidumping order requires a cash deposit.

At the time of the entries under consideration there was no requirement under an antidumping order for a cash deposit of antidumping duties for the merchandise in those entries (the merchandise was entered during the pre-antidumping order, investigative phase referred to in the Court of Appeals Timken decision (37 F. 3d at 1474-1476), during which interest is not applicable). No cash deposit was actually posted. In view of the position of the Department of Commerce as described in the Timken decisions (see above), we conclude that the instruction was that no interest should be required for the entries under consideration (see the statement by the Court of Appeals at 37 F. 3d 1477, described above, that cash deposits and interest were not required for similarly situated entries). Since Customs failed to follow this instruction and did liquidate the entries with interest, the failure by Customs may be subject to protest under 19 U.S.C. 1514 (see ABC International Traders and American Hi-Fi, cited and quoted above).

The question of whether the assessment of interest by Customs on the underpayment of duties is protestable has been addressed by the Courts. In New Zealand Lamb, supra, concerning interest on the underpayment of countervailing duties under 19 U.S.C. 1677g, the Court, citing Syva Co. v. United States, 12 CIT 199, 681 F. Supp. 885 (1988), stated:

We start from the premise that interest on the underpayment of duties is a charge "within the jurisdiction of the Secretary of the Treasury," 19 U.S.C. 1514(a)(3). [40 F. 3d at 382]

Since a charge or exaction under 19 U.S.C. 1514(a)(3) is one of the decisions which is protestable under section 1514 (19 U.S.C. 1514(c)(1); 19 U.S.C. 1514(a)(3)), since the failure of Customs to follow the Department of Commerce liquidation instructions in an antidumping matter may be protestable under section 1514 (see above), and since Customs failed to follow the Department of Commerce instructions in charging interest on the antidumping duties for these entries, we conclude that the issue protested is protestable under section 1514. Consistent with the above authorities and analysis, the protest is GRANTED.

HOLDING:

The protest, of interest on antidumping duties for the protested entries (the amount of duty is specifically not protested), is GRANTED.

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, with the Customs Form 19, 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

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