HQ 226631 - Application for further review of Protest No. 2904-95-100158; Extension of time for liquidation; Deemed liquidation; 19 U.S.C. ?1504; Intercargo Insurance Company f/k/a International Cargo & Surety Co. (Surety for M. Genauer) v. United States - United States International Trade Commision Rulings

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HQ 226631

January 23, 1997

LIQ-11-RR:IT:EC 226631 IOR

CATEGORY: LIQUIDATION

Port Director
U.S. Customs Service
511 NW Broadway
Portland OR 97209

RE: Application for further review of Protest No. 2904-95-100158; Extension of time for liquidation; Deemed liquidation; 19 U.S.C. ?1504; Intercargo Insurance Company f/k/a International Cargo & Surety Co. (Surety for M. Genauer) v. United States

Dear Sir:

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 protestant is the surety for Unique Stone Imports, the importer of the subject merchandise. Unique Stone Imports ("importer") filed entry no. T14-xxxx210-901 on March 15, 1993. On the CF 7501, the imported merchandise is described as "STONE,MRBLE SLABS,WRK,NOT FLAT," and was classified under Harmonized Tariff Schedule of the United States (HTSUS) subheading 6802.91.0500, with a duty rate of 2.8%. The file contains an invoice to the importer for the subject merchandise, which describes the merchandise as "oriental jade." A Certificate of Inspection in the file refers to the merchandise a "medium green marble tiles." A Customs Notice to Mark and/or Notice to Redeliver (CF 4647), dated March 30, 1993, instructs the importer to properly mark the merchandise with the name of the country of origin. The CF 4647 refers to the merchandise as "Oriental Jade tile."

Customs records indicate that the liquidation of the subject entry was extended two times. The code for extension was "01." The file includes a Customs lab report dated May 4, 1993, according to which the subject merchandise was submitted to the lab for the purpose of identifying its identity as marble slab with less than 3/32" bevel, on April 5, 1993. The lab report concludes:

The sample is green with white vein; cut and polished. Laboratory analysis indicates that it is other stone (serpentine). The beveled edge is 1/16", and the thickness is 9 MM.

A Notice of Action was issued by Customs on October 13, 1994 to the importer, indicating that the entry had been rate advanced as the stone tile is "oriental jade" classified under subheading 6802.99.00, HTSUS, at a rate of 6.5%. The entry was liquidated on January 13, 1995. The formal demand on the surety for this duty, with interest, was mailed on April 13, 1995.

The protestant filed the protest under consideration on June 29, 1995. The grounds stated for the protest are that: 1) the extension of liquidation for the subject entry was improper for citing a reason other than one authorized by statute or regulation (citing Intercargo Insurance Co. (Genauer) v. United States, 879 F.Supp. 1338 (CIT 1995)); 2) liquidation of the protested entry was null and void because it was after the one year limitation on liquidation and since "all information needed to properly appraise, classify and assess duties on the subject entry was available... within one year prior to the anniversary date" and that no authorized party requested an extension of liquidation, the decision to extend the period for liquidation was void and the entry liquidated "as entered" by operation of law; and 3) the Notice of Action issued October 13, 1994 was unlawful having been issued 19 months after the entry date and 7 months after the entry was deemed liquidated by operation of law on March 15, 1994.

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 demand upon the protestant surety; see 19 U.S.C. ?1514(c)(2)) and the matter protested is protestable under 19 U.S.C. ?1514(a)(5). The certification that the protest is not being filed collusively to extend another authorized person's time to protest, as required for a protest by a surety (see 19 U.S.C. ?1514(c)(2)), was provided.

Under 19 U.S.C. ? 1504, an entry of merchandise not liquidated within 1 year from the date of entry of such merchandise 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, unless this one-year period for liquidation is extended. The statute authorizes reasons for which liquidation may be extended, including that information needed for the proper appraisement or classification of the merchandise is not available (i.e., code "01" mentioned above). Authority is provided for regulations prescribing the procedures for such extensions of liquidation.

The Customs Regulations issued under this statute are found in 19 CFR ? 159.12. Under statutory period for liquidation for an additional period not to exceed 1 year if information needed by Customs for the proper appraisement or classification of the merchandise is not available. Under ? 159.12(b), if the port director extends the time for liquidation as provided above, he is required to promptly notify the importer or the consignee and his agent and surety that the time has been extended and the reasons for doing so.

In this case, the evidence in the file is sufficient to create the presumption that proper notice of extension was given (see e.g., International Cargo & Surety Insurance Co. (Data Memory Corp.) v. United States, 15 CIT 541, 779 F.Supp. 174 (1991)). In such a case, when the protestant fails to rebut that presumption (there is no evidence in the file alleged to do so), "the only issue to be decided is whether the extension was permissible under the statute," (15 CIT at 545).

The issue of the permissibility of extension of liquidation was addressed by the Court of Appeals for the Federal Circuit in St. Paul Fire & Marine Ins. Co. [Carreon] v. United States, 6 F.3d 763 (Fed. Cir. 1993) (reversing the CIT decision (16 CIT 663, 779 F.Supp. 120 (1992)), wherein the court concluded:

...Customs may, for statutory purposes and with the requisite notice, employ up to four years to effect liquidation so long as the extensions it grants are not abusive of its discretionary authority. Such an abuse of discretionary authority may arise only when an extension is granted even following elimination of all possible grounds for such an extension.
There is, in sum, a narrow limitation on Customs discretion to extend the period of liquidation. (6 F.3d at 768)

The court went on to state that "Customs decisions to extend are entitled to a presumption of legality unless [the plaintiff] can prove that these decisions were unreasonable." (6 F.3d at 768)

The protestant has not met its burden in this regard. There is no evidence in the file, submitted by the protestant or otherwise, proving that Customs decision was unreasonable, that all possible grounds for extension of liquidation may be eliminated. That is, the merchandise under consideration was claimed to be classifiable under subheading 6802.91.0500, HTSUS, and was ultimately classified under subheading 6802.99.00, HTSUS (we note that the protestant does not contest the correctness of this classification). There is affirmative evidence of the need to extend the period for liquidation in order for Customs to ensure the correctness of the claimed classification of the subject merchandise. The CF 6445A indicates that Customs extended the period for liquidation of the subject merchandise due to sampling, penalty and laboratory actions. Although the laboratory report is dated May 4, 1993, well within one year of the date of entry of the merchandise, the protestant has provided no evidence to establish the elimination of all grounds for extension, nor has the protestant proved that the decision was unreasonable.

It should be further noted that the presumption of legality accorded Customs decisions to extend liquidation discussed in St. Paul, supra, was further bolstered by the CAFC in Intercargo Insurance Company f/k/a International Cargo & Surety Co., (Surety for M. Genauer) v. United States, 83 F.3d 391(Fed. Cir. 1996,) petition for cert. filed, (U.S. Oct. 22, 1996) (No. 96-650) (reversing the CIT decision (879 F.Supp. 1338)). In that case the liquidation extension notices in question, which were verbatim of the ones at issue in this protest, read as follows:

THIS IS A COURTESY NOTICE.
THE LIQUIDATION OF THIS ENTRY HAS BEEN EXTENDED; ADDITIONAL TIME IS REQUIRED BY CUSTOMS TO PROCESS THIS TRANSACTION. NO ACTION IS NECESSARY ON YOUR PART UNLESS INFORMATION IS SPECIFICALLY REQUESTED BY CUSTOMS.

The plaintiff claimed that the liquidation extensions were invalid, and the subject entries therefore deemed liquidated by operation of law, because the extension notices did not recite one of the statutory reasons for obtaining additional time for liquidations set forth in 19 U.S.C. determined that fact alone did not render the extended liquidations invalid so long as Customs error in this regard had no prejudicial impact on the plaintiff. In determining that no such prejudicial impact existed in that case, the court stated that the purpose of the notice ("to increase certainty in the customs process by apprising the importer and its surety of the precise period within which final action would be taken on the liquidation") was met. Moreover, the court stated that if the plaintiff believed that Customs did not have a valid statutory reason for the extensions, the plaintiff could seek to have them judicially invalidated on that ground.

Using the analysis of the CAFC in Intercargo, supra, we reach the same conclusion with respect to the protest under consideration. Since the importer and surety were advised of the subject extensions, and they were not deprived of the opportunity to challenge the extensions in court on the ground that the extensions were not obtained for a statutorily valid reason, neither the importer nor surety suffered prejudicial impact justifying an invalidation of the liquidation extensions in question.

Accordingly, the protest must be denied.

HOLDING:

The protest in this case may not be granted because the protestant has not met its burden of proving that Customs extension of liquidation was unreasonable, that all possible grounds for extension of liquidation may be eliminated, nor did the protestant suffer prejudicial impact resulting from the liquidation extension notices.

Consistent with the decision set forth above, you are hereby directed to deny the subject protest. 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,

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