HQ 226892 - Application for further review of Protest No. 3901-96-100191; 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 226892

April 21, 1997

LIQ-11-RR:IT:EC 226892 IOR

CATEGORY: LIQUIDATION

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

RE: Application for further review of Protest No. 3901-96-100191; 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 SAS Overseas Inc., the importer of the subject merchandise. SAS Overseas Inc. ("importer") filed entry no. 483-xxxx941-0 on July 7, 1994. On the CF 7501, the imported merchandise is described as "GLASSES, TEMPERED, NOT CERAMIC," and was classified under Harmonized Tariff Schedule of the United States (HTSUS) subheading 7013.29.0500, with a duty rate of 12.5%. The file contains an invoice to the importer for the subject merchandise, which describes the merchandise as "pressed tumbler." A Customs Request for Information (CF 28), dated July 27, 1994, requests the importer to provide Customs with samples of three styles of the merchandise and the name and phone number of a contact person for the importer.

Customs records indicate that the liquidation of the subject entry was extended one time, on February 3, 1995. The code for extension was "01." A Notice of Action (CF 29) was issued by Customs on January 3, 1995 to the importer, indicating that a rate advance of the entry is proposed as the merchandise is classified under subheading 7013.29.10, HTSUS, at a rate of 38%. The importer was provided 20 days within which to provide written notice of disagreement with the proposed action. The entry was liquidated on August 18, 1995. The formal demand on the surety for this duty, with interest, was mailed on or after November 2, 1995.

The protestant filed the protest under consideration on January 25, 1996. The grounds stated for the protest are numerous, however, they are stated in the context of a protective protest pending receipt of documents under the Freedom of Information Act. By letter dated March 13, 1996 from the protestant, Customs is informed that the basis of the protest is that the liquidation of the entry occurred more than one year after the date of entry. More specifically according to the protest: 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)); and 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 the one year prior to 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. An additional matter protested is that the protestant, Intercargo Insurance Company (422) has no information indicating that it is the surety on the bond used to secure the merchandise in question, and requests that the subject liquidation be removed from Customs Formal Demand on the Intercargo Insurance Company.

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 7013.29.0500, HTSUS, and was ultimately classified under subheading 7013.29.1000, 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. According to the CF 28, Customs required samples of the subject merchandise and a contact person for the importer, indicating that examination of the merchandise and discussion with the importer may be required, and according to the CF 29, the importer was given notice of a proposed rate advance on January 3, 1995. Although the CF 28 and CF 29 are dated 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,) cert. denied, 117 S. Ct. 943 ( 1997) (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.

With respect to the protestant's claim that it is not the surety on the bond used to secure the merchandise in question, the evidence is to the contrary. The entry documents show that the protestant is in fact the surety for the subject importer and entry. The bond (CF 301) itself shows Intercargo Insurance Company, surety no. 422, as the surety for the importer, for the subject entry, the Entry/Immediate Delivery (CF 3461) indicates no.422 in block no. six, and the CF 7501 indicates in block no. 6 that the bond is no. 422.

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, and the evidence is clear that the protestant is in fact the surety for the importer and the subject entry.

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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