HQ 227401 - Protest 3801-94-102849; Merchandise Processing Fee; Total Zone Value; 19 U.S.C. 58c(b)(8)(D)(vi); Miscellaneous Trade and Technical Corrections Act of 1996, Section 4; 19 U.S.C. 1514 - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1997 HQ Rulings > HQ 227035 - HQ 544684 > HQ 227401

Previous Ruling Next Ruling
HQ 227401

January 28, 1997

FOR-2-06/ENT-1-03-RR:IT:EC 227401 PH

CATEGORY: PROTEST

Port Director
U.S. Customs Service
477 Michigan Avenue, Room 200
Detroit, Michigan 48226
ATTN: Ms. Sandra Needham

RE: Protest 3801-94-102849; Merchandise Processing Fee; Total Zone Value; 19 U.S.C. 58c(b)(8)(D)(vi); Miscellaneous Trade and Technical Corrections Act of 1996, Section 4; 19 U.S.C. 1514

Dear Madame or Sir:

The above-referenced protest was forwarded to this office for further review. It appears that you sent the original documents for the entries and the protest. We are returning original documents with this ruling.

Our decision follows.

FACTS:

According to the file and Customs records, on July 3, 6, and 27, 1990, the protestant entered from a foreign trade zone (FTZ) in the United States certain new passenger vehicles. According to Customs records, merchandise processing fees in the amounts of $5,075.05, $1,366.42, and $1,984.39, respectively, were paid with these entries.

According to Customs records, liquidation of each of the entries was extended three times, with the date of the last extension notice being March 20, 1993, in the case of each entry. The reason given for the extensions of liquidation for each entry was "Code 1", which at the time under consideration meant that information needed for the proper appraisement or classification of the merchandise was not available to the appropriate customs officer. The extensions of liquidation are not in controversy.

According to Customs records, each of the entries was liquidated on April 29, 1994. The liquidated amount of the merchandise processing fees were, respectively, $78,438.90, $207,820.23, and $216,370.43. According to notations in the file, the reason for the increase was that merchandise processing fees were assessed on the total zone value of the merchandise, as was then Customs position (see, e.g., ruling HQ 545721, February 27, 1995).

On June 15, 1994, the protestant filed the protest under consideration. The protest is against "the liquidated Merchandise Processing Fee assessed on the ... [e]ntries." According to the protestant:

Legislation has been introduced ... that will correct [t]his problem, and allow the Merchandise Processing Fee to be assessed on foreign content only, and not on domestic merchandise, labor, overhead or profit.

Your forwarded the protest as a "lead protest", representative of protests referred to in our letter of August 18, 1995 (File: 226281), also regarding this matter, in which we voided the denial of further review of certain protests, and the denial of the protests, under 19 U.S.C. 1515(c).

ISSUE:

May the protest in this case be granted?

LAW AND ANALYSIS:

Initially, we note that the protest was timely filed (19 U.S.C. 1514(c)(3)(A) and that the issue protested is protestable under section 1514 (19 U.S.C. 1514(a)(3), (5); see also Norfolk and Western Ry. Co. v. United States, 843 F. Supp. 728, 733 (CIT 1994) (other issues of the same case were considered at 869 F. Supp. 974 (CIT 1994), and 62 F. 3d 1395 (Fed. Cir. 1995), but the decision as to protestability was not affected).

At the time under consideration, the Secretary of the Treasury was required to charge and collect, for the provision of customs services in connection with the processing of any merchandise (with certain exceptions not applicable in this case) that is formally entered, or withdrawn from warehouse for consumption, a fee in an amount equal to the lesser of 0.17 percent ad valorem or an amount to be set by the Secretary of the Treasury. (Section 8101(a), Omnibus Budget Reconciliation Act of 1986, Public Law 99-509, 100 Stat. 1874, 1965-1966.) As indicated above in the FACTS portion of this ruling, insofar as the applicability of this provision to the entry of merchandise from a FTZ is concerned, Customs has held that:

Because formal entry is required for the motor vehicles due to [their] foreign status portion, the [merchandise processing fee] is properly assessed on the total zone value of the merchandise. ... [HQ ruling 545721, February 27, 1995; for a definition of "total zone value" for purposes of FTZ's, see 19 CFR 146.65(b)(1).]

Section 4(a) of the Miscellaneous Trade and Technical Corrections Act of 1996 (Public Law 104-295; 110 Stat. 3514, 3516-3517; enacted October 11, 1996), amended 19 U.S.C. 58c(b) as follows:

(b) Limitations on fees

(D) The fee charged under subsection (a)(9) or (10) of this section with respect to the processing of merchandise shall--

(vi) in the case of merchandise entered from a foreign trade zone (other than merchandise to which clause (v) [involving certain agricultural products] applies), be applied only to the value of the privileged or nonprivileged foreign status merchandise under [19 U.S.C. 81c].

Section 4(b) of the Act provided a specific effective date for the amendments made by section 4(a). Section 4(b) provides that:

The amendments made by subsection (a) apply to--

(1) any entry from a foreign trade zone on or after the 15th day after the date of the enactment of this Act; and

(2) any entry made from a foreign trade zone after November 30, 1986, and before such 15th day if liquidation of the entry was not final before such 15th day.

In the case under consideration, the protested entries were made from a FTZ after November 30, 1986, and liquidation of the entries was not final before the 15th day after enactment of the Miscellaneous Trade Act of 1996. Therefore, the amendment effected by section 4(a) of the Miscellaneous Trade and Technical Corrections Act of 1996 applies to the protested entries and the merchandise processing fee may be applied "only to the value of the privileged or nonprivileged foreign status merchandise", and not the total zone value.

Accordingly, the protest must be GRANTED. We note that this protest is treated as a "lead protest" for 15 other protests, referred to in our letter of August 18, 1995. To the extent that the entries protested in those protests meet the criteria in this ruling (i.e., entry from a FTZ after November 30, 1986, timely pending protest, and liquidation of the entries not made final before October 26, 1996), the other protests may be similarly handled.

HOLDING:

The protest in this case may be granted, pursuant to the amendment to 19 U.S.C. 58c by section 4 of the Miscellaneous Trade and Technical Corrections Act of 1996.

The protest 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

Previous Ruling Next Ruling