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 546539 - HQ 559177 > HQ 558685

Previous Ruling Next Ruling



HQ

558685

August
23, 1996

CLA-2 RR:TC:SM 559685 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Port Director
JFK Airport
Jamaica, New York 11430

RE: Application for Further Review of Protest No. 1001-91-108393

Dear Sir:

This is in reference to an Application for Further Review (AFR) of Protest No. 1001-91-108393, timely filed on behalf of N&B Jewelry Corp. ("N&B"). We regret the delay in our response, but we were awaiting the receipt of additional information from counsel for the protestant (Sandler, Travis & Rosenberg, P.A.). By letter dated July 29, 1996, counsel advised that they would not be supplementing the above AFR.

Please also note that we have been informed by the Trustee in Bankruptcy that N&B is currently in a Chapter 7 bankruptcy proceeding, and that the principals are no longer in the U.S. Further, we have been advised by Customs counsel for N&B that his firm is no longer representing the company. You should also be aware that a separate protest covering the entries in question (No. 1001-91-101559) has been timely filed by Washington International Insurance Co., the surety in this case.

FACTS:

N & B filed four entries of gold jewelry from the Dominican Republic dated June 22, 1987 through July 5, 1987, claiming allowances in duty under subheading 807.00, Tariff Schedules of the United States (TSUS) (precursor to subheading 9802.00.80, Harmonized Tariff Schedule of the United States), and duty-free entry under the Generalized System of Preferences (GSP). The entries were liquidated prior to the expiration of four years at their entered values, but then reliquidated with a rate advance for the reason that the importer failed to submit documentation
to support the entered classifications, and the entered values did not include all elements of value.

The importer protested the reliquidations based on the following:

1) Liquidation was not properly extended and the entries were liquidated as a matter of law one year after entry. Even if the entries were properly extended, they were not liquidated within the four year limitation on liquidation.

2) The gold chains were entitled to duty-free entry under the Generalized System of Preferences (GSP).

3) The gold bangles were entitled to the partial duty exemption under subheading item 807.00, Tariff Schedules of the United States (TSUS) (predecessor of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS)), based on the value of the U.S. components assembled in the Dominican Republic.

4) The entered value of the merchandise contained all the necessary elements of value in accordance with 19 U.S.C. 1401a and the value should not have been advanced upon liquidation.

ISSUES:

1) Whether the entries were properly liquidated pursuant to 19 U.S.C. 1504, and if so, whether the reliquidations under 19 U.S.C. 1501 were effected within the 90-day period from the date on which the original liquidations were given.

2) Whether the gold chains are entitled to duty-free treatment under the GSP.

3) Whether the gold bangles are entitled to the partial duty exemption under item 807.00, TSUS.

4) Whether the entered values contain all elements of value required for proper appraisement of the merchandise.

LAW AND ANALYSIS:

1) Deemed Liquidations and Reliquidations

Ent. # Ent. Times Ext.
Ext. Liq. Reliq. date extended code not. date date

4701 ** 5-2 6/22/87 3 01
6/11/87 3 01 3/31/90
5/31/91 8/16/91 4701 ** 0-7 6/05/87 3
01 3/31/90 5/24/90 8/16/91
4701 ** 7-9 7/05/87 3 01
3/31/90 6/28/91 8/30/91

In the case of entries 4701 ** 2-4 and 4701 ** 0-7, reliquidation was effected by the posting of a manually generated Customs Form 4333 (Bulletin of Entries Liquidated) on the date indicated.

A "Code 1" designation, as a reason for extension of liquidation, at the time under consideration, meant that "information needed for the proper appraisement or classification of the merchandise is not available to the appropriate customs officer" (see 19 U.S.C. 1504(b)(3); 19 CFR 159.12(a)(1)(i); St. Paul & Fire & Marine Ins. Co. [Carreon] v. United States, 799 F. Supp. 120 (CIT 1992), reversed, 6 F. 3d 763 (Fed. Cir. 1993)).

According to the file, the importer in this matter was audited by Customs with respect to entries made between August of 1983 and March of 1991. According to the audit report and other information in the file, the books and records of the importer were incomplete and failed to support entry under item 807.00, Tariff Schedule of the United States TSUS (predecessor of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS)), and GSP claims. The audit report indicates that value problems were found as well. According to the audit report and other information in the file, the importer was uncooperative. However, nowhere in the file is there evidence that during the time between the dates of entry and the dates of the third extensions of liquidation the importer notified Customs that the information needed by Customs to properly appraise and classify the merchandise would not be submitted.

Under 19 U.S.C. 1504, at the time under consideration, "[e]xcept as provided in subsection (b) of [section 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." Under subsection (b), the period in which to liquidate
an entry may be extended by giving notice of such extension to the importer of record in such form and manner as prescribed by regulations if, among other things "information needed for the proper appraisement or classification of the merchandise is not available to the appropriate customs officer." Under subsection (d) of section 1504, "[a]ny entry of merchandise not liquidated at the expiration of four years from the applicable date specified in subsection (a) [of section 1504], shall be deemed liquidated at the rate of duty, value, quantity, and amount of duty asserted at the time of entry by the importer of record ..." The Customs Regulations issued under this statute are found in 19 CFR 159.12.

With regard to the question of whether notices of extension of liquidation were properly given, we find relevant the decision in International Cargo & Surety Insurance Co. (Data Memory Corp.) v. United States, 15 CIT 541, 779 F. Supp. 174 (1991). In that case, the evidence on behalf of Customs to show proper notice was similar to that in the case under consideration (i.e., the "entry summary header file" was presented which contained encoded data which established that notices to the required parties were printed on a particular date and would have been, as a routine matter, mailed following that date). The Court recognized the presumption that proper notice was given on the basis of this evidence, and since no evidence was provided to rebut this presumption, the Court held for Customs (see also the discussion of the giving of such notice in St. Paul Fire & Marine Ins. Co. v. United States, supra, 6 F. 3d at 765). On the same basis we conclude that proper notice was given.

With regard to the reasonableness of the extensions of liquidation, we find applicable the decision in St. Paul Fire & Marine Ins. Co. v. United States, supra. [See also Intercargo Insurance Co. (Genauer) v. United States, 83 F.3d 391 (Fed. Cir. 1996), in which the court reversed the CIT decision reported at 979 F. Supp. 1338 (1995), and found that the failure to give a statutory reason for extension of liquidation on a notice of extension of liquidation was harmless error and, therefore, the entries should not have been liquidated solely as a result of the defect in the notice of liquidation.] In St. Paul, the court stated "[i]n determining whether Customs' decisions to extend the periods of liquidations for Carreon's imports were sufficiently unreasonable to constitute an abuse of discretion, we must accept the fact that Congress has directed the [CIT] to presume that Customs' decisions to extend are correct and that it is St. Paul's burden to prove otherwise. *** In other words, Customs' decisions to extend are entitled to a presumption of legality unless St. Paul can prove that these decisions were unreasonable." In regard to the importer's failure to supply Customs with information necessary to support the entered classification, the court in St. Paul stated, "[i]n order for St. Paul to prevail in this case, it would have had to prove that Carreon, or someone else notified Customs that the required cost data would not be submitted." (6 F.3d at 769).

There is no evidence in the file, submitted by the protestant or otherwise, showing that Customs' decisions were unreasonable. Nor is there any evidence that Customs was notified that the information needed by Customs to properly appraise and classify the merchandise would not be submitted. Therefore, we conclude that the decisions to extend were reasonable and the protestant has not met its burden in this regard.

In the case of each of the protested entries, according to the file, notices of extension of liquidation were properly given and the decisions to extend liquidation were reasonable (see above discussion). In each of the protested entries, the entries were liquidated prior to the expiration of four years from the date of entry. Therefore, the entries may not be deemed liquidated under 19 U.S.C. 1504.

The protestant also challenges Customs reliquidations of the entries under 19 U.S.C. 1501 because those reliquidations were after the four-year "deemed" liquidation period in 19 U.S.C. 1504. The statutes themselves rebut this challenge. As stated above, section 1504 provides for deemed liquidations of entries which are not liquidated within four years from the date of entry (with certain exceptions not applicable to this case). Section 1504 does not prohibit liquidations or reliquidations after the four year period. Section 1501 provides that "[a] liquidation made in accordance with [19 U.S.C. 1500] or any reliquidation thereof made in accordance with this section may be reliquidated in any respect ... within 90 days from the date on which notice of the original liquidation is given ..." Section 1501 requires notice of reliquidation under that section in the same manner as that prescribed with respect to original liquidations. Thus, section 1501 authorizes reliquidation of any liquidation made under section 1500 or reliquidation made under section 1501 within 90 days of the date of notice of the original liquidation. There is no limitation in section 1501 requiring reliquidation within the four-year "deemed" liquidation period provided for in section 1504.

As stated above, reliquidations under 19 U.S.C. 1501 must be within 90 days of the date on which notice of the original liquidation is given. In this case, the record shows that each of the reliquidations of the four protested entries were within the 90-day time period for reliquidation under section 1501. Therefore, the claim in this regard must be denied.

2) GSP

Under the GSP, eligible articles the growth, product or manufacture of a
designated beneficiary developing country (BDC) which are imported directly into the customs territory of the U.S. from a BDC may receive duty-free treatment if the sum of (1) the cost or value of materials produced in the BDC, plus (2) the direct costs of the processing operations performed in the BDC, is equivalent to at least 35% of the appraised value of the article at the time of entry. See 19 U.S.C. 2463(b). The Dominican Republic is a BDC. See General Note 4 (formerly General Note 3(c)(ii)(A)), Harmonized Tariff Schedule of the United States, HTSUS.

The record contains two Form A's (required documentation during the period in question) issued by the Dominican Republic covering "Rope Chains Of Gold", attributable to two of the four entries. These documents appear to reflect that the cost or value of materials produced in the BDC, plus the direct cost of processing operations performed in the BDC was 38 percent, and thus satisfied the value- content requirement under the GSP. However, in a report dated November 29, 1991, the Regulatory Audit Division determined, upon review of the importer's books and records, that there was insufficient documentation to support duty-free treatment under the GSP. In this regard, the report found that the entries did not reflect the true cost of labor for the merchandise, and the importer failed to provide documentation indicating both the cost of direct and indirect labor. The protestant has failed to submit with the protest any additional information to support its claim under the GSP. Therefore, we find that the claim for duty-free treatment under the GSP has not been substantiated.

3) Item 807.00

Effective January 1, 1989, the HTSUS superseded and replaced the TSUS. TSUS item 807.00 was carried over into the HTSUS without change as subheading 9802.00.80. This tariff provision provides a partial duty exemption for:

Articles, except goods of heading 9802.00.90, assembled abroad in whole or in part of fabricated components, the product of the United
States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and
(c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process such as cleaning, lubricating and painting.

An article entered under HTSUS subheading 9802.00.80 is subject to duty upon
the full value of the imported assembled article less the cost or value of such U.S. components, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

In this regard, the record reflects that the documentation required under 19 CFR 10.24, the assembler's declaration and importer's endorsement, were not submitted with the entry documents to substantiate the entered classifications. The concerned import specialist also reports that the importer did not respond to her request for documentation in support of the claim under item 807. Nor has any additional information been provided in connection with this protest in support of this claim.

A presumption of correctness exists in favor of Customs classification and the importer has the burden to prove otherwise. PPG Industries, Inc. V. United States 4 CIT 143, 147 (1982). The import specialist has found that the evidence does not support the claim for the partial duty exemption under item 807.00. Protestant has failed to submit any evidence to rebut the presumption of correctness attached to the Customs official's findings. Accordingly, we find that the imported gold bangles are not entitled to the partial duty exemption provided under item 807.00, TSUS.

4) Value

A review of the file reveals that the importer has not provided Customs with sufficient evidence to substantiate its claim that the merchandise should have been appraised based on the invoiced amounts. Section 402(a) through (f) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 ("TAA"; 19 U.S.C. 1401a) sets forth the hierarchy of methods used in determining the value of imported merchandise. The preferred method of appraisement, transaction value, is set forth in section 402(b)of the TAA and is defined as "the price actually paid or payable" plus certain enumerated additions. Section 402(f) provides for a method of determining a value for imported merchandise if other values cannot be determined or used.

Section 500 of the TAA is the general authority for Customs to appraise merchandise. Section 500(a) states that the appraising officer shall:
appraise merchandise by ascertaining or estimating the value thereof, under section 1401a of this title, by all
reasonable ways and means in his power, any statement of cost or costs of production in any invoice, affidavit, declaration, other document to the contrary notwithstanding...

As noted in the Statement of Administrative Action:

Section 500 of the TAA authorizes the appraising officer to weigh the nature of the evidence before him in appraising the imported merchandise. This could be the invoice, the contract between the parties, or even the recordkeeping of either of the parties to the contract. For example, if information contained in an invoice is negated by sworn statements contained in affidavits, the appraising officer has the authority to appraise the merchandise based on information contained in the affidavits.

According to the file, transaction value could not be used to appraise the merchandise, since the customs audit had revealed that the invoice prices failed to reflect all elements of value, including the cost of assists, freight, labor, profit and other unexplained cash payments, discovered during the audit. Likewise, transaction value of identical or similar merchandise and deductive value could not be determined and the importer failed to supply computed value figures.

The appraising officer, accordingly, appraised the merchandise under section 402(f) of the TAA. Section 402(f) provides for appraisement on the basis of a value that is derived from the methods set forth in sections 402(b) through(e), with such methods being reasonably adjusted to the extent necessary to arrive at a value.

In view of the importer's failure to provide Customs with evidence in support of its claimed appraisement, we find the appraising officer's method of appraisement to be in accordance with the above-referenced statutory authority. In keeping with section 500 of the TAA, the officer considered all the evidence available, and determined an appropriate and reasonable value for the imported merchandise.

HOLDING:

1) Each of the four entries was properly liquidated under 19 U.S.C. 1504 prior to the expiration of the prescribed four year period commencing from the date of entry, and reliquidated within the 90- day period prescribed under 19 U.S.C. 1501.

2) An audit of N&B disclosed that its books and records were incomplete. Upon request, the company failed to submit documentation with regard to the cost of labor in support of its claim for duty-free treatment under the GSP. No additional supporting evidence regarding its claim under the GSP was submitted with this protest. Under the circumstances, we find that the claim for duty-free treatment under the GSP has not been substantiated.

3) Protestant has failed to submit the documentation required under section 10.24, Customs Regulations (19 CFR 10.24), to support its claim for a duty allowance under item 807.00, TSUS (precursor to subheading 9802.00.80, HTSUS). Accordingly, we find that the imported gold bangles are not entitled to the partial duty exemption provided under this provision.

4) In view of the importer's failure to provide Customs with evidence in support of its claimed appraisement, we find the appraising officer's method of appraisement to be in accordance with section 402(f) of the TAA. In keeping with section 500 of the TAA, the officer considered all the evidence available, and determined an appropriate and reasonable value for the imported merchandise.

Under the circumstances, you are directed to deny the protest in full. 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 attached to the Form 19, Notice of Action, no later than 60 days from the date of this letter. Any reliquidation of the entries 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
Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

John

Previous Ruling Next Ruling

See also: