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HQ 559724




April 7, 1997

CLA-2 RR:TC:SM 559724 JML

CATEGORY: CLASSIFICATION

TARIFF NO: 9801.00.10

Port Director
Port of El Paso
9400 Viscount Blvd.
El Paso, TX 79925

RE: Application for Further Review of Protest No. 2402-95-100043; applicability of subheading 9801.00.10, HTSUS; documentary requirements; extension of liquidation; 19 CFR 10.1; 19 CFR 159.

Dear Sir:

The above-referenced protest was forwarded to this office for further review. We have considered the arguments raised by your office and the protestant/surety. Our decision follows.

FACTS:

Protestant, Intercargo Insurance Company, is the surety for the importer, Mantor Electronics Inc., in connection with the importation of telecommunications instruments from Mexico, which were entered at El Paso, Texas on December 17, 1993.

At the time of entry, the importer claimed duty-free treatment for the goods as American Goods Returned under subheading 9801.00.10, Harmonized Tariff Schedule of the United States ("HTSUS"). The importer failed, however, to submit documentary evidence to substantiate its subheading 9801.00.10, HTSUS, claim. In order to allow importer additional time to furnish the required documentation, your office extended the liquidation of the entry on September 13, 1994, pursuant to section 159.12(a), Customs Regulations (19 CFR 159.12(a)). Notices of the extension were issued on September 17, 1994. After the importer failed to furnish the required information, Customs liquidated the entry on April 28, 1995 under subheading 9030.89.80, HTSUS, and assessed duty at 4.3% ad valorem. Following the importer's failure to pay the liquidated duties, Customs issued a notice for demand of payment against the importer's bond on August 8, 1995. On October 4, 1995, protestant filed the above referenced protest under 19 U.S.C. 1514(c)(2). Accordingly, the protest was timely filed within the ninety (90) day period required by section 174.12(e)(3), Customs Regulations (19 CFR 174.12(e)(3)). On April 23, 1996, this office granted protestant sixty (60) additional days to provide the required documentary evidence in support of its 9801.00.10, HTSUS, claim. As Customs has failed to receive the requested information, the protest is reviewed on the basis of the current record.

Initially, protestant contends that no information exists which indicates its liability as surety on the bond. Protestant contends that the claimed classification of the merchandise as American Goods Returned under subheading 9801.00.10, HTSUS, at the time of entry was correct. Protestant also asserts that the grounds for extending liquidation of the entry was unlawful in that proper notice was not given, and that the extension was not based upon any one of the three enumerated grounds for extension set forth in 19 U.S.C. ?1504(b) and its implementing regulations, 19 CFR 159.12(a).

Your office contends that sufficient information exists on record which indicates that protestant is in fact surety for the importer. Your office's position is that the claimed classification of the merchandise at the time of entry was incorrect because the importer could not substantiate its claim of American Goods Returned under subheading 9801.00.10, HTSUS. Also, your office maintains that liquidation was properly extended under section 159.12(a)(1), Customs Regulations (19 CFR 159.12(a)(1)), as the information necessary to classify the merchandise under subheading 9801.00.10, HTSUS, was not available. Additionally, your office asserts that proper notification of extension of liquidation was issued.

ISSUES:

I. Whether sufficient evidence exists on record which indicates protestant is liable as surety on the bond in connection with the entry.

II. Whether the telecommunications instruments are eligible for classification under subheading 9801.00.10, HTSUS, as entered.

III. Whether Customs' extension of liquidation was based upon the appropriate grounds, and if so, whether notice of such extension was issued to surety.

LAW AND ANALYSIS:

I. Protestant's Liability as Surety

The record clearly indicates protestant's liability as surety on the bond in connection with the entry in question. Customs notes that protestant's surety number as required under section 113, Customs Regulations (19 CFR 113), is 422. The Customs Form 7501 entry summary filed in connection with the importation, dated December 17, 1993, clearly indicates surety number 422 as surety on the bond in question. Customs Bond (Customs Form 301) #249101882, the bond filed in connection with the entry in question, clearly indicates that the surety number is 422, Intercargo Insurance Company. Furthermore, James R. Zuhlke signed the bond as Attorney-in-fact on behalf of Intercargo Insurance Company.

II. 9801.00.10

Subheading 9801.00.10, HTSUS, provides for the duty-free entry of U.S. products that are exported and returned without having been advanced in value or improved in condition by any means while abroad, provided that the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1), are met.

The goods subject to this protest were entered on December 17, 1993. Although section 10.1 was amended by Treasury Decision ("T.D.") 94-97, the application of those amendments was effective for goods entered on or after June 16, 1994. Therefore, the entered goods are subject to the provisions of section 10.1 as that section existed before the changes were made. Section 10.1(a), Customs Regulations, which required separate declarations by the foreign shipper, and the owner, importer or agent of the goods, as well as a certificate of exportation, was mandatory and a condition precedent for entitlement to subheading 9801.00.10, HTSUS, treatment, unless compliance had been waived. 19 CFR 10.1(a); Maple Leaf Petroleum, Ltd. V. United States, 25 CCPA 5, T.D. 48976 (1937). The basis for waiver of the required documentation is predicated on the port director being reasonably satisfied, because of the nature of the articles or production of other evidence, that the articles are imported in circumstances meeting the requirements of subheading 9801.00.10, HTSUS. Moreover, section 10.1(b), Customs Regulations (19 CFR 10.1(b)), granted the port director authority to require, in addition to the declarations required in section 10.1(a), other documentation or evidence as may be necessary to substantiate a claim for duty-free treatment under 9801.00.10, HTSUS.

Customs notes that in the present case, none of the requirements of section 10.1, as it appeared prior to the 1994 amendments, have been fulfilled by the importer. Furthermore, no evidence exists on the record which indicates that the port director waived the documentary requirements of that section. In fact, the record reflects that the importer was given several opportunities to furnish the necessary information to substantiate its claim for 9801.00.10, HTSUS, treatment. Customs extended the liquidation of the entry to allow the importer to comply with section 10.1, and this office gave, upon receipt of protestant's Application for Further Review, sixty (60) additional days to provide information to substantiate the claim. In both instances, no information was received. Thus, as compliance with the requirements of section 10.1(a), Customs Regulations, was mandatory and a precondition to receipt of 9801.00.10, HTSUS, treatment, the importer's failure to provide the necessary information precludes the entered goods from receiving such treatment.

III. Extension of liquidation

A. Grounds for Extension

Under 19 U.S.C. ?1504, an entry of merchandise not liquidated within one 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. The Customs Regulations issued pursuant to this statute are found in 19 CFR section 159.12. Under section 159.12(a)(1), the port director may extend the one year statutory period for liquidation for an additional term not to exceed one year if information needed by Customs for the proper appraisement or classification of the merchandise is not available, and notice is given to the importer, or the consignee and his agent and surety.

The issue of permissibility of extension of liquidation was further addressed by the Court of Appeals for the Federal Circuit ("CAFC") in St. Paul Fire & Marine Ins. Co. [Carreon] v. United States, 6 F.3d 763 (Fed. Cir. 1993) (reversing 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 only arise when an extension is granted even following the 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." Id.

Customs is of the opinion that the protestant has not overcome the presumption of legality in favor of Customs' extension of liquidation of the entry. There is no evidence on record, submitted by the Protestant or otherwise, which indicates that Customs' decision to extend was not based upon a proper statutory basis, or that such extension was unreasonable. The merchandise was entered on December 17, 1993 and Customs extended the period of liquidation on September 13, 1994. The merchandise was thereafter liquidated on April 28, 1995, all dates well within the applicable statutory periods. Rather, the record affirmatively reflects, in the form of a request for information issued to importer, Customs' need to extend the period of liquidation to allow importer time to submit evidence supporting its claim for subheading 9801.00.10, HTSUS, treatment, so that Customs could ensure the correctness of the claimed classification. Furthermore, the Customs ACS data base affirmatively indicates that the code for Customs' grounds for extension of liquidation of the entries was "01." As such, Customs' extension of liquidation under the present facts was both reasonable and based upon a proper statutory basis under 19 U.S.C. ?1504 and 19 CFR 159.12(a)(1).

B. Notice

Protestant asserts that in its capacity as surety on the bond in connection with the merchandise, it was entitled to but did not receive notice of extension of liquidation as required by 19 U.S.C. ?1504(b) and section 159.12(b), Customs Regulations (19 CFR 159.12(b)). Protestant contends that Customs' failure to issue proper notice renders extension of the liquidation invalid.

Protestant is correct in its contention that 19 U.S.C. liquidation be issued to the surety. The record, however, reflects that notice of the extension was properly sent to surety on September 17, 1994. According to the Customs ACS data base, notice of extension of liquidation was sent to surety at:

Intercargo Insurance Co. c/o Trade Insurance Company
1450 E. American Lane 20th Floor
Schaumburg, IL 60173

The above address is also given for the surety on the bond filed in connection with the entry. Customs is of the opinion that the above information conclusively establishes Customs' compliance with the notice requirements for extension of liquidation. Thus, protestant's argument that proper notice of extension of liquidation was not issued to surety in accordance with 19 U.S.C. ?1504(b) and section 159.12(b), Customs Regulations is without merit.

HOLDING:

The record establishes that protestant, Intercargo Insurance Company, is in fact the surety on the bond used to secure the merchandise in question. However, in view of the insufficient evidence submitted by the importer and the fact that the documentary requirements of 19 CFR 10.1 have not been satisfied nor waived, the telecommunications instruments do not qualify for duty-free entry under subheading 9801.00.10, HTSUS. The goods were properly classified as liquidated under subheading 9030.89.80, HTSUS.

Furthermore, Customs' extension of the period for liquidation of the telecommunications instruments was effectuated upon a proper statutory basis under 19 U.S.C. ?1504 and 19 CFR 159.12. Accordingly, the protest should be denied.

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 sixty (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 (60) 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,

John Durant, Director
Tariff Classification Appeals

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