HQ 227564 - Application for further review of Protest No. 2720-97-100566; 19 U.S.C. 1520(c)(1); mistake of fact; classification of thyristor modules; classification of parts; ABB Power Transmission v. United States; Taban co. v. United States; Zaki Corp. v. United States - United States International Trade Commision Rulings

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HQ 227564

March 5, 1998

LIQ-9-01-RR:IT:EC 227564 IOR

CATEGORY: LIQUIDATION

Port Director
U.S. Customs Service
Protest Section
11099 South La Cienega Boulevard
Los Angeles CA 90045
Attn: Suzanne McCarthy

RE: Application for further review of Protest No. 2720-97-100566; 19 U.S.C. 1520(c)(1); mistake of fact; classification of thyristor modules; classification of parts; ABB Power Transmission v. United States; Taban co. v. United States; Zaki Corp. v. United States

Dear Sir:

The above-referenced protest was forwarded to this office for further review. Our review follows a meeting held on December 23, 1997 between counsel for protestant and the Duty and Refund Determination Branch, and our receipt of a December 31, 1997 submission on behalf of the protestant. We have considered the facts and issues raised, and our decision follows.

FACTS:

This protest has been filed against your denial of requests for reliquidation of the subject entries, pursuant to 19 U.S.C.

This protest concerns 13 entries filed by the protestant from May 9, 1995 through September 11, 1995, in the Los Angeles airport, covering various different items, identified on the invoices and air waybills as fiber optic ducts, long rod insulators, insulators, MKV capacitors, TE-connectors, spare parts VBE & TM, optical interface, water ducts, mechanical parts, tools, bus conductors/fittings, arrester system, fibre optics, spare parts valve tower, screws and bolts, thyristor level test unit, thyristor monitoring, TE-cards and spare parts module (collectively referred to herein as "parts") and thyristor modules. The items are classified under various subheadings, including 8504.90.9090, 8546.20.0090 and 8532.25.0080 of the Harmonized Tariff Schedule of the United States (HTSUS). The entry summaries describe the merchandise as "inductor parts, other" under subheading 8504.90.9090, HTSUS, as well as other items such as "ceramic insulator: other", "static converters, other" and "other threaded articles." Of the 13 entries which are the subject of this protest, the entry documents for six of them, make no reference to "thyristor". Apparently three additional entries were made at the Los Angeles seaport, and are the subject of a protest filed at the seaport.

A decision of the Court of International Trade, in ABB Power Transmission v. United States, 896 F. Supp. 1279, Slip op. 95-141, was issued on August 4, 1995. The decision concerned the classification of thyristor modules. Customs had classified the thyristor modules under subheading 8504.90.00, HTSUS, which provided for:

8504 Electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof:
8504.90.00 Parts....................................................3%

The court determined that thyristor modules are properly classifiable under subheading 8541.30.00, HTSUS, which provides for:

8541 Diodes, transistors and similar semiconductor devices...:
8541.30.00 Thyristors, diacs and triacs, other than photosensitive devices..............Free

The subject entries were liquidated from September 22, 1995 through December 29, 1995. According to Customs ACS (Automated Commercial System) records, of the thirteen entries at issue, all but two were liquidated on bypass, that is, without review by Customs. Of the two entries reviewed by a Customs import specialist, Entry no. 322-xxxx213-4, dated May 9, 1995, does not include any thyristor modules, but includes long rod insulators, MKV capacitors and TE-connectors, and Entry no. 322-xxxx413-4, dated July 11, 1995, consists of insulators, water ducts, mechanical parts, tools, thyristor module and bus conductors/fittings.

According to an import specialist familiar with the entries, the May 9, 1995 entry was reviewed based on matters other than the classification issues under ABB, and the entry was accepted on June 1, 1995, according to the CF 7501. According to the import specialist, the July 11, 1995 entry was rejected for lack of information on the mechanical parts and tools, and upon receipt of additional information, was accepted on August 7, 1995, three days after the decision in the ABB case was issued. There is no information as to whether or not the import specialist accepting the entry on August 7, 1995 was aware of the ABB decision.

On January 29, 1996, Customs issued to the protestant a Request for Information (CF 28), with respect to "various" entries made on "various" dates, requesting "descriptive or illustrative literature or information explaining what the merchandise is, where and how it is used, and exactly how it operates," "breakdown of component materials or ingredients by weight and the actual cost of the components at the time of assembly into the finished articles." The CF 28 further stated: "The entry documentation (invoices, bills of lading, etc.) is insufficient to establish that the merchandise is actually "thyristor modules", as in Slip Op 95-141. Please provide information via mail or fax ... to support the claimed classification."

The petitions for reliquidation under 19 U.S.C. ?1520(c)(1) were filed on September 11, 1996. A petition pertaining to thyristors and parts, sets forth the mistake of fact alleged as follows:

The imported merchandise which is the subject of this request is thyristor modules and related parts. The imported merchandise was entered under the provision for inductor parts under subheading 8504.90.90. The imported articles were liquidated as entered under that provision because Customs was not aware of the true nature of the articles.

The liquidation of this entry inadvertently occurred after the decision in the ABB case when the classification of the article was no longer in dispute. Had the true nature of the articles been known, this mistake of fact would not have occurred and the articles would be classified as they have been at Los Angeles and other ports. The articles liquidated under subheading 8504.90.90 should be reclassified with the thyristor modules classified under subheading 8541.30.00, HTS, and the parts under subheading 8541.90.00, HTS. Unfortunately, this entry was liquidated before the true nature of the articles was made known to Los Angeles Customs in our submission of February 28, 1996. That submission cleared up the mistake of fact as to the nature of the articles.

The petitions varied, in that they pertained to thyristor parts only, thyristor modules only, or thyristor modules and related parts as in the language set forth above. Some of the 520(c) petitions specifically describe the thyristor parts, for example the petition for Entry no. 322-xxxx513-2 includes the term "bus conductors" in parentheses after referring to "thyristor parts."

The petitions for reliquidation were denied on October 31, 1996 on the grounds that the claims are "not correctable under section 520(c)(1)." A protest against the denials of the 19 U.S.C. ?1520(c)(1) claims was filed on January 8, 1997. The protest alleges that the subject merchandise, the thyristor modules and parts should have been classified, respectively, under subheadings 8541.30.00 and 8541.90.00, HTSUS. The protest alleges that the CF 28 dated January 29, 1996 was issued with respect to other entries of thyristor modules made prior to the decision in the ABB case, and liquidated after the ABB decision. According to the instant protest, protests with respect to the other entries were granted after the February 28, 1996 response to the CF 28 clarified the true nature of the thyristor modules for Customs in Los Angeles. The protestant alleges:

The liquidation of the entries involved herein inadvertently occurred after the decision in the ABB case when the legal classification of thyristor modules was no longer in dispute. These liquidations occurred before the true nature of the imported articles was made known to Los Angeles Customs and Import Specialist Pazzo in our submission of February 28, 1996. That submission cleared up the misunderstanding and mistake of fact as to the nature of the articles, the only issue which remained open with Customs at the time of liquidation.

Further, the protestant alleges that two requests for reliquidation under section 1520(c) which were filed, were approved by Customs and were reliquidated with refunds. Based on the Customs action of approving two requests for reliquidation, the protestant takes the position:

Obviously, the Import Specialist recognized that all that was involved was a mistake of fact as to the true nature of the imported merchandise or the request for reliquidation would never have been approved on these two entries. This is a clear recognition that all that is involved is a mistaken factual issue as to the nature of the merchandise. Accordingly, these two requests for reliquidation under 19 U.S.C. ?1520(c) were properly approved.

The Port Director takes the position that "if the merchandise is the same, a mistake of fact is supported" as the descriptive literature supplied shows the thyristor modules to be similar to those in ABB. However, the issue of parts was not raised in ABB and in any event the parts that were discussed in ABB are not the same as those shown on the entry documents.

ISSUE:

Whether the failure to liquidate the subject entries under an HTSUS subheading determined by a court decision which was made before the dates of the subject entries, constitutes an inadvertence or mistake of fact, correctable under 19 U.S.C.

LAW AND ANALYSIS:

Initially we note that this protest was timely filed pursuant to 19 U.S.C. 1514(c)(2)(B). The date of decisions protested was October 31, 1996 and the protest was filed on January 8, 1997. In addition, the refusal to reliquidate an entry under section 1520(c)(1) is a protestable matter pursuant to 19 U.S.C. 1514(a)(7).

19 U.S.C. ?1514 sets forth the proper procedure for an importer to protest the classification and appraisal of merchandise when it believes the Customs Service has misinterpreted the applicable law. A protest must be filed within ninety days after notice of liquidation or reliquidation. Otherwise, the tariff treatment of merchandise is final and conclusive.

19 U.S.C. 1520(c)(1) is an exception to the finality of 1514. Under section 1520(c)(1) Customs may reliquidate an entry to correct a clerical error, mistake of fact, or other inadvertence, not amounting to an error in the construction of a law. The error must be adverse to the importer and manifest from the record or established by documentary evidence and brought to the attention of the Customs Service within one year after the date of liquidation. The relief provided for in 19 U.S.C. 1520(c)(1) is not an alternative to the relief provided for in the form of protests under 19 U.S.C. 1514; section 1520(c)(1) only affords "limited relief in the situations defined therein" (Phillips Petroleum Company v. United States, 54 CCPA 7, 11, C.A.D. 893 (1966), quoted in Godchaux-Henderson Sugar Co., Inc., v. United States, 85 Cust. Ct. 68, 69, C.D. 4874, 496 F. Supp. 1326 (1980); see also, Computime, Inc. v. United States, 9 CIT 553, 555, 622 F. Supp. 1083 (1985), and Concentric Pumps, Ltd. v. United States, 10 CIT 505, 508, 643 F. Supp. 623 (1986)).

For section 1520(c)(1) purposes, a mistake of fact has been defined as "a mistake which takes place when some fact which indeed exists is unknown, or a fact which is thought to exist, in reality does not exist." C.J. Tower & Sons of Buffalo, Inc. v. United States, 68 Cust. Ct. 17, 21, C.D. 4327, 336 F. Supp. 1395, 1398 (1972), aff'd, 61 CCPA 90, C.A.D. 1129, 499 F.2d 1277 (1974). Inadvertence, on the other hand, has been defined as "an oversight or involuntary accident, or the result of inattention or carelessness, and even as a type of mistake." Id.

Essentially the protestant's claim is that the subject merchandise was classified under the wrong HTSUS provision. The mistake alleged by the protestant is that Customs was unaware of the nature of the imported merchandise. The protestant has not alleged any inadvertence other than that "the liquidation of this entry inadvertently occurred after the decision in the ABB case when the classification of the article was no longer in dispute." The protestant has satisfied the import specialist that the thyristor modules are the same as the thyristor modules at issue in the ABB case. With respect to the "thyristor parts", the protestant has failed to provide any evidence that the subject imported merchandise was incorrectly classified. "Thyristor parts" were not at issue in the ABB case. In the ABB case, the thyristor modules were described as consisting of "six thyristor elements..., heatsinks, voltage divider circuits and electronic firing' circuitry." The imported "parts" are not described as those in the ABB case, and the protestant has presented no evidence or allegations to support that the "parts" were incorrectly classified. The statements of counsel regarding the classification of the parts in the 520(c) petitions and the December 31, 1997 submission, are not evidence. Bar Bea Truck Leasing Co. Inc. v. United States, 5 CIT 124, 126 (1983). Therefore, the protestant has failed to establish that any error has occurred with respect to the thyristor parts, as is required under 19 U.S.C. ?1520(c)(2).

However, assuming that a classification error was made, with respect to both the thyristor modules and the "parts" we will address the alleged mistake of fact. The courts have consistently taken the position that an erroneous classification of merchandise is not a clerical error, mistake of fact, or other inadvertence within the meaning of 19 U.S.C. 1520(c)(1), but is an error in the construction of a law. See, Mattel Inc. v. United States, 377 F. Supp. 955, 72 Cust. Ct. 257, C.D. 4547 (1974); and C.J. Tower & Sons of Buffalo, Inc. v. United States, 336 F.Supp. 1395, 68 Cust. Ct. 17, C.D. 4327, aff'd. 499 F.2d 1277, 61 CCPA 90 (1972). Here, the only error set forth by the protestant is one involving the classification of the imported merchandise. Customs has found that an exception exists and reliquidation is proper when a Customs officer is not aware of a classification ruling. ORR Ruling 75-0026, dated January 24, 1975. The same holds true for court decisions. ORR Ruling 75-0026 also states, however, that if an import specialist takes note of a Headquarters ruling, and decides it is not applicable to the merchandise, that decision is an error in the construction of the law, excluded from relief under 19 U.S.C. ?1520(c)(1). The limited exception described in ORR Ruling 75-0026 does not apply to eleven of the subject entries, as they were not reviewed by Customs, and it does not apply to the two entries reviewed by Customs as 1) review of one of the entries had been completed prior to the decision in the ABB case and 2) there is no allegation that any of the import specialists were unaware of the ABB case.

In C.J. Tower, supra, the U.S. Court of Customs and Patent Appeals found a mistake of fact existed where neither the importer nor Customs was aware that the merchandise under consideration was emergency war materials entitled to duty-free entry under a separate item of the tariff schedule until after liquidation. The court found that this mistake of fact was correctable under section 1520(c)(1) because it was a mistake that went to the nature of the merchandise and was the underlying cause for its incorrect classification. See Taban Co. v. United States, 960 F. Supp. 326 (CIT 1997) (reprinted in Customs Bulletin, March 19, 1997, p. 43) and Zaki Corp. v. United States, 960 F. Supp. 350 (CIT 1997) (reprinted in Customs Bulletin, April 2, 1997, p.84) (wherein the U.S. Court of International Trade (CIT) found that there was a mistake of fact, rather than one of law, because "the exact physical properties' of the merchandise were not known to the broker or to Customs in this case"); HQ 223524, dated February 13, 1992 (wherein we found a mistake of fact where merchandise was classified as a wool fabric, because it had been identified on an invoice as "chief value wool" when in fact it was "chief value silk").

As stated above, a mistake of fact must be manifest from the record or established by documentary evidence. The CIT has ruled that mere assertions by a complainant without supporting evidence will not be regarded as sufficient to overturn a Customs official's decision. Bar Bea Truck Leasing Co., Inc. V. United States, 5 CIT 124, 126 (1983). Further, upon an assertion that merchandise has been wrongly classified due to a mistake of fact, "it is incumbent on the plaintiff to show by sufficient evidence the nature of the mistake of fact." PPG Industries, Inc. v. United States, 4 CIT 143, 147-148 (1982), citing Hambro Automotive Corp. v. United States, 81 Cust. Ct. 29, 31, 458 F. Supp. 1220,1222(1978) aff'd 66 CCPA 113, C.A.D. 1231, 603 F.2d 850 (1979).

In ITT Corp. v. United States, 24 F.3d 1384, 1387 (Fed. Cir. 1994), the court found that reliquidation under 19 U.S.C. clerical error, mistake of fact, or other inadvertence includes asserting the existence of a clerical error, mistake of fact, or other inadvertence "within the proper time and with sufficient particularity to allow remedial action." Id. With respect to substantiation, the court stated "[m]istakes of fact that are not manifest from [the] record ... must be established by documentary evidence." Id. In a footnote on p. 1389, in discussing the type of evidence that can be considered at trial, the court referred to a Customs assertion that a claim of mistake of fact must be supported by evidence (testimony or other credible proof) "of the underlying facts that demonstrate the existence of such error," and that the plaintiff/importer bears the burden of establishing the mistake of fact "by demonstrating the underlying facts" needed to prove the allegation. The plain language of the statute requires that the error be established by documentary evidence, if it is not manifest from the record.

In this case, unlike in C.J. Tower, Taban, and Zaki, there is no allegation that the importer of the merchandise, or the broker who entered the merchandise was unaware of the nature of the merchandise. In Taban, and Zaki, the court found that "the exact physical properties' of the merchandise were not known to the broker or to Customs." Taban, Customs Bulletin at p. 53; Zaki, Customs Bulletin at p. 94. The court also concluded that the "broker and Customs were unaware [of the exact physical properties of the merchandise] until more than ninety days after their liquidation and therefore plaintiff's broker could not have relayed that information to Customs for its consideration in classifying and liquidating the merchandise at issue." Id., Taban at 54; Zaki at 95-96. Similarly, in C.J. Tower, neither the importer nor Customs was aware that the merchandise was emergency war materials entitled to duty-free entry, until after the liquidations became final. In this case, there is no allegation or evidence that the entries could not have been protested within 90 days of liquidation. Moreover, the entries were liquidated from September 22, 1995 through December 29, 1995, and the ninety days after liquidation would have run from December 21, 1995 through March 28, 1996. At the very least, protestant could have filed a protest under 19 U.S.C. ?1514 for at least half of the entries, after receiving the January 29, 1996 CF 28.

In its protest, protestant states that:

ABB and [protestant] are intense, head-on competitors in the converter station market. The ABB and [protestant's] thyristor modules, or thyristor valves, perform exactly the same functions in the converter stations and are composed of essentially the same elements, the principal element of which is the individual thyristors connected in series which are designed for high voltage usage.

The foregoing statement was made in support of the position that the subject merchandise is the same as that at issue in the ABB case. The statement also belies any inclination to assume that the protestant was unaware of the fact that its thyristor modules were the same as the ones at issue in the ABB case, or that the protestant was unaware of the correct classification of the merchandise. However, the protestant's understanding of the nature of the merchandise is not at issue, as it is not alleged that the protestant was unaware of the nature of the merchandise.

Another dissimilarity between the facts in C.J. Tower, Taban, and Zaki, is that in those cases, the entry documents were not clear as to the aspect of the nature of the merchandise which caused the incorrect classification. In C.J. Tower, the merchandise was known to be fuel cells, but it was not known that they were emergency war materials. In Taban and Zaki, the entry documents were not sufficient to inform the broker and Customs as to the nature of the merchandise to be classified correctly (the entry documents are described as providing a "limited description of the imports," Zaki, id. at 47; Taban, id. at 88), whereas in this case, the invoices clearly refer to "thyristor modules" which was the exact item in issue in ABB. There is no mistake about the nature of the merchandise. There is no allegation that Customs did not know that the merchandise at issue consisted of thyristor modules, just that Customs was not aware that the thyristor modules being entered were the same as those in ABB. Had the import specialist considered the classification of the thyristor modules, the decision to classify the merchandise as entered would be a mistake of law on the part of Customs, in that the responsible import specialist concluded that the thyristor modules were not classified the same as the ones in the ABB case. To find that Customs made a mistake of fact by not knowing that the thyristor modules imported were the exact same ones as in ABB, and therefore classifiable under the same provision, is no different than finding that Customs did not know under which provision to classify imported thyristor modules, which would clearly be a mistake of law. However, in this case no decision on the entries at issue were made by Customs, except on two, one of which did not include any thyristor modules, and the other for which there is no evidence that the classification of the thyristor module was considered.

Protestant takes the position that there must have been a mistake of fact with respect to the liquidation of the entries at issue because two petitions under section 1520(c)(1) with respect to the entry of similar merchandise were granted. That is insufficient to support a finding of a mistake of fact. Each section 1520(c) claim is reviewed on its own merits, and Customs is not required to follow a decision pertaining to a different entry, especially if that decision may have been in error.

With respect to the "parts," there is insufficient evidence provided from which to determine whether there was a mistake of fact. It is alleged that the "parts" are "thyristor parts" but there is no evidence provided on the nature of the mistake of fact, and a mistake of fact is not manifest from the record.

In support of its position, the protestant cites ITT Corp. v. United States, supra, and Executone Information Systems v. United States, 96 F.3d 1383 (Fed. Cir. 1996). In ITT, the claimed error was a mistake of fact in the initial creation of the broker's records for which the broker used company records applicable to other parts to be sent to a different customer. See, 812 F.Supp. at 216. The CIT found that the broker understood the nature of the merchandise to be other than what it was, thereby finding a mistake of fact. Id. It was this mistake of fact, which was demonstrated by evidence, that resulted in the improper classification of the merchandise upon improper liquidation. An error that does not directly cause an improper liquidation is not an error within the meaning of section 1520(c). In ITT, in filling out the Customs entry forms, the importer's agent used company records applicable to parts which were finished to a greater degree and which were to be sent to a different customer. In this case, there is no claim that the entry documents do not correctly reflect the merchandise entered.

In Executone Information Systems v. United States, 96 F.3d 1383 (Fed. Cir. 1996), the court made an initial inquiry of whether the plaintiff therein, Executone, had alleged a mistake of law or a mistake of fact. Id. 1385. In Executone, the importer had failed to file, upon entry, the forms required for duty-free treatment under the Caribbean Basin Economic Recovery Act (CBERA). The court found that the importer had alleged a mistake of fact, that the importer believed, at the time of importation, that the required forms under CBERA had been filed when, in fact, they had not. Id. at 1386. In Executone, the court distinguished between a mistake of law and mistake of fact:

[M]istakes of fact occur in instances where either (1) the facts exist, but are unknown, or (2) the facts do not exist as they are believed to. Mistakes of law, on the other hand, occur where the facts are known, but their legal consequences are not known or are believed to be different than they really are. (Emphasis supplied)

Id. (citing Hambro Automotive Corp. v. United States, 603 F.2d 850, 855 (CCPA 1979). Secondly, the court determined whether the importer had "sufficiently demonstrated rather than merely alleged, a clerical error, mistake of fact, or other inadvertence' as those terms are used in section 1520(c)(1)." Id. at 1388. The court found that it was not manifest from the record and the importer failed to establish that the importer's failure to submit the required forms was due to a mistake of fact or inadvertence. Similarly, in the instant case, the protestant alleges a mistake of fact, that Customs did not know the nature of the merchandise entered, however, fails to substantiate the claim, and fails to show how such a mistake of fact resulted in the erroneous classification.

We find that the protestant has failed to establish that the "parts" were erroneously classified, but has established that the thyristor modules were erroneously classified. However, with respect to the "parts" and the thyristor modules, the protestant has failed to meet either the notice or substantiation requirements of section 1520(c)(1). No mistake of fact whatsoever is alleged with respect to the "parts" and the mistake alleged with respect to the thyristor modules is insufficient to establish that it caused the erroneous liquidation. With respect to the "parts" there is no alleged mistake to substantiate and with respect to the thyristor modules, other than descriptions of other entries for which reliquidation was granted, no documentary evidence is provided to substantiate the alleged mistake of fact, and no mistake of fact is manifest from the record.

Each of these entries were made after December 8, 1993, the effective date of the NAFTA Implementation Act (Act of December 8, 1993, 107 Stat. 2057, Pub. L. 103-182) under which Congress implemented the concept of shared responsibility between Customs and importers. Congress amended 19 U.S.C. ?1484 to require importers to use reasonable care in classifying merchandise on entries and allowed Customs to rely on the information submitted by importers. See H. Rpt. 100-361, Part 1, 136 (November 5, 1993).

As pointed out above, more than one half of the invoices describe the merchandise as thyristor modules. The protestant claims that they are thyristor modules. If there was a mistake in the liquidation, the evidence does not show a lack of knowledge as to the identity of the goods. The other entries are claimed to cover thyristor parts. For these entries, neither the entry papers, nor any documentary evidence, show that they were thyristor parts; that they were classified incorrectly, and that if they were classified incorrectly, that the incorrect classification was due to a mistake of fact or other inadvertence not amounting to an error in the construction of a law. The importer does not allege it was unaware of the identity of the merchandise and by law the importer was responsible for the classification.

HOLDING:

The protestant has not established that the liquidation of entries under a different HTSUS subheading than that decided in a court case is a mistake of fact in the liquidation of the subject entries, and reliquidation of the entries is not permissible pursuant to 19 U.S.C. ?1520(c)(1).

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,
Commercial Rulings Division

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