HQ 227844 - Protest and Application for Further Review No. 4909-97-100057; Harbor Maintenance Fee; Exemption; 26 U.S.C. ?4462(b)(1)(B) and (C); Mistake of Fact; 19 U.S.C. ?1520(c); Timeliness of protest - United States International Trade Commision Rulings

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HQ 227844

March 5, 1998

LIQ-9-01/PRO-2-01 RR:IT:EC 227844 CB

CATEGORY: LIQUIDATION

Port Director
U.S. Customs Service
Num. 1 Puntilla Street
San Juan, PR 00901
ATTN.: Protest Officer
Hampton Carter

RE: Protest and Application for Further Review No. 4909-97-100057; Harbor Maintenance Fee; Exemption; 26 U.S.C. ?4462(b)(1)(B) and (C); Mistake of Fact; 19 U.S.C. ?1520(c); Timeliness of protest

Dear Sir/Madam:

The above-referenced protest was forwarded to this office for a determination. We have considered the points raised and a decision follows.

FACTS:

There are two entries which are the subject of this protest. The entries cover shipments of petroleum products shipped from St. Croix, U.S. Virgin Islands and unloaded for consumption in San Juan, Puerto Rico. Protestant was the importer of record. Both entries were liquidated with the assessment of the harbor maintenance fee (HMF). The two entries were liquidated on June 20, 1997, and July 7, 1997.

According to the record, protestant filed a 19 U.S.C. liquidation of the entries. Your denial of the petition is dated October 20, 1997. You denied the 1520(c)(1) petition on the grounds that liquidation resulted from a mistake of law not correctable under 19 U.S.C. ?1520(c)(1). The subject protest was filed on November 18, 1997.

Protestant is seeking a refund of the HMF based on the exemption provided for in 26 U.S.C. ?4462. Protestant is alleging that Customs failure to amend 19 CFR Part 24 has led Customs officers to incorrectly interpret the statute. It is protestant's position that this does not constitute a mistake of law. Moreover, that because Customs has failed to amend the applicable regulations, the statutory time limit for filing a protest and/or section 1520(c) petition should be extended.

ISSUE:

Should the subject protest be granted?

LAW AND ANALYSIS:

Initially, we note that while the protest was filed within 90 day of the Customs letter of October 20, 1997, and that a denial of a request for reliquidation under 19 U.S.C. ?1520(c)(1) is protestable under 19 U.S.C. ?1514(a)(7), the evidence shows that the request for reliquidation was premature since it was filed before liquidation of either entry. Subsequent to liquidation no timely protest was filed on either entry. Although we must deny the protest on procedural grounds, we are providing comments on the issue of whether the subject liquidation resulted from a mistake of fact or mistake of law.

Under 19 U.S.C. ?1514 decisions of the Customs Service, including the legality of all orders and findings entering into the same, as to liquidation or reliquidation are final unless a protest is filed within 90 days from the date of liquidation. Similarly, 19 U.S.C. ?1520(c)(1) provides for the reliquidation of an entry to correct a clerical error, etc., thus, the statute presupposes that a liquidation has taken place. The requirement that a protest be filed within 90 days after but not before notice of liquidation or reliquidation or the date of the decision protested has been interpreted by the courts. See generally, The Best Foods, Inc. v. United States, 37 Cust. Ct. 1, 9-10, 147 F. Supp. 749, C.D. 1791 (1956) (prematurely filed protest, filed after a "courtesy" notice advising of scheduled liquidation but before the date of the bulletin notice of liquidation dismissed in appellate decision reversing lower court's denial of motion to dismiss); and McDonnell Douglas Corp. v. United States, 75 Cust. Ct. 6, 465 F. Supp. 1291, C.D. 4604 (1975). Unlike the situation at bar, in Best Foods Customs did nothing after the liquidation. In the instant case, your office purported to deny the petition after liquidation of the entries.

More specifically, the courts have addressed the issue of filing a premature petition. In Hensel, Bruchman & Orbacher v. U.S., 57 Cust. Ct. 52, 53-54(1966) the sequence of events was as follows: (1) petition on September 1, 1961; (2) liquidation on October 25, 1961; and (3) protest filed on December 22, 1986. The court held that inasmuch as section 1520(c)(1) only supports a claim for reliquidation, as distinguished from liquidation, no relief can be granted in the absence of a request for reliquidation made in conformity with the language of the statute.

In J.S. Sareussen Marine Supplies v. U.S., 304 F. Supp. 1185, 62 Cust. Ct. 449 (1969), the court found similar facts to the Hensel case. The request was made on April 11, 1961 but the entries were not liquidated until 1963. The court observed, at 62 Cust. Ct. 451:

Clearly then, plaintiff has not made a proper request for reliquidation as is contemplated in the statute. Moreover, there is no evidence of any request made by plaintiff subsequent to the liquidation which would fulfill the requirements of the statute.

The question, thus, is whether the otherwise premature filing of a petition is cured by the post-liquidation action of Customs. We conclude that the action by Customs was a nullity because liquidating the entries constituted the only legal action available to Customs.

First, the courts have held that the statutory procedures for correction of an administrative error are binding on all concerned. Omni U.S.A. Inc. v. U.S., 840 F. 2d. 912, 6 Fed. Cir. 99, 101 (1988), cert. den. 109 S. Ct. 56, reh. den. 109 S. Ct. 405. Second, the courts have held that all actions taken by Customs prior to the liquidation are subsumed in the liquidation. The rule is that all decisions of Customs involved in fixing the duties chargeable against imported merchandise are merged in and become part of the legal liquidation. Clover Linen Corporation v. U.S., 26 Cust. Ct. 275 (1951). Under 19 U.S.C. ?1514, a liquidation is final and conclusive on all parties, including the Government, absent action taken in accordance with the statutes permitting reliquidation in specified circumstances. U.S. v. Cherry Hill Textiles Inc., 112 F.3d 1550 (1997). The finality of assessment, absent a timely protest, refers to the decisions on duties and related exactions subsumed in final liquidation. U.S. v. Utex International Inc., 857 F.2d. 1408(Fed. Cir. 1988).

The attempted denial by Customs (by the letter of October 20, 1997), which did not purport to reliquidate the liquidations of June 20, 1997 or July 7, 1997, was a nullity. Customs could not have acted under 19 U.S.C. ?1520(c)(1) since the protestant here did not file any petition that complied with the express statutory requirement that such a petition, to be timely, had to be filed after the liquidation. Likewise, Customs could not simply treat the petition as a protest for the same reason, i.e., the letter even as a protest was premature under 19 U.S.C. such an action if taken on October 20, 1997, would have been outside the time limits imposed by that statute.

Consequently, we conclude that the purported denial of October 20, 1997, does not provide a basis for a protest. The petition was premature under 19 U.S.C. ?1520(c)(1). The liquidations of June 20, 1997, and July 7, 1997 became final and binding on all parties, including the Government, in the absence of a timely protest. Any purported action by Customs on the premature 1520(c)(1) petition for reliquidation cannot amount to a denial of such a petition encompassed by 19 U.S.C. ?1514(a)(7) so as to confer the ability to act on the purported denial by Customs. The action of the Customs officer here is no different than the action of Customs that was the subject of the court's comment in footnote 3 in Fujitsu Ten Corp. of America v. United States, 957 F. Supp. 245 (1997), concerning actions subject to protest. Acting on an invalid premature 1520(c) petition did not convert the petition into a timely valid petition.

Having said that, the statutory authority for the harbor maintenance fee is found in the Water Resources Development Act of 1986 (Pub. L. 99-662; 100 Stat. 4082, 4266; 26 U.S.C. ?4461 et seq.) Under this statute, a fee is imposed for the use of a port, defined as any channel or harbor or component thereof in the United States which is not an inland waterway, is open to public navigation, and at which Federal funds have been used since 1977 for construction, maintenance, or operation. Pursuant to 26 U.S.C. ?4462(b), no tax shall be imposed with respect to-- . . .
(B) cargo loaded on a vessel in Alaska,
Hawaii, or any possession of the United
States for transportation to the United
States mainland, Alaska, Hawaii, or such a possession for ultimate use or consumption in the United States mainland, Alaska,
Hawaii, or such a possession,

(C) the unloading of cargo described in subparagraph (A) or (B) in Alaska, Hawaii, or any possession of the United States, or in the United States mainland, respectively, or . . .

The Customs Regulations implementing this provision are found at 19 CFR Part 24. The applicable regulation provides that "possessions" of the United States include Puerto Rico and the U.S. Virgin Islands. See 19 CFR 24.24(c)(4)(ii)(C).

As indicated in the FACTS portion of this ruling, the consumption entries under protest covered merchandise loaded on a vessel in the U.S. Virgin Islands and unloaded in San Juan, Puerto Rico. Thus, both movements (i.e., the loading and unloading) are exempt from the HMF pursuant to 26 U.S.C.

According to information provided by your office, the port determined that such movements between insular possessions were subject to the HMF based on your reading of the applicable regulation and required that the HMF be paid. The regulation (19 CFR 24.24(c)(4)(i)(B)) was not amended to conform to the 1988 statutory change which exempts such movements from the HMF. A regulatory provision does not override statutory language. Thus, the fact that the regulation has not been amended to include movements for ultimate consumption in an insular possession does not negate the fact that statutorily these movements are exempt from the HMF.

We disagree with protestant's contention that the Customs officer's failure to follow 26 U.S.C. ?4662(b) is not a mistake of law. The courts have defined mistake of law as mistakes which occur "... where the facts are known, but their legal consequences are not known or are believed to be different than they really are" (Executone Information Systems v. United States, 96 F. 3d 1383, 1386 (Fed. Cir. 1996) (emphasis in original), citing Hambro Automotive Corporation v. United States, 66 CCPA 113, 118, C.A.D. 1231, 603 F. 2d 850 (1979); see also, Degussa Canada Ltd. v. United States, 87 F. 3d 1301 (Fed. Cir. 1996)). The instant protest falls squarely within that definition. Customs was aware that the entries covered movements between two insular possessions but incorrectly believed that these movements were subject to the HMF. This is a mistake of law which is not correctable under 19 U.S.C. ?1520(c)(1).

Finally, protestant contends that the erroneous deposits of the HMF were made because the ABI program was erroneous. It appears that protestant is misinformed as to the nature of the ABI filing process. The software program used by ABI filers is not provided by Customs; rather, the software is sold by private vendors. Thus, protestant is incorrect when it alleges that Customs required the payment of the HMF through the ABI program. The onus is on the ABI filer to know when it is appropriate to pay the HMF. If the software program being used by the filer requires that the HMF be calculated then it is up to the filer to discuss this problem with the software vendor.

HOLDING:

The subject protest against the denial of a 19 U.S.C. in the LAW AND ANALYSIS section. The petition involves the construction of the statute imposing the harbor maintenance fee and, as such, is outside the subject matter that can be covered by a petition to reliquidate under 19 U.S.C. ?1520(c)(1). Finally, the failure to file a timely protest against two liquidations makes those liquidations final and binding on all parties.

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,

John A. Durant, Director
Commercial Rulings Division

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