HQ 228525 - Protest and AFR No. 2809-98-100738; Amdahl Corp.; 19 U.S.C. 1520(c); mistake of fact; reliquidation without interest; George Weintraub & Sons, Inc. v. US; SCA International v. US - United States International Trade Commision Rulings

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HQ 228525

May 8, 2000

LIQ-9-01-RR:CR:DR
228525 CK

Category: RELIQUIDATION

Port Director of Customs
Attn: Protest Office
555 Battery Street
San Francisco, CA 94105

RE: Protest and AFR No. 2809-98-100738; Amdahl Corp.; 19 U.S.C. 1520(c); mistake of fact; reliquidation without interest; George Weintraub & Sons, Inc. v. US; SCA International v. US

Dear Sir or Madam:

The above-numbered protest, dated July 26, 1999, was forwarded to this office for further review. We have considered the facts and issues raised, and our response follows.

FACTS:

This protest has been filed against your denial of the 19 U.S.C. 1520(c), mistake of fact petition, No. 2809-98-100312, filed June 9, 1998. That petition was filed against your failure to pay interest on duties refunded in the reliquidation of entry number E07-XXXX669-1, pursuant to the protest you had previously approved, number 2809-93-102001.

Entry number E07-XXXX669-1 was entered May 10, 1993, and liquidated on October 29, 1993. That liquidation was one of four liquidated entries protested on December 8, 1993. Protest was made against the classification of the merchandise in those entries, a refund in duties plus interest was sought due to a lesser duty rate. By letter dated January 31, 1995, Protestant amended its protest by canceling some of the entries listed in the protest, and amending the protest amounts in the remaining entries, since drawback had been claimed for portions of those entries. The above-numbered entry was one of the entries in which partial drawback had been claimed, and the amount of that entry in protest was lowered accordingly. The protest was granted and entry E07-XXXX669-1 was reliquidated on February 27, 1998. Notice of the reliquidation, without payment of interest was posted to the Port’s bulletin board on February 27, 1998. A reliquidation worksheet dated February 10, 1998, for that entry is attached to the file. The worksheet states: the entry number; the total duties paid; the reliquidation amount, which was lowered due to the amount of the drawback paid; the merchandise processing fee, and under interest date the word “none” is printed.

On June 9, 1998, Protestant filed a 1520(c) petition with the Port, alleging that the port made a mistake of fact when it reliquidated entry E07-XXXX669-1 without paying interest on the duty refund. Protestant argues that interest was payable since the CAFC in Travenol Laboratories v. US, 118 F.3d 749 (Fed. Cir. 1997), rehearing denied, and suggestion for rehearing in blanc declined, 1997 US App. Lexis 31641 (October 23, 1997) held that 19 U.S.C. 1505(c), was applicable to any entry liquidated or reliquidated after December 8, 1993, regardless of the date of entry. Section 1505(c) states, “interest on excess moneys deposited shall accruefrom the date the importer of record deposits estimated duties, fees, and interest to the date of liquidation or reliquidation of the applicable entry or reconciliation.” Protestant states, “therefore, we submit that due to a clerical error, Customs failed to refund interest properly owed upon the duty amount returned after enactment of section 1505(c), and we respectfully request correction of this error.

The port on July 16, 1999, denied the 1520(c) petition, 2809-98-100312, stating the issue was not protestable under 19 U.S.C. 1520(c). The port states that no mistake of fact or clerical error occurred. The port states its failure to include interest with the duty refund was an issue protestable under 19 U.S.C. 1514, and correctable only under that section. It states further that a section 1514 protest must be filed within 90 days of liquidation or reliquidation, which Protestant failed to do. The port states that since the 520(c) petition was received on June 9, 1998, well beyond the 90-day protest period, it could not be treated as a timely 1514 protest, and must be denied as a 1520(c) petition because the issue is not remedial under that section as no mistake of fact had occurred.

The present protest, before us on further review, 2809-98-100738, dated October 9, 1998, states the port incorrectly denied its 1520(c) mistake of fact petition. Protestant argues that the CAFC in Travenol ruled that section 1505(c) applies to entries reliquidated after the amendment, even though the entries were filed before the amendment. Which is the situation here, states Protestant. Protestant also states that a few days prior to reliquidation of the entries involved, Customs headquarters issued instructions to implement the Travenol decision. These instructions entitled, “Mod Act Liquidation Instruction” (Instructions) (Revised), dated July 7, 1998, stated the Customs position, acknowledging that interest is payable pursuant to 1505(c) on reliquidations made after the Mod Act regardless of the entry date. Protestant states that the Travenol decision and Customs headquarters Instructions to implement that decision confirm, as a matter of law, the importer’s entitlement to the interest requested.

Protestant also states that the Instructions err in applying protest time limits to recover unpaid interest that start from the date of reliquidation. Protestant states the error is based on a false presumption that Customs makes a protestable decision to refuse to pay interest that coincides with the date of reliquidation. Protestant quotes the following as evidence of its statement “Absent information to the contrary, the date of the decision whether and in what amount to pay or bill interest is presumed to be the same as the date of liquidation or reliquidation action using the ACS liquidation module.” Instructions, section 4, emphasis added.

Protestant also states that the Instructions further state that in importer’s failure to protest customs failure to refund interest within 90 days of the date of reliquidation is a basis for denial of the refund request, Instruction sections 4 and 5.

Protestant states that the presumption of a Customs decision to pay interest is contrary to the findings of the Customs courts in decisions refunding interest that Customs was obligated to pay and failed to pay in liquidations or reliquidations. Protestant states further that it is important only that Customs made no notation on the approved classification protest that provided notice to the importer of a decision by Customs refusing to pay interest on the reliquidations of the entry involved. Protestant states that in such circumstances, the Customs courts have found that there is no protest required and ordered refunds.

Protestant also states that an action to recover interest, which may be brought under 28 U.S.C. 1581(I), is timely filed within two years of the date of the reliquidation. However, a section 1581(I) action is unnecessary where, as here, the procedural remedy of mistake of fact is available. At the time the mistake of fact petition was filed, the law, as set out in the Travenol decision, was clear. When the law is clear and there is no room for discretion, there can be no mistake in the interpretation of the law. There can only be a mistake of fact or other inadvertence not amounting to an error in the construction of the law. Such an error or inadvertence is correctable under a petition timely filed, as here, within one year, in accordance with section 1520(c).

Protestant argues, finally, an analogous situation existed in George Weintraub & Sons, Inc. v. US, 12 CIT 643, 691 F. Supp. 1449 (1988), vacated as moot, 855 F. Supp. 401 (CT. Int’l Trade 1994). In that case, after entry of the goods but before liquidation, the President issued a Proclamation granting Column 1 tariff treatment to imports from Poland under contracts finalized before a certain date. The Court of International Trade concluded that Customs failure to liquidate at Column 1 could only have resulted from a mistake of fact or other inadvertence.

It is the port’s position that its failure to pay interest on the reliquidation of entry E07-XXXX669-1 was not a clerical error or mistake of fact. Additionally, it states that its decision was protestable under 19 U.S.C. 1514. The port further states that its decision to deny the subsequent protest for failure to refund the interest under 1520(c), and treating the 1520(c) petition as an untimely 1514 protest was appropriate. The port also states that its decision was not a mistake of fact as the decision was made after the Instructions were issued. Finally, the port states that the Mod Act liquidation instructions, dated July 7, 1998, were relied on in all particulars in denying protest number 2809-98-100312.

A copy of the “Mod Act Liquidation Instructions (Revised),” dated July 7, 1998 is included in the file. These revised instructions set out various scenarios where the CAFC’s opinion in Travenol would make section 1505(c) interest applicable for entries that were liquidated or Reliquidated after December 8, 1994.

However, we note that these revised instructions were dated July, 7, 1998, almost five months after the notice of reliquidation of entry E07-XXXX669-1 was published, on February 27, 1998. Therefore, at the time of the reliquidation, which is the event that Protestant claims a mistake of fact occurred, these instructions were not yet in existence. However, these instructions are informative since the first paragraph sets out the instructions that were in place on February 27, 1998. That paragraph states,

“Headquarters bulletin board message number 4063021, entitled ‘Liquidation instructions Under the Mod Act,’ dated March 8, 1994, provided instructions to field offices for the collection and payment of interest, at the time of liquidation or reliquidation of consumption (import) entry summaries, for underpayments and overpayments of duties and fees. Field offices were instructed to follow the liquidation guidelines provided, and to refund or bill interest in accordance with the Mod Act on liquidations or reliquidations involving those entry summaries with a date of entry on or after December 8, 1994.”

Also included in the file is a copy of a cc:Mail dated May 4, 1998, titled Travenol-Mod Act Interest. This message is a precursor to the July 7, 1998 revised liquidation instruction. However, again we note, this message is dated May 4, 1998, which is almost three months after the reliquidation notice on February 27, 1998, which is the event that gave rise to Protestant’s claim that a mistake of fact occurred.

ISSUE:

Should the mistake of fact petition filed pursuant to 19 U.S.C. 1520(c) have been granted?

LAW AND ANALYSIS:

We note that this protest is timely filed within 90 days of the denial of the mistake of fact petition. A petition alleging a mistake of fact pursuant to 19 U.S.C. 1520(c) was filed on June 9, 1998, and was denied by Customs on July 16, 1998. This protest was timely filed on October 10, 1998, and is a protestable issue pursuant to 19 U.S.C. 1514(a)(7).

On February 27, 1998, the port pursuant to a successful protest filed by Protestant regarding classification, gave notice that it reliquidated the entry in question. The entry was reliquidated and Protestant received a refund of duties, however, no interest was paid on the refund. On June 19, 1998 Protestant filed a 1520(c) mistake of fact petition against the decision to not refund interest. The June 19, 1998 petition could not be considered a timely protest since it was filed 112 days after the notice of liquidation was given. Protestant states that the port made a mistake of fact in not assessing interest, based on a misinterpretation of reliquidation instructions issued from Customs headquarters.

First, we note that the failure to pay interest is a protestable issue. The court in New Zealand Lamb Co. v. United States, 40 F.3d 377 (Fed. Cir. 1994) stated that Customs billing of New Zealand Lamb for interest, by virtue of section 1514(c)(2)(B), commenced the running of the 90-day limitation period. Additionally, we have reiterated this rule in Customs headquarters rulings, such as HQ 226263, dated December 10, 1996. Therefore, Protestant could have protested the Customs failure to pay interest on the reliquidation within 90 days of the reliquidation. Instead Protestant failed to file a protest and instead filed a petition under section 1520(c), alleging Customs made a mistake of fact.

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 an exception to the finality of section 1514. 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.

Protestant argues in support of its position that an analogous situation to the present one existed in George Weintraub & Sons, Inc. v. US, 12 CIT 643, 691 F. Supp. 1449 (1988), vacated as moot, 855 F. Supp. 401 (CT. Int’l Trade 1994). We note that while the decision in George Weintraub was vacated, the court held in United States v. Articles of Drug Consisting of 203 Paper Bags, 818 F.2d 569, 572 (7th Cir. 1987), that “vacating a decision because of supervening mootness does not destroy its precedential effect.”

In George Weintraub, after entry of the goods but before liquidation, the President issued a Proclamation granting Column 1 tariff treatment to imports from Poland under contracts finalized before a certain date. After liquidation (May 6, 1983) plaintiff gave Customs a copy of its contract (May 27, 1983), as provided by the terms of the Proclamation. After the protest period expired, on the 91st day, Plaintiff requested reliquidation (August 5, 1983). Customs denied the request as an untimely protest under section 1514. Six months after liquidation plaintiff filed a reconsideration of the denial under section 1520(c) (November 28, 1984). That request was also denied by Customs (December 8, 1984). The court first stated that there is no error in the construction of the law, as both parties agreed to the classification of the merchandise, and that the plaintiff was entitled to Column 1 duty rates, upon presentation of evidence that the goods qualified for Column 1 tariff treatment. The court then noted that the protest request of August 5th was pursuant to the Proclamation, therefore, plaintiff had brought the error to the attention of the Customs Service within one year of liquidation. In respect to whether an inadvertence or mistake of fact occurred, the court stated that Customs Service did not dispute the fact that the merchandise was entitled to Column 1 duty rates. The court also stated that if the goods were entitled to Column 1 duty rates, whether or not Customs was aware of this fact or not, and the goods were in fact liquidated under Column 2, then it must follow that there was a mistake of fact. The court found plaintiff’s claim of a mistake of fact or other inadvertence persuasive since, the Customs Service did not deny that the liquidation was not correct under the terms of the Proclamation. The court stated that while the Customs Service did not have any evidence that plaintiff was entitled to be included under the provision of the Proclamation at the time of entry, it was on notice, by an internal New York Regional directive, of a change in the status of many Polish imports. The court stated that while the August 5th request for reliquidation was untimely as a protest, the language of the request, which references the Proclamation was sufficient to fall within section 1520(c). The court then quoted from United States v. Sheldon and Co., 5 Ct. Customs Appls. 427, 429, T.D. 34946 (1914), “one cardinal rule in construing a protest is that it must show fairly that the objection was in the mind of the party at the time the protest was made and was brought to the knowledge of the collector to the end that he might ascertain the precise facts and have an opportunity to correct the mistake and cure the defect if it was one that could be obviated.” Id. at 646. The court then proceeded to apply this language to the request for reliquidation, which it terms a reliquidation request under section 1520(c). The court stated that it is clear that plaintiff had it in mind to have its entry reliquidated by application of the Proclamation when it requested reliquidation on August 5th. The court stated that it is clear that the August 5th letter is well within the one year prescribed in section 1520(c), and that it sufficiently made clear the relief plaintiff sought. The court concluded that the only issues of fact or law to be decided was whether or not an error of fact or inadvertence had occurred, and the court found that such an error or inadvertence had occurred, and whether plaintiff had filed its request for reliquidation within one year of the liquidation, which it found it had in the August 5th request.

In the George Weintraub case, the court never identified the mistake of fact or inadvertence in the liquidation, nor does the court identify the documentary evidence which shows such a mistake or inadvertence. The court’s position in George Weintraub that an error consisting of a failure to follow a Tariff provision without anything else is not supported by the position in ITT Corp v. United States, 812 F. Supp. 213 (CIT 1993), reversed, 24 F. 3rd 1384 (Fed. Cir. 1994). In ITT, the court stated, under 19 U.S.C. §1520(c)(1), the clerical error, mistake of fact, or other inadvertence not amounting to an error in the construction of a law must be "manifest from the record or established by documentary evidence." Id. at 1387, "... manifest from the record [means] apparent to Customs from a facial examination of the entry and the entry papers alone, and thus requir[ing] no further substantiation"). In ITT, the court stated that "[m]istakes of fact that are not manifest from [the] record ... must be established by documentary evidence." Id.

Additionally, the court in George Weintraub found that the August 5th reliquidation request was a petition for relief under section 1520(c). The court after determining that the August 5th letter was a petition under section 1520(c), then applied the elements of a protest set forth in 19 U.S.C. 1514(c)(1)(A-D) tot he letter. Essentially, the court analyzes the August 5th letter as if it were a protest.

The elements of a petition under section 1520(c)(1) have frequently been interpreted by the court s both before and since the George Weintraub decision. It has been stated that: "[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 [and] [m]istakes 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" (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)). Inadvertence has been defined as "an oversight or involuntary accident, or the result of inattention or carelessness, and even as a type of mistake" (Aviall of Texas, Inc. v. United States, 70 F. 3d 1248, 1249 (Fed. Cir. 1995), citing Hambro, supra).

The conditions required to be met under 19 U.S.C. §1520(c)(1) are that the clerical error, mistake of fact, or other inadvertence must be adverse to the importer, manifest from the record or established by documentary evidence, and brought to the attention of Customs within one year after the date of liquidation of the entry. 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 GodchauxHenderson 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, supra).

Additionally, the CIT’s decision in SCA International, Inc. v. United States, 14 CIT 590 (1990) is more directly on point than the George Weintraub case, even if that case has some precedential value considering the court’s position in the 1520(c) cases that followed. In that case, the Protestant rather than protesting Customs liquidation under section 1514, filed for reliquidation under section 1520(c) alleging that Customs made a mistake in not recognizing a deemed liquidation. The CIT found that Customs, prior to the decision in Pagoda Trading Corp. v. United States, 804 F.2d 665 (Fed. Cir. 1986) had taken the legal position that a deemed liquidation does not occur when a suspension notice is outstanding, even if the suspension terminates. The court found that Customs position was a legal determination rather than an inadvertence or a factual mistake, and as such was not correctable under section 1520(c). In the present case, the timing of events shows that a mistake in the interpretation of the law occurred, not a mistake of fact or inadvertence. The appellate decision in the case of Travenol Laboratories v. US, 118 F.3d 749 (Fed. Cir. 1997), rehearing denied, and suggestion for rehearing in blanc declined, 1997 US App. Lexis 31641 (October 23, 1997) was issued on July 2, 1997. The motion for rehearing was denied on October 23, 1997, but the court’s mandate was issued on October 30, 1997. Under the relevant Supreme Court rules, a petition for certiorari could have been filed within 90 days from the date that the petition for rehearing was denied. The file contains evidence that the Solicitor General filed a request for extension of time to file for certiorari with the Supreme Court in January 1998, and that request was for time was to and including February 20, 1998. The evidence shows that a final decision on whether to seek certiorari was being considered during February 1998. There is no evidence to show that the Customs Officer who reliquidated the entry was aware that certiorari would not be sought. As such, the port’s actions regarding the reliquidation was in accordance with the Customs Regulations. In 19 CFR 176.31(b), it states that no entry shall be reliquidated in accordance with a decision of the Court of Appeals for the Federal Circuit, if a petition for certiorari is taken to the Supreme Court. This is significant since the appellate court in its July 2, 1997 decision reversed the decision of the Court of International Trade, which had upheld the Government’s interpretation of the application of the 1993 statutory amendments.

Here, the notice of liquidation was posted February 27, 1998, but the decision regarding the reliquidation was made on the liquidation worksheet dated February 10, 1998, which contains the handwritten word “none” with regard to interest, and is initialed by the Customs Officer who did the reliquidation. The figures on the worksheet are consistent with the action taken on the reliquidation since the appellate Travenol decision became final only when the period for certiorari expired without a petition being filed, and the decision whether to file for certiorari was still being made in February 1998. The reliquidation without interest can clearly be said to be in error in view of Travenol. In this case, the circumstances of the timing of the court’s decision in Travenol, the decision on reliquidation and the evidence of the reliquidation worksheet show that the error was not due to a mistake of fact, clerical error or inadvertence. Instead, the action by Customs was consistent with the position of the Government before that position was reversed by the appellate court. The error in not refunding interest consistent with the court’s interpretation in Travenol involved a legal determination, albeit an erroneous one, but that error could have been corrected only with a timely filed protest.

Additionally, Protestant incorrectly argues the port made a mistake of fact in applying headquarters instructions on refunding interest amounts. However, the reliquidation that gave rise to this case occurred on February 10, 1998 and notice of that reliquidation was given on February 27, 1998. The interest instructions were issued on July 7, 1998, and the cc:Mail regarding the interest issue was sent on May 4, 1998. Therefore, it was not possible that a mistake of fact based on a failure to follow these instructions occurred on a reliquidation that occurred approximately five months before the instructions were even issued, even assuming that a failure to follow an instruction is always an error correctable within 19 U.S.C. 1520(c)(1).

HOLDING:

The protest should be denied. The port correctly denied the 1520(c) petition alleging a mistake of fact. The evidence shows that error resulted from the conscious determination to not include interest in the refund it issued Protestant, and that decision is not a correctable issue under section 1520(c).

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, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.

Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

John Durant, Director
Commercial Rulings Division

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