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HQ 228809

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June 27, 2000

PRO-2-06:RR:CR:DR
228809 RND

CATEGORY: LIQUIDATION PROTEST

Port Director of Customs
Mr. Robert Lehman
Trade Operations
610 S. Canal Street
Chicago, IL 60607

RE: Protest 3901-99-101136; Application for further review of Protest No. 3901-99-101136; Extension of time for liquidation; Deemed liquidation; 19 U.S.C. §1504; Intercargo Insurance Company f/k/a International Cargo & Surety Co. (Surety for M. Genauer) v. United States; St. Paul Fire & Marine Ins. Co. [Carreon] v. United States; 19 U.S.C. 1501; 19 U.S.C. 1514; §174.26 C.R.

Dear Mr. Lehman:

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

FACTS:

The importer in the instant protest is AM Multigraphics, Incorporated, (“Multigraphics”), importer number 34-0xxxxxx00, of Mount Prospect, Illinois. We note that this importer, number 34-0xxxxxx00, is also known as AM International, Incorporated, (“AM International”), Rosemont, Illinois. Multigraphics requests further review of Protest Number 3901-99-101136 which was denied by you, Acting Assistant Port Director Robert Lehman. The request for review is timely and properly filed per Customs regulations (§174.12 CR; §174.25 CR).

Multigraphics protests the liquidation of 18 entries and the re-liquidation of 4 entries of mechanical assemblies for digital color printers (DCP-1) entered between March 9, 1995 and October 1, 1996. During this 19-month period protestant entered the mechanical assemblies under subheading 8473.30.90, HTSUS, (Harmonized Tariff Schedule of the United States) at a zero rate of duty.

On July 9, 1997 Headquarters Ruling 957981 was issued to Multigraphics’ representative, R. Kevin Williams of the law firm O’Donnel, Byrne, Basham & Williams. Per Headquarters Ruling 957981 and based upon the application of Legal Note 4 to Section XVI, the Xeikon DCP-1 digital color printer is classifiable under subheading 8443.59.50, HTSUS. It must be noted however, that the merchandise entered with the protested entries are DCP-1 digital color printer mechanical assemblies, not the printers themselves which were the subject of HQ 957981. The mechanical assemblies were ultimately classified under subheading 8443.90.50.

According to Customs’ electronic entry data collection system (ACS), the Customs Service sent three notices of extension of liquidation to Multigraphics on 20 of the entries; two notices of extension of liquidation were sent to the importer on 2 of the entries (entries 143-3 and 208-1). All the notices advised that the extension code was 01, indicating that the reason for the extension was that further information was necessary to process the entry. The import specialist required additional information to determine if the subject merchandise was DCP-1 digital color printers or instead, a part thereof. It was eventually determined that the mechanical assemblies entered were parts of the color printers.

On April 19, 1999 a Notice of Action was sent to the protestant advising of a rate advance for the entries entered between September 25, 1995 and October 1, 1996. A second Notice of Action was sent to AM International on April 28, 1999 advising of the rate advance for the entries entered between March 9, 1995 and September 13, 1995. Both these notices stated that Customs’ re-classified the mechanical assemblies under subheading 8443.90.5000, HTSUS. The re-classification of the goods caused an increase in duties payable and interest. Based upon these Notices of Action, nineteen of the 22 entries were liquidated within 4 years of the entry dates. Three entries (358-0; 809-5; 545-3), were liquidated within 4 years of entry and re-liquidated within 90 days of that initial liquidation date.

The protestant currently challenges the liquidation and re-liquidation of the subject entries on the following grounds:
the extensions were invalid because the U.S. Customs Service had no statutorily valid reason to extend liquidation; the entries had liquidated by operation of law prior to Customs’ extension of liquidation and Customs failed to extend the liquidations before the expiration of the previous liquidation period; the liquidations were invalid because the entries were liquidated after the four-year limit and therefore had liquidated by operation of law prior to the Customs liquidation.

The following table shows the pertinent entry information for the subject protested entries as found in Customs’ electronic entry data collection system (ACS).

Notice of Action sent 4/28/99
Entry no.
Entry date
Extension 1
Extension 2
Extension 3
Liquidation /
Re liquidation
1
358-0
12/30/95
12/21/96
1/17/98
2
809-5
2/24/96
3/28/98
3
545-3
4/27/95
2/10/96
1/18/97
4
958-6
5/19/95
2/24/96
3/28/98
5/14/99
5
248-1
5/23/95
2/24/96
3/15/97
3/28/98
6
624-0
6/21/95
3/23/96
3/29/97
4/25/98
5/21/99
7
318-8
8/17/95
5/18/96
6/21/97
5/21/99
8
739-4
8/29/95
5/18/96
6/21/97
5/21/99
9
665-7
9/13/95
6/28/97
7/18/98
5/21/99

Notice of Action sent 4/19/99
Entry no.
Entry date
Extension 1
Extension 2
Extension 3
Liquidation
10
679-0
9/25/95
6/28/97
5/21/99
11
866-3
10/9/95
7/27/96
8/30/97
9/12/98
5/21/99
12
918-2
10/13/95
7/27/96
8/30/97
9/12/98
5/21/99
13
940-6
10/15/95
7/27/96
8/30/97
9/12/98
5/21/99
14
951-3
10/27/95
8/03/96
8/30/97
9/12/98
5/21/99
15
131-1
10/31/95
8/03/96
8/30/97
9/12/98
5/21/99
16
297-0
11/15/95
8/10/96
9/20/97
10/17/98
5/21/99
17
341-6
11/15/95
8/10/96
9/20/97
10/17/98
5/21/99
18
336-5
11/23/96
11/22/97
12/12/98
5/21/99
19
524-6
2/22/96
11/23/96
11/22/97
12/12/98
5/21/99
20
143-3
4/19/97
5/30/98
NA
5/21/99
21
208-1
9/30/96
6/21/97
7/18/98
NA
5/21/99
22
223-0
10/1/96
8/30/97
09/12/98
10/17/98
5/21/99

ISSUES:

Were the liquidations for the protested entries timely extended for a statutorily valid reason?

Did the entries liquidate by operation of law before they were liquidated or re-liquidated by Customs?

LAW AND ANALYSIS:

Section 504 of the Tariff Act, as amended (19 U.S.C. §1504 (1999)) provides, in pertinent part, an entry of merchandise not liquidated within one year from the date of entry of such merchandise shall be deemed liquidated (19 U.S.C. §1504(a)). Subsection (b) of section 1504 provides an exception: the period in which to liquidate an entry may be extended by giving notice of such extension to the importer, if, (among other reasons) information needed for the proper classification of the merchandise is not available to the appropriate customs officer (19 U.S.C. §1504(b)). As stated in 19 C.F.R. §159.12(b), if the port director extends the time for liquidation as provided above, he is required to promptly notify the importer, his agent and surety that the time has been extended and the reasons for doing so.

Therefore, per 19 U.S.C. §1504, Multigraphics’ entries of mechanical assemblies which were not liquidated within 1 year from the date of entry are deemed liquidated unless this one-year period for liquidation is extended for a statutorily valid reason (19 U.S.C. §1504(a) and (b); see 19 C.F.R. §159.11). According to Customs’ electronic entry data collection system (ACS), notices of extension of liquidation for the protested entries were timely sent to the protestant (and its surety) as required by 19 C.F.R. §159.12(b). For all 22 entries the first notice of extension of liquidation was sent within 12 months of the date of entry and the second notice was sent within 24 months. For the 20 entries where the liquidation was extended a third time, the third and final notice of extension was sent within 36 months of the entry date.

The protestant contends that the extensions of liquidation were invalid because Customs had no statutorily valid reason to extend liquidation. The protestant bases this contention on the fact that Customs issued Ruling 957981, classifying related merchandise, and reasons that, therefore, no additional information was necessary because the ruling determined the classification of the entered mechanical assemblies conclusively. Section 1504(b) sets out the reasons for which liquidation may be extended, including the circumstance when information needed for the proper classification of the merchandise is not available. As noted above, the liquidations were extended because further information was needed to classify the merchandise entered by the protestant.

The issue of the permissibility of extension of liquidation was addressed by the Court of Appeals for the Federal Circuit in St. Paul Fire & Marine Ins. Co. [Carreon] v. United States, 6 F.3d 763 (Fed. Cir. 1993) (reversing the CIT decision (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 arise only when an extension is granted even following 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" (6 F.3d at 768).

It should be further noted that the presumption of legality accorded Customs decisions to extend liquidation discussed in St. Paul, supra, was further bolstered by the CAFC in Intercargo Insurance Company f/k/a International Cargo & Surety Co., (Surety for M. Genauer) v. United States, 83 F.3d 391(Fed. Cir. 1996,) cert. denied, 117 S. Ct. 943 ( 1997) (reversing the CIT decision (879 F.Supp. 1338)). That case involved defective liquidation extension notices. That court stated that if the plaintiff believed that Customs did not have a valid statutory reason for the extensions, the plaintiff could seek to have them judicially invalidated on that ground.

Using the analysis of the CAFC in Intercargo, supra, we reach the same conclusion with respect to the protest under consideration. Since the importer was advised of the subject extensions, and not deprived of the opportunity to challenge the extensions in court on the ground that the extensions were not obtained for a statutorily valid reason, the importer did not suffer a prejudicial impact as a result of the extensions. Moreover, there is no evidence that Customs’ decision to extend liquidation in this instance was unreasonable, nor that all possible grounds for extension of liquidation may be eliminated.

The merchandise under consideration was entered under subheading 8473.30.90, HTSUS, and was ultimately classified under subheading 8443.90.5000, HTSUS. (We note that the protestant does not contest the correctness of this classification.) Moreover, the goods entered were not the subject of HQ Ruling 957981, which classified digital color printers. The merchandise entered was mechanical assemblies for use in digital color printers. Hence, there is affirmative evidence of the need to extend the period for liquidation in order for Customs to ensure the correctness of the claimed classification of the subject merchandise. The protestant has provided no evidence to establish the elimination of all grounds for extension, nor has the protestant proved that the decision was unreasonable. Consequently, the protestant has not met its burden in this regard; the extensions were valid and the Customs Service had a statutorily valid reason to extend liquidation.

Next, the protestant contends that “the liquidation of the entries occurred more than four years after the entry dates” and therefore, the entries had liquidated by operation of law prior to Customs liquidation. Multigraphics is factually mistaken in this contention. According to ACS the liquidation of the entries did not occur more than four years after the entry dates. Subsection (d) of 19 U.S.C. §1504 provides: Any entry of merchandise not liquidated at the expiration of four years from the applicable date specified in subsection (a) of this section (19 U.S.C. §1504) shall be deemed liquidated (19 U.S.C. §1504(d)). In this case, the applicable date provided by subsection (a) is §1504(a)(1), “the date of entry of such merchandise.” Entry number 297-0 is offered as an example to illustrate that none of the 22 protested entries were liquidated more than four years after the entry date. Entry number 297-0 was entered on November 15, 1995. Hence, this entry would liquidate by operation of law under 19 U.S.C. §1504(d) four years from the date of entry, i.e., on November 15, 1999. This entry was actually liquidated on May 21, 1999, some months before the expiration of four years from the entry date. Each of the other entries also follow this pattern and none were liquidated more than four years after the entry date.

However, three entries, 358-0; 809-5; and 545-3 were re-liquidated more than four years after the entry date, but within the ninety days from the initial liquidation as permitted by 19 U.S.C.§1501. An entry, liquidated under 19 U.S.C.§1500 may be re-liquidated within 90 days of the original liquidation (19 U.S.C.§1501). Under 19 C.F.R. §173.3 (promulgated under the authority of 19 U.S.C. §1501), Customs may voluntarily reliquidate the liquidation of an entry, within ninety days from the date on which notice of the original liquidation is given to the importer, his consignee or agent." As an example that Customs properly applied section 1501 to entries 358-0; 809-5 and 545-3, we offer entry number 358-0.

Entry number 358-0 was entered on March 9, 1995 hence it would have liquidated by operation of law in one year, i.e., on March 9, 1996 (19 U.S.C. §1504(a)) unless liquidation was extended (19 U.S.C. §1504(b)). On December 30, 1995 the first notice of extension was issued, extending the liquidation period from March 9, 1996 (the one year operation of law period) to March 9, 1997 (19 C.F.R. §159.12(a)(1)(i)). On December 21, 1996 a second notice of extension was issued, extending the liquidation period an additional year, to March 9, 1998. The third notice of extension was issued on January 17, 1998, extending the liquidation period one final year (to the maximum of four years), to March 9, 1999. Entry 358-0 was liquidated on February 26, 1999 (prior to the four-year date of March 9, 1999) and re-liquidated within ninety days on May 14, 1999, per 19 U.S.C.§1501.

Protestant’s third and final contention is that the protested entries had liquidated by operation of law prior to Customs’ extensions of liquidation. Protestant states that “Customs failed to extend these liquidations before the expiration of the previous liquidation period on at least one occasion” for each entry. Multigraphics is mistaken in this assertion. According to the Customs Regulations issued under 19 U.S.C. §1504 (19 C.F.R. §159.12), per §159.12(a)(1)(i), the port director may extend the 1-year statutory period for liquidation for an additional period not to exceed 1 year. Further, “the total time for which extensions may be granted by the port director may not exceed 3 years (19 C.F.R. §159.12(e)). The operative date and the starting point for time calculations under §159.12(a)(1)(i) and §159.12(e) is the date of entry, per subsection (d) of 19 U.S.C. §1504. Subsection 1504(d) provides: Any entry of merchandise not liquidated at the expiration of four years from the applicable date specified in subsection (a) of this section (19 U.S.C. 1504) shall be deemed liquidated (19 U.S.C. 1504(d)). In this case, the applicable date provided by subsection (a) is §1504(a)(1), “the date of entry of such merchandise.” Together these two sections permit 3 additional 1-year extensions, calculated from the date of entry (per 19 U.S.C. §1504(a)), in which to liquidate.

As an example that the instant protested entries did not liquidate by operation of law prior to extension, we use entry number 739-4. Entry number 739-4 was entered on August 29, 1995, hence it would have liquidated by operation of law in one year, i.e., on August 29, 1996 (19 U.S.C. §1504(a)) unless liquidation was extended (19 U.S.C. 1504 (b)). On May 18, 1996, the first notice of extension was issued for this entry, extending the liquidation period an additional one year: from August 29, 1996 (the one year operation of law period) to August 29, 1997 (19 C.F.R. §159.12(a)(1)(i)). On June 21, 1997 a second notice of extension was issued, extending the liquidation period an additional year, to August 29, 1998. The third notice of extension was issued on July 4, 1998, extending the liquidation period one final year, to August 29, 1999. Entry number 739-4 was liquidated on May 21, 1999, before the liquidation by operation of law date, August 29, 1999. Moreover, all of the instant protested entries follow this pattern: notices of extension were timely issued and no entries liquidated by operation of law prior to Customs’ extensions of liquidation.

HOLDING:

The Customs Service had a statutorily valid reason to extend liquidation of the subject entries. No entries were liquidated more than four years after the entry date. No entries liquidated by operation of law prior to Customs’ extensions of liquidation.

The protest is therefore 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 this decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make this decision available to Customs personnel, and to the public via the Customs Home Page on the World Wide Web, the Freedom of Information Act, and other public distribution channels.

Sincerely,

John Durant, Director

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See also:

• Tariff No.: 8443.59.50 - Printing machinery, nesoi
• Tariff No.: 8443.90.50 - Parts for printing machinery other than textile printing machinery
• Tariff No.: 8473.30.90 - Parts and accessories of the ADP machines of heading 8471, incorporating a CRT, nesi