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HQ 229188




March 4, 2002

LIQ-7:RR:CR:DR 229188DR

CATEGORY: LIQUIDATION

Port Director of Customs
Attn: Rebecca Lee, Import Specialist
200 E. Bay Street
Room 225
Charleston, SC 29401

RE: Protest No. 1601-01-100072 and Application for Further Review; misclassification; entitlement to quota-class treatment; quota priority; quota status; tariff-rate quota; entry summary; proper form; 19 U.S.C. §1484; 19 C.F.R. §132.1; 19 C.F.R. 132.11; 19 C.F.R. 141.0a(b)

Dear Ms. Lee:

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

FACTS:

The subject protest covers three entries of wire rod in coils made on August 28, 2000. Specifically, the entries consisted of 2,171,334 kg of hot rolled steel wire rod in coils produced in Italy and shipped to the importer Stemcor (“Protestant”) under two house bills of lading pursuant to an order issued by Stemcor to the manufacturer Lucchini Spa. The merchandise was subject to a tariff-quota pursuant to Presidential Proclamation 7273, dated February 16, 2000, which authorized the assessment of additional duties on subject merchandise imported into the United States from any country (except Canada and Mexico) in excess of certain annual quota limitations. The quantity limitations of this tariff-quota were further divided during each annual period into specific shorter periods of time, during which lesser quantity limitations applied. The total annual tariff-rate quota limit for the period in question was 1,433,351,886 kg. Merchandise classifiable under subheading 7213.91.3090, Harmonized Tariff Schedule of the United States (“HTSUS”), and entered not in excess of the annual quantity limit or the three-month quantity limit in effect during the quota period June 1 through August 31, 2000 (“Period II”), would be subject to duty at 0.8% ad valorem under HTSUS subheading 9903.72.02. The same merchandise imported over either quota limit would be subject to duty at the “over-quota” rate of 0.8% + 10% ad valorem, under HTSUS subheading 9903.72.05. The same duty rates applied to merchandise entered during the quota period September 1 through November 30, 2000 (“Period III”).

Protestant states that prior to arrival of the shipment by vessel, and in accordance with its standard procedures, it prepared written instructions dated August 21, 2000, to its customs broker, Southern Overseas Division, Union Transport Corp., (“Southern”) with respect to the entry of the shipment into the United States. Specifically, Protestant alleges that it instructed Southern to classify all the merchandise in the shipment and covered by the two house bills of lading under HTSUS subheading 7213.91.3090. Protestant has included copies of the instructions, the house bills, and the commercial invoices collectively as an exhibit to the protest. Southern filed the entry summary for the merchandise on August 23, 2000, through the Customs Automated Broker Interface (“ABI”), and the merchandise was imported on August 25, 2000. Customs accepted the ABI entry summary on August 28, 2000. See CF 7501.

However, Protestant alleges that a mistake occurred on August 23, 2000, when Southern filed the ABI summary and classified the merchandise in question under the regular tariff classification of subheading 7213.91.3090, but incorrectly identified the tariff-rate quota subheading. Instead of entry under the tariff-rate quota for HTSUS subheading 9903.72.02, which would have covered Period II, Southern indicated HTSUS subheading 9903.72.03, which covered Period III, and also included the notation “9/1 – 11/30/00,” which presumably indicated Period III well. See CF 7501, Lines 1 – 3. Southern deposited the required duty amount of 0.8% ad valorem, which was the proper amount for both Period II and Period III.

At the time the entry was filed, neither the annual tariff-rate quota limit nor the tariff-rate quota limits applicable to Period II were filled. The U.S. Customs Quota Weekly Commodity Status Report as of 8/28/00 indicated that the aggregate annual tariff-rate quota level of 1,433,351,886 kg was 48.13% filled, and that the quota level for the period June 1, 2000, through August 31, 2000, was 86.13% filled.

Protestant now asserts that because the duty rate of 0.8% ad valorem was applied, and the entry was accepted by Customs at the port of entry despite the inaccurate tariff-rate quota HTSUS number, there was no immediate recognition of the error in the tariff-rate quota classification number by Stemcor or its customs broker. Customs notified Protestant of the error on January 12, 2001, by sending a Notice of Action (CF 29) that explained that the indicated chapter 99 number was indicated on the entry and that by the time the error was discovered and corrected, the quota period had already ended. The CF 29 further stated that the quota on the entry had been placed on hold, “awaiting a determination of the proper proration of entries on which the quota was entered after the period had ended,” and that Customs Headquarters had subsequently instructed the port to allow 11.97% of the imported merchandise to enter at the under-quota duty rate, with the balance reclassified upon liquidation under subheading 7213.91.3090/9903.72.05, HTSUS, dutiable at 0.8% + 10% ad valorem. The entry was eventually liquidated on February 9, 2001, in accordance with the above instructions from Customs Headquarters.

ISSUE:

Whether the subject merchandise is entitled to entitled to quota-class priority and status for the period June 1, 2000, through August 31, 2000

LAW AND ANALYSIS:

When merchandise is entered into the United States, documents are filed with Customs for two purposes: (1) to determine whether the merchandise is admissible and may be released from Customs' custody; and (2) so that Customs officials may verify the value and classification of the merchandise, assess duties, collect certain statistical information, and determine whether the requirements of various laws have been met. 19 U.S.C. § 1484(a)(1)(B). These documents are referred to as the “entry summary.” See 19 C.F.R. §141.0a(b). Generally, it is the duty of the “importer of record” or his authorized agent to file these documents. 19 U.S.C. §1484(a)(1). The date on which “these papers are originally filed is the official date of entry.” See generally, 19 C.F.R. § 141.68(a), (b). In order to qualify for quota-class priority and status, entry summaries must be presented in proper form to the appropriate Customs officer. See 19 C.F.R. § 132.1(d). “Quota priority” is the precedence granted to one entry or withdrawal for consumption of quota-class merchandise over other entries or withdrawals of merchandise subject to the same quota. “Quota status” is the standing which entitles quota-class merchandise to admission under an absolute quota, or to a reduced rate of duty under a tariff-rate quota, or to any other quota benefit. 19 C.F.R. §132.1(f), (g). However, quota status will not attach to merchandise in a quota period by presentation of an entry or withdrawal for consumption at any time prior to the opening of that period. 19 C.F.R. 132.11(d). Finally, the terms of a Presidential Proclamation, Executive order, or legislative enactment establishing a quota, and the regulations implementing the quota, must be strictly complied with. 19 C.F.R. 132.2(c).

In the context of tariff-rate quotas, the C.I.T. has examined the issue of whether documentation provided to Customs is sufficient to satisfy the requirement that documents be presented in “proper form.” In DMV USA, Inc. v. United States, C.I.T. Slip Op. 2001-99, 2001 Ct. Intl. Trade LEXIS 105 (Aug. 10, 2001), an importer entered tariff-rate quota merchandise which it identified as “whey protein concentrate” pursuant to subheading 0404.10.05, HTSUS. However, Customs later tested the merchandise and concluded that the merchandise constituted “a modified whey of the reduced minerals type ... and not whey protein concentrate.” At liquidation, Customs classified all entries of the subject merchandise identified by Plaintiff as “whey protein concentrate” and entered prior to the quota's closure, under HTSUS subheading 0404.10.15 as “Modified whey ... Other ... Other,” because the documentation presented at the time of entry was not “in proper form” and, therefore, Plaintiff's merchandise was not entitled to quota-class “priority and status.” After the court determined the Customs classification was correct, it examined DMV’s argument that some of the subject merchandise should have been accorded quota class tariff-rate treatment under subheading 0404.10.11, HTSUS, since it was properly entered prior to the September 3, 1997, closing of the quota covering “other” modified whey.

In siding with Customs, the court drew upon Fleshman v. West, 138 F.3d 1429 (Fed. Cir. 1998), in which the plaintiff appealed a Court of Veterans Appeals decision denying him disability benefits because he had timely submitted an incomplete application and then untimely filed a completed one. In affirming the lower court's decision, the Court of Appeals for the Federal Circuit held that an application for disability benefits that omitted the date, the applicant's signature and his address was not “in the form prescribed by the Secretary,” since an incomplete application might not contain “an element of the application ... reasonably regarded as necessary to enable the agency to process the claim.” Id. at 1430, 1432. As a result of that applicant's failure to file the application “in the form prescribed,” the Federal Circuit held that the applicant did not gain the benefit of his initial filing date. Id. at 1432-33 (“Because Mr. Fleshman's original claim form lacked a critical component ... and ... because [he] failed to return the [properly] completed form within one year ... [he] is not entitled to an effective date earlier than ... the [later] date [at which] he submitted his [properly completed] formal claim.”). Applying the logic of Fleshman, the C.I.T. in DMV concluded that

[DMV’s] documents were not in proper form because: (1) they did not classify the merchandise under a subheading eligible for quota-class priority and status; (2) they did not claim the appropriate rate of duty for quota-class merchandise; and (3) they did not have the proper estimated duties attached

By thus omitting “critical components” “reasonably regarded as necessary,” Fleshman, 138 F.3d at 1432, for Customs to determine whether its merchandise was entitled to quota-class priority and status, Plaintiff failed to satisfy the requirement that documents be submitted in proper form. Nor are Plaintiff's omissions harmless, for were Plaintiff now to get the benefits of quota-class treatment for its merchandise it would, as the Government points out, “result in circumvention of the ... quota” because a greater amount of merchandise would be subject to a lower duty than the quota would otherwise allow While Plaintiff's entry summary might have been sufficient solely for purposes of classification, it was not in proper form for purposes of gaining the benefit of quota-class priority and status.

DMV at *25.

Based upon the above, we conclude that this Protestant has not met its burden of presenting its documentation in “proper form.” There are critical factors which warrant this result. Although Protestant correctly classified the wire rod under its proper HTSUS subheading of 7213.91.3090, which was a subheading eligible for quota-class priority and status, Protestant failed to also submit an accurate tariff-quota rate HTSUS number that corresponded to that classification HTSUS number, and which would have given the merchandise quota status for Period II. Instead, Protestant’s broker indicated that the applicable quota period was September 1, 2000, through November 30, 2000 (Period III), as evidenced by the HTSUS number 9903.72.03 and the notation “9/1 – 11/30/00” on each line item on the entry summary.

Protestant maintains that its broker’s error is not fatal to its claim because it submitted the correct first six digits of the applicable tariff-quota rate number, and it indicated on the entry summary that it claimed the under-quota duty rate for that merchandise, and attached the proper estimated duties for the merchandise. See CF 7501, Boxes 34, 37 – 40. In Protestant’s view, its failure to correctly indicate that the second quarter was the applicable quota period is “insignificant and insubstantial,” and “it cannot be said, even under the most critical reading, that the importer herein either omitted any element reasonably necessary to enable Customs to process the entry under quota status or ‘tacitly declared that it was not seeking quota-class treatment.’” See Protestant’s Addendum dated October 31, 2001 (quoting DMV)

However, the law is quite clear regarding the importance of proper presentation of entry documents. Under 19 U.S.C. §1484, the making of an entry may be a two-step process. After imported merchandise is presented to Customs for release, an importer completes the entry by classifying the merchandise and filing that information with Customs. The statute also requires the importer to use reasonable care in the determination of the classification. A similar obligation is imposed on brokers by 19 U.S.C. §1641. The purpose of providing the entry information is to insure that information needed by Customs to properly assess duties and collect accurate statistics is provided.

The Customs regulations regarding the entry of quota class merchandise are also quite clear in that regard. As discussed above, quota priority and status are determined as of the time of presentation of the entry summary for consumption, or withdrawal for consumption, in proper form, and in strict compliance with the applicable Customs regulations. The documentation presented must indicate the proper HTSUS subheading and tariff rate for the entered merchandise (19 C.F.R. §141.90(b)), as any deficiencies with respect to that presented information could lead to abuse of the quota. As clearly stated in DMV, while Protestant’s entry summary “might have been sufficient solely for purposes of classification, it was not in proper form for purposes of gaining the benefit of quota-class priority and status,” and were Protestant “now to get the benefits of quota-class treatment for its merchandise it would ‘result in circumvention of the ... quota’ because a greater amount of merchandise would be subject to a lower duty than the quota would otherwise allow.” Id. at *26.

As an alternative argument, Protestant asserts that notwithstanding its broker’s mistaken classification, the merchandise is properly classifiable under subheading 7213.91.3010, HTSUS, dutiable at 0.8% ad valorem. However, were we to agree with that conclusion, that would run counter to the requirement of strict compliance with the applicable Customs regulations concerning quota administration and result in circumvention of the quota, especially since Protestant has offered no evidence in support of its position.

Based upon the above, we find that in this case the merchandise was not entitled to quota-class priority and status for the period June 1, 2000, through August 31, 2000, because Protestant failed to present accurate entry documents required for quota status and priority.

HOLDING:

This protest should be DENIED. Because Protestant failed to present its entry documentation in proper form, we find that the subject merchandise is not entitled to the tariff-quota rate of 0.8% ad valorem in effect at its time of entry. 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 make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.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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