HQ 229565 - Internal advice; Protest No. 1303-02-100055; Application for further Review; destruction; damaged merchandise; nonimportation; 19 U.S.C. 1506(1); 19 U.S.C. 1557(c); 19 U.S.C. 1558; 19 U.S.C. 1563(a); 19 CFR 158.11; 19 CFR 158.12; 19 CFR 158.23; 19 CFR 158.27; 19 CFR 158.28; 19 CFR 158.42 - United States International Trade Commision Rulings

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HQ 229565

August 14, 2002

LIQ-8-RR:CR:DR 229565 IOR

Category: RELIEF FROM DUTIES

Port Director
U.S. Customs Service
40 S. Gay St.
Baltimore MD 21202

Attn: Leslie Harper, Entry Specialist

RE: Internal advice; Protest No. 1303-02-100055; Application for further Review; destruction; damaged merchandise; nonimportation; 19 U.S.C. 1506(1); 19 U.S.C. 1557(c); 19 U.S.C. 1558; 19 U.S.C. 1563(a); 19 CFR 158.11; 19 CFR 158.12; 19 CFR 158.23; 19 CFR 158.27; 19 CFR 158.28; 19 CFR 158.42

Dear Sir:

The above-referenced protest was forwarded to this office for further review. As explained below, because the requirements for further review have not been met, we are treating the application as a request for internal advice per 19 CFR 177.11. We have considered the facts and issues raised and our decision follows.

FACTS:

According to the CF 7501, Entry Summary, for entry no. 655-xxxx236-9, on February 6, 2001, “7 total pieces granite slabs” were imported from Spain, and unladen in Norfolk, Virginia. On the bill of lading, the container was identified as HJCU8033770, and the merchandise described as “7 bundles in a total container said to contain 44 pcs granite slabs”.

 According to the invoice and packing list, the merchandise sold consisted of 44 slabs in seven bundles. The protestant was the importer of record and consignee of the merchandise. On the CF 7501, the location of the goods was identified as Baltimore, Maryland. The entry summary date is February 28, 2001. The CF 3461, entry document, indicates that the merchandise was released from Customs custody by Customs in Baltimore on February 28, 2001.

A Supplemental Information Letter (“SIL”) requesting a refund of the duties, HMT and MPF, paid for entry no. 655-xxxx236-9, was received by Customs on November 26, 2001. According to the SIL, container no. HJCU8033770 was discharged from the importing vessel in Norfolk and dropped to the ground by the pier, in error. Upon arrival by barge in Baltimore, the importing shipping line notified National Marine Consultants to survey the container. According to the SIL, upon inspection, National Marine Consultants deemed the freight unusable, and the protestant notified the shipping line that it was abandoning the cargo.

On January 28, 2002, Customs noted that it disagrees with the SIL, stating that the request “lacks details concerning final disposition of the merchandise”. The entry was liquidated as entered on February 15, 2002.

The National Marine Consultants report, dated February 28, 2001, indicates that the container no. HJCU8033770 was inspected on February 21, 2001. The merchandise was described as “granite slabs approximately 11 feet long, 6 feet wide and 1 ¼ “ thick”, placed on their ends, between lumbers, approximately ten pieces per slot. According to the report, the “entire load shifted in stow with most chockings racked and disintegrated throughout”, and the probable cause was identified as an external impact on the container. As to the condition of the merchandise the report stated as follows:

Our examination revealed most of the slabs to have sustained damages in the form of breakage or cracking. At this point, it was not possible to make an accurate estimate of the loss. However, we feel all slabs sustained heavy damage.

As to the disposition, it was reported that “[w]e are of the opinion that the granite slabs have little salvage value.” The report includes photographs of the container and the contents, however the report submitted with the protest is a black and white photocopy, and it is difficult to determine what is depicted in the photographs.

The protest includes a letter dated January 17, 2002 from the protestant, to the importing shipping line, notifying the line that the protestant is abandoning the container no. HJCU8033770. The letter was also copied to the protestant’s broker.

The file contains notes made by the Customs Entry Specialist recording telephone conversations with the protestant’s broker. In a January 14, 2002 conversation, the broker stated that most of the merchandise is unusable however any usable portion will probably be sold. In a January 15, 2002 voice mail message to the Customs officer, the broker stated that a letter regarding the disposition of the merchandise will be sent that same day or the following day. A note dated January 28, 2002 indicates no response was received. The file contains a letter received May 3, 2002 from the shipping line, stating that container no. HJCU8033770 is still located at the marine terminal in Baltimore, and that the line is in the process of determining how to handle the matter. In an e-mail message of May 10, 2002, to a Customs officer, the protestant’s broker states that it will not be able to send Customs a letter confirming that the material will be destroyed, due to the lack of responsiveness by the shipping line.

ISSUE:

Whether the protestant is entitled to a refund of duty paid for damaged merchandise.

LAW AND ANALYSIS:

Initially, we note that the protestant’s March 12, 2002 protest, is timely inasmuch as it was filed within 90 days from the February 15, 2002 liquidation, as required under 19 U.S.C. §1514(c)(3). The matter is protestable under 19 U.S.C. §1514(a)(5).

We also note that the protestant’s application for further review (AFR) does not meet the requirements set forth in 19 C.F.R. § 174.24, which provides:

Further review of a protest which would otherwise by denied by the port director shall be accorded a party filing an application for further review which meets the requirements of § 174.25 when the decision against which the protest was filed:

(a) Is alleged to be inconsistent with a ruling of the Commissioner of Customs or his designee, or with a decision made at any port with respect to the same or substantially similar merchandise;

(b) Is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Customs courts;

(c) Involves matters previously ruled upon by the Commissioner of Customs or his designee or by the Customs courts but facts are alleged or legal arguments presented which were not considered at the time of the original ruling; or

(d) is alleged to involve questions which the Headquarters Office, United States Customs Service, refused to consider in the form of a request for internal advice pursuant to § 177.11(b)(5) of this chapter.

Therefore, further review will be accorded to the party filing an application for further review which meets the requirements of §174.25 and at least one of the criterion in §174.24. In the subject protest, the port approved the AFR notwithstanding the fact the protestant has not alleged any of the conditions required in §174.24 of the decision protested. Consequently, the criteria for further review have not been met and therefore, we are treating protestant’s application as a request for internal advice.

The protestant has not asserted the specific provision on which it bases its request for a refund of duties. There are statutory and regulatory provisions for refunds of duties due to destroyed or abandoned merchandise, and reductions in duties for damaged merchandise. However, the protestant has not met the requirements for any of the provisions.

The warehouse statute, 19 U.S.C. §1557, provides for refund of duties for destroyed merchandise:

(c) Destruction of merchandise at request of consignee

Merchandise entered under bond, under any provision of law, may, upon payment of all charges other than duty on the merchandise, be destroyed, at the request and at the expense of the consignee, within the bonded period under customs supervision, in lieu of exportation, and upon such destruction the entry of such merchandise shall be liquidated without payment of duty and any duties collected shall be refunded.

The above provision is implemented by Customs Regulations 158.43. In this case, there is no assertion or evidence that the merchandise was entered under bond, and there is no assertion or evidence that the merchandise has been destroyed within the meaning of 19 U.S.C. §1557(c), and the protestant is not entitled to a refund under this provision.

The refund of duties is limited by 19 U.S.C. §1558, which provides, in pertinent part, as follows:

(a) Exceptions No remission, abatement, refund, or drawback of estimated or liquidated duty shall be allowed because of the exportation or destruction of any merchandise after its release from the custody of the Government, except in the following cases: (1) When articles are exported with respect to which a drawback of duties is expressly provided for by law; (2) When prohibited articles have been regularly entered in good faith and are subsequently exported or destroyed pursuant to a law of the United States and under such regulations as the Secretary of the Treasury may prescribe; and (3) When articles entered under bond, under any provision of law, are destroyed within the bonded period as provided for in section 557 of this Act [19 USCS § 1557], or are destroyed within the bonded period by death, accidental fire, or other casualty, and proof of such destruction is furnished which shall be satisfactory to the Secretary of the Treasury, in which case any accrued duties shall be remitted or refunded and any condition in the bond that the articles shall be exported shall be deemed to have been satisfied.

In this case, there is no claim for drawback in accordance with the drawback statute (which would require exportation or destruction of the merchandise in any event), and again there is no assertion or evidence that the merchandise has been entered under bond, exported or destroyed. In Khosrovschahi & Co. v. United States, 39 C.C.P.A. 40 (1951), the Court affirmed the Customs Court holding that a refund of duty was prohibited for wool which was exported after being released from Customs custody and delivered to the importer, because none of the exceptions in 19 U.S.C. §1558 were involved. The protestant’s claim for a refund does not fit within any of the exceptions provided for in 19 U.S.C. §1558, and the protestant is not entitled to a refund under that statute.

An allowance in duties for damage to merchandise is provided for in 19 U.S.C. §1563(a), in pertinent part:

In no case shall there be any abatement or allowance made in the duties for any injury, deterioration, loss, or damage sustained by any merchandise while remaining in customs custody, except that the Secretary of the Treasury is authorized, upon production of proof satisfactory to him of the loss or theft of any merchandise while in the appraiser's stores, or of the actual injury or destruction, in whole or in part, of any merchandise by accidental fire or other casualty, while in bonded warehouse, or in the appraiser's stores, or while in transportation under bond, or while in the custody of the officers of the customs, although not in bond, or while within the limits of any port of entry and before having been landed under the supervision of the officers of the customs, to abate or refund, as the case may be, the duties upon such merchandise, in whole or in part, but no abatement or refund shall be made in respect of injury or destruction of any merchandise in bonded warehouse occurring after the expiration of three years from the date of importation. The decision of the Secretary of the Treasury as to the abatement or refund of the duties on any such merchandise shall be final and conclusive upon all persons.

The Secretary of the Treasury is authorized to prescribe such regulations as he may deem necessary to carry out the provisions of this subdivision and he may by such regulations limit the time within which proof of loss, theft, injury, or destruction shall be submitted, and may provide for the abatement or refund of duties, as authorized herein, by appropriate customs officers in cases in which the amount of the abatement or refund claimed is less than $ 25 and in which the importer has agreed to abide by the decision of the customs officer. The decision of the customs officer in any such case shall be final and conclusive upon all persons.

The Customs Regulations implementing section 1563, require an application to be filed with Customs on CF 4315, within 30 days of the discovery of the loss, theft, injury or destruction, and evidence to be filed within 90 days from the date of discovery. 19 CFR 158.23. The evidence required in the event of casualty, is set forth in 19 CFR 158.27:

In the case of injury or destruction by accidental fire or other casualty, the following evidence shall be submitted:

(a) A declaration of the master of the vessel, the conductor or driver of the vehicle, the proprietor of the warehouse, or other person (except a Customs officer) having charge of the merchandise at the time of casualty, stating:

(1) The time, place, and nature of such casualty;

(2) That the merchandise was on board the vessel or vehicle, in the warehouse, or otherwise in his charge, as the case may be, at the time of the casualty; and

(3) That it was totally destroyed and there is no probability of recovering or saving any part thereof, or that it was injured as the result of the casualty.

(b) The bill of lading, the entry summary (where appropriate) and the invoice covering the merchandise, or certified copies of the foregoing, unless such documents are already in the possession of the director of the port where the claim is filed.

(c) A copy of the insurance appraiser's report, if any.

In this case, the application was not filed within 30 days of the date of discovery. The first document filed with Customs was the SIL, which Customs received approximately nine months after the February 28, 2001 National Marine Consultants report. Secondly, the documentation submitted does not include the evidence required by 19 CFR 158.27(a)(3) above, that the merchandise “was totally destroyed and there is no probability of recovering or saving any part thereof”. The evidence does indicate damage to the merchandise, however, there is no request or evidence as to the allowance for any portion of the duties to be refunded. Moreover, the National Marine Consultants were unable to make and accurate estimate of the loss. Under 19 CFR 158.28, the port director may waive the production of evidence required in section 158.27 if the validity of the claim is otherwise established. In this instance given the contents of the Customs officer’s notes and the remarks on the SIL, it appears the port director is not satisfied as to the validity of the claim. Based on the foregoing, the protestant is not entitled to an abatement or refund of duties under 19 U.S.C. §1563.

An allowance in duties for abandonment is provided for in 19 U.S.C. §1506(1) as follows:

Allowance shall be made in the estimation and liquidation of duties under regulations prescribed by the Secretary of the Treasury in the following cases:

(1) Abandonment within thirty days. Where the importer abandons to the United States, within thirty days after entry in the case of merchandise released without an examination, or within thirty days after the release in the case of merchandise sent to the Customs Service for examination, any imported merchandise representing 5 per centum or more of the total value of all the merchandise of the same class or kind entered in the invoice or invoice in which the item appears, and delivers, within the applicable thirty-day period, the portion so abandoned to such place as the Customs Service directs unless the Customs Service is satisfied that the merchandise is so far destroyed as to be nondeliverable;

The above provision is implemented by Customs Regulations 158.42. In this case, there has been no abandonment to the United States of the merchandise. The only notice of abandonment was to the shipping line, according to the SIL and the letter dated January 17, 2002. These notices were well after 30 days after the date of entry, and the notices were not of abandonment to the United States. Based on the foregoing, the protestant is not entitled to an allowance in the liquidation of duties under 19 U.S.C. §1506.

Finally, the Customs Regulations provide for allowance in duties for worthless and partially damaged merchandise, in sections 158.11(a) and 158.12(a) as
follows:

§158.11 Merchandise completely worthless at time of importation.

(a) Nonperishable merchandise. When a shipment of nonperishable merchandise, or any portion thereof which shall have been segregated from the remainder of the shipment under Customs supervision at the expense of the importer, is found by the port director to be entirely without commercial value at the time of importation by reason of damage or deterioration, an allowance in duties on such merchandise on the ground of nonimportation shall be made in the liquidation of the entry.

§158.12 Merchandise partially damaged at time of importation.

(a) Allowance in value. Merchandise which is subject to ad valorem or compound duties and found by the port director to be partially damaged at the time of importation shall be appraised in its condition as imported, with an allowance made in the value to the extent of the damage. However, no allowance shall be made when forbidden by law or regulation; for example, Chapter 72, Additional U.S. Note 3, Harmonized Tariff Schedule of the United States (19 U.S.C. 1202), provides that no allowance or reduction of duties for partial damage or loss in consequence of discoloration or rust occurring before importation shall be made upon iron or steel or upon any article of iron or steel.

As stated above, there is no evidence that the imported merchandise is entirely without commercial value, and no information upon which an appraisal could be made of partially damaged merchandise. Also as stated above, the National Marine Consultants specifically stated they were unable to make an accurate estimate of the loss. In Wm. J. Jones and Co. v. United States, 38 C.C.P.A. 158, 162 (1951), the court held that in order to have merchandise treated as a nonimportation, “it is incumbent upon the importer to establish by appropriate evidence that the goods at the time of importation were wholly worthless, not merely damaged.” (Emphasis supplied). Based on the foregoing, due to a lack of evidence, the protestant is not entitled to an allowance in duties on the grounds of nonimportation, or an allowance or reduction of duties for partial damage, under 19 CFR 158.11 0r 158.12.

In conclusion, because the protestant has not met the requirements for any of the provisions for refunds of duties due to destroyed, abandoned or nonimported merchandise, or allowance in duties for partially damaged merchandise, and has not presented sufficient evidence regarding the disposition or condition of the merchandise, we recommend that the protest be denied.

HOLDING:

The protestant is not entitled to a refund of duties or an allowance in duties for the damaged merchandise, due to a failure to meet the statutory and regulatory requirements and lack of evidence as to the disposition and condition of the merchandise.

Sixty days from the date of this 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,

Myles B. Harmon

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