HQ 115595 - Application for further review of Protest No. 2304-01-100183; discrepancy in manifest; concealed shortage of merchandise discovered after release by Customs, manifest discrepancy report; missing bottles of Tequila; 19 CFR 158.5, Customs Directive 3240-067; - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 2003 HQ Rulings > HQ 115170 - HQ 116013 > HQ 115595

Previous Ruling Next Ruling
HQ 115595

MARCH 25, 2002

RR:IT:EC 115595 RSD

CATEGORY: ENTRY QUOTA

Port Director
United States Customs Service
PO Box 3130
Laredo Texas 78044

Attention: Protest Section

RE: Application for further review of Protest No. 2304-01-100183; discrepancy in manifest; concealed shortage of merchandise discovered after release by Customs, manifest discrepancy report; missing bottles of Tequila; 19 CFR 158.5, Customs Directive 3240-067;

Dear Sir:

This is in response to your memorandum dated October 25, 2001, which forwarded the above referenced protest to this office for further review. We have considered the facts and issues raised, and our decision follows.

FACTS:

Under the provisions of Section 514, Tariff Act of 1930, as amended (19 USC 1514(a)(2))) as per 19 CFR 174.11(a), Daniel B. Hastings, Inc. on behalf of the Protestant, Southern Wine & Spirits of Northern California is requesting a refund of the Federal Excise Tax that it paid on a shipment of alcoholic beverages that it imported into the United States. According to the Protestant on June 14, 2000, a shipment from Tequila Sauza S.A. De C.V. was entered into the United States. When the shipment arrived at Daniel B. Hastings, Inc.’s warehouse, the Protestant noticed that the seal on the trailer was broken. The merchandise was inspected and a shortage in amount of merchandise ordered was discovered. The quantity of merchandise missing amounted to 450 cases of 750 ml Sauza Hornitos and 144 cases of 750 ml Tres Generaciones. Daniel B. Hastings, Inc. informed its client of this discrepancy. Southern Wine and Spirits launched an investigation into the incident. Upon review of the circumstances, it was concluded that pilfering of the merchandise had taken place in Mexico, before the merchandise entered into the United States. Southern Wine and Spirits made a claim against the Mexican Transportation Company.

In its protest, the Protestant has requested an administrative refund of the Federal Excise Tax that was levied on the portion of the shipment that was not received in the United States. Southern Wine and Spirits tendered $28,808.75 to U.S. Customs for the Federal Excise Tax that was calculated on 8,078 PFL (Proof Liters) of tequila imported into the United States on June 14, 2000. The Protestant is requesting a refund of the Federal Excise Tax on the difference of $13,402.24.

ISSUE:

Whether the protestant is entitled to a refund of the Federal Excise Tax that it paid on imported alcoholic beverages that it did not receive due to a concealed shortage of merchandise which was not discovered until after the shipment arrived in the United States.

LAW AND ANALYSIS:

Initially, we note that he subject protest was timely filed pursuant to 19 U.S.C. § 1514(c)(3)(A). The notice of liquidation as to which protest is made was April 27, 2001 and the date of this protest was May 29, 2001.

The Customs laws and regulations require that imported merchandise be manifested, be accounted for Customs and any discrepancies between the manifest and the actual quantity or identity of the imported merchandise be reported to Customs. See 19 U.S.C. 1431. Responsibility for the reporting of discrepancies rests with the importing carrier and with the party that was last receipted for the full amount of merchandise listed on the manifest, in-bond or transfer document. An importing carrier who cannot show that landed imported merchandise was properly released from Customs custody may be liable for liquidated damages and payment of duty on that merchandise. A custodian of bonded merchandise who cannot account for merchandise in it custody may be liable.

19 CFR § 158 provides for relief from duties on merchandise lost, damaged, abandoned or exported. Specifically, 19 CFR § 158.5 states that allowances “shall be made in the assessment of duties for deficiencies in the contents of packages when, before the liquidation of the entry becomes final, the importer files: (a) In the case of a concealed shortage, a Customs Form 5931” and the port director is satisfied as to the validity of the claim. Customs Directive No 3240-067A issued on June 4, 2000, indicates that the time period for filing of a manifest discrepancy report is 60 days for a vehicle carrier. The directive further indicates that all importers whether automated or not must transmit or file a paper manifest discrepancy report immediately upon the discovery of a discrepancy. Manifest discrepancy reports may be electronically transmitted or otherwise submitted within the reporting period as prescribed by regulation after permit or entry of the merchandise to avoid a penalty action. A penalty for late reporting may be assessed when reports are received by Customs after the reporting period. In this instance, there was a concealed shortage of merchandise that was not discovered until the release of the merchandise by Customs. The shipment in question was entered on June 14, 2000. The shortage was discovered after the shipment arrived at the broker’s warehouse. An investigation was launched into the incident. Upon review of the circumstances, it was concluded that the pilfering of the merchandise took place in Mexico, before the merchandise was entered in the United States. A claim was filed against the Mexican Transportation Company on June 19, 2000, which is an indication that the broker/importer was aware of the quantity discrepancy within 5 days from the date of importation. However, the protestant never filed the type of discrepancy report that is referenced in 19 C.F.R. §158.5, a Customs Form 5931. Instead, importer filed a protest and submitted a revised Customs Form 7501 that reflects the corrected quantity and value of the merchandise that was received in the United States.

Since the protestant failed to submit a completed manifest discrepancy report, Customs Form 5931 during the applicable period, as required by 19 CFR §158.5, no allowance for the concealed shortages can now be made. Therefore, we find that the protest should be denied in full.

HOLDING:

As detailed in the law and analysis section, we find that because the importer did not file a manifest discrepancy report as required by 19 CFR 158.5, the protestant is not entitled to refund of the Federal Excise Tax that it paid on imported alcoholic beverages due to concealed shortage of merchandise that was discovered after the shipment arrived in the United States.

In accordance with §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 new billing (the equivalent of the reliquidation of an 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,

Larry L. Burton

Previous Ruling Next Ruling