HQ 229614 - Application for Further Review of Protest No. 2002-02-100780; Reebok International; withdrawal from warehouse; destruction; drawback; 19 U.S.C. 1557(c); 19 C.F.R. Part 158 - United States International Trade Commision Rulings

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HQ 229614

October 25, 2002

LIQ-9-01 RR:CR:DR 229614 EAB

CATEGORY: LIQUIDATION

Port Director
US Customs Service
423 Canal Street
New Orleans, Louisiana 70130

RE: Application for Further Review of Protest No. 2002-02-100780; Reebok International; withdrawal from warehouse; destruction; drawback; 19 U.S.C. 1557(c); 19 C.F.R. Part 158

Dear Port Director:

The referenced protest was forwarded to this Office for review of your decision to deny reliquidation of entries pertaining to merchandise withdrawn from warehouse for destruction under Customs supervision. Our decision follows.

FACTS:

Wearing apparel in 1801 cartons was admitted (entry no. 110-NNNN810-8) into a Customs bonded warehouse on June 6, 2000. Of the 1801 cartons, 1647 were withdrawn for consumption (entry no. 110-NNNN437-9) on June 7, 2000 and duties were paid. None of the merchandise, however, was physically removed from the warehouse. On June 13, 2000, protestant submitted a CF 3499, seeking permission to "Open 24 cartons to remove c/o Turkey items to be separated out and re-packed. The c/o Turkey items to be put aside with 130 cartons (all c/o Turkey) for eventual destruction; the various c/o items to be re-packed and withdrawn on the above warehouse withdrawal"; this application was approved by Customs on June 16, 2000. On July 11, 2000, by eMail Janice McEachern, of Reebok International, Ltd., the protestant, advised/instructed Rosanna Parrinello, of the Customs broker, as follows:

"We have decided to destroy the entire shipment due to incorrect labelling of the apparel.

"I have notified Bill Fisher at Gilco warehouse to destroy everyting and to send the signed documents to me.

"Problem: Bill sent me a copy of the withdrawal, which I never authorized. I sent a note to Tara on June 9th stating that24 cartons had to be opened and searched, and 130 cartons to be destroyed in their entirety. I mentioned on the phone a few times that we were planning to destroy some and withdraw some, but I never mentioned a quantity of cartons. I could not since I did not know exactly how many cartons would be destroyed, other than the 130 mentioned above. There was $46,331.56 in duty and fees paid which we are not responsible for.

"Once I receive the copies . . . I will forward them . . . so you can submit a protest/SIL to get your money back. . . ."

On July 13, 2000, protestant submitted a CF 3499, seeking permission to "Destroy all contents of total 1801 cartons by way of shredding"; this application was approved on July 27, 2000 and on August 8, 2000, Customs verified the destruction of the 1801 cartons of wearing apparel. On May 4, 2001, the bond on entry 110-NNNN437-9 was cancelled and entry 110-NNNN810-8 was liquidated without change, the sum of $45,889 in duties collected. On October 17, 2001, protestant filed a petition to reliquidate (2002-01-200452), seeking a refund of the duties paid on the destroyed merchandise. This petition was denied on January 2, 2002, by reason of "not meet[ing] the criteria per 19 CR 158.45(b)". On April 1, 2002, protestant filed this protest, 2002-02-100780, against your decision to refuse to reliquidate and refund duties.

The essence of this protest is that the filing of the consumption entry covering the 1647 cartons of wearing apparel was a clerical error, mistake of fact, or other inadvertence not amounting to an error in the construction of a law within the meaning of 19 U.S.C. § 1520(c)(1) and, therefore, Customs erred in refusing to reliquidated the entry and refund the duties paid in connection therewith.

In support of the claim, protestant has submitted two affidavits, one from Ms. McEachern and one from Ms. Parrinello. In part, Ms. McEachern states:

"5. I advised our broker, Fritz Companies, that approximately 154 cartons of the merchandise of Turkish origin from the warehouse entry referenced in paragraph 4 would be subject to destruction.

"6. Initially I was unaware of the condition of the merchandise contained in the remaining 1647 cartons.

"8. I never authorized the release of the cartons nor did I provide Fritz with authorization to file a withdrawal on the 1647 cartons.

"9. Upon learning of the condition of the goods, it was decided that all 1801 cartons should be destroyed.

"10. I notified our broker, Fritz, and in particular, Rosanne Parrinello, the Reebok account supervisor at Fritz that the goods were to be destroyed. I was advised by Fritz that 1647 cartons had been duty paid.

"11. I instructed Fritz to leave the cartons in the bonded warehouse and to file a request for destruction on all 1801 cartons on a Customs Form 3499.

"13. At no time did I intend that the 1647 cartons be withdrawn from warehouse. . . ." In her affidavit, Ms. Parrinello states in part that

"5. I received information from Janice McEachern of Reebok International that 154 cartons of the merchandise in the warehouse entry was to be destroyed as it was of Turkish origin.

"6. I was provided no other authorization for the disposition of the remaining cartons.

"7. I believed that it was Reebok's intention to withdraw and duty pay the remaining cartons. I instructed employees of Fritz to prepare the paperwork for the withdrawal of 1647 cartons and the destruction of 154 cartons.

"8. Subsequent to the payment of duty, but prior to the merchandise being removed from the bonded facility, I was advised by Reebok that it was Reebok's intention to destroy all 1801 cartons.

"12. At no time did I receive authorization from Reebok to withdraw 1647 [sic] of wearing apparel. . . ."

ISSUE:

Whether duties paid upon merchandise entered for consumption pursuant to a withdrawal from warehouse are refundable under 19 U.S.C. 1520(c)(1) after the protestant requested permission to and did destroy the merchandise under Customs supervision.

LAW AND ANALYSIS:

We begin by noting that a refusal to reliquidate under 19 U.S.C. § 1520(c)(1) is a protestable decision under 19 U.S.C. § 1514(a)(7) and such a protest must be filed within 90 days from the date of the denial to reliquidate (19 U.S.C. § 1514(c)(3)(B)). We find that this protest was timely filed on April 1, 2002, against the January 2, 2002 decision to deny reliquidation of entry 110-NNNN810-8. We further note that a petition to reliquidate an entry must be filed within one year from the date of liquidation of the entry. See, again, 19 U.S.C. § 1520(c)(1). We further find that the petition to reliquidate was timely filed on October 17, 2001, within one year from the date of liquidation of entry 110-NNNN810-8.

Generally speaking, merchandise subject to duty and entered for warehousing may be withdrawn for consumption upon payment of the duties at the rate in effect on the date of withdrawal. See 19 U.S.C. § 1557(a)(1). Also, merchandise entered under bond may be destroyed within the bonded period under customs supervision and any duties collected "shall be refunded" pursuant to 19 U.S.C. § 1557(c). See also 19 U.S.C. § 1558(a)(3), no refund or drawback of estimated or liquidated duty shall be allowed for the destruction of any merchandise after its release from the custody of the Government, except when articles entered under bond are destroyed within the bonded period as provided for in section 1557 "of this title".

Clearly the subject merchandise was destroyed under Customs supervision. At the time that the merchandise was so destroyed, no later than August 8, 2000, it was not, however, in the custody of the Government inasmuch as it had been withdrawn for consumption more than one month earlier, on June 7, 2000. See Customs Regulations in 19 C.F.R. § 144.38.

Under 19 U.S.C. § 1520(c)(1), reliquidation may be sought where a clerical error, mistake of fact, or other inadvertence adverse to the importer is brought to the attention of the Customs Service as further provided thereunder. The evidence does not show any intent to destroy the withdrawn merchandise before July 11, 2000, the date of the eMail from Ms. McEachern to Ms. Parrinello. Thus, no decision to destroy any portion or all of the entered merchandise was made prior to the June 7, 2000 withdrawal from warehouse. Although Ms. McEachern states that it was her decision to make, she fails to state when she made that decision. Ms. Parrinello states that she was responsible for acting on Reebok's instructions for disposition of the goods, but she does not provide any evidence, documentary or otherwise, as required by 19 U.S.C. § 1520(c)(1), as to what instructions were issued between the import date of May 11, 2000 and June 7, 2000, the date of withdrawal for consumption was made for the 1647 cartons of wearing apparel. Consequently, there is no evidence, documentary or otherwise, to show that the withdrawal for consumption on June 7, 2000 was made in error, especially in error correctable under 19 U.S.C. § 1520(c)(1). What the evidence does show is that after the goods were withdrawn from warehouse for consumption and duties paid in accordance therewith, it was determined that the goods should be destroyed under Customs supervision. This tableau is the opposite side of the coin presented in Godchaux-Henderson Sugar Co., Inc. v. United States, 85 Cust. Ct. 68, 496 F. Supp. 1326 (Cust. Ct. 1980). Therein the court held that the failure to make and entry was not an error, etc., correctable under 19 U.S.C. § 1520(c)(1); in doing so, the court wrote, in part

. . . that Congress intended the statute to eliminate injustice resulting from certain errors, mistakes, and inadvertences in an entry, liquidations, and other Customs transactions. However, I see nothing in either section 520(c)(1) or the legislative history cited by plaintiff which suggests that Congress intended the statute to be remedial in situations where, as here, the importer mistakenly or inadvertently failed to make and entry within the time limit prescribed by law to obtain duty-free treatment. . . . Simply put, plaintiff's "mistake" or "inadvertence" was not in an entry, but rather in failing to make an entry [emphasis in original] . . . .

Godchaux-Henderson Sugar Co., Inc., at 74. In this case, the error is not in failing to make an entry, but in making an entry. As such, protestant has also made an error that is not remedial under 19 U.S.C. § 1520(c)(1). HOLDING:

The protest should be denied.

Duties paid upon merchandise entered for consumption pursuant to a withdrawal from warehouse are not refundable under 19 U.S.C. 1520(c)(1) when the merchandise has been destroyed under Customs supervision at the request of the protestant.

In accordance with Section 3(A)(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed, with the Customs Form 19, 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 take steps to make the decision available to customs personnel via the Customs Ruling Module in ACS and public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

William G. Rosoff, for

Myles B. Harmon,
Acting Director

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