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HQ 229677




December 9, 2002

LIQ-11- RR:CR:DR

229677 RDJ

Port Director of Customs

9901 Pacific Highway
Blaine, Washington 98230

RE: Protest #3004-02-100124; Red Dragon Skateboard Co. Avalon Risk Management; Aegis Security Insurance; Surety Protest, “Protective Protest”; extension of liquidation

Dear Sir:

Reference is made to Protest # 3004-02-100124 filed by Avalon Risk Management on behalf of Aegis Security Insurance Co. Our decision follows.

FACTS:

Entry AD1-XXXX645-2 was entered on September 26, 2001 by Red Dragon Skateboard Corporation, the importer of record. The entry summary was submitted on October 11, 2001. The CF301 identified the surety as Aegis Security Insurance Co. The surety filed a single transaction bond with a limited liability of $8,000. The address recorded on the CF301 for Aegis Security Insurance Co. (a Pennsylvania Corporation) was: P.O. 3153, Harrisburg PA 17105. The CF301 also identified Avalon Risk Management, Inc., as the General Agent for Aegis Security Insurance Co. (3315 E. Algonquin Road, Suite 340 Rolling Meadows, IL 60008).

The merchandise was described as 654 nylon backpacks with an appraised value of about $7,XXX.XX. The importer claimed NAFTA preference criteria “B” by adding the suffix “CA” beside the 4202.92.3020, HTUSA. The merchandise was claimed by the importer to be duty-free.

On October 29, 2001, the port issued a CF 28- Request for Information requesting the submission of the Certificate of Origin and samples of the packpacks. The files shows that a certificate was submitted. On November 28, 2001, the port extended the liquidation of this entry and issued a CF 28 -Request for Information – requesting the importer to submit documentary evidence concerning the origin of the fabric in order to sustain its NAFTA claim. Customs requested the following information:

A statement from the manufacturer of the FABRIC, certifying on his letterhead, the country of origin for the FIBER used in the production of the fabric. State where this fabric was woven.
Preference criterion “B” indicate that there is some foreign content in the packs, identify the Foreign components and indicate the country of origin of each. You have included an invoice for “repair costs” of $2.00 each What exactly was repaired. How do you establish your selling price to Red Dragon Distribution, Santa Ana, CA? Describe in detail. provide a cost breakdown of the production of these packs, include fabric costs, assembly costs, additional parts costs, profit, etc. Submit copies of you cutting and sewing records used in the production of these packs. Provide a copy of your billing invoice from the producer of the FABRIC.

On December 7, 2001, Carson International, the broker for Red Dragon Corp. responded by stating that its client, Red Dragon, had decided to take the rate advance on the subject entry and added that Customs should go ahead and issue the CF29. Customs made a pencil annotation on December 31, 2001 requiring the broker to respond to “all other questions” on the CF28.

On January 18, 2002, the port issued a CF29 informing the following:

Pursuant to Customs regulations Part 181, on November 28, 2001, the USCS initiated a verification of the origin of packpacks entered under entry summary AD1-XXXX6452 and Certificate of Origin dated September 25, 2001 covering the blanket period 090101 through 090102 claiming preference criterion “B”. Customs intends to deny preferential tariff treatment for these goods because information sufficient to complete the verification was not received pursuant to 19 CFR 181.72.
A copy of the original request for information needed to verify the Certificate of Origin is attached. Unless the additional information requested is submitted within 30 days from the issuance of this CF 29, the claim will be denied without further notification.
After the claim is denied, the exporter has the right to appeal the determination of origin, pursuant to 19 USC 1514 and part 174 of the Customs Regulations within 90 days after the liquidation of the entry listed in this notice. A Bulletin Notice of Liquidation will be posted, at the Customs Office where the goods were entered, on the date of the entry liquidation. Appeal rights will be allowed for 90 days after the date of posting of the Bulletin Notice of Liquidation. Appeals file prior to liquidation will be denied as untimely.

The entry liquidated on March 22, 2002. No protest by the importer or its broker was filed within 90 days of the liquidation.

On August 30, 2002, Protest #3004-02-100124 was filed by Avalon Risk Management Inc., acting as general agent for Aegis Security Insurance. On September 13, 2002, the National Finance Center certified that the first bill to the surety was mailed on June 10, 2002. The surety had 90 days to file its protest from this date.

Avalon’s protest contained the following:

Surety stated that the protest was being filed pursuant to 19 USC 1514(c)(2), on its own behalf, and not collusively to extend any other authorized persons’ time to protest. Surety requested a stay for further action on this protest until the surety has received documents requested via FOIA and surety has had the opportunity to review said documents and supplement this protest. Surety files a “protective protest” against Customs decisions involving this entry. Surety protested the liquidation of the subject entry as being null and void having been made after the expiration of the one-year and/or four year limitations on liquidation under 1504(a). Protest is also made on the grounds that the suspension or extension of liquidation for the subject entry was not properly issued and was improper for citing a reason other than one authorized by statute of regulation, section 1504(b) and under Intercargo Insurance Co. (Surety for Genaur) v. US. (879 F. Supp. 1338, reversed and remanded 83 F. 3d 391 (Fed Cir. 1996 (cert. den., 117 S.Ct. 943 (1997)). Surety protested the liability of the subject liquidations, Surety alleged it had no information available indicating that Aegis Security Insurance Co. was in fact the surety on the bond used to secure the merchandise in question.

ACS records show that the bill issued by NFC was paid on September 10, 2002.

ISSUES:

May this protest be granted as to:

Is the protest timely filed by the Surety, not collusively?

Does the documentary evidence support the Surety’s allegation that it is not liable for this claim?
c) Under section 1514, can a Surety request to “stay” any further action on a protest until it receives documents requested under FOIA provisions and has had opportunity to review the documents in order to supplement the protest?
d) Is the liquidation of this entry “null and void” having been made after the expiration of the one-year period and/or four year limitation on liquidation under section 1504(a)?

LAW & ANALYSIS:
a) Is the protest timely filed by the Surety, not collusively?

Initially, we find that the protest was timely filed. The issue of liquidation is protestable matter under 19 U.S.C. 1514(a)(5). In terms of timeliness, Customs received this protest on August 30, 2002. The protest was filed by Avalon Risk Management acting as agent for Aegis Security Insurance Co. The protest was filed under the terms of 19 U.S.C.1514(c). Section 1514(c) states that a protest by the surety which has an unsatisfied legal claim under its bond may be filed within 90 days from the date of mailing of notice of demand for payment against its bond. If another party has not filed a timely protest, the surety’s protest shall certify that it is not being filed collusively to extend another authorized person’s time to protest as specified in this subsection. The protest must include the non-collusion clause as required by 19 C.F.R. 174.13(a)(8).

The subject protest does contain the required certification that it is filing the protest on its own behalf and not collusively in order to extend any other authorized person’s time to protest. A memo from the National Finance Center revealed that the first bill to the surety was mailed on June 10, 2002. Therefore, the surety had 90 days, until September 10, 2002, to file this protest. The protest was filed at the port of Blaine, Washington on August 30, 2002 as such, the protest was timely filed.

Does the documentary evidence support the Surety’s allegation that it is not liable for this claim?

In its protest, Avalon stated that the surety presently had no information available to indicate that Aegis Security Insurance Co. (032) was in fact the surety on the bond used to secure the merchandise in question. The documents in file do indicate that Aegis Security is the surety under this claim. Aegis Security did not present any documentary evidence that would show the contrary. The CF301 clearly states that Aegis Security Insurance Co. is the surety covering the principal, Red Dragon Corp, importer number 003004-02083. The surety issued a single transaction bond for AD1-101096452, on September 26, 2001, limited to the amount of $8,0000. The amount demanded under the subject claims did not surpass the liability limitation stated in the CF301. We find that Avalon’s allegation that Aegis Security Insurance is not the surety for Red Dragon to be without merit.

Under section 1514, can a Surety request to “stay” any further action on a protest until it receives documents requested under FOIA provisions and has had opportunity to review the documents in order to supplement the protest?

The next issue is whether under the provisions of section 1514, a surety can request to “stay” any further action on a protest until it receives documents requested under FOIA provisions and has had the opportunity to review the documents in order to supplement the protest. The surety claims that it has filed a “protective protest” against Customs’ decision to:

"reclassify and/or reappraise the subject entry"; "deny drawback"; "assess antidumping or countervailing duties, marking duties, vessel repair duties, or any other special duties, charges or exaction, including but not limited to interest." The surety also protests "the untimely liquidation or reliquidation and/or unlawful suspension or extension of liquidation as notification was inadequately issued", and "any clerical error or mistake of fact made on the subject entry." As this is a protective protest, surety initially claims: the merchandise is properly appraised at the invoice unit values; the classification and rate at the time of entry is correct; the entry is entitled to drawback; the entry is not subject to antidumping countervailing duties, marking duties, vessel repair duties or any other special duties, charges, exactions, including but not limited to interest. Surety is presently trying to gather the information and evidence necessary to establish our claims. upon receipt of the documents under our FOIA request from US Customs and/or receipt of such information from other sources, surety will complete review and reserves the right to supplement the claims raised in our protest. in the alternative, timely notification will be served upon the District Director if no grounds for further protest are found to exist.

The Customs Regulations (19 CFR 174.13(a)(6)) requires that a protest set forth the nature of, and justification for the objection set forth distinctly and specifically with respect to each category, payment, claim, decision, or refusal." The assertion of potential claims without a distinct and specific justification for each claim does not fulfill the requirements of 19 C.F.R. 174.13(a)(6).

Is the liquidation of this entry “null and void” having been made after the expiration of the one-year period and/or four year limitation on liquidation under section 1504(a)?

Concerning the issue of untimely liquidation as alleged by the surety, the following facts show that its allegation is without merit. The facts leading to the liquidation of this entry are as follows.

Entry AD1-XXXX645-2 was entered by the importer of record, Red Dragon Corp. on September 26, 2001. On November 28, 2001 the Port issued a CF 28 requesting the importer to submit evidence of the origin of the fabric in order to sustain their NAFTA claim. On the same date (November 28, 2001), the port proceeded to extend the liquidation of the entry pending the submission of the information concerning the origin verification. The notice of the extension was issued on December 1, 2001 to both the importer and the surety. On December 7, 2001, Red Dragon, through its broker, informed Customs that it would take the rate advance and affirmed that Custom should proceed to issue the required CF29, Notice of Action. On January 18, 2002, Customs issued the CF29 notifying the importer, among other things, that Customs would rate advance the subject entry without preferential tariff treatment under NAFTA. The entry liquidated on March 22, 2002.

Under 19 U.S.C. § 1504, an entry of merchandise not liquidated within one year from the date of entry of such merchandise shall be deemed liquidated at the rate of duty, value, quantity, and amount of duties asserted at the time of entry by the importer of record, unless this one year period for liquidation is extended.

In reviewing the facts of this case, we conclude that there is no evidence whatsoever to support the surety’s allegation that the liquidation of this entry was untimely as being “null and void” because it was made after the expiration of the one-year and/or four year limitation of liquidations under section 1504(a). The surety submitted no evidence that the extension of the liquidation was not based upon a proper statutory basis, or that such extension was unreasonable. The merchandise was entered on September 26, 2001 and the entry was liquidated on March 22, 2002. In this respect, the extension to allow the importer time to submit information as to the asserted classification does not amount of an abuse of discretion (see, St. Paul Fire & Marine Ins. Co. v U.S. 6 F.3d. 703 (Fed Cir. 1993 and Detroit Zoological Society v U.S. 630 F. Supp. 1350 (CIT1986)).

HOLDING: Protest is to be 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 Customs Form 19 to the protestant no later than sixty (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 of the decision. Sixty (60) days from the date of the decision the Office of Regulations and Rulings will make this decision available to Customs personnel and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, the Freedom of Information Act and other public access channels.

Myles Harmon
Acting Director for
Commercial Rulings Division


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