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HQ 967479




September 22, 2005

CLA-2 RR:CTF:TCM 967479 tmf

CATEGORY: CLASSIFICATION

TARIFF NO.: 2401.20.8710; 2401.20.8720

Customs and Border Protection
Port of Norfolk
101 East Main Street
Norfolk, VA 23510

RE: Protest 1401-04-100353; Classification and Tariff Rate Quota For Tobacco Strips; Actual Use Provision

Dear Port Director:

This is in reply to your correspondence forwarding Application for Further Review of Protest (AFR) 1401-04-100353, which was filed by RJ Reynolds Tobacco Company.

The protest and request for Application for Further Review (hereinafter “AFR”), which was timely filed on September 13, 2004, is against Customs and Border Protection’s (CBP) reliquidation of certain tobacco strips. The merchandise was liquidated on August 27, 2004 and reclassified in subheadings 2401.20.8710 and 2401.20.8720, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), both which provide for “Unmanufactured tobacco (whether or not threshed or similarly processed); tobacco refuse: Tobacco, partly or wholly stemmed/stripped: Thresh or similarly processed: Other: Other: Other: OtherFlue-cured or Burley,” dutiable at 350 percent ad valorem.

The protestant asserts that the merchandise should be classified in subheadings 2401.20.8310 and 2401.20.8320, HTSUSA, which provide, in pertinent part, for tobacco not used in cigarettes, as the protestant’s intent is to no longer to use the goods in cigarettes.

FACTS:

The merchandise in the shipment in question was invoiced as unmanufactured Brazilian tobacco, 2004 crop in strips. The strips are produced by removal of the tobacco leaf stem (threshing). The merchandise was entered in subheadings 2401.20.8510 and 2401.20.8520, both which provide for “Unmanufactured tobacco (whether or not threshed or similarly processed); tobacco refuse: Tobacco, partly or wholly stemmed/stripped: Thresh or similarly processed: Other: Other: OtherFlue-cured or Burley,” subject to quantitative limitations outlined in U.S note 5 to chapter 24.

However, the entry was rejected on the basis that the quota for that subheading was filled. The broker was informed that the tariff rate quota (TRQ) was not possible and the entry was subsequently liquidated in subheading 2401.20.87, HTSUSA.

The protestant states in the submission that that they intended for the tariff rate quota to be available at the time of entry. However, now that it is closed and there is a higher imposed duty rate of 350 percent ad valorem, the subject tobacco will not be used in the manufacture of cigarettes. Accordingly, it is the importer’s position that the imposition of the higher tariff rate quota (TRQ) would render the use of the merchandise as cigarette filler financially unattractive.

Based on this situation, the protestant requests that the liquidation of the instant entries be suspended pending certification of actual use as provided with CBP Regulations (discussed in the Law and Analysis section below).

In its supplemental submission, the protestant asserts that reclassification within subheadings 2401.20.8310 and 2401.20.8320, HTSUSA, is appropriate because of alleged missteps taken by the Port of Norfolk. First, the protestant states that on June 8, 2004, the protestant gave to its broker a properly completed and timely filed Live Entry documentation for submission to the Port. This documentation included a CF-7501, which was prepared by the protestant showing an Entry Type 02 ABI/N/L for the broker. On June 15, 2004, the protestant states that TRQ was available at the time of entry of the goods, according to an ABI quota entry. According to the protestant, the broker subsequently filed the entry documents on June 15, 2004, and paid $34,141.96 of in-quota duty rate. The entry summary that was given to the port was dated June 26, 2004.

The protestant asserts that CBP failed to process the entry on July 20, 2004, 24 days after the entry date. According to the protestant, this resulted in the entry’s rejection on July 20, 2004 and the subsequent tariff rate quota closure and re-liquidation over the imposed TRQ in subheadings 2401.20.8710 and 2401.20.8720, HTSUSA. The liquidation amount is approximately $1.16M, a rate advance of approximately $1.13M.

The protestant states that CBP was noticed on July 3, 2004, that the entry summary was “accepted” for purposes of 19 C.F.R.§ 141.64 and that entry could not be rejected more than 10 days after presentation per the CBP Directive 099-3550-06, issued February 2, 1994. The protestant argues that the initial intent was to use the merchandise in the manufacture of cigarettes and that any imported tobaccos that fall outside the TRQ would not be used for that process. It is the opinion of the importer that as CBP denied TRQ in this case, their intent to manufacture cigarettes has changed to non-cigarette use with the merchandise transferred to their bonded storage facility pending our determination of this protest.

ISSUE:

Whether the Port correctly rejected the subject tobacco entries?

What is the classification of the subject tobacco?

Whether the actual use of the subject tobacco may be modified subsequent to entry?

LAW AND ANALYSIS:

The protestant relies on 19 C.F.R. §141.64 and Customs Directive 099-3550-06

Note: Customs Directive 099 3550-06, issued February 2, 1994, updates the procedures set forth in Customs Directives 3550-025, dated September 8, 1987, and interpret 19 C.F.R. §141.64 by providing guidelines for uniform acceptance and rejection of entry summaries. and argues that CBP accepted the entry and is prohibited from rejecting it as untimely. 19 C.F.R. §141.64 provides, in pertinent part, that:

Entry and entry summary documentation may be reviewed before acceptance to ensure that all entry and statistical requirements are complied withIf any errors are found, the entry and the entry summary documentation shall not be considered to have been filed in proper form and shall be returned to the importer for correction.

Part D of CBP Directive 099-3550-06, dated February 2, 1994 states, in pertinent part, that:

Non-ABI entry summaries may be rejected at any time up to 30 calendar days following the summary filing date. ABI/A, ABI/S or ABI/N entry summaries cannot be rejected after 10 working days following the presentation date for all errors, including census errors. The only exception to these time frames is for all entry summaries subject to anti-dumping and/or countervailing duty cases (ABI and non-ABI). These summaries may be rejected up to 60 days without supervisory approval, and up to 90 days with Headquarters approval.

We have reviewed these two cited Directives and find that they are not controlling with respect to how the goods are classified nor as to whether the TRQ was closed once the broker filed the ABI/A entry documents, the entry summaries and paid the duty.

Rather, for purposes of determining the classification of merchandise, we refer to the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes. When goods cannot be classified solely on the basis of GRI 1 and if the terms of the headings and any relative section or chapter notes do not require otherwise, the remaining GRIs 2 through 6 may be applied.

The HTSUS subheadings under consideration are as follows:

2401 Unmanufactured tobacco (whether or not threshed or similarly processed); tobacco refuse:

Tobacco, partly or wholly stemmed/stripped: Threshed or similarly processed:
Other:
Other:
To be used in products other than cigarettes Flue-cured
Burley

Other:
2401.20.85 Described in additional U.S. note 5 to this chapter and entered pursuant to its provisions Flue-cured
2401.20.8520 Burley

2401.20.87 Other:
Flue-cured
2401.20.8720 Burley

Additionally, the Harmonized Commodity Description and Coding System Explanatory Notes (ENs) are the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

The merchandise is unmanufactured flue-cured tobacco, threshed or similarly processed, which was entered for the purpose of being used in the production of cigarettes. At the time of entry, the subject tobacco was entered in subheadings 2401.20.8510 and 2401.20.8520, HTSUSA. CBP liquidated the tobacco and reclassified the tobacco in subheadings 2401.20.8710 and 2401.20.8720, HTSUSA, both, which are subject to quantitative limits outlined in additional U.S. Note 5 to Chapter 24, HTSUSA (2004). Once the quantitative limitation was reached, CBP reclassified the merchandise to subheadings 2401.20.8710 and 2401.20.8720, both resulting in a reliquidation at a general rate of 350 percent ad valorem.

In the instant case, the broker made entry of the subject merchandise on June 16, 2004 as tobacco for the use in the production of cigarettes. On June 29, 2004, the broker filed the entry summary sheet for the respective entries.

It is understood that the provisions governing subheadings 2401.20.83, 2401.20.85 and 2401.20.87 are actual use provisions. See Headquarters Ruling Letter 959492, dated August 13, 1996. Additional U.S. Rule of Interpretation, 1(b), HTSUSA, defines the term "actual use" as follows:

A tariff classification controlled by the actual use to which the imported goods are put in the United States is satisfied only if such use is intended at the time of importation, the goods are so used and proof thereof is furnished within 3 years after the date the goods are entered. (Emphasis added.)

At the time of entry on June 15, 2004, the intended use of the subject tobacco was for the production of cigarettes and the quota was not closed. On June 29, 2004 when the broker submitted the Entry Summary documents, the quota was closed. (In fact, quota was closed on June 24, 2004 at 1:45 Eastern Standard Time.) The protestant subsequently filed a protest at the Port and requested reclassification since according to the protestant, the actual use was no longer for cigarette production since the manufacture would be cost prohibitive in light of the quota closure.

The protestant believes that reclassification into subheadings 2401.20.8310 and 2401.20.8320, HTSUSA, which covers tobacco used in the production of non-cigarette products, is appropriate in this case due to the TRQ closure. The protestant’s reasoning for this reclassification is based on the doctrine of actual use as outlined in Additional U.S. Rule of Interpretation 1(b), HTSUSA, supra, along with their reliance on HQ 961890 dated September 17, 1998.

In HQ 961890, tobaccos from Greece were shipped to England through the United States for blending, casing, and flavoring processing, then returned to England for testing and the manufacture of cigarettes. At entry, CBP classified the tobacco as tobaccos for use in the manufacture of cigarettes, subject to a TRQ. The issue in HQ 961890 was whether the merchandise’s intended use was governed by use in a foreign country or in the United States. CBP determined that the intended use of the tobacco was controlled by the intended use of the goods at the time of importation into the U.S., not the intended and actual use of the goods once they were returned to England. Thus in HQ 961890, CBP ruled that the liquidation as tobaccos to be used in non-cigarette products (subject to satisfying CBP regulations, 19 C.F.R. §§ 10.131-139, actual use provisions) was correct and that the port erred by rejecting liquidation of the merchandise as tobacco for use in cigarettes.

With respect to actual use, certain conditions are required to establish actual use, as stated in 19 C.F.R. §§ 10.131-139:

Such use is intended at the time of importation. The article is so used.
Proof of use is furnished within 3 year after the date the article is entered or withdrawn from warehouse for consumption.

To establish intent, the regulations are clear. A showing of intent by the importer shall be made by “filing with the entry for consumption or for warehouse a declaration as to the intended use of the merchandise, or by entering in the proper subheading of an actual use provision of the HTSUS.”

However, in this case, the broker at the time of entry did not file any declaration of intent to use the subject tobacco to make non-cigarette tobacco products. The entry summary indicates the goods were imported to be used in the production of cigarettes. Although the protestant cites to HQ 961890, we find this case is not controlling in this instance. Rather, we note that in HQ 961890, the subject tobaccos were entered into the US for the intended purpose of use as non-cigarette products because the blending, casing and flavoring processes occurred in the U.S. Further, it was only upon exportation and re-importation to England that they would be ultimately used as tobacco for use in cigarette products. Whereas, in the instant case, the subject tobacco was entered with the intended purpose for use in cigarettes, not as non-cigarette tobacco. In the case of HQ 961890, the importer had an exclusive intent upon importation into the U.S. as non-cigarette tobaccos; the intent never changed. However, in the case at bar, the protestant desires to change the intended use to use as non-cigarette tobaccos due to a closure of the TRQ.

The entry procedures are clear as to the broker’s responsibility with regard to filing the appropriate customs documentation for purposes of importing tobaccos subject to a TRQ. 19 C.F.R. §142.21(e)(1) discusses quota-class merchandise and states:

At the discretion of the port director, merchandise subject to a tariff rate quota may be released under a special permit for immediate delivery provided the importer has on file a bond on Customs Form 301, containing the bond conditions set forth in §113.62 of this chapter. However, merchandise subject to a tariff-rate quota may not be incrementally released under a special permit for immediate delivery as provided in paragraph (g) of this section. Where a special permit is authorized, an entry summary will be properly presented pursuant to §132.1 of this chapter within the time specified in §142.23, or within the quota period, whichever expires first. If proper presentation is not made until after the tariff-rate quota is filled, merchandise shall not be entitled to the quota rate of duty, and the importer shall pay duties at the over-quota rate.

Section 19 C.F.R. §142.23 states, in pertinent part, that the “applicable documentationshall be filed and estimated duties, if any, shall be depositedfor quota class merchandise within the quota period, whichever expires first.”

In this case, because the broker did not file the requisite entry summary documents prior to the expiration of the tariff rate quota period, the protestant’s request for reclassification to subheading 2401.20.8310 and 2401.20.8320, HTSUSA is denied. Based on Additional U.S. Rule of Interpretation 1(b), the protestant’s claim of use cannot be changed. Thus, there cannot be any reclassification of the subject merchandise as non-cigarette tobacco products. Further, as the TRQ was filled, the port properly liquidated the merchandise and classification in subheadings 2401.20.8710 and 2401.20.8720 is correct.

HOLDING:

The protest is DENIED. The subject tobacco remains classified in subheading 2401.20.8710 and 2401.20.8720, HTSUSA, which provide for “Unmanufactured tobacco (whether or not threshed or similarly processed); tobacco refuse: Tobacco, partly or wholly stemmed/stripped: Thresh or similarly processed: Other: Other: Other: OtherFlue-cured or Burley,” dutiable at 350 percent ad valorem.

In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), you are to mail this decision, together with the Customs Form 19, 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 CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Myles B. Harmon, Director
Commercial and Trade Facilitation Division

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