HQ W231396 - Zungshen, Inc., Protestant number 2904-05-100061 - United States International Trade Commision Rulings

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HQ W231396

February 5, 2007

LIQ-15 RR:CTF:ER W231396RDC

Customs & Border Protection
Port Director
8337 NE Alderwood Road
Portland, OR 97220
Attn: Katie Schultz

RE: Zungshen, Inc., Protestant number 2904-05-100061

Dear Sir or Madam:

Protest number 2904-05-100061 was forwarded to this office for further review. We have considered the evidence provided and the points raised by your office and the protestant. Our decision follows.

FACTS:
Zungshen, Inc. (Zungshen) was the importer of record for an entry of what is described as motor scooters. The motor scooters were entered 11/4//2004, and the entry was liquidated on 9/16/2005. The entry summary reflects that $91.41 was paid for the Merchandise Processing Fee (MPF) and $54.42 was paid for Harbor Maintenance Fee (HMF). Zero duty was paid. The scooters were imported aboard the vessel Akashi Bridge. Included with the entry package was a declaration by the importer that the scooters conformed to all applicable U.S. laws, a certificate of conformity and a CBP Notice of Custody Receipt for Detained Property. By letter dated 12/20/2004, the EPA requested that CBP seize the “83 motorcycles imported by Zungshen, Inc. . . .” and the scooters were seized.

As stated in the Administrative Settlement Agreement (Agreement) between Zungshen and the EPA, the scooters were found to violate the Clean Air Act (42 U.S.C. § 7522), i.e., they lacked “valid EPA emissions labels permanently affixed” to them and lacked the requisite “EPA-issued certificate of conformity.” Pursuant to this Agreement, Zungshen was to “export or destroy” the motor scooters under CBP supervision. There is no evidence that the motor scooters were exported or destroyed. On 11/16/2005, Zungshen filed the instant protest, stating only that “All product was seized by EPA. Duty / Fees paid by filer. Request Duty / Fees be refunded to filer.” The protest was forwarded to this office on 4/14/2006, pursuant to an approved application for further review.

ISSUE:
Is the importer of record, Zungshen, Inc., entitled to refund of the MPF and HMF?

LAW AND ANALYSIS:

The Merchandise Processing Fee (MPF) is collected per 19 U.S.C. 58c(a)(9)(A) for the processing of merchandise that is formally entered or released into the United States. The Harbor Maintenance Fee (HMF) is required by 26 U.S.C. §§ 4461, 4462, for any port use where commercial cargo is involved. The entry summary reflects that the protestant paid MPF of $91.41 and HMF of $54.42. Per 19 U.S.C. § 58c(g)(2) fees are treated as duty.

Per 19 C.F.R. §141.1, liability for payment of duties by an importer “accrue upon imported merchandise on arrival of the importing vessel within a Customs port with the intent then and there to unlade . . . .” The scooters were in CBP custody when seized; thus they had been imported and liability for duty had accrued.

The refund of duties is limited by 19 U.S.C. § 1558, which prohibits the “remission, abatement, refund, or drawback” of duties after the goods have been released from CBP custody, with some exceptions. (§1558(a)). The exceptions to this limitation permit refund of duties when drawback is permitted by statute, when goods entered under bond are destroyed within the bond period and when “prohibited articles have been regularly entered in good faith” but are subsequently exported or destroyed because of a U.S. law. (19 U.S.C. §1558(a)(2)).

First, § 1558 is inapplicable to the entry of scooters because there is no evidence that the scooters were ever released from CBP custody. In fact, there is evidence to the contrary, i.e., the file includes a Notice of Custody Receipt for Detained Property. This notice advised the importer that the scooters were being held by CBP as directed by EPA. Thus, it seems that the scooters were still in CBP custody when the EPA requested their seizure and CBP was able to seize the scooters without demanding re-delivery. Second, there is no drawback claim and the goods were not entered under bond as required for relief per §§ 1558(a)(1) and (3). It is also clear that the protestant is not entitled to a refund of the fess under § 1558(a)(2), which permits a refund of duties when “prohibited articles have been regularly entered in good faith” but are subsequently exported or destroyed because of a U.S. law. (19 U.S.C. §1558(a)(2)).

In Zungshen’s case there is no evidence that the scooters were entered in good faith or prohibited articles, or that the scooters have been exported or destroyed. The entry filed for the scooters included a declaration by the importer that the scooters were in conformance with all applicable U.S. laws. Clearly, this assertion was proved to be untrue by the EPA. Since there is no evidence as to what the importer intended when submitting such a declaration when entering non-compliant scooters, it cannot be determined whether the importer was mistaken or intended to declare a fact it knew was not accurate. Thus, there is no evidence of good faith. (See HRL 222460 11/8/1990, which stated, “ If the importer cannot make a good faith assertion of intent as to all merchandise covered by a certification, then the certification is invalid from the beginning.)

Further, the scooters were restricted merchandise and not prohibited articles. Refund of duty is not permitted on restricted merchandise. The distinction between merchandise that is prohibited from that which is restricted is well settled. (See HRL 221669, 9/3/1991). Prohibited merchandise is that which cannot be lawfully imported `into the United States under any circumstances. Restricted merchandise is that which may be altered to become conforming with U.S. requirements and then may be lawfully entered. (See A.N. Deringer, Inc. v. United States, 84 Cust. Ct. 196, C.D. 4858 (1980); aff’d 593 F.2d 1015 (1979 Cust. Ct. Pat. App.); HRL 225115, 3/171995). In Zungshen’s case, the scooters could have been lawfully entered into the U.S. with the proper labels affixed and accompanied by the proper EPA certification. Since the circumstances of the scooters’ importation could have been changed to render the scooters admissible, they fall into the category of restricted merchandise and no refund of duty is permitted. (See Columbia Co. v. United States, 9 Cust. Ct. 179 (1942); C.D. 688, which held that “where Chinese wine was not per se inadmissible, but was subject to detention until packed in containers which complied with the internal revenue regulations, it was not prohibited merchandise.”)

Finally, there is no evidence that the scooters were exported or destroyed. There is not even an assertion of either by the protestant. Since there is no evidence that the protestant has met the statutory requirements for a refund of duty per § 1558, no relief may be granted. (See also 19 C.F.R. § 158.41.)

HOLDING: The importer of record, Zungshen, Inc., is not entitled to refund of the MPF and HMF and the protest is DENIED IN FULL.

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 claim 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 Harmon, Director

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