PRO-1-CO:R:C:E 220042 MS
Regional Commissioner of Customs
New York Region
6 World Trade Center
New York, New York 10048-0945
RE: Application for Further Review of Protest No. 1001-6-018412,
protesting the refusal to reliquidate Entry Nos. 85-466160-8 and
85-466864-3, dated August 6, 1985, and September 13, 1985,
respectively, under 19 U.S.C. 1520(c)(1).
Dear Sir:
The above-referenced protest was forwarded to our office for
further review. We have considered the points raised by your
office and the importer. Our decision follows:
FACTS:
The protestant entered two shipments of merchandise into the
United States on August 6, 1985, and September 13, 1985. Each
shipment contained two styles of women's grain leather "Bean"
boots designated by the protestant as Style Nos. 21610A and
21615K. Both styles of the boots were entered under item 700.57,
Tariff Schedules of the United States (TSUS). The entries were
liquidated on October 11, 1985, and October 25, 1985, with no
change in the tariff classification of either style of boot.
On February 11, 1986, Customs received letters from the
protestant requesting reliquidation and refund of duties under
section 520(c)(1), Tariff Act of 1930, as amended (19 U.S.C.
1520(c)(1)). Customs determined that substantiating
documentation had not been submitted to show a clerical error,
mistake of fact, or other inadvertence correctable under 19
U.S.C. 1520(c)(1) and denied the reliquidation requests on
October 31 and November 7, 1986. On November 25, 1986,
protestant filed the subject protest against these refusals to
reliquidate.
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An affidavit of the protestant's employee, the Import
Traffic Manager (hereafter, the "Manager" or "importer's
employee") was submitted with the protest. From that affidavit
and subsequent information provided by the protestant, we find
that the circumstances which led to entry of the Style 21615K
boots under item 700.57, TSUS, were as follows: The Manager
began as the protestant's import traffic manager in May, 1985.
Prior to that, he had no experience relating specifically to the
classification of footwear under the TSUS. In the short time
that he worked for the protestant prior to the making of the
subject entries, he processed documents for other entries which
collectively involved several styles of "Bean" boots which he had
been advised were dutiable at 37.5% ad valorem. When he
received the shipping and invoice documents pertaining to the two
entries in question, the Manager, noting that the merchandise was
described as "Bean" boots, and assuming that they were the same
"Bean" boots as previously entered, instructed the protestant's
broker to enter the merchandise under item 700.57, TSUS, and at
its duty rate of 37.5% ad valorem. He did not refer to the CF
5523, "Invoice for Details for Footwear" which specifically
described the leather composition. He later learned that the
Style 21615K boots were entitled to entry under item 700.45,
TSUS, and at a duty rate of 10% ad valorem by virtue of the
leather content of their uppers.
Protestant claims that there were several errors or mistakes
on the basis of which the protestant's entries should be
reliquidated under 19 U.S.C. 1520(c)(1). First, it alleges that
the Manager inadvertently overlooked the documented fact that
style 21615K had uppers of 60% grain leather and 40% rubber, and
therefore should have been entered and classified under item
700.45, TSUS, at an 10% ad valorem duty rate, rather than under
item 700.57, TSUS, at 37.5% ad valorem. The protestant also
states that the Manager was not aware of the fact that the
company intended to enter the boots at a duty rate of 10%, and
claims this intent is evident by examining the purchase orders
and confirmation, by which it may be determined that if duty at
10% was added to the importer's purchase price of the Style
21615K boots, the boots sale price would have a similar markup
corresponding to the 31% markup on the other boots involved in
the transaction. In contrast, if 37.5% duty was added to the
purchase price, the resale price would include only a 5% markup
from the protestant's resale price, which when combined with
administrative and other costs of the transaction, the total cost
would exceed the resale price of the merchandise, and "obviously
not be profitable."
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Protestant alleges the broker's clerk was not aware of the
true facts regarding the leather content of the boot uppers or
the importer's intention to enter the merchandise at the lower
rate due to a mistake of fact and "possibly inadvertence."
Protestant contends that the broker's clerk who made the
entries, followed the Manager's instructions and made a mistake
of fact in thinking that the protestant wanted the Style 21615K
boots to be entered dutiable at 37.5% ad valorem when, in fact,
the protestant wanted those boots to be entered dutiable at 10%
ad valorem.
Protestant also claims that a mistake of fact occurred on
the part of the Customs officer who processed the entries in
question. Protestant states that it may reasonably be assumed
that the appropriate Customs officer was aware of the legal
consequences of the leather content of the upper surface area of
the Style 21615K boots and therefore, the Customs officer must
have also made a mistake of fact when he liquidated the
merchandise at 37.5% ad valorem.
ISSUE:
Whether, within the context of 19 U.S.C. 1520(c)(1):
(1) When an importer's employee who is responsible for
advising how his employer's merchandise should be entered, fails
to take note of a material fact in classifying merchandise under
the TSUS, such failure constitutes a mistake of fact,
inadvertence or clerical error;
(2) a Customs broker who enters a client's merchandise under
an incorrect classification, as instructed by the importer,
commits a mistake of fact or inadvertence by not having
ascertained all material facts regarding the classification
determination by his client when all correct and supporting
documentation was provided to the broker;
(3) a mistake of fact or inadvertence can be inferred on the
part of a Customs officer who liquidates duties on merchandise
based on the wrong tariff provision, when all correct and
relevant information has been provided at this time of entry.
LAW AND ANALYSIS:
19 U. S. C. 1520(c)(1) provides that Customs
may reliquidate an entry to correct:
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a clerical error, mistake of fact, or other inadvertence
not amounting to an error in the construction of a law,
adverse to the importer and manifest from the record or
established by documentary evidence, in any entry,
liquidation, or other customs transaction, when the error,
mistake, or inadvertence is brought to the attention of
the appropriate customs officer within one year after the
date of liquidation or exaction;
The alleged clerical errors and mistakes of fact made in
connection with the two entries were timely brought to the
attention of Customs under 19 U.S.C. 1520(c)(1). Customs
refusals to reliquidate the entries under this provision were
timely protested within 90 days, in accordance with 19 U.S.C.
{1514.
The importer's first claim for relief under 19 U.S.C. 1520
(c)(1) is that the Manager made a mistake of fact, inadvertence
or clerical error by failing to recognize that the Style 21615K
boots have uppers of which 60% of the exterior surface area is
leather. Section T.D. 54848 describes and distinguishes
correctable errors under section 1520(c)(1). Mistake of fact
occurs when a person believes the facts to be other than what
they really are and takes action based on that erroneous belief.
The reason for the belief may be that a fact exists but is
unknown to the person or he may believe that something is a fact
when in reality it is not. Inadvertence connotes inattention,
oversight, negligence, or lack of care while clerical error
occurs when a person intends to do one thing but does something
else, including mistakes in arithmetic and the failure to
associate all the papers in a record under consideration. These
errors are not necessarily mutually exclusive. However, errors
in the construction of a law are not correctable under section
1520(c). Those occur when a person knows the true facts of a
case but has a mistaken belief of the legal consequences of
those facts and acts on that mistaken belief. 94 Treas. Dec.
244, 245-246 (1959).
These entries do not concern a clerical error, since such an
error is made by one in a clerical capacity who has no duty to
exercise original thought or judgment. PPG Industries Inc. v.
United States 7 CIT 118, 124 (1984). The importer's traffic
manager had responsibility to review the documents and determine
the appropriate tariff item number for each entry. Although the
manager had originally been advised that the entries of similar
merchandise were dutiable at 37 1/2%, he had ongoing
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responsibility to evaluate and process entry documents. There is
no indication that any other employee directed him to designate
the entries in question under a particular tariff item or duty
rate or that his mistake was in the nature of a transcription
error.
We do not believe that the importer's employee's actions
amounted to negligent inaction, which is not within the scope of
section 1520(c). See C.S.D. 80-250. Negligent inaction cases
usually are the result of the submission of incorrect or
incomplete documentation, intentionally or not, and the failure
to submit or late submission of "correct" documentation. This
ruling states that the failure to act may be correctable under 19
U.S.C. 1520(c), when coupled with another significant factor,
such as a misunderstanding of the facts.
There is evidence that the importer's employee made a less
than thorough review of the entry documents and therefore was
unaware of a material fact. In the Manager's affidavit, he
states that when he received the invoice and shipping documents,
he assumed the merchandise was the same type of boots as
previously entered, and instructed the broker to enter them at
37.5% (corresponding to TSUS item 700.57). He states that
because of his mistake and inadvertence in not carefully checking
the CF 5523, and the importer's purchase orders, he mistakenly
advised the broker as to the duty rate.
Some official at the importer's business knew the correct
composition of the boots before entry, since a correct CF 5523,
apparently prepared by the importer, detailed the correct
composition. The CF 5523 provides evidence that the boots' were
composed of 60% leather uppers. The Manager did not review this
form but based his classification decision on prior experience of
boots by the same name. Therefore, due to inattention,
carelessness or other inadvertence, the Manager was unaware of
the boots composition, a material fact needed to determine the
classification of the merchandise. However, the mistake of fact
by the importer's employee does not provide direct correlation to
a mistake of fact made in the entry of the merchandise as
required under section 1520(c)(1), since the broker, not the
importer or its employee filed the entry.
We reject the protestant's argument that the purchase orders
and confirmation provide proof that the boots were intended to be
entered at the lower rate of duty. Disparate profit margins
provide some indication that the merchandise was intended to be
entered by the importer at the lower rate, but it is not
conclusive. Customs will not evaluate the reasonableness of
business decisions regarding this kind of difference in profit
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margin to determine the importer's classification intent.
However, the underlying basis of the importer's intent to use the
lower duty rate, the composition of the boots, is established by
the CF 5523, submitted with the entry.
The record does not establish that any mistake of fact,
inadvertence or clerical error was made by the Customs Service
the broker. No affidavits or other statements are provided from
those parties to substantiate such an error. See C.J. Tower &
Sons v. United States, 68 Cust. Ct. 17, 22, CD 4327, (1972),
aff'd 61 CCPA 90, C.A.D. 1129 (1974), where Customs agreed it was
unaware of a material fact at the time of liquidation. We cannot
rely on the assumptions and assertions of the protestant without
any facts. As we recently ruled in C.S.D. 89-29, mistakes of
fact cannot be presumed from circumstances that do not
necessarily support such a finding. Inferences are not
sufficient proof. The requirement in section 1520(c)(1) that
mistakes of fact be manifest from the record or established by
documentary evidence necessitates something more than assertions
of logical inference. When it is alleged that merchandise has
been wrongly classified due to a mistake of fact, it is incumbent
on the protestant to show by sufficient evidence the nature of
the mistake of fact. PPG Industries, Inc. v. United States, 4
CIT 143, 147 (1982).
The fact that the broker was advised to enter the
merchandise under the incorrect tariff item number by the
importer, and that the broker did enter the merchandise
accordingly, does not provide sufficient proof that a mistake of
fact occurred in the entry, since accurate documents describing
the composition entry, were available to the broker and submitted
with the entry. The broker has an independent obligation to
determine the correct tariff classification and duty rate for
entries it files for a client. No evidence is provided to refute
the possibility that the broker considered all relevant facts as
to the true nature of the imported merchandise and incorrectly
determined the classification, which would be a mistake of law.
A Customs broker is licensed to transact Customs business on
behalf of others. As defined in the Customs Regulations, section
111.1, Customs business includes transactions involving entry,
classification, value and payment of duty. Furthermore, under 19
U.S.C. 1641, a broker is required to exercise responsible
supervision and control over the Customs business it conducts.
There is no evidence in the record that the broker was not aware
of all material facts, since the CF 5523 was part of the entry
documents which were submitted to Customs through the broker.
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The fact that an importer advised the broker of how it wished
merchandise to be entered does not presume that the broker, with
expertise and experience in Customs matters, would evaluate the
evidence in the same manner as the importer. See PPG
Industries,Inc. v. United States, 7 CIT 118, 121, 126 (1984).
Since the CF 5523 was included in the file, it was also
available to the Customs officials who reviewed the form, and
liquidated the entry. There is no evidence that Customs officials
were unaware of the true composition and erroneously applied the
incorrect tariff classification. It is well established that a
determination that merchandise is covered by a certain tariff
item is a conclusion of law. An error of judgement on the part
of a customs officer who was aware of the pertinent facts but
entered the merchandise under the wrong tariff item number is a
mistake in the construction of law, not correctable under section
520(c)(1). See Mattel, Inc. v. United States, 72 Cust. Ct. 257,
262-264, C.D. 4547 (1974); Computime, Inc. v. United States, 9
CIT 553 (1985).
A protest under section 514, Tariff Act of 1930, (19 U.S.C.
1514) filed within 90 days of liquidation, is the remedy to
correct erroneous classifications caused by the misinterpretation
of law. No such protest was filed. Section 1520(c)(1) is not
remedial for every conceivable form of mistake or inadvertance
adverse to an importer, but offers limited relief. Concentric
Pumps, Ltd. v. United States, 643 F.Supp. 623, 626, 10 CIT 505
(1986).
HOLDING:
(1) The importer's employee did not thoroughly review the
entry documents and was unaware of a material fact contained in
the entry documents when it advised the broker of the
classification of merchandise for entry. This error did not
amount to a mistake of fact in the entry under 19 U.S.C.
1520(c)(1) since the broker, not the employee, had
responsibility for filing the entry.
(2) The broker had all documentation necessary to file a
correct entry. Notwithstanding the erroneous instructions it
received from the importer, the record does not establish that
the broker made a mistake of fact, inadvertence or clerical error
in filing the entry under the wrong classification, rather than a
mistake of law by improperly classifying the merchandise.
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(3) The record provides no evidence that Customs made a
mistake of fact, clerical error or inadvertence in classifying
the merchandise when all documentation was included in the entry
and was available before liquidation.
Since a clerical error, mistake of fact or inadvertence in
the entry or liquidation is not manifest from the record or
established by documentary evidence, you are advised to deny the
protest.
Sincerely,
John Durant, Director
Commercial Rulings Division