LIQ-9-01-CO:R:C:E 221887 C
District Director of Customs
U.S. Customs Service
477 Michigan Avenue
Detroit, MI 48226
RE: 19 U.S.C. 1520(c)(1); request for reliquidation and duty
refund; correctable error must be manifest from the record or
established by documentary evidence; protest No. 3801-8-002052
Dear District Director:
This case is a protest and application for further review
submitted by your office under 19 CFR 174.26(b)(1)(i) (PRO-2-
CO:CT KF; P9002052/TXTFRISC; April 25, 1989). The PROTESTANT
protests a decision by you denying a request for reliquidation
under 19 U.S.C. 1520(c)(1). You denied the request on the
grounds that no error correctable under the statute occurred. We
have reviewed the record of this case, including your decision,
the opinion of the Customs Information Exchange, and the
arguments submitted by the PROTESTANT. Our decision follows.
FACTS:
The record demonstrates that the PROTESTANT had been engaged
in the importation of furniture and furniture components for a
number of years. In this scenario, Sunarhauserman, LTD of Canada
(LTD) is the foreign manufacturer/shipper, and Sunarhauserman,
Inc. (U.S.), the PROTESTANT, is the importer. During late 1985
and early 1986, PROTESTANT and Customs were engaged in talks
regarding various subjects, including intercompany transactions,
invoices, and end-user pricing. To respond to Customs inquiries
on these subjects, PROTESTANT formed a task force to evaluate the
relationship between LTD and PROTESTANT, as such related to the
sale of products in the United States, the commission arrangement
between the companies, and the issue of customs duties. At that
time, it appeared that PROTESTANT's invoicing practice, under the
deductive value method of valuation, may have been producing
erroneous duty assessments.
Thus began a period characterized by efforts made by
PROTESTANT and Customs designed to rectify these problems,
efforts including the reevaluation of PROTESTANT's and LTD's
relationship and pricing structure, as well as the construction
of a formula or means by which accurate invoice prices could be
determined for use in the entry of merchandise. This series of
efforts extended from the above time frame (January - April 1986)
through January of 1987, by which time PROTESTANT finally
rectified the aforementioned problems and began submitting
invoices that reflected accurate prices for duty assessment
purposes. In the meantime, through December 1986, PROTESTANT,
knowing fully the facts, continued to submit invoices that
reflected incorrect prices.
As indicated, PROTESTANT became aware of the invoice pricing
problem by early 1986. Rather than file a protest under 19
U.S.C. 1514 immediately, or a formal request for extension of
liquidation under 19 CFR 152.12 - probably the course best suited
to the circumstances, PROTESTANT continued to submit erroneous
invoices while working to iron out its problems. By summer of
1986, PROTESTANT decided that it needed the assistance of an
attorney to finally resolve its value problem, a problem that
required revision of its relationship with the Canadian company;
yet, it was not until October 1986 that PROTESTANT, through
counsel, requested that liquidations be withheld, a more informal
procedure. This request appears to have been made verbally to
Customs at Champlain on October 1, 1986. It was made
subsequently by letter, dated October 20, 1986, from PROTESTANT's
counsel to Customs at Champlain, certified copy to Port Huron.
PROTESTANT testifies that copies of this letter were sent
subsequently (date unspecified) to Detroit and Buffalo. The copy
sent to Detroit was returned as undeliverable and then sent again
to a corrected address. Subsequent to the request, PROTESTANT
believed that liquidations were being withheld. The record shows
that, after the request, entries continued to liquidate
automatically at the four offices involved: Champlain, Port
Huron, Buffalo, and Detroit. Corrected prices were eventually
calculated, and these were finally reflected in invoices in
January 1987.
On July 10, 1987, subsequent to the discovery in June 1987
that entries had continued to liquidate, PROTESTANT filed
requests for reliquidation under 19 U.S.C. 1520(c)(1) at the four
offices involved. It was too late by then to file a protest for
entries liquidated between July 1 and December 31, 1986. Customs
at Champlain, in April 1988, denied PROTESTANT's reliquidation
request for entries liquidated between July 1 and October 1,
1986, subsequently (the record suggests September 1988) approving
a protest of such denial only for liquidations between October 1
and December 31, 1986. None of the other ports approved
protestant's reliquidation requests. PROTESTANT filed this
protest with your office, protesting your October 12, 1988,
denial of its section 1520(c)(1) request and petitioning for
reliquidation of entries liquidated at Detroit during the
October-December 1986 period (hereinafter referred to as the
referenced period). We understand that the other offices are
awaiting the decision on this protest.
ISSUE:
On the facts of this case, has an error correctable under 19
U.S.C. 1520(c)(1) been established to the satisfaction of the
statute's standard - manifest from the record or established by
documentary evidence?
LAW AND ANALYSIS:
PROTESTANT advances two theories in support of its protest.
First, Customs committed correctable error under the statute in
failing to withhold liquidations, as PROTESTANT requested.
Second, correctable error was committed in Customs failure to
liquidate or reliquidate entries according to corrected invoice
prices. The entries involved in this protest were liquidated
during the referenced period.
PROTESTANT's second theory cannot be sustained. First,
PROTESTANT asserts a failure to liquidate entries in accordance
with corrected prices; yet, the liquidations in question occurred
during the referenced period while corrected prices were not
finally formulated until January 1987. The entries liquidated
during the referenced period were liquidated on the basis of the
information - invoices, etc. - submitted knowingly by PROTESTANT,
such entries and invoices containing erroneous prices. There is
no evidence that PROTESTANT, during or after the referenced
period, submitted specific requests to liquidate specific
entries, identified by entry number, according to corrected
prices. Again, there were no corrected prices until January
1987.
Second, PROTESTANT asserts a failure by Customs to
reliquidate liquidated entries according to corrected prices;
yet, first, as above, there were no such prices until January
1987, and, second, there is no evidence that PROTESTANT submitted
specific requests for reliquidation that identified specific
entries and included corrected prices. In fact, PROTESTANT did
not submit a request for reliquidation under 19 U.S.C. 1520(c)(1)
until July 1987, the denial of which is the subject of this
protest.
When an importer is aware that entries submitted contain
erroneous information, he has several choices. Prior to
liquidation, he can notify Customs of the problem and submit
corrected information. When the information necessary to correct
the erroneous entries is unavailable, the importer can file for
extension of liquidation under 19 CFR 159.12. Subsequent to
liquidation, the importer can notify Customs and Customs may
reliquidate voluntarily under 19 U.S.C. 1501 on the basis of
corrected or additional information. Customs voluntary action
must take place within 90 days of liquidation. Alternatively, or
if Customs chooses not to reliquidate voluntarily, he may file a
protest under 19 U.S.C. 1514 within 90 days of the liquidation.
In all of these cases, the importer must identify the entries to
be liquidated or reliquidated and must submit corrected or
additional information upon which Customs can perform the
requested liquidation or reliquidation.
On the facts here, although PROTESTANT, at all times
relevant, knew of the problem with the invoice prices, it
neglected to avail itself of these procedures, waiting until
October 1986 to make a request to withhold liquidations.
Moreover, PROTESTANT cannot complain of a failure by Customs to
liquidate or reliquidate in accordance with corrected prices when
it failed to submit particular requests to liquidate or
reliquidate that identified specific entries and contained
corrected prices. Again, there were no corrected prices until
January 1987.
PROTESTANT's first theory - that Customs at Detroit
committed a clerical error or inadvertence correctable under 19
U.S.C. 1520(c)(1) in failing to withhold liquidations as
requested - is sustainable only if it can be established that a
request to withhold liquidations was made at Detroit and some
error or mistake occurred to prevent the withholding. We have
given PROTESTANT every opportunity to demonstrate that an error
causing a failure to withhold liquidations occurred at Detroit,
but we are unable to draw that conclusion.
PROTESTANT asserts that a copy of the October 20, 1986,
letter to Champlain, which requested the withholding of
liquidations, was sent to Detroit subsequent to its mailing to
Champlain. The letter was returned as undeliverable and then
sent again. The dates of these actions are unspecified. There
is no evidence on this record to show that Detroit received the
letter. There is no evidence to show that Customs Detroit acted
on the letter one way or another - denying or approving the
request. Despite PROTESTANT's assertions, there is no evidence
on this record that Customs Detroit received a request to
withhold liquidations in any form.
PROTESTANT also asserts that the import specialist at
Champlain acted as "middleman" between PROTESTANT and the other
Customs offices involved, including Detroit. Mr. Wayne Nystrom,
the Champlain import specialist, currently retired, executed a
sworn affidavit, dated March 30, 1991. In it he testifies that,
subsequent to being contacted by PROTESTANT's counsel during
October of 1986, he agreed to be the official to whom PROTESTANT
could submit information pertaining to the value issue. Also,
after receiving PROTESTANT's request to withhold liquidations in
October 1986, he informed the import specialists at Buffalo and
Detroit of his conclusion that the invoice values were not
accurate reflections of the transaction value of the merchandise.
Further, he states that the other import specialists involved
agreed that he would receive value information from PROTESTANT,
make a determination on the correct value of the transactions,
and report his findings to them for their own review and
determination. Mr. Nystrom acknowledges in the affidavit that
liquidations were not withheld at Champlain "for some reason,"
and that invoice values were not finally corrected until January
of 1987, at which time he accepted the values as accurate and
after which time entries were liquidated according to corrected
prices.
Mr. Nystrom does not state in his affidavit that the import
specialists agreed to withhold liquidations at all ports
involved. He does not state that he told the import specialist
at Detroit that liquidations should be withheld or that
PROTESTANT requested withholding. He does not indicate that he
even discussed this particular matter with a Customs Detroit
official.
By memorandum of June 3, 1991, we asked the Detroit Customs
office to provide further information. Specifically, we asked
whether or not Customs Detroit was requested by PROTESTANT to
withhold liquidations and, if so, when and by what means was the
request made. By memorandum of response from the Assistant
District Director of Commercial Operations, dated July 31, 1991,
Customs Detroit stated that, to the best of its knowledge,
including what office records revealed, no request was made by
PROTESTANT to withhold liquidations in 1986 because of a
transaction value problem. Customs Detroit further explained
that absent notification of a value problem or any indications of
such on the entry summaries, the entries were liquidated "no
change."
That Customs Champlain granted PROTESTANT's protest, and
approved reliquidation and refund of duty for entries liquidated
at Champlain during the referenced period, is not evidence that
Customs Detroit knew of the request to withhold liquidation at
that time. It is not evidence that Customs Detroit committed
correctable error under the statute. While the record of this
case demonstrates a basis for the granting of PROTESTANT's
protest at Champlain, as such is viewed from a hindsight
perspective, it does not demonstrate a basis for granting the
instant protest at Detroit. The difference is that at Champlain,
the director, in his discretion, determined on the record that a
request for withholding had been made by PROTESTANT and received
by Customs. Receipt of the request is verified by the affidavit
of the Champlain import specialist. Apparently, the director
determined that the withholding of liquidations, in accordance
with PROTESTANT's request, was warranted in the circumstances,
and that failure to implement withholding was due to a mistake or
inadvertence by Customs. Contrarily, at Detroit, receipt of a
withholding request is refuted and the position taken is that no
correctable error occurred.
As stated, we recognize that, in some circumstances, a
failure by Customs to withhold liquidations can be a correctable
error under the statute. (See Esso Standard Oil Co. v. United
States, 30 Cust. Ct. 111, C.D. 1506 (1953), where the record
clearly demonstrates a failure by a Customs official to follow a
Customs instruction to withhold liquidation. On these facts,
there is clearly evident an intent by Customs to withhold
liquidations and a failure to do so.) However, since the statute
requires identification and establishment of a particular
mistake, error, or inadvertence, reliquidation cannot be
authorized on the basis of continued liquidations, after a
withholding request, in the absence of sufficient evidence
identifying and establishing the mistake, error, or inadvertence
that occurred. As this principle relates to the instant case, we
submit that before reliquidation can be authorized, a mistake or
error must be identified; such mistake or error cannot be
established unless it first is established that a request for
withholding was made by PROTESTANT and received by Customs at
Detroit. The record establishes the foregoing with respect to
the protest at Champlain, as evidenced by the affidavit executed
by the Champlain import specialist and the fact that the protest
was approved by the district/port director. The record fails to
establish the foregoing with respect to Detroit.
In Customs Service Decision (CSD) 79-386, we decided that a
failure to withhold liquidations was an inadvertence correctable
under 19 U.S.C. 1520(c)(1). 13 Cust. Bull. 1581 (1979). Two
points must be made about this case. First, the facts of the
instant case are distinguishable from the facts considered in CSD
79-386. There, the importer had been dealing directly with the
Customs office involved, the office later alleged to have failed
to withhold liquidations. There was an agreement between the
importer and Customs that, pending resolution of the value
problem, the importer would increase the transaction value of the
entries by 25%. This further establishes that the two parties
were engaged in arms length dealings with one another. Most
significantly, Customs withheld liquidations of most of the
entries made during the period when values were unresolved; there
were only a few of numerous entries that were liquidated. This
clearly indicates that it was Customs intention to withhold
liquidations. Given this intention, inadvertence or mistake as
the reason for the failure to withhold liquidation in the few
cases is indicated.
On the facts of the instant case, it is clear that
PROTESTANT and Customs Detroit did not communicate effectively.
PROTESTANT was dealing primarily with the Customs Champlain
office, mistakenly expecting that what was understood between it
and Champlain was also understood between it and the other
offices. In short, there was a communication problem involved in
the instant case that was not evident on the facts of CSD 79-
386. Also, unlike CSD 79-386, where Customs withheld the
liquidation of most entries as the importer there allegedly
requested - such action clearly indicating an intent to withhold
by Customs - there is no indication on the record in the instant
case that Customs Detroit had intended to withhold liquidations
but failed to do so through a mistake or inadvertence.
Consequently, while there was a basis for ruling in favor of the
importer in CSD 79-386, that basis is lacking on the facts of the
instant case.
The second point to be made about CSD 79-386 pertains to its
broad statement that a disagreement between an importer and
Customs as to the existence of an agreement to withhold
liquidations is, without more, a mistake of fact. As a general
proposition, this statement is incorrect and the CSD is hereby
clarified. Where a mistake of fact is evident from the facts,
and it produces a failure to withhold liquidations, one will be
recognized; however, the mere fact of a disagreement between
Customs and an importer as to whether or not a request to
withhold liquidations had been made is not conclusively
indicative, by itself, of a mistake of fact. In determining
whether or not there has been a mistake of fact, or some other
correctable error, we are limited by the facts of the case. In
the instant case, the evidence is insufficient to establish that
Customs Detroit was aware of a request to withhold liquidations.
In CSD 79-386, the broker was dealing with Customs officials in
the district where the entries in question were filed and
controlled. In the instant case, evidence demonstrating direct
and persistent communication with Customs Detroit (where the
entries in question were filed), during the relevant period, is
lacking. Evidence establishing that PROTESTANT and Customs
officials at Detroit discussed the withholding of liquidations is
lacking. Communication with an import specialist at another port
is not the equivalent of dealing directly with the port where
entries are made and controlled. In CSD 79-386, it at least
appeared that Customs and the broker agreed that some confusion
existed regarding a request to withhold liquidations. On the
facts here, Customs Detroit makes no such concession. Given that
Customs Detroit was unaware of a request to withhold
liquidations, its liquidation of entries was proper and bulletin
notices of liquidation, absent protests, were final and
conclusive.
In summary, the case for reliquidation under 19 U.S.C.
1520(c)(1) has not been made. Entries at Detroit were liquidated
and bulletin notices were properly posted. The protest procedure
under 19 U.S.C. 1514 provides the statutory remedy to correct
erroneous liquidations, but protests were never filed. In some
circumstances, a failure by Customs to withhold liquidations is
correctable error under 19 U.S.C. 1520(c)(1), but PROTESTANT has
not established, on the record of this case, that such an error
occurred at Detroit. On this record, the protest must be denied.
HOLDING:
Reliquidation under 19 U.S.C. 1520(c)(1), to correct a
clerical error, mistake of fact, or other inadvertence not
amounting to an error in the construction of a law, may be made
only when such clerical error, mistake of fact, or inadvertence
is manifest from the record or established by documentary
evidence. The burden of establishing correctable error is on the
petitioner. When the alleged correctable error is a failure by
Customs to withhold liquidation, the petitioner, in demonstrating
that a correctable error occurred, must at least demonstrate that
a request to withhold had been made and was received by an
appropriate Customs officer. Where Customs refutes that a
request was received, and the record lacks sufficient evidence to
establish otherwise, the protest must be denied.
You are hereby instructed to deny the protest and to inform
the PROTESTANT of this decision in accordance with 19 CFR
174.30(a).
Sincerely,
John Durant, Director
Commercial Rulings Division