PRO-2-01/02 RR:CR:DR 227993
Port Director
U.S. Customs Service
Accounting Services Division
6026 Lakeside Boulevard
Indianapolis, IN 46278
RE: Protest and Application for Further Review No. 9920-98-106354; Refusal to Refund Harbor Maintenance Fee; 19 CFR §24.24(e)(5); 19 U.S.C. §1514(a)(3) and (c)(3)(B); 19 U.S.C. §1520(c)(1); HQ 227932; 26 U.S.C. §4462; protestable issues
Dear Sir/Madam:
The above-referenced protest was forwarded to this office for a determination. Please note that, in addition to the memorandum of law originally submitted with the CF 19, protestant has also made two additional written submissions. These additional submissions are dated December 15, 1998, and January 18, 1999. Additionally, a conference was held with protestant’s counsel on December 16, 1998. We have considered the points raised and a decision follows.
FACTS:
Protestant is in the business of shipping crude oil from the Port of Valdez, Alaska to various ports within the United States. For the period of June 1991 through December 31, 1994, protestant filed quarterly HMF reports on Customs Form 349 with respect to its shipments, and paid HMF based on the value of the cargo reported thereon. Several years later, protestant determined that the said HMF reports included shipments that had been off-loaded at exempt ports. As a result, protestant prepared Amended Quarterly Summary Reports on Customs Form (CF) 350 for each quarter to reflect the value of the exempt and non-exempt cargo. The Amended Reports were forwarded to Customs on October 31, 1996 together with a request for a refund of the erroneously collected HMF. By letter dated September 16, 1997, the protestant’s claims for a refund of the HMF were rejected. Denial of the refunds was on the basis that the refund requests were untimely based on 19 U.S.C. §1514 and/or §1520. The subject protest was filed on December 12, 1997.
Protestant contends that the statutory provisions and time limits contained in 19 U.S.C. §§1514 and 1520 do not apply to requests for refunds of HMF paid on domestic vessel movements. This contention is based on the fact that HMF on domestic shipments is not assessed in connection with the liquidation of an entry. Thus, there is no liquidation or reliquidation which would trigger the statutory time limits for filing a request for a refund. Additionally, protestant points that in early 1995, Customs approved similar refund claims made by protestant without regard to the time limits of 19 U.S.C. §§1514 or 1520(c)(1).
ISSUE:
Whether the denial of a refund claim, on a domestic shipment, made pursuant to 19 C.F.R. §24.24(e)(5) is a protestable event?
LAW AND ANALYSIS:
The statutory authority for the harbor maintenance fee is found in the Water Resources Development Act of 1986 (Pub. L. 99-662; 100 Stat. 4082, 4266; 26 U.S.C. §4461 et seq.) Under this statute, a fee is imposed for the use of a port, defined as any channel or harbor or component thereof in the United States which is not an inland waterway, is open to public navigation, and at which Federal funds have been used since 1977 for construction, maintenance, or operation. Pursuant to 26 U.S.C. §4462(f), all administrative and enforcement provisions of customs laws and regulations apply to the HMF as if such tax were a customs duty, unless inconsistent with another regulatory provision.
The Customs Regulations implementing this statutory provision are found at 19 CFR Part 24. Specifically, 19 C.F.R. §24.24(e)(1)(ii), provides that the fees shall be paid on a quarterly basis. Quarterly periods end on the last day of March, June, September and December. 19 C.F.R. §24.24(f). Subparagraph (e)(5), sets forth the procedure to be followed with regard to refunds and supplemental payments of the HMF. It provides that:
Where a refund is requested or a supplemental payment is made, a Harbor Maintenance Fee Amended Quarterly Summary Report, Customs Form 350, should be mailed to the U.S. Customs Service, . . . along with a copy of the Harbor Maintenance Fee Quarterly Summary Report, Customs Form 349, for the quarter(s) in which the refund is requested or a supplemental payment is made.
Unlike the requirement that payments be made on a quarterly basis, the regulation does not set forth a time frame within which a request for a refund must be submitted or supplemental payments made.
The Customs Service as an Executive Agency is limited by the statutory authority provided by Congress. In general, the statutory authority for the Customs Service to make refunds is found in 19 U.S.C. §1520. As stated by the Court of International Trade in Swisher International, Inc. v. United States, 27 F. Supp.2d 234 (CIT 1998), 19 U.S.C. §1520(a) is not applicable to HMT refund claims because there is no liquidation (19 U.S.C. §1520(a)(1)) and
taxes are specifically excluded from §1520(a)(2). Nor, as noted by the court, can the statute form a basis for the court’s jurisdiction in such actions. See, Swisher, supra at note 9.
The regulatory provision in issue was promulgated by T.D. 91-44. The promulgation authority was claimed under 5 U.S.C. §301, 19 U.S.C. §§58a-58c, 66 1202 (General Note 8, Harmonized Tariff Schedule of the United States (HTSUS)), 1624 and 31 U.S.C. §9701. Also, general regulatory authority for 19 CFR §24.24 is claimed under 26 U.S.C. §§4461 and 4462.
The provisions of 19 U.S.C. §§58a-58c allow for collection of fees to cover the costs of services for Customs officers, user fees for Customs services at listed small airports and other facilities and fees for various services performed in connection with arrivals of commercial vessels and other vehicles and those involved in processing imported merchandise. Those statutory provisions, by their plain language do not cover the situation here. The authority under 19 U.S.C. §1202 (General Note 8, HTSUS (1991 ed.) (now General Note 20) is limited to issuance of rules and regulations governing the admission of merchandise under the tariff schedule. This authority clearly does not cover this situation under the plain words of the grant.
The provision of 5 U.S.C. §301 authorizes the promulgation of regulations for the government of an executive department and the performance of the department’s business. The provision of 31 U.S.C. §9701 authorizes the promulgation of regulations establishing a charge for a service or thing of value provided by the Agency. The provision of 19 U.S.C. §66, in pertinent part, gives regulatory authority to carry out the laws relating to raising revenue from imports or duties on imports or to warehousing, to direct Customs officers and to prescribe the rules and forms to be observed by those officers in the execution of the law. The provision of 19 U.S.C. §1624 authorizes such rules and regulations as are necessary to carry out the provisions of Chapter 4, Title 19, U.S. Code. Because 26 U.S.C. §§4461 and 4462 are not within Chapter 4, Title 19, U.S. Code, this section does not appear to provide the requisite authority for the regulation involved here. Finally, 26 U.S.C. §4462(c) authorized the promulgation of regulations to carry out the collection of the tax imposed and to provide for settlement and compromise of claims. There is no indication, in the statutory language itself or the legislative history, that the inclusion of the ability to settle and compromise claims was intended to cover the situation presented by this protest, i.e.,Customs refusal to refund monies paid by protestant.
Here, where Customs accepted the deposit of money, it is not clear that such acceptance constitutes a demand or assertion for said money. To the contrary, the court in United States Shoe Corp., supra, at 19 CIT 1296-1298, held such conduct to be merely ministerial. In fact, the court noted that 19 CFR §24.73 also provides a means to request a refund. The authority for Part 24, Customs Regulations (1988 ed.) lists the same statutory authority discussed above and does not list any specific separate authority for section 24.73. Authority for Part 24 is not claimed under 19 U.S.C. §§1514 or 1515, or 1520 (compare with Parts 173, or 174, Customs Regulations). Thus, the basis for the tax refund regulation appears to be the general rulemaking authority of the Secretary, particularly 5 U.S.C. §301.
It also seems clear that a person whose refund request is not honored can seek judicial review of that refusal under 28 U.S.C. §1581 (i), based on the United States Shoe Corp. decisions, supra. The issue then is whether the Secretary has the ability to expand the scope of the court’s jurisdiction under 19 U.S.C. §1581 by regulation. Such a power would appear to be at odds with the concept of federal jurisdiction. Wright, Miller and Cooper, Federal Practice and Procedure, Section 3522 (Federal courts are courts of limited jurisdiction and the limits are set by the Constitution and by Congress). See also Cherry Lane Fashion Group v. U.S., 712 F. Supp 190, 13 CIT 291 (1989) (Customs failure to follow the requirements of 19 CFR §174.21(b) did not result in deemed protest denial giving the court jurisdiction); Owen Equip & Erection Co. v. Kroger, 437 U.S. 376, 98 S. Ct. 2396, 2403 (1978) (limits of jurisdiction set by the Constitution and Congress); and American Society of Ass’n Executives v. Bentson, 848 F. Supp 245 (D.C. 1994) (Subject matter jurisdiction is conferred only by the Constitution and by an Act of Congress).
A corollary issue is whether Customs application of the regulation is a protestable event.
Protestable events are those seven items listed in paragraph (a) of 19 U.S.C. §1514. Playhouse Import & Export Inc. v. U.S., 843 F. Supp 716, 18 CIT 41 (1994), reh’g. denied 18 CIT 438 (1994). Protestant asserts that a refusal to refund a duty or charge can be protestable and cites three court decisions in support of that proposition. It is unclear, from protestant’s submissions, on which provision (refusal to refund a duty or refusal to refund a charge) the protestant relies. However, it must be noted that the three cases cited deal only with duties on imported merchandise.
The protestant cites first the appellate decision in the case of Eurasia Import Co. Inc. v. U.S., 10 Cust. Ct. 186, (1943), rev’d. 31 CCPA 202 (1944). There imported merchandise was entered for warehousing by Aargol Import Corp. in June, 1936. On December 24, 1936, Aargol sold the goods to Eurasia. Eurasia withdrew the goods and paid estimated duties in March and September, 1937. A court decision in November, 1937 made those goods subject to a lower duty. The Customs Simplification Act of 1938 was enacted on June 25, 1938. That Act changed the legal relationship of a warehouse entry transferee by amending paragraph (b) of 19 U.S.C. §1557 to provide that the transferee would have the importer’s protest rights and be entitled to any refund. The effective date clause made the change effective to merchandise entered for warehouse prior to the date of enactment. Customs liquidated the entry on September 27, 1940 and determined that the importer, and not Eurasia, was entitled to the refund because the Act did not apply to the entry. Customs so notified Eurasia on October 28, 1940. Eurasia protested on November 6, 1940. At that time, protests had to be filed within 60 days after liquidation. The lower court appears, at page 188 of the decision, to have concluded that Eurasia protested the refusal of the collector to recognize it as the proper recipient of the refund rather than against the liquidation. Both courts found that the effective date clause of the Act showed a Congressional intent to apply the Act retroactively. The appellate court noted that the Government conceded, in its brief, that if the court determined the Act to be retroactive Eurasia was entitled to the refund. The appellate court then quoted the statutory changes to 19 U.S.C. §1557 which expressly conferred on the transferee the right to protest and receive any refund. Eurasia, supra, involved duties on imported merchandise that were the subject of a liquidation and a statute which expressly conferred standing on warehouse transferences to protest and receive refund. The court interpreted the protest statute (19 U.S.C. §1514) in conjunction with the rights conferred by 19 U.S.C. §1557(b). Here, the sum in dispute is not connected with any importation, was not the subject of any Customs entry, did not involve any Customs liquidation and involves the application of a regulation promulgated under the Agency’s general rulemaking authority. Protestant here has a right to judicial review, but that right is based on 28 U.S.C. §1581(i) rather than by a denial of protest.
The second cited case is the appellate decision in Rudolph Miles v. U.S., 61 Cust. Ct. 245 (1968), rem’d 416 F.2d 973, 57 CCPA 1 (1969). That case involved imported copper scrap that was entered for consumption after February 8, 1966. The entries were liquidated on March 7, 1966, March 31, 1966, and April 25, 1966. New tariff legislation was enacted June 23, 1966, and provided that the change was to apply to copper scrap that was entered for consumption after February 8, 1966. Plaintiff requested reliquidation of the entry on July 11, 1966. Customs refused to reliquidate on July 15, 1966, stating that the new law could not affect the final liquidations on those entries. The lower court upheld the protest relying on 19 U.S.C. §1520(c)(1). The appellate court sustained the protest but rejected the reasoning based on 19 U.S.C. §1520(c)(1). The appellate court found that the unqualified language of the tariff amendment made the Act applicable to entries made after February 8, 1966, even if those entries were liquidated. The court held that the Act of June 23, 1966, gave the importer a new right of action and that a protest was appropriate to challenge Customs interpretation of that Act.
Again, in Rudolph Miles, supra, the dispute concerned the proper classification and applicable duties due on imported merchandise that was entered and the liquidation of those entries. In the instant protest, the sum in dispute was paid on port use and does not involve any importation, entry of merchandise, or liquidation. In Rudolph Miles and Eurasia, supra, the key issue was whether a Customs law was to be given retroactive effect. The issue here is whether the application of a regulation, which in turn, affects the jurisdiction of the Court of International Trade, was proper.
The third case cited by the protestant is the appellate decision of C.J. Tower & Sons of Buffalo, Inc. v U.S., 68 Cust. Ct. 17 (1972), aff’d. 490 F.2d. 1277, 61 CCPA 90 (1974). The jurisdictional issue there involved the interpretation of 19 U.S.C. 1514 and 19 U.S.C. §1520(c)(1). The relevant text of 19 U.S.C. §1520(c)(1) is stated at 68 Cust. Ct. 20-21. It provided for reliquidation of an entry to correct a clerical error, mistake of fact or other inadvertence. The relevant text of 19 U.S.C. §1514 provided for protests against the refusal to reliquidate an entry for clerical error. The Government argued that refusals to reliquidate for clerical errors alone were protestable. The appellate court noted that under the Government’s interpretation of 19 U.S.C. §§1514 and 1520(c)(1), an importer was entitled to administrative review of errors based on mistakes of fact or other inadvertence, but not judicial review. The courts held that 19 U.S.C. §1520(c)(1) created a substantive right in the importer to seek correction of errors in the liquidation of an entry. The second statute, 19 U.S.C. §1514, provided for judicial review if the importer disagreed with the results of the administrative review. The jurisdictional issue in C.J. Tower, supra, involved the proper interpretation of two statutes. The issue was whether the absence of the words “mistake of fact” or “other inadvertence” in 19 U.S.C. §1514 was indicative of a Congressional intent to limit the scope of review of challenges under 19 U.S.C. §1520(c)(1) to clerical errors.
As in the other two cases cited by the protestant, the C.J. Tower case involved imported merchandise that was entered and liquidated. They also involved the effect of specific statutory language. Here, as previously stated, there is no importation, entry, or liquidation. There was a deposit of money and the protestant has the right to seek a refund. However, given the limitations of rulemaking authority, that right can be no more extensive than the appropriate basis for judicial review, i.e., 28 U.S.C. §1581(i). Thus, any request for a refund must be made within 2 years from the date of payment of the tax. As noted by the courts, a permissive administrative procedure (i.e., 19 C.F.R. §24.24(e)) does not toll the running of the statute of limitations.
In contrast to the payment of the tax in the instant case, a payment made as part of an import entry is subject to liquidation and must be protested because that payment is subsumed in the liquidation by virtue of 26 U.S.C. §4462(f) and 19 CFR §24.24(e)(3)(i) and (ii). See U.S. v Utex International Inc., 857 F.2d. 1408, 6 Fed. Cir. 166 (1988) (all findings involved in an entry of imported merchandise merge in the liquidation). Domestic vessel movements, as here, do not involve imported merchandise, do not require a Customs entry of that merchandise and any payment made is not subject to a liquidation by Customs. The issue is whether a protest right can be created by the regulatory text set forth in 19 CFR §24.24(e)(5). If the regulation did not exist, the protestant’s remedy would be to seek relief under 28 U.S.C. §1581(i). The protestant may not expand that right by treating the application of a regulation as a protestable event.
HOLDING:
The subject protest should be DENIED. Customs denial of a request for a refund on overpayment of the harbor maintenance fee, on domestic movements of merchandise, is not a protestable issue.
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 the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
John A. Durant, Director
Commercial Rulings Division