RR:IT:VA 546226 KCC
Port Director
U.S. Customs Service
610 S. Canal Street
Chicago, Illinois 60607
RE: Internal Advice 50/95; suspension of liquidation; 19 U.S.C.
1504(b); galvanized steel coils; 7225.90.00; Note 1(f),
Chapter 72; titanium content; laboratory report; Customs
Directive 099 3820-002; antidumping duty applicable at time
of entry; A-427-808-000; transaction value; price actually
paid or payable; terms of sale; freight costs; HRLs 544538,
543827, 542467
Dear Port Director:
This is in regard to your memorandum of October 11, 1995,
under cover of which you forwarded a request for internal advice
(IA 50/95), dated May 18, 1995, submitted by Ross and Hardies on
behalf of Francosteel Corporation, concerning whether suspension
of liquidation was proper, the tariff classification of
galvanized steel coils, the proper application of antidumping
duties to galvanized steel coils and the appraisement of the
merchandise imported into the U.S. A memorandum from Chief,
Machinery Branch, National Commodity Specialist Division, New
York Seaport, dated December 18, 1995, was taken into
consideration in rendering this decision.
FACTS:
On May 10, 1993, Francosteel Corporation, the importer,
entered various steel products, including galvanized steel coils
into the U.S. At entry, Francosteel classified the galvanized
steel coils under subheading 7225.90.00, Harmonized Tariff
Schedule of the United States (HTSUS), as other alloy galvanized
steel coils based on the submitted mill analysis of the
galvanized steel coils. On October 8, 1993, you issued a Notice
of Action (Customs Form (CF) 29), stating that pursuant to the
submitted mill analysis, the galvanized steel coils entered under
subheading 7225.90.00, HTSUS, were properly classified under
subheading 7210.39.00, HTSUS, as electrolytically galvanized
carbon steel coils. Therefore, pursuant to the Notice of
Preliminary Determination in Case No. A-427-808-000, the
galvanized steel coils were subject to antidumping duties of
10.58%. Pursuant to the instructions in A-427-808-000 and 504,
Tariff Act of 1930, as amended (19 U.S.C. 1504), you then
suspended liquidation of this entry on October 12, 1993, and
notified Francosteel of the suspension on October 16, 1993.
In a letter to you dated October 20, 1993, Francosteel
stated that Customs mistakenly interpreted the mill analysis.
The mill tests submitted to Customs placed the titanium content
at levels greater than 0.05% and, therefore, the galvanized steel
coils were classified, as entered, under subheading 7225.90.00,
HTSUS. Thus, Francosteel stated the galvanized steel coils were
not subject to antidumping duties pursuant to A-427-808-000.
Francosteel requested that Customs withdraw the October 8, 1993
Notice of Action. On October 26, 1993, you issued a Request for
Information (CF 28) which acknowledged Francosteel's letter of
October 20, 1993, and stated that you overlooked the titanium
content in the mill analysis. However, you requested a sample of
the galvanized steel coils for Customs analysis. Francosteel
submitted a sample, packing list and mill tests for the sample to
Customs on November 11, 1993. Customs laboratory report 3-94-30311-001 dated December 28, 1993, found that the submitted
sample, described as one piece 6" x 6" steel sheet, was "...an
unalloyed galvanized steel sheet containing 0.045 percent
titanium by weight." Thereafter, on April 27, 1995, you issued a
Notice of Action (CF 29), stating that:
1. Based on Customs laboratory report 3-94-30311-001, the
galvanized steel coils were classified under subheading
7210.39.00, HTSUS;
2. The galvanized steel coils were subject to antidumping
duties of 39.40% pursuant to A-427-808-000; and
3. The merchandise was appraised at the invoiced total
"FOB Amount"...for the lot, net, packed because no
documentary evidence was available to deduct any
charges from the FOB amount.
The galvanized steels coils were produced by Sollac S.A.,
France and sold to Francosteel by Daval S.A., France. The
invoice from Daval to Francosteel dated April 15, 1993, states
that the terms of sale and payment/invoicing condition are "C.F.
LINER TERMS LANDED DUTY UNPAID"with the port of destination
listed as "CHICAGO (USA GRANDS LACS)." Page 3 of the invoice
lists a total FOB Amount with the addition of a Freight Amount
for a total invoice amount. Francosteel asserts that the
appraised value of the entry is the total invoice value with
deductions for "Ocean Freight" and "Border-Antwerp." This
additional break down of the total invoice price is also found on
page 3 of the invoice. You appraised the entry at the "FOB
Amount" for the lot, net, packed because no documentary evidence
was available to deduct any charges from the FOB amount.
Francosteel contends that it is not required to deposit
either increased duties or estimated antidumping duties for the
galvanized steel coils because the subject entry was deemed
liquidated as entered on its first anniversary pursuant to 504
of the Tariff Act of 1930, as amended (19 U.S.C. 1504).
Francosteel states that there was no lawful extension or
suspension of liquidation and, therefore, the entry was deemed
liquidated at the rate of duty, value, quantity, and amount of
duties asserted at the time of entry by Francosteel.
Francosteel does not deny that it received notification of
the liquidation suspension on October 16, 1993. However,
Francosteel asserts that there was no legal basis for suspension
of the liquidation. Francosteel states that suspension of
liquidation was based upon Customs belief that the galvanized
steel coils were covered by the Notice of Preliminary
Determination in Case No. A-427-808-000. See, CF 29, dated
October 8, 1993. Francosteel states that the CF 29 change in
classification was based on Customs error in interpreting the
mill analysis submitted at entry. Francosteel states that
Customs did not change classification of the galvanized steel
coils until it issued another CF 29 dated April 27, 1995, after
it requested the sample in the CF 28 and after the December 28,
1993, laboratory analysis of the submitted sample. Francosteel
states that the CF 28 dated October 26, 1993, rescinded the CF 29
dated October 8, 1993. Therefore, Francosteel contends that
Customs did not change the classification of the galvanized steel
coils until April 27, 1995. Therefore, the change in
classification did not occur until after the subject entry had
been deemed liquidated, as entered, by operation of law.
ISSUE:
1. Whether liquidation of the entry was properly suspended or
was the entry deemed liquidated by operation of law pursuant
to 19 U.S.C. 1504?
2. Are the galvanized steel coils classified under subheading
7210.39.00, HTSUS, as electrolytically galvanized carbon
steel coils, or under subheading 7225.90.00, HTSUS, as other
alloy galvanized steel coils?
3. Should the antidumping duty deposit be the 10.58% rate in
effect when the merchandise was entered into the U.S.?
4. Whether the imported merchandise is appropriately appraised
at the FOB Amount?
LAW AND ANALYSIS:
1. Suspension of Liquidation
Liquidation of an entry of merchandise constitutes the final
computation by Customs of all duties accruing on that entry. As
provided in 504, Tariff Act of 1930, as amended (19 U.S.C.
1504), if Customs fails to liquidate and entry within one year
from the date of entry or final withdrawal from warehouse, that
entry "shall be deemed liquidated at the rate of duty, value,
quantity, and amount of duties asserted at the time of entry by
the importer of record." Pursuant to 19 U.S. C. 1504(b),
Customs may extend this one year period if:
(1) information needed for the proper appraisement or
classification of the merchandise is not available to
the appropriate customs officer;
(2) liquidation is suspended as required by statute or
court order; or
(3) the importer of record requests such extension and
shows good cause therefore.
Customs must provide the importer with notice of extension. Any
entry not liquidated at the expiration of four years from the
date of entry or withdrawal from warehouse is deemed liquidated
at the rate of duty, value, quantity, and amount of duty asserted
at the time of entry by the importer, unless liquidation
continues to be suspended.
Francosteel does not deny that it received notice of
suspension of liquidation on October 16, 1993. Moreover, a
search of Customs computer records indicates that liquidation of
the subject entry was suspended on October 12, 1993, and notice
of the suspension was issued on October 16, 1993. However,
Francosteel asserts that there was no legal basis for suspension
of the liquidation. Francosteel states that suspension of
liquidation was based upon Customs belief that the galvanized
steel coils were covered by the Notice of Preliminary
Determination in Case No. A-427-808-000. See, CF 29, dated
October 8, 1993. Francosteel states that the CF 29 notice of
change in classification was based on Customs error in
interpreting the mill analysis submitted at entry. Francosteel
states that Customs did not change classification of the
galvanized steel coils until it issued another CF 29 dated April
27, 1995, after it requested the sample in the CF 28 and after
the December 28, 1993, laboratory analysis of the submitted
sample. Francosteel states that the CF 28 dated October 26,
1993, rescinded the CF 29 dated October 8, 1993. Therefore,
Francosteel contends that Customs did not change the
classification of the galvanized steel coils until April 27,
1995. Therefore, the change in classification did not occur
until after the subject entry had been deemed liquidated, as
entered, by operation of law.
In this situation, Customs issued a CF 29 on October 8,
1993, notifying Francosteel that, based on the mill analysis, the
galvanized steel coils were classified under subheading
7210.39.00, HTSUS, and, therefore, subject to antidumping duties
pursuant to A-427-808-000. Thereafter, on October 16, 1993,
Francosteel was notified that liquidation of the subject entry
was suspended. It is our position that suspension of liquidation
in this instance is proper.
Liquidation of the entry was suspended based on Customs
position that the galvanized steel coils were subject to A-427-808-000. Even though Customs original interpretation of the mill
analysis submitted at entry was incorrect, Customs laboratory
report later determined that its classification of the galvanized
steel coils as set forth in the October 8, 1993, CF 29 was
correct. We know of no law or regulation which states that when
a CF 28 Request for Information is issued any proceeding CF 29
Notice of Action is rescinded. Customs often issues various
documents to ascertain the correct classification, value, duty,
etc. Moreover, we note that Francosteel's October 20, 1993,
letter to Customs, regarding the mill analysis, specifically
requested Customs to withdrawal the CF 29 Notice of Action.
Customs did not actively withdrawal the CF 29, but requested
further information to ascertain the tariff classification of the
galvanized steel coils. Although Customs initial basis for a
change in classification was based on a misinterpretation of the
submitted mill analysis, its basis for a change in classification
was correct pursuant to the ensuing laboratory report. Thus,
Customs basis for suspending liquidation of the entry was correct
and lawful. It is our position that there is no grounds for
declaring the suspension unlawful.
2. Classification
The classification of merchandise under the HTSUS is
governed by the General Rules of Interpretation (GRIs). GRI 1,
HTSUS, states in part that "for legal purposes, classification
shall be determined according to the terms of the headings and
any relative section or chapter notes...." The competing
subheadings are:
7210.39.00 Flat-rolled products of iron or nonalloy
steel, of a width of 600 mm or more, clad,
plated or coated...Electrolytically plated or
coated with zinc...Other.
7225.90.00 Flat-rolled products of other alloy steel, of
a width of 600 mm or more...Other.
Note 1(f), Chapter 72, HTSUS, defines "other alloy steel"
as:
Steels not complying with the definition of stainless steel
and containing by weight one or more of the following
elements in the proportion shown:...
- 0.05 percent or more of titanium....
In this case there is no question, that if the galvanized steel
coils containby weight 0.05% or more of titanium, they are
classified under subheading 7225.90.00, HTSUS. However, if they
contain by weight less than 0.05% titanium, the galvanized steel
coils are classified under subheading 7210.39.00, HTSUS.
Francosteel has submitted the mill analysis showing that the
galvanized steel coils contain over 0.05% titanium and a
laboratory analysis no. 95-1306 from Stillwell & Gladding dated
May 10, 1995, stating that a "STEEL SHEET", "FILE NO: S/S FEDERAL
OTTAWA", "SAMPLE MARKED 'G 61988'", "RECEIVED ON MAY 2, 1995"
contained "TITANIUM, Ti, by Wt. 0.052%." Francosteel states that
the sample tested by Stillwell and Gladding is a parallel sample
of that submitted to Customs on November 11, 1993. However,
Customs laboratory report 3-94-30311-001 dated December 28, 1993,
found that the submitted sample was "...an unalloyed galvanized
steel sheet containing 0.045 percent titanium by weight."
In cases such as this, where the internal advice applicant
submits independent reports that differ from the Customs
laboratory report, the Customs laboratory report cannot be
disregarded and, therefore, takes precedence over the independent
reports. Customs Directive 099 3820-002 dated May 4, 1992. In
administering the HTSUS, Customs must be consistent while
classifying the same type of merchandise entering the U.S. In
order to consistently classify steel products according to their
chemical content, the same laboratory analysis must be used
throughout Customs. Customs cannot rely on outside reports which
may or may not utilize different testing methods and still remain
consistent in its tariff classification. Thus, the galvanized
steel coils are classified under subheading 7210.39.00, HTSUS, as
electrolytically galvanized carbon steel coils.
Francosteel contends that the sample tested by Customs
laboratory is not from the imported galvanized steel coils
because the sample Francosteel provided was a one foot by one
foot dimension piece. The sample tested by Customs is described
on the laboratory report as "one piece 6" x 6" steel sheet."
Francosteel admits that Customs could have cut the submitted
sample into a smaller piece, but finds it hard to imagine how
your office converted a one foot square sample into a six inch
square piece. You state that the one foot square sample was cut
into four quarters producing for 6" x 6" piece samples. You also
state that you are still in possession of the remaining three 6"
x 6" piece sample. Therefore, it appears that the sample tested
is from the sample submitted by Francosteel.
3. Antidumping Duties
Francosteel states that should Customs find that the
galvanized steel coils are classified under subheading
7210.39.00, HTSUS, and therefore, subject to antidumping duties
pursuant to A-427-808-000, the antidumping duties should be
10.58% and not 39.40% as requested in the April 27, 1995, Notice
of Action. Francosteel states that they should be allowed to
deposit antidumping duties at the rate in effect at the time of
entry. The entry at issue was made between the initiation of
investigation and the issuance of a final order. Therefore,
under the rules governing the deposit of estimated antidumping
duties, entries made during this period are subject to a deposit
rate of 10.58%.
You agreed that the rate of duty for the antidumping duties
is the 10.58% pursuant to e-mail message 3043113 dated February
11, 1993. Therefore, Francosteel should deposit antidumping
duties at 10.58% and not 39.40% as requested in the April 27,
1995 Notice of Action.
4. Appraisement
The preferred method of appraisement is transaction value
which is defined by 402(b)(1) of the TAA (19 U.S.C. 1401a(b))
as "the price actually paid or payable for the merchandise when
sold for exportation to the United States..." plus certain
additions specified in 402(b)(1) (A) through (E). The term
"price actually paid or payable" is defined in 402(b)(4)(A) of
the TAA as:
...the total payment (whether direct or indirect, and
exclusive of any costs, charges, or expenses incurred for
transportation, insurance, and related services incident to
the international shipment of the merchandise from the
country of exportation to the place of importation in the
United States) made, or to be made, for imported merchandise
by the buyer to, or for the benefit of, the seller.
In this situation, the terms of sale as listed on the
invoice are "C.F. LINER TERMS LANDED DUTY UNPAID"with the port of
destination listed as "CHICAGO (USA GRANDS LACS)." C.F. or "Cost
and Freight (...named port of destination)" term means that the
seller must pay the costs and freight necessary to bring the
goods to the named port of destination. See, International
Chamber of Commerce, Incoterms, at 44 (1990). Thus, the total
invoice price includes the costs for freight. The invoice does
distinguish the freight costs from the total invoice price.
Freight costs pertaining to the international movement of
merchandise from the country of exportation are, to the extent
included in the price actually paid or payable, to be excluded
from the total payment made for imported merchandise appraised
under transaction value. The costs associated with freight are
not the estimated costs, but the actual cost paid to the freight
forwarder, transport company, etc.
In Headquarters Ruling Letter (HRL) 544538, issued December
17, 1992, Customs acknowledged that pursuant to 402(b)(4)(A) the
cost of international transportation is to be excluded from the
price actually paid or payable for imported merchandise.
However, Customs explained that in determining the cost of the
international transportation or freight, it always looked to
documentation from the freight company, as opposed to the
documentation between the buyer and the seller which often
contains estimated freight costs or charges. In essence, Customs
requires documentation from the freight company because the
actual cost, and not the estimated charges, for the freight is
the amount that Customs excludes from the price actually paid or
payable. See also HRL 543827, issued March 9, 1987, in which
Customs determined that the proper deduction from the price
actually paid or payable for marine insurance was the amount
actually paid to the insurance company by the seller, as opposed
to the amount paid by the related importer/buyer; and HRL 542467
dated August 13, 1981.
In this case, the freight costs are included in the price
actually paid or payable for the imported merchandise. The
actual freight costs, not the estimated freight costs, are to be
excluded from the price actually paid or payable in determining
transaction value. The file does not contain any documentation,
such as contract between the seller and shipping company, an
invoice from the shipping company and confirmation of payment of
the actual freight cost. Provided that documentation is
available which establishes the actual freight costs, these costs
should be deducted from the total invoice price in determining
transaction value.
It appears that Francosteel is also asserting that a
deduction for a "Border-Antwerp" cost should be deducted from the
total invoice price. However, Francosteel has not provided any
evidence of, or stated what is the "Border-Antwerp" cost.
Therefore, we find that insufficient evidence has been presented
to deduct the "Border-Antwerp" cost from the price actually paid
or payable in determining transaction value.
HOLDING:
There was a proper suspension of liquidation of the subject
entries pursuant to 19 U.S.C. 1504(b).
The galvanized steel coils are classified under subheading
7210.39.00, HTSUS, as electrolytically galvanized carbon steel
coils. Based on this classification, the galvanized steel coils
are subject to 10.58% antidumping duties pursuant to A-427-808-000.
The actual cost for freight is to be excluded from the price
actually paid or payable for the imported merchandise.
Francosteel has proffered insufficient evidence to establish a
deduction for the "Border-Antwerp" cost from the price actually
paid or payable in determining transaction value.
This decision should be mailed by your office to the
internal advice requester no later than 60 days from the date of
this letter. On that date the Office of Regulations and Rulings
will take steps to make the decision available to Customs
personnel via the Customs Rulings Module in ACS and the public
via the Diskette Subscription Service, Freedom of Informational
Act and other public access channels.
Sincerely,
Acting Director
International Trade Compliance
Division