VAL-2 OT:RR:CTF:VS H081300 CMR
U.S. Customs and Border Protection
Port Director
9 North Grand Avenue Nogales, AZ 85621
RE: Application for Further Review of Protest No. 2604-09-100008; Reconciliation Entry; Multiple Submissions
Dear Port Director:
This is in response to Application and Further Review of Protest No. 2604-09-100008, filed by YRC Logistics, on behalf of Oxford Industries Inc., against your decision to liquidate a Reconciliation Entry, submitted on January 25, 2008, without change. The protest was timely filed and further review was requested. The Application for Further Review was properly approved pursuant to 19 C.F.R.
§ 174.24(b).
FACTS:
YRC Logistics (hereinafter, YRC) filed a Reconciliation Entry, on behalf of Oxford Industries Inc., to reconcile the estimated value of imported merchandise and associated duties and fees. The entries were flagged at importation and were entered from August 23, 2006 through June 11, 2007. The reconciliation was necessary to account for certain assists for which the costs were not known at the time of importation into the United States.
The Reconciliation Entry at issue was filed four times. The first transmission of the Reconciliation Entry occurred on January 16, 2008. It was transmitted to Customs and Border Protection (CBP) at the Port of Nogales in error prior to its review by the responsible parties at the broker’s offices. YRC notified CBP and requested that the entry be rejected, which it was. A revised Reconciliation Entry was filed on January 23, 2008 and two disks were submitted to the CBP Entry Branch Reconciliation Desk at the Port.
YRC determined that the revised entry filed on January 23, 2008 contained errors from the software system they used and requested the Port to again reject the entry. The errors YRC found were that the interest owed on the underpayment had not been calculated or paid. The system also incorrectly recalculated the total line item duty by the percentage increase in value instead of recalculating the individual line item value increases by a pro rata allocation of the assists and then computing the ad valorem duty. The error caused a pro rata increase in not just the ad valorem duty, but also in the specific duty owed for certain merchandise. While the ad valorem duty owed should increase due to the addition of the assist amount, the specific duty should not have increased. We note that YRC submitted a further explanation of this software error with an example on March 11, 2010 to this office.
YRC notified CBP and requested the entry be rejected, again. A new header and worksheet was submitted to CBP on February 5, 2008. The entry was rejected on February 12, 2008 and the corrected entry was accepted on February 13, 2008. However, the corrected entry was rejected on September 16, 2008. CBP indicated the rejection was due to two errors – incorrect calculations of the merchandise processing and harbor maintenance fees and a difference in the interest amount owed calculated by CBP’s system and indicated on the Reconciliation Entry accepted on February 13, 2008. CBP’s system indicated that the interest amount owed was higher than that indicated on the Reconciliation Entry.
In addition, CBP noted on the rejection sheet sent to YRC:
. . . aware that a refund is owed to you on this reconciliation, but the amount cannot be netted out and a refund cannot be sent to you until the mismatch in fees is corrected. Please send a check for the difference of [ ] so that your reconciliation can be processed. Also on a note, your interest amounts [are] incorrect [and] you indicate that the interest due is [ ], but our system shows an amount due of [ ]. This amount, the interest, will be taken care of at time of liquidation. . . .
YRC submitted a check to satisfy the amount due for the merchandise processing and harbor maintenance fees. YRC also submitted a new header sheet. The Reconciliation Entry liquidated without change on December 19, 2008, i.e., based on the Reconciliation Entry transmitted on January 16, 2008 and given an entry date of January 25, 2008. A bill for interest due was issued to Oxford Industries. Oxford Industries paid the amount due for interest to stop any additional interest from accruing. YRC filed this protest on behalf of Oxford Industries claiming that due to transmission and calculation errors, Oxford Industries overpaid duties and interest.
The Port would deny the protest and indicated the reason on the protest form as: “No actual cost submission provided reflecting value reconciliation with recon entry or with protest #2604 09 10008.” As noted above, the Port did approve the AFR.
ISSUE:
Was liquidation of the Reconciliation Entry based on the January 16, 2008 filing proper?
LAW AND ANALYSIS:
Title VI of the North American Free Trade Agreement Implementation Act (the Act), Pub. L. 103-182, 107 Stat. 2057 (December 8, 1993), contains the provisions pertaining to the Customs Modernization Act (107 Stat. 2170). Subtitle B of Title VI established the National Customs Automation Program (NCAP) - an automated and electronic system for the processing of commercial importations. Title 19 U.S.C. §§ 1411 through 1414 describe the implementation of the components of the NCAP. Section 637 of the North American Free Trade Agreement Implementation Act amended Section 484 of the Tariff Act of 1930 to establish a new subsection (b), entitled "Reconciliation", a planned component of the NCAP. Section 101.9(b) of the CBP Regulations (19 CFR 101.9(b)) provides for the testing of NCAP components. The test procedures serve as the regulations to implement the statutes by virtue of 19 U.S.C. §§ 1411-1414 and 19 C.F.R. 101.9. The ACS Reconciliation Prototype was established pursuant to these regulations. The two-year prototype testing period commenced on October 1, 1998, and was extended indefinitely on October 1, 2000 (“Extension of the ACS Reconciliation Prototype,” 65 FR 55326 (September 13, 2000). See Headquarters Ruling Letter (HQ) 229670, dated February 10, 2003, for a discussion of the Reconciliation Program.
A Reconciliation Entry is comprised of three components: the header, the association file and the summarized line item data spreadsheet (“Modification of National Customs Automation Program Test Regarding Reconciliation,” 64 FR 73121 (December 29, 1999)). In order for a Reconciliation Entry to be considered filed, all three components must be received by the CBP processing port assigned to the importer. Accordingly, the actual filing date for each Reconciliation Entry is the date when all of these components have been properly presented to CBP (“Modification of National Customs Automation Program Test Regarding Reconciliation,” 64 FR 73121). In cases where a Reconciliation Entry is filed with no adjustments to value and other elements of the underlying transactions, the spreadsheet need not be provided (“Modification of National Custom Automation Program Test Regarding Reconciliation,” 63 FR 44303 (August 18, 1998)). When the reconciliation is filed with the intended corrections, CBP will review and liquidate accordingly. The liquidation of the reconciliation will be posted to the Bulletin Notice of Liquidation, and may be protested pursuant to section 1514 but the protest may only pertain to the issue(s) flagged for reconciliation (i.e., the protest may not re-visit issues previously liquidated on the underlying entry summary).
In this case, the three components necessary for the filing of a Reconciliation Entry, dated January 25, 1008, were filed with the initial transmission of January 16, 2008. In addition, duties and fees were paid and collected. However, a series of errors occurred in the transmission of the data related to the Reconciliation Entry. CBP was
notified of the errors and requested to reject the initial, second and third transmissions of data. CBP found errors in the fourth transmission. As the port did not receive a clear explanation of the reasons for the repeated errors when requested, the entry was liquidated based upon the initial data transmitted to CBP.
In filing the protest, YRC did present an explanation of the errors which occurred in the various transmissions. With regard to the software error in the third transmission, YRC submitted a further explanation directly to this office. After reviewing the information in the file, consulting with port personnel directly involved in the matter, and speaking with the broker, this office is satisfied with the explanation of the errors in the transmissions and believes the port erred in liquidating the entry based on the initial transmission of data which the broker quickly notified CBP was sent in error.
HOLDING:
The protest is allowed. The port should examine the last transmission from the protestant and reliquidate the entry based on its analysis of that transmission.
In accordance with the Protest/Petition Processing Handbook (CIS HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with this decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision Regulations and Rulings of the Office of International Trade 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 B. Harmon, Director
Commercial and Trade Facilitation Division