PRO-2-06/ENT-1-CO:R:C:E 220678 JR
District Director of Customs
101 East Main Street
Norfolk, Virginia 23510
RE: Allowance of Protest; Action to be Taken When Allowance
Results in a Bill rather than a Refund; 19 U.S.C. 1515(a);
19 U.S.C. 1501; 19 U.S.C. 1514; Omni U.S.A., Inc. v. U.S.
Dear Sir:
Your office has requested a clarification of policy and
procedure on an allowance of a protest.
FACTS:
The following situation was presented in your letter of July
29, 1986: An entry was made with a classification under item
379.3120, Tariff Schedules of the United States (TSUS), which
called for a rate of duty of 34.2%; however, due to a clerical
error, the broker multiplied the entered value ($165,000) by only
3.42% and, accordingly, paid $5,643.00 at entry. The entry was
processed under the by-pass procedures and liquidated as entered.
The importer timely filed a protest against the classification
under item 379.31, TSUS, and claimed item 376.56, TSUS, as the
proper classification. The District agreed with the importer
that item 376.56, TSUS, was the correct classification and
allowed the protest. Reliquidation at the 10.6% rate applicable
to item 376.56, TSUS, resulted in a bill to the importer in the
amount of $17,490.00. The importer paid the bill of $11,847.00,
which was the difference between the amount previously paid and
the correct rate of duty. Your position in this situation is
that there is no prohibition in the statute or regulations to
allowance of the protest and issuance of a bill for the
additional duties due as a result of such allowance.
ISSUE:
Basically, the issue presented is: Should the protest of a
liquidation be accepted if it will result in increased liability
for the importer (phrased another way, if acceptance will result
in a decision adverse to the importer's financial interests)?
LAW AND ANALYSIS:
While we agree with your view that 19 U.S.C. 1515(a) does
not explicitly state what action should be taken when the
allowance of a protest would result in a bill, rather than a
refund, to the importer, we disagree with you that if the
importer protests, Customs can correct the errors even if they
result in a higher rate of duty. This is not permissible. See
generally Omni U.S.A., Inc. v. U.S., 840 F.2d 912, 914 (Fed. Cir.
1988) reh'g denied, 109 S.Ct. 405 (1988)(no correlative provision
of 19 U.S.C. 1520(c)(1) exists for the increase of duties in case
the clerical error was adverse to the government). Our
construction of Section 1515(a) is that it provides for refunds
of duties collected, not increases in duties assessed. See 19
U.S.C. 1515(a) which directs Customs to "review the protest" and
"allow or deny ... in whole or in part," and pay refunds and
drawbacks. Reading Sections 1515 and 1501, United States Code,
together, it appears that the Government is time-barred after 90
days of the original liquidation from reliquidating an entry to
correct any errors adverse to the Government. Moreover, 19
U.S.C. 1514 states that, except for certain specific situations
(i.e., voluntary reliquidations under Section 1501; petitions
under Section 1516 by domestic interested parties as defined in
Section 1677(9)(C),(D), and (E); refunds or errors as defined in
Section 1520; and fraud as covered by Section 1521), decisions of
the Customs officer in liquidating entries shall be final and
conclusive on all persons, "including the United States ...".
Therefore, upon review of a protest, if Customs ascertains
that the classification asserted by the importer is both correct
and results in a duty increase over the liquidated amount,
Customs cannot reliquidate the entry to the detriment of the
importer if the period for voluntary reliquidation by Customs
under Section 1501 has passed. The power to administratively
correct errors by the Government is limited after the voluntary
reliquidation period has expired. See generally Omni, supra. In
that instance, when the correct classification results in a
collection of higher duties pursuant to Section 1515(a), Customs
must deny the protest. Of course, Customs would not refuse a
voluntary tender of the withheld duties from the importer.
In general, our position is:
If Customs' decision on the protest is different
from that advanced by the importer and if it
results in a higher rate of duty than found in
liquidation, the resulting decision can be used
to collect additional duties only in a voluntary
reliquidation by Customs within the 90-day period
provided in 19 U.S.C. 1501.
We might also mention that a common occurrence is the filing
of a protest alleging a different classification of merchandise
which, when reviewed, discloses that a third classification is
correct instead. If the protest is acted upon within 90 days, an
increase in duties can equally be assessed in reliquidation. If
more than 90 days has passed, the protest is merely denied in
full.
HOLDING:
No. A protest must be denied when the correct
classification results in a duty increase over the liquidated
amount pursuant to 19 U.S.C. 1515(a) unless the period for
voluntary reliquidation by Customs under 19 U.S.C. 1501 has not
expired.
Sincerely,
John Durant, Director
Commercial Rulings Division