LIQ-9-01 222049 GG
U.S. Customs Service
Protest and Control Section
6 World Trade Center, Room 762
New York, New York 10048
RE: Protest No. 1001-9-005205; request for further review;
protest against denial of 19 U.S.C. 1520(c)(1) reliquidation
request; negligent inaction; concealed shortages; 19 CFR 158.5
Dear Sir:
This is in response to your request for further review of
the protest referenced above.
FACTS:
Protestant entered merchandise between March 31, 1988 and
May 2, 1988. All of the entries were liquidated on May 13, 1988.
On April 4, 1989, protestant filed a 19 U.S.C. 1520(c)(1)
reliquidation request, stating that due to a clerical error, more
merchandise had been included on the invoice that was used to
make entry, than had actually been shipped. This concealed
shortage resulted in the protestant paying duties on merchandise
that it did not import. To substantiate its claims, on June 27,
1989 protestant sent Customs its "edit lists", which were
prepared by the protestant and detailed all of the shortages.
The first of these lists was dated March 31, 1988, the last May
9, 1988. The protestant did not file a discrepancy report and
declaration on Customs Form 5931. Customs denied the
reliquidation request on August 2, 1989. Protestant on October
3, 1989, protested this denial.
ISSUE:
Whether entries may be reliquidated under
19 U.S.C. 1520(c)(1), when the entries included merchandise that
appeared on the invoice but was not included in the shipment, and
the information submitted by the protestant to substantiate the
shortages indicated that the protestant knew of the shortages
prior to the liquidation of the entries?
LAW AND ANALYSIS:
The Customs Service will make an allowance in the assessment
of duties for deficiencies in the contents of packages, when,
before the liquidation of the entry becomes final, the importer
files a discrepancy report with Customs and the district director
satisfies himself as to the validity of the claim. 19 CFR 158.5.
One of the questions raised by the protest at issue is whether
the protestant filed a discrepancy report with Customs before the
liquidation of the entries became final.
The protestant never filed the type of discrepancy report
that is referenced in 19 CFR 158.5: a Customs Form 5931. It
did, however, submit its own "edit lists" which listed the
shortages. The sufficiency of this alternative type of
discrepancy report will be discussed after the timeliness of its
submission to Customs is determined.
As noted above, discrepancy reports have to be filed before
the liquidation of the entry becomes final. Generally, a
liquidation becomes final 90 days after the date of liquidation,
unless a timely protest is filed. See 19 U.S.C. 1514(a);
19 CFR 159.9(c)(iii); Occidental Oil & Gas Co. v. United States,
Slip Op. 89-40 (CIT 1989). Under this rule, since the protestant
did not protest the liquidation, the liquidation of the entries
would have been final in mid-August of 1988, which preceded the
filing of the edit lists by approximately 10 months. A
liquidation is not considered final, however, if a timely and
meritorious claim for reliquidation is filed under Section
520(c)(1) of the Tariff Act of 1930, as amended
(19 U.S.C. 1520(c)(1)). See Customs Service Decision (C.S.D.)
84-42; Universal Cooperatives, 715 F.Supp 1113 (CIT 1989).
19 U.S.C. 1520(c)(1) permits the reliquidation of an entry to
correct clerical errors, mistakes of fact, or other inadvertences
in the entry or liquidation not amounting to an error in the
construction of a law, which are adverse to the importer,
manifest from the record or supported by documentary evidence,
and have been brought to Customs' attention within one year after
the date of liquidation. The protestant filed a timely
19 U.S.C. 1520(c)(1) request, which Customs denied, and is
currently protesting Customs' refusal to reliquidate under this
provision. The merits of its request are at issue.
Protestant's original 19 U.S.C. 1520(c)(1) request, filed by
its customhouse broker on April 4, 1989, stated that "through a
clerical error duty was paid on merchandise which was never
imported". According to the broker, the clerical error was the
act of listing on the entries merchandise that had been included
on the invoice but had not actually been a part of the shipment.
This argument fails because case law has established that there
is no clerical error where words and figures are entered as
intended by the writer, and interpreted by Customs with the
meaning and effect which were intended by the writer. See United
States v. Wyman & Co., 4 Ct.Cust.Appls. 264, T.D. 33485 (1913).
It was the intention of the preparer of the entries to list those
invoiced items which, it was subsequently revealed, were not
shipped. Customs correctly carried out this intention when it
included the missing items in its final ascertainment and
assessment of duties on the merchandise covered by those
particular entries. Clearly, no evidence has been presented
which would support the allegation of clerical error.
In its protest of Customs' refusal to reliquidate under
19 U.S.C. 1520(c)(1), the protestant abandoned the clerical error
argument and presented a new reason why Customs should have
reliquidated under that provision, namely, there was a mistake of
fact "based solely upon the importer's unawareness of the hidden
shortages prior to liquidation." To support its position,
protestant cites the case of C.J. Tower & Sons of Buffalo, Inc.
v. United States, 68 Cust.Ct. 17, C.D. 4327, 336 F.Supp 1395
(1972), aff'd. 61 CCPA 90, C.A.D. 1129, 499 F.2d 1277 (1974), in
which a mistake of fact was defined as "a mistake which takes
place when some fact which indeed exists is unknown, or a fact
which is thought to exist, in reality does not exist". This new
position of the protestant of necessity must fail, because the
documents supplied to Customs by the protestant clearly show that
the protestant knew of the hidden shortages well before
liquidation. The edit lists, which the protestant routinely
prepares upon receipt of imported merchandise, and which in this
case were submitted to Customs with its reliquidation request to
substantiate the concealed shortages, were all completed by May
9, 1988, at least 4 days prior to liquidation of the entries.
Consequently, these facts do not support the contention that
there was a mistake of fact on account of the protestant being
unaware of the shortages until after liquidation.
In a meeting with Customs on May 2, 1991, the protestant's
attorneys argued that the entries should be reliquidated because
the ignorance of both the importer and Customs of the concealed
shortages at the time of entry constituted a mistake of fact that
was correctable under 19 U.S.C. 1520(c)(1). When asked why the
protestant had failed to file the required Customs Form 5931 upon
discovery of the discrepancy, the attorneys explained that the
protestant was unfamiliar with the Customs regulations.
The protestant's latest argument would have been more
persuasive if the protestant had not detected the concealed
shortages until more than 90 days after liquidation of the
entries. Such was the case in C.J. Tower, where the importer
learned only after the liquidation had become final that its
merchandise was to be used for a purpose which would have
entitled it to duty-free entry. Clearly the mistake in that
situation was of the kind 19 U.S.C. 1520(c)(1) was designed to
correct, i.e., a factual mistake whose late discovery rendered
correction under other provisions of the Customs law impossible.
See Hearings on H.R. 5505 before the Senate Committee on Finance,
82d Cong., 2d Sess., 30 (1952); Hearings on H.R. 1535 before the
House of Representatives Committee on Ways and Means, 82d Cong.,
1st Sess., 171 (1951). In contrast, the current protestant's
pre-liquidation discovery of the shortages left it with more than
3 months to take advantage of the procedure that had been
established in 19 CFR 158.5 to enable an importer to obtain a
refund of duties paid on merchandise it had never imported, i.e.
filing a Customs Form 5931. This procedure had also been clearly
outlined in C.S.D. 78-199. The protestant's failure to file the
required form during that 3-month period constituted negligent
inaction.
In HRL 725690, dated April 8, 1986, Customs stated that
"[c]ases involving negligent inaction almost always involve a
situation where the importer has not come forward with a
reasonable explanation why some required act was not performed."
For example, in C.S.D. 80-250, the importer's failure to respond
to several requests from Customs for additional information to
aid Customs in determining the value of the merchandise was not a
mistake of fact or inadvertence for purposes of a
19 U.S.C. 1520(c)(1) reliquidation claim. The failure to provide
the requested information or to protest the liquidation in a
timely manner was held to constitute negligent inaction. Since
the importer in C.S.D. 80-250 did have the necessary paperwork at
his office, the facts did not fall within the guidelines set down
in that case, which were that a failure to act may be correctable
under 19 U.S.C. 1520(c)(1), when the failure is coupled with
another significant factor, such as a misunderstanding of the
facts, or the inability of the importer to obtain documentation
to establish a claim. Similarly, the current protestant's
failure to file the Customs Form 5931 within 90 days after
liquidation can only be attributed to negligence on its part,
because it knew of the shortages before liquidation and could
have used the information contained in its edit lists to prepare
the required form. The protestant's explanation that it was
ignorant of the Customs Regulations is not a mitigating factor,
because ignorance of the law is not a ground for reliquidation
under 19 U.S.C. 1520(c)(1). See PPG Industries, Inc. v. United
States, 7 CIT 118, 126 (1984).
The protestant has failed to demonstrate that there was a
clerical error, mistake of fact, or other inadvertence in the
entries or their liquidation which would warrant a reliquidation
under 19 U.S.C 1520(c)(1). Consequently, the liquidation of the
entries in question became final 90 days after liquidation
occurred on May 13, 1988, and since the protestant failed to
submit a completed Customs Form 5931 during that period, as
required by 19 CFR 158.5, no allowance for the concealed
shortages can now be made. Customs's earlier decision to deny
the reliquidation request was correct, and protestant's protest
must be DENIED.
The denial of protestant's 19 U.S.C. 1520(c)(1)
reliquidation request was not based solely, as the protestant
contends, on its failure to supply an executed Customs Form 5931.
That particular request was properly denied because the
protestant failed to prove that there was a clerical error,
mistake of fact, or inadvertence in the entries or liquidation of
the entries. Had one of these three factors been present, then
it would have been the prerogative of the district director to
determine if the edit lists alone would have sufficed to
establish the discrepancy, or if the filing of a Customs Form
5931 was necessary. See Treasury Decision 78-199.
HOLDING:
Entries containing concealed shortages may not be
reliquidated under 19 U.S.C. 1520(c)(1), where the protestant has
failed to establish that there was a clerical error, mistake of
fact, or inadvertence in the entries or their liquidation.
Sincerely,
John Durant
Director, Commercial