CON-9-13/LIQ-9-01-CO:R:C:E 223031 PH
Regional Commissioner of Customs
Pacific Region
RE: Protest 3004-90-000010; A TIB Entry May not be Converted to
a Consumption Entry; Subheading 9813.00.55, HTSUSA; 19
U.S.C. 1514
Dear Sir:
The above-referenced protest was forwarded to this office
for further review. We have considered the points raised by your
office and the protestant. Our decision follows.
FACTS:
On July 18, 1989, the protestant imported certain computer
equipment, entered as "automatic data processing machines" and
described by the protestant as three "specially-equipped graphics
workstations configured to manipulate GFIS (Geographic Facilities
Information System)". The date of the entry was July 18, 1989.
The date of the entry summary for the merchandise was July 25,
1989. The merchandise was initially entered under the Temporary
Importation Bond (TIB) provision subheading 9813.00.50,
Harmonized Tariff Schedule of the United States Annotated
(HTSUSA).
On July 27, 1989, Customs advised the protestant that
"[t]here is no TIB provision which allows the foreign supplier to
rent equipment to a U.S. firm without the payment of duty. Enter
accordingly." On August 3, 1989, the protestant advised Customs
that it was changing the TIB provision under which the
merchandise had been entered to subheading 9813.00.55, HTSUSA,
for which it (i.e., the protestant) believed the shipment
qualified. The port of importation accepted the entry, according
to documents in the file, and requested advice from the National
Import Specialist (N.I.S.) on the classification of the
merchandise. The N.I.S., in a report dated August 24, 1989,
advised that the merchandise was not classifiable under the TIB
provision (subheading 9813.00.55, HTSUSA) and should be
classified under the appropriate provisions in Chapter 84,
HTSUSA. According to the file, on October 17, 1989, Customs
required the protestant to reclassify the merchandise
accordingly.
On October 17, 1989, the protestant sent to Customs an
amended entry summary to reflect the reclassification of the
merchandise (under subheadings 8471.91.0020, 8471.92.2000, and
8471.92.4075, HTSUSA), with duty in the amount of $1,480.90. On
October 26, 1989, the protestant wrote Customs to seek the refund
of a portion of this duty under subheadings 9801.00.10 and
9802.00.80, HTSUSA. A refund in the amount of $881.75 was
granted and the entry was liquidated on November 24, 1989. The
protestant filed the protest under consideration on January 19,
1990.
The merchandise under consideration is described in the
protest as computer "hardware", consisting of three IBM PS/2
Model 70 computers with dual asynchronous adapters, 8514
adapters, and extra memory. According to documentation in the
file, the merchandise was used by the importer in the United
States solely to remodel the cartographic data of the Canadian
company which loaned the merchandise to the importer. At the
time the protest was filed, two of the three workstations had
been returned to the United States. Proof of exportation was
included in the file and the protestant stated that when the
third workstation was exported, proof of exportation for it would
be available as well.
ISSUES:
(1) Does the computer equipment described in this case
qualify for duty-free entry under 9813.00.55, HTSUSA?
(2) May Customs require an importer to convert the TIB
entry under which merchandise has been entered to a consumption
entry after the TIB entry has been accepted by Customs?
(3) May the protest under consideration in this case be
granted?
LAW AND ANALYSIS:
Initially, we note that the protest, with application for
further review, was timely filed under the statutory and
regulatory provisions for protests (see 19 U.S.C. 1514 and 19 CFR
Part 174).
Subheading 9813.00.55, HTSUSA, provides for free entry under
bond, as prescribed in U.S. Note 1 of the subchapter in which the
subheading is found (Subchapter XIII of Chapter 98), of:
Articles of special design for temporary use
exclusively in connection with the manufacture
or production of articles for export.
Pursuant to U.S. Note 1(a) of Subchapter XIII of Chapter 98:
The articles described in the provisions of
this subchapter, when not imported for sale or
for sale on approval, may be admitted into the
United States without the payment of duty,
under bond for their exportation within 1 year
from the date of importation ....
This tariff provision has been the subject of a number of
published rulings (see Customs Service Decisions (C.S.D.'s) 82-
158, 84-55, and 89-109). In C.S.D. 82-158, we reviewed the
legislative history of this provision in holding that fish
processing machines used to process fish for export could not be
admitted temporarily free of duty under bond under item 864.55,
Tariff Schedules of the United States (TSUS), the predecessor to
subheading 9813.00.55, HTSUSA. In this ruling we stated:
We do not doubt that the fish processing
machinery in issue is of limited manufacture,
but we do not consider them to be "articles of
special design" such as, say, a die or an
engraving plate, any more than we would
consider a die stamping machine or printing
press in which the die or plate is used, to be
an article of special design. It is the die or
plate that is specially designed to produce or
manufacture a particular thing and that is
unique and possesses the unusual qualities
necessary to be deemed an article of special
design.
In C.S.D. 89-109, we adopted the reasoning of C.S.D. 82-158 to
the "special design" requirement of subheading 9813.00.55,
HTSUSA, in holding that a brine freezer unit used to freeze whole
herring roe for export was not "an article of special design" and
did not qualify for admission under the subheading.
Based on the foregoing, we conclude that the merchandise
under consideration (standard computer hardware, according to the
evidence in the file) may not be considered to be articles of
special design, for purposes of subheading 9813.00.55, HTSUSA.
Although computer software, specially configured to be
temporarily used exclusively in connection with the production of
products for export could possibly qualify for treatment as an
article of special design for purposes of subheading 9813.00.55,
HTSUSA, as would be true of a die or an engraving plate, the
computer hardware used with such software, as is true with a die
stamping machine or printing press in which a die or plate is
used, is not "unique and [does not possess] the unusual qualities
necessary to be deemed an article of special design" (see
material quoted above from C.S.D. 82-158).
As an alternative basis for relief, the protestant contends
that Customs improperly directed the protestant to change the TIB
entry to a consumption entry and that the TIB entry should have
been allowed to stand. As support for this contention, the
protestant cites the "Temporary Importation under Bond Seminar"
of November 1975, page 49, in which it is stated:
It often happens that after a TIB entry has
been accepted and the articles released to the
importer it is subsequently found that a
temporary importation bond entry item would not
be applicable. The practice has been for many
years to let the entry stand if made in good
faith. ...
Customs has ruled, in a published ruling (C.S.D. 82-109),
that seminar notes which were not issued by an authorized
employee and which were not issued under the procedures set forth
in 19 CFR Part 177 are not decisions of the Customs Service. The
cited seminar consists of such seminar notes. Therefore, the
quoted material is not a decision of the Customs Service.
Customs actual position on this issue is as follows. TIB
entries are considered entries. However, TIB entries shall not
be liquidated (19 CFR 10.31(h)). Entries, once properly
accepted, may not be rejected by Customs (see 19 CFR 141.64 and
141.68; see also ruling 222367, dated December 28, 1990). There
is no authority for the conversion of a TIB entry which has been
accepted by Customs to a consumption entry (T.D. 78-363; see also
19 CFR 10.31-10.40). The correct procedure for Customs to follow
when a TIB entry is filed and accepted by Customs for merchandise
subsequently found not to qualify for the TIB provision is to
consider the bond breached and to assess liquidated damages
(letter 723561/726002, dated August 13, 1984).
The TIB entry under consideration was accepted by Customs.
The liquidation of the consumption entry which was substituted
for the TIB entry was timely protested under 19 U.S.C. 1514.
However, we note that Customs may not "unliquidate" a liquidation
(see United States v. Utex International Inc., 6 Fed. Cir. (T)
166 (1988); see also ruling 221591, dated February 13, 1990,
following Court decision). As stated above, TIB entries may not
be liquidated, so the entry under consideration could not be
reliquidated under subheading 9813.00.55, HTSUSA. We understand
that the TIB bonds for the merchandise under consideration have
been cancelled and that at least two of the three workstations
have been exported. Accordingly, even if Customs could
"unliquidate" the protested liquidation and "revive" the TIB
entries, there would be no existent TIB bonds against which to
assess liquidated damages. In view of the comments on the "void
liquidation" theory by the Court in Omni U.S.A., Inc. v. United
States, 6 Fed. Cir. (T) 99, 103, 840 F. 2d 912 (1988), cert.
den., 488 U.S. 817 (1988), rehearing den., 488 U.S. 961 (1988),
we believe that this is an instance in which what may seem to be
a procedural nicety (i.e., that Customs cannot "unliquidate" a
liquidation and that TIB entries may not be liquidated) results
in the proper disposition of the case. We note that the
liquidated damages which Customs should have assessed in this
case would have been more than five times the amount of duty
which is being protested (see 19 CFR 10.31(f)).
The protest is DENIED.
HOLDINGS:
(1) The computer equipment described in this case does not
qualify for duty-free entry under 9813.00.55, HTSUSA, because the
pieces of equipment are not "articles of special design" within
the meaning of that provision.
(2) Customs has no authority to require an importer to
convert the TIB entry under which merchandise has been entered to
a consumption entry after the TIB entry has been accepted by
Customs. The correct procedure for Customs to follow in such a
circumstance when the merchandise is subsequently found not to
qualify for the TIB provision is to consider the TIB bond
breached and to assess liquidated damages.
(3) The protest under consideration in this case may not be
granted because Customs may not "unliquidate" a liquidation and
TIB entries may not be liquidated.
The protest is DENIED. A copy of this decision should be
attached to the Form 19, Notice of Action, to be sent to the
protestant.
Sincerely,
John Durant, Director