LIQ-9-01-CO:R:C:E 224118 PH
District Director of Customs
San Diego, California 92188
RE: Protest No. 2501-92-100048; Clerical Error, Mistake of Fact,
or other Inadvertence; Computer Programming Error; 19 U.S.C.
1514; 19 U.S.C. 1520(c)(1)
Dear Sir:
The above-referenced protest was forwarded to this office
for further review. We have considered the evidence provided,
and the points raised, by your office and the protestant. The
protestant made a supplementary submission on February 18, 1993,
which is enclosed for your file. Our decision follows.
FACTS:
According to the file, between April 4, 1990, and September
21, 1990, the protestant entered certain television sets and
parts. Included in the entries were articles stated to have been
assembled from United States fabricated components and other
articles stated to be products of the United States returned
after having been exported without having been advanced in value
or improved in condition while abroad. Duty-free entry was
claimed for these articles under subheading 9802.00.80 or
9801.00.10, Harmonized Tariff Schedule of the United States
Annotated (HTSUSA).
The duty-free allowance for the entries was based on
"standard cost estimates", pending the submission of actual costs
at the end of the accounting period (see 19 CFR 10.21). The
protestant filed its actual cost submission for the period under
consideration (April 1, 1990, through September 30, 1990) in
December of 1990 (according to documents in the file, the date of
this original submission was December 3, 1990).
The protestant states that the values used in the
preparation of the cost reconciliation for the entries under
consideration were the values included in computer tapes from the
fiscal period for the first half of 1989. According to the
protestant, the incorrect values were used due to a computer
processing error caused by a missing label parameter in the
computer program created for costs submissions. A copy of a
print-out of the computer "job" for the cost submissions with the
missing label parameter and a copy of the correction of that
"job" with the missing label parameter added (the correction is
dated July 29, 1991) was provided with the protest.
Because of the alleged error, the dutiable material values
for the merchandise covered in the entries under consideration
were inflated because actual overall cost reductions were not
reflected in the cost submission. The result, according to the
protestant, was that rather than determining that the protestant
was entitled to refunds of approximately $348,000, it was
reported in the cost reconciliation that Customs was still due
$67,854 for the entries, which was deposited with Customs. The
protestant contends that it is entitled to a refund of $416,759.
The protestant states that the error was discovered by its
personnel in May of 1991, when the next cost submission was being
prepared. That cost submission was done properly with up-dated
overall reduced material values and work was begun on the
revision of the cost submission for the period under
consideration. According to the protestant, this work took
several months to complete.
With regard to the foregoing allegations, there is evidence
filed with the protest which indicates that the officials
responsible for the cost submission may have known at the time of
preparation of the cost submission for the entries under
consideration about the problem which is at issue in this case
but may have made a management decision to do nothing about it.
I.e., in Exhibit B, "Proforma Price Update History", it is stated
that "an error in the MIS job instruction prevented any new tapes
from being created" and the cost submission under consideration
"was completed based upon an update which used the originally
created 6 tapes containing 1989 1st half price information."
When this evidence was pointed out to the protestant, the
protestant requested and was given the opportunity to provide
additional evidence on this issue. The protestant did provide
such evidence, in the form of written statements "under penalty
of perjury", by the person (i.e., the Controller of the
subsidiary of the protestant in Mexico which assembled the
merchandise under consideration in Mexico) who states that he has
been in charge of the protestant's U.S. Customs cost submissions
since the preparation and filing of the first-half 1990
submission, covering the entries under consideration, and by the
person who states that he is the manager of the "Assembly
Manufacturing Group of the MIS Department" of the protestant,
located at Rancho Bernardo, California.
According to these statements, the problem at issue in this
case (i.e., the use of the values for the first half of 1989 in
the cost submission for the entries under consideration) was not
discovered until May of 1991 when the Controller making the
statement was reviewing the foreign material costs for the second
half of 1990 cost submission, covering the entries made from
October 1990, through March 1991. The Controller discovered
discrepancies between foreign material costs and the average
material costs furnished by the MIS Department. With the help of
that Department, it was learned that the 1989 foreign material
cost information had been used in all subsequent cost submissions
prior to this discovery. Due to a missing label parameter in the
language of the "system job", new monthly tapes were not created
and the 6 original tapes were used to furnish the material cost
information "without realizing that there were no new monthly
tapes." The Data Center, which took the 6 tapes for use in the
cost submissions from the protestant's tape library, did not make
any substantive decisions (as to which tapes to select), "but
merely ran its information through the computer for the Cost
Submission every 6 months, as instructed by the MIS Department
... without any knowledge whether it [i.e., the data from the
tapes] was correct or not."
Both statements state that no management decision was made
to use the 1989 cost information for subsequent cost submissions.
The Controller states that "at no time was any managerial
decision or any other decision ever made by any [personnel of the
Protestant of the Mexican subsidiary of the Protestant] to use
the 1989 Cost information in subsequent Cost Submissions. In
each subsequent Cost Submission, it was understood and believed
by [such personnel] that the correct and current foreign material
cost information for each period was being furnished by
[protestant's] MIS Department, whose personnel also believed it
to be current and correct." According to the second statement,
by the Manager of the Assembly Manufacturing Group of the MIS
Department of the protestant, "No managerial decisions were made
by anyone in the MIS Department or in the Data Center whether to
run the original 6 tapes over and over for successive Cost
Submissions, and it was not even known in the MIS Department that
there were no new tapes being used in the Cost Submissions until
May, 1991, when [the Controller of the protestant's Mexican
subsidiary] discovered and disclosed that fact."
The entries under consideration were liquidated between
August 17, 1990, and February 8, 1991. By letters of August 16,
20, and 27, 1991, the protestant requested reliquidation of the
entries under consideration under 19 U.S.C. 1520(c)(1). (The
Customs field official handling this matter advises that the
request for reliquidation was timely filed with regard to each of
the entries under consideration (i.e., within 1 year of
liquidation).)
By letter of August 29, 1991, the Customs field official
handling this matter advised the protestant that the request for
reliquidation was deficient because no evidence was provided to
support the claimed error in material values, the alleged error
was not declared by a corporate officer of the protestant, and
the calculation process used in determining the claimed
overpayment of duty was not revealed. The protestant was given
30 days to support the claim with factual data.
According to the Customs field official handling this
matter, a number of informal meetings were held on this matter up
until March 20, 1992. On March 12, 1992, protestant, for the
first time, submitted the revised cost submission for the entries
under consideration.
On March 24, 1992, the request for reliquidation was denied.
On June 17, 1992, the protestant filed a protest of this denial
of the request for reliquidation. The bases given by the
protestant for the protest are described above. Further review
of the protest was requested and the protest was forwarded for
such review on August 7, 1992.
ISSUE:
Is the alleged error in the cost submission in this case, as
described in the FACTS portion of this ruling, a clerical error,
mistake of fact, or other inadvertence for which relief may be
granted under 19 U.S.C. 1520(c)(1)?
LAW AND ANALYSIS:
Initially, we note that both the request for reliquidation
under 19 U.S.C. 1520(c)(1) and the protest of the denial of that
request, under 19 U.S.C. 1514(a), were timely filed (with regard
to the time of submission of the revised cost submission for the
period under consideration, see the recent case of ITT Corp. v.
United States, CIT Slip Op. 93-7, January 19, 1993, published in
Vol. 27, Customs Bull. & Dec., No. 6, February 10, 1993, page
22).
Under 19 U.S.C. 1520(c)(1), Customs may reliquidate an entry
to correct a clerical error, mistake of fact, or other
inadvertence, not amounting to an error in the construction of a
law, when certain conditions are met. Section 1520(c)(1) has
frequently been interpreted by the Courts. It has been stated
that "[a] clerical error is a mistake made by a clerk or other
subordinate, upon whom devolves no duty to exercise judgement, in
writing or copying the figures or in exercising his intention"
(see PPG Industries, Inc., v. United States, 7 CIT 118, 124
(1984), and cases cited therein). It has been held that a
"mistake of fact exists where a person understands the facts to
be other than they are, whereas a mistake of law exists where a
person knows the facts as they really are but has a mistaken
belief as to the legal consequences of those facts" (Hambro
Automotive Corporation v. United States, 66 CCPA 113, 118, C.A.D.
1231, 603 F. 2d 850 (1979), quoted in Concentric Pumps, Ltd., v.
United States, 10 CIT 505, 508, 643 F. Supp. 623 (1986); see
also, C.J. Tower & Sons of Buffalo, Inc. v. United States, 68
Cust. Ct. 17, 22, C.D. 4327, 336 F. Supp 1395 (1972), aff'd, 61
CCPA 90, C.A.D. 1129, 499 F. 2d 1277 (1974), and Universal
Cooperatives, Inc. v. United States, 13 CIT 516, 518, 715 F.
Supp. 1113 (1989)). Inadvertence has been defined as "an
oversight or involuntary accident, or the result of inattention
or carelessness, and even as a type of mistake" (Occidental Oil &
Gas Co. v. United States, 13 CIT 244, 246 (1989), quoting C.J.
Tower & Sons of Buffalo, Inc. v. United States, supra, 68 Cust.
Ct. at 22).
The conditions required to be met under 19 U.S.C. 1520(c)(1)
are that the clerical error, mistake of fact, or other
inadvertence must be adverse to the importer, manifest from the
record or established by documentary evidence, and brought to the
attention of Customs within one year after the date of
liquidation of the entry. The relief provided for in 19 U.S.C.
1520(c)(1) is not an alternative to the relief provided for in
the form of protests under 19 U.S.C. 1514; section 1520(c)(1)
only affords "limited relief in the situations defined therein"
(Phillips Petroleum Company v. United States, 54 CCPA 7, 11,
C.A.D. 893 (1966), quoted in Godchaux-Henderson Sugar Co., Inc.,
v. United States, 85 Cust. Ct. 68, 69, C.D. 4874, 496 F. Supp.
1326 (1980); see also, Computime, Inc. v. United States, 9 CIT
553, 555, 622 F. Supp. 1083 (1985), and Concentric Pumps, Ltd. v.
United States, supra).
Basically, the protestant in this case claims that the
entries should have been reliquidated because it made a computer
error in the preparation of the cost submissions resulting in the
inflation of the dutiable material values for the entries under
consideration. The protestant provided documentary evidence of
the alleged error (i.e., the copies of the printouts of the
computer "job" for the cost submissions with the missing label
parameter and the correction of that "job" with the missing label
parameter added). The statements submitted with the protestant's
February 18, 1993, submission establish that, contrary to what
could have been understood from the "Proforma Price Update
History," responsible officials of the protestant did not know of
the error under consideration and did not make a management
decision to do nothing about the error until May of 1991.
We conclude that the protestant has alleged a mistake of
fact or other inadvertence. That is, at the time of the
submission of the cost submissions under consideration facts were
otherwise than the protestant understood them to be (i.e., the
protestant understood and intended that the cost submissions were
based on correct and current material cost information, whereas
they were actually based on the incorrect [for the period under
consideration] 1989 cost information). The protestant has
provided documentary evidence to establish the mistake of fact or
other inadvertence. The mistake under consideration is not a
mistake of law (see, e.g., Mattel, Inc. v. United States, 72
Cust. Ct. 257, 262-263, C.D. 4547 (1974), and cases cited
therein; see also, Cavazos v. United States, 9 CIT 628 (1985);
Boast, Inc., v. United States, CIT Slip Op. 93-20, February 10,
1993, published in Vol. 27, Customs Bull. & Dec., No. 9, March 3,
1993, page 11; and ITT Corp. v. United States, supra, at page 24
"The purpose of section 1520 is to allow correction of such
mistakes and neither the government nor the courts should
struggle excessively to turn mere bumbling into a controversy
over law"). Accordingly, the protest is GRANTED.
HOLDING:
The alleged error in the cost submission in this case, as
described in the FACTS portion of this ruling, is a clerical
error, mistake of fact, or other inadvertence for which relief
may be granted under 19 U.S.C. 1520(c)(1).
The protest is GRANTED. A copy of this decision should be
attached to the Form 19 and provided to the protestant as part of
the notice of action on the protest.
Sincerely,
John Durant, Director
Commercial Rulings Division