LIQ-11-RR:IT:EC 226631 IOR
Port Director
U.S. Customs Service
511 NW Broadway
Portland OR 97209
RE: Application for further review of Protest No. 2904-95-100158; Extension of time for liquidation; Deemed
liquidation; 19 U.S.C. 1504; Intercargo Insurance Company
f/k/a International Cargo & Surety Co. (Surety for M.
Genauer) v. United States
Dear Sir:
The above-referenced protest was forwarded to this office
for further review. We have considered the facts and issues
raised, and our decision follows.
FACTS:
The protestant is the surety for Unique Stone Imports, the
importer of the subject merchandise. Unique Stone Imports
("importer") filed entry no. T14-xxxx210-901 on March 15, 1993.
On the CF 7501, the imported merchandise is described as
"STONE,MRBLE SLABS,WRK,NOT FLAT," and was classified under
Harmonized Tariff Schedule of the United States (HTSUS)
subheading 6802.91.0500, with a duty rate of 2.8%. The file
contains an invoice to the importer for the subject merchandise,
which describes the merchandise as "oriental jade." A
Certificate of Inspection in the file refers to the merchandise a
"medium green marble tiles." A Customs Notice to Mark and/or
Notice to Redeliver (CF 4647), dated March 30, 1993, instructs
the importer to properly mark the merchandise with the name of
the country of origin. The CF 4647 refers to the merchandise as
"Oriental Jade tile."
Customs records indicate that the liquidation of the subject
entry was extended two times. The code for extension was "01."
The file includes a Customs lab report dated May 4, 1993,
according to which the subject merchandise was submitted to the
lab for the purpose of identifying its identity as marble slab
with less than 3/32" bevel, on April 5, 1993. The lab report
concludes:
The sample is green with white vein; cut and polished.
Laboratory analysis indicates that it is other stone
(serpentine). The beveled edge is 1/16", and the
thickness is 9 MM.
A Notice of Action was issued by Customs on October 13, 1994 to
the importer, indicating that the entry had been rate advanced as
the stone tile is "oriental jade" classified under subheading
6802.99.00, HTSUS, at a rate of 6.5%. The entry was liquidated
on January 13, 1995. The formal demand on the surety for this
duty, with interest, was mailed on April 13, 1995.
The protestant filed the protest under consideration on June
29, 1995. The grounds stated for the protest are that: 1) the
extension of liquidation for the subject entry was improper for
citing a reason other than one authorized by statute or
regulation (citing Intercargo Insurance Co. (Genauer) v. United
States, 879 F.Supp. 1338 (CIT 1995)); 2) liquidation of the
protested entry was null and void because it was after the one
year limitation on liquidation and since "all information needed
to properly appraise, classify and assess duties on the subject
entry was available... within one year prior to the anniversary
date" and that no authorized party requested an extension of
liquidation, the decision to extend the period for liquidation
was void and the entry liquidated "as entered" by operation of
law; and 3) the Notice of Action issued October 13, 1994 was
unlawful having been issued 19 months after the entry date and 7
months after the entry was deemed liquidated by operation of law
on March 15, 1994.
ISSUE:
May the protest in this case be granted?
LAW AND ANALYSIS:
Initially we note that the protest was timely filed (i.e.,
within 90 days of the demand upon the protestant surety; see 19
U.S.C. 1514(c)(2)) and the matter protested is protestable under
19 U.S.C. 1514(a)(5). The certification that the protest is not
being filed collusively to extend another authorized person's
time to protest, as required for a protest by a surety (see 19
U.S.C. 1514(c)(2)), was provided.
Under 19 U.S.C. 1504, an entry of merchandise not
liquidated within 1 year from the date of entry of such
merchandise shall be deemed liquidated at the rate of duty,
value, quantity, and amount of duties asserted at the time of
entry by the importer of record, unless this one-year period for
liquidation is extended. The statute authorizes reasons for
which liquidation may be extended, including that information
needed for the proper appraisement or classification of the
merchandise is not available (i.e., code "01" mentioned above).
Authority is provided for regulations prescribing the procedures
for such extensions of liquidation.
The Customs Regulations issued under this statute are found
in 19 CFR 159.12. Under
159.12(a)(1)(i), the port director may extend the 1-year
statutory period for liquidation for an additional period not to
exceed 1 year if information needed by Customs for the proper
appraisement or classification of the merchandise is not
available. Under 159.12(b), if the port director extends the
time for liquidation as provided above, he is required to
promptly notify the importer or the consignee and his agent and
surety that the time has been extended and the reasons for doing
so.
In this case, the evidence in the file is sufficient to
create the presumption that proper notice of extension was given
(see e.g., International Cargo & Surety Insurance Co. (Data
Memory Corp.) v. United States, 15 CIT 541, 779 F.Supp. 174
(1991)). In such a case, when the protestant fails to rebut that
presumption (there is no evidence in the file alleged to do so),
"the only issue to be decided is whether the extension was
permissible under the statute," (15 CIT at 545).
The issue of the permissibility of extension of liquidation
was addressed by the Court of Appeals for the Federal Circuit in
St. Paul Fire & Marine Ins. Co. [Carreon] v. United States, 6
F.3d 763 (Fed. Cir. 1993) (reversing the CIT decision (16 CIT
663, 779 F.Supp. 120 (1992)), wherein the court concluded:
...Customs may, for statutory purposes and with the
requisite notice,
employ up to four years to effect liquidation so long
as the extensions
it grants are not abusive of its discretionary
authority. Such an abuse
of discretionary authority may arise only when an
extension is granted
even following elimination of all possible grounds for
such an extension.
There is, in sum, a narrow limitation on Customs
discretion to extend
the period of liquidation. (6 F.3d at 768)
The court went on to state that "Customs decisions to extend are
entitled to a presumption of legality unless [the plaintiff] can
prove that these decisions were unreasonable." (6 F.3d at 768)
The protestant has not met its burden in this regard. There
is no evidence in the file, submitted by the protestant or
otherwise, proving that Customs decision was unreasonable, that
all possible grounds for extension of liquidation may be
eliminated. That is, the merchandise under consideration was
claimed to be classifiable under subheading 6802.91.0500, HTSUS,
and was ultimately classified under subheading 6802.99.00, HTSUS
(we note that the protestant does not contest the correctness of
this classification). There is affirmative evidence of the need
to extend the period for liquidation in order for Customs to
ensure the correctness of the claimed classification of the
subject merchandise. The CF 6445A indicates that Customs
extended the period for liquidation of the subject merchandise
due to sampling, penalty and laboratory actions. Although the
laboratory report is dated May 4, 1993, well within one year of
the date of entry of the merchandise, the protestant has provided
no evidence to establish the elimination of all grounds for
extension, nor has the protestant proved that the decision was
unreasonable.
It should be further noted that the presumption of legality
accorded Customs decisions to extend liquidation discussed in St.
Paul, supra, was further bolstered by the CAFC in Intercargo
Insurance Company f/k/a International Cargo & Surety Co., (Surety
for M. Genauer) v. United States, 83 F.3d 391(Fed. Cir. 1996,)
petition for cert. filed, (U.S. Oct. 22, 1996) (No. 96-650)
(reversing the CIT decision (879 F.Supp. 1338)). In that case
the liquidation extension notices in question, which were
verbatim of the ones at issue in this protest, read as follows:
THIS IS A COURTESY NOTICE.
THE LIQUIDATION OF THIS ENTRY HAS BEEN EXTENDED;
ADDITIONAL TIME IS REQUIRED BY CUSTOMS TO PROCESS
THIS TRANSACTION. NO ACTION IS NECESSARY ON YOUR
PART UNLESS INFORMATION IS SPECIFICALLY REQUESTED
BY CUSTOMS.
The plaintiff claimed that the liquidation extensions were
invalid, and the subject entries therefore deemed liquidated by
operation of law, because the extension notices did not recite
one of the statutory reasons for obtaining additional time for
liquidations set forth in 19 U.S.C.
1504. Notwithstanding the defective notices, the CAFC
determined that fact alone did not render the extended
liquidations invalid so long as Customs error in this regard had
no prejudicial impact on the plaintiff. In determining that no
such prejudicial impact existed in that case, the court stated
that the purpose of the notice ("to increase certainty in the
customs process by apprising the importer and its surety of the
precise period within which final action would be taken on the
liquidation") was met. Moreover, the court stated that if the
plaintiff believed that Customs did not have a valid statutory
reason for the extensions, the plaintiff could seek to have them
judicially invalidated on that ground.
Using the analysis of the CAFC in Intercargo, supra, we
reach the same conclusion with respect to the protest under
consideration. Since the importer and surety were advised of the
subject extensions, and they were not deprived of the opportunity
to challenge the extensions in court on the ground that the
extensions were not obtained for a statutorily valid reason,
neither the importer nor surety suffered prejudicial impact
justifying an invalidation of the liquidation extensions in
question.
Accordingly, the protest must be denied.
HOLDING:
The protest in this case may not be granted because the
protestant has not met its burden of proving that Customs
extension of liquidation was unreasonable, that all possible
grounds for extension of liquidation may be eliminated, nor did
the protestant suffer prejudicial impact resulting from the
liquidation extension notices.
Consistent with the decision set forth above, you are hereby
directed to deny the subject protest. In accordance with Section
3A(11)(b) of Customs Directive 099 3550-065, dated August 4,
1993, Subject: Revised Protest Directive, this decision should be
mailed by your office to the protestant no later than 60 days
from the date of this letter. Any reliquidation of the entry in
accordance with the decision must be accomplished prior to
mailing of the decision. Sixty days from the date of the
decision the Office of Regulations and Rulings will take steps to
make the decision available to customs personnel via the Customs
Rulings Module in ACS and the public via the Diskette
Subscription Service, Freedom of Information Act and other public
access channels.
Sincerely,
Director,
International Trade
Compliance Division