LIQ-1-CO:RR:CR:DR 228169BJB
Port Director of Customs
U.S.Customs Service
P.O. Box 1490 - Federal Building
St. Albans, VT 05478
RE: Further Review of Protest # 020198-100027; Norman G. Jensen, Inc.; Interest; Effective Date; Retroactivity; North American Free Trade Agreement (NAFTA) Implementation Act; Customs Modernization Act; Public Law 103-182, Title VI, Section 62; 19 U.S.C. §1505(c); Travenol Laboratories, Inc., v. U.S., C.A. Fed. 1997, 118 F.3d 749.
Dear Sir:
This office has receive the above-referenced application for further review of the protest as provided for under Customs regulations. We have considered the request and have made the following decision.
FACTS:
On July 22, 1997 Norman G. Jensen, Inc. (“protestant”) imported two vehicles into the United States. The first vehicle was an “Articulated Dump Truck.” The second was a 1989 “Koehring 2150 Skid Steer Tractor.” In order to enter the vehicles into the United States duty-free, under subheading 9801.00.10. HTSUS, protestant was required to provide documentation of U.S. origin. At the time of entry, protestant failed to provide sufficient documentation necessary to establish the vehicles’ country of origin. On October 8, 1997, Customs issued a Customs Form 28 (“CF28") requesting further information with respect to the origin of the two vehicles.
On December 5, 1997, protestant provided a copy of the serial number plate riveted to the Koehring 2150 Skid Steer Tractor, showing U.S. origin. The plate read, “Koehring Construction Equipment, AMCA International Port Washington, WIS 53074 (1st left handed block) 2150 and (2nd handed block) 6A0160.” Protestant did not provide a serial number and country of origin plate for the Articulated Dump Truck. Protestant also filed a Carrier’s Certificate, dated July 9, 1997, for a 1988 O&K D232 6x6, Articulated Truck, S/N WFN3k23BD1X000485, cost/price $49,000 Canadian/ $35,499.52 U.S..
On April 14, 1998, the protestant enquired of Customs as to the liquidation status of the two vehicles. Customs had scheduled the two entries for liquidation on May 22, 1998. On April 21, 1998, Customs reset the liquidation date to May 8, 1998, assessed duty, and issued a service bill. Customs approved the Koehring 2150 Skid Steer Tractor as being U.S. origin merchandise, and liquidated it as duty-free. The second entry, the articulated dump truck, was determined to have been of non-U.S. origin. Customs liquidated the entry on May 8, 1998, for duty, Merchandise Processing Fees. Customs also imposed interest dating from the date of entry, July 22, 1997.
Pursuant to Customs ACS database, Protestant paid $3890.09 on June 10, 1998. Protestant filed its protest and application for further review with Customs on June 17, 1998.
ISSUE:
1. Whether the articulated dump truck entered into the United States on July 22, 1997, is of U.S. origin and qualifies for duty-free treatment under classification 8704.10.5000 HTSUS?
2. Is Customs authorized to assess interest on the duty owed on non-U.S. origin goods from the date of entry pursuant to 15 U.S.C. § 1505(c) as amended?
LAW AND ANALYSIS:
Initially, we note that the protest was timely filed (i.e., within 90 days of May 8, 1998, the date of final liquidation of the entries) under 19 U.S.C. §1514(c)(3)) and the matter protested is protestable under 19 U.S.C. §1514(a)(5).
1. Issue One:
The threshold issue is whether the articulated dump truck (“ADT”) is of U.S. origin. If the ADT is of U.S. origin it could be entered duty-free into the United States under subheading 8704.10.5000 HTSUS. On its protest, (“CF 6445A”), protestant claims, inter alia, that its protest, “is made against liquidation with assessment of interest retroactive to 7/22/97.” This statement appears to suggest that the protestant is protesting the actual classification of the ADT, as well as the imposition of interest upon the duty owed for the ADT, if in fact, it was of non-U.S. origin. The two-page narrative attachment to the protestant’s CF6445A, states however, that “[t]he buyer was able to satisfactorily substantiate U.S. origin for only one unit, and this was provided to U.S. Customs on December 5, 1997.” Thus, protestant acknowledges that there was insufficient documentation to prove that the ADT was U.S. origin merchandise as of December 5, 1997. The protestant has further failed to provide sufficient additional documentation to alter the basis for this conclusion, even though afforded an opportunity to do so pursuant to its protest and application for further review.
The Carrier’s Certificate submitted by the protestant does include a notation, by the the protestant, that the merchandise is of U.S. origin. However, with the exception of this self-serving statement, there is no additional evidence to support such a claim. No place of manufacture or other material evidence linking the S/N number appears on the certificate with this “Articulated Dump Truck.” No actual American manufacturer name or location of manufacture was provided by the protestant or by the buyer. No actual, or even, copy of a nameplate, serial number plate, or country of manufacture/origin plate has been provided. The protestant is well aware of the simple documentation necessary to prove country of origin, as it accomplished for the Skid Steer Tractor. In its December 3, 1997 response to Customs’ CF-28, protestant stated that the consignee, “James H. Davis [wa]s unable to provided origin for the USAR Articulated.” (Letter December 3, 1997). Although protestant was afforded an additional opportunity under its protest and application for further review to submitt additional evidence of U.S. origin for the ADT, it failed to do so.
While the protestant did provide a Bill of Sale from the Canadian sellers, “Ritchie Bros.,” located in Montreal (Carignan) (QC) and sold to “HM Davis Equipement C orp.,” for an “Articulated Dump Truck, s/n WFN3K23BD1X000485,” as with the Carrier’s Certificate, no evidence was provided to establish that this ADT was of U.S. origin, or that the registration number is actually registered for a U.S. origin vehicle and attached to this ADT.
2. Issue Two:
The second issue centers on protestant’s disagreement with the amount of interest assessed on the duty it owed Customs. Protestant acknowledges that the statute governing the imposition of interest on duty payments, is now covered under amended statute 15 U.S.C. §1505(c). However, Protestant argues that Customs has failed to issue regulations implementing the Customs Modernization Act of 1993 with regard to interest charges. Thus, protestant asserts that Customs should rely upon 19 C.F.R. §24.3(e) to determine the imposition of interest.
19 C.F.R. §24.3(e) requires the following:
“All other bills for duties, taxes, or other charges are due and payable upon the bill date appearing on the bill. A bill for increased or additional duties determined to be due upon a
liquidation or reliquidation is due 15 days from the date of such liquidation or reliquidation.”
Adherence to this regulatory provision would require Customs to impose additional interest 15 days from the date of liquidation or 15 days from May 8, 1998.
Protestant is correct that no further regulations have been issued to implement the Customs Modernization Act of 1993, with respect to 19 U.S.C. §1505. Nonetheless, the statute is prima facie clear and should therefore be relied upon, even absent further implementing regulations.
The North American Free Trade Agreement (NAFTA) Implementation Act (Public Law 103-182; 107 Stat. 2057) was enacted on December 8, 1993. Title VI of the NAFTA Implementation Act, titled Customs Modernization, contains various amendments to the Customs
laws and other statutes. Section 642(a) of Title VI of the NAFTA Implementation Act (107 Stat. 2205) amended 19 U.S.C. §1505, by, among other things, adding a new subsection (c) providing as follows:
“(c) Interest
Interest assessed due to an underpayment of duties, fees, or interest shall accrue, at a rate determined by the Secretary, from the date the importer of record is required to deposit estimated duties, fees, and interest [19 U.S.C. 1505(a) requires the importer of record to deposit estimated duties and fees at the time of making entry or at such later time as the Secretary may prescribe by regulation] to the date of liquidation or reliquidation of the applicable entry or reconciliation. Interest on excess moneys deposited shall accrue, at a rate determined by the Secretary, from the date the importer of record deposited estimated duties, fees, and interest or, . . . , from the date on which such claim is made, to the date of liquidation or reliquidation of the applicable entry or reconciliation.”
Section 692 of Title VI of the NAFTA Implementation Act (107 Stat. 2225) provides that “[t]his title takes effect on the date of the enactment of this Act.” Thus, despite protestant’s assertion to the contrary, 19 U.S.C. § 1505 is the basis to determine the date for the computation of interest.
Section 1505(a), in pertinent part, reads as follows:
“(a) Deposit of estimated duties, fees, and interest
Unless merchandise is entered for warehouse or transportation, or under bond, the importer of record shall deposit with the Customs Service at the time of making entry, or at such later time as the Secretary may prescribe by regulation, the amount of duties and fees estimated to be payable thereon. Such regulations may provide that estimated duties and fees shall be deposited before or at the time an import activity summary statement is filed. If an import activity summary statement is filed, the estimated duties and fees shall be deposited together with interest, at a rate determined by the Secretary, accruing from the first date of the mont the statement is required to be filed until the date such statement is actually filed.”
Additionally 19 U.S.C. §1505(b) states,
“(b) Collection or refund of duties, fees, and interest due upon liquidation or reliquidation
The Customs Service shall collect any increased or additional duties and fees due, together with interest thereon, or refund any excess moneys deposited, together with interest thereon, as determined on a liquidation or reliquidation. Duties, fees, and interest
determined to be due upon liquidation or reliquidation are due 30 days after issuance of the bill for such payment.”
The statute is clear that the interest shall be determined from the date of the bill for such payment. The date from which interest or additional duties shall be determined shall be from the date of entry as required under 19 U.S.C. §1505(c):
Under 19 C.F.R. §141.1, liability for payment of duties by an importer are determined in the following manner:
“Liability of importer for duties.
“(a) Time duties accrue. Duties and the liability for their payment accrue upon imported merchandise on arrival of the importing vessel within a Customs port with the intent then and there to unlade, or at the time of arrival of the importing vessel within the Customs territory of the United States if the merchandise arrives otherwise than by vessel, unless otherwise specially provided for by law.”
As previously mentioned, regulations implementing the amended statute have not been adopted. We find that the previous, existing regulations are prima facie inconsistent with the amended statute. There is no requirement that an agency must re-promulgate a pre-existing regulation so that it is consistent with a subsequent statute. The relationship between regulations and statutes, and annulment of regulations upon enactment of statutes is as follows:
Administrative rules must conform to the laws enacted by the legislature.
A regulation, valid when promulgated, becomes invalid upon the enactment of a statute in conflict with the regulation. However, an administrative regulation will not be considered as having been impliedly annulled by a subsequent act of the legislature unless the two are irreconcilable, clearly repugnant, and so inconsistent that they cannot have concurrent operation. Moreover, implied repeal of a regulation by a statute is disfavored, especially where the regulation has been approved by the legislative regulation review committee.
. . .
If a regulation has been in existence for a substantial period of time and the legislature has not sought to override the regulation, this fact, although not determinative, provides persuasive evidence of the continued validity of the regulation.
(2 Am. Jur. 2d Administrative Law § 227 (1994)).
Customs finds that the amended statute is in conflict with the previously promulgated regulations. The previous regulations are irreconcilable with the statute. They are clearly repugnant or so inconsistent that the statute and the regulation cannot have concurrent operation - for precisely the reasons protestant argues for reliance upon the regulations and not upon the amended statute.
Protestant quotes 19 C.F.R. §24.3a(b)(2), for the proposition that Customs should begin the computation of interest from a date other than the date of entry. 19 C.F.R. §24.3a(b)(2) states,
“[t]he due date for increased or additional duties, determined to be due upon a liquidation or reliquidation, is 15 days from the date of such liquidation or reliquidation. If such duties are not paid within 30 days after their due date (the 45th day) they shall be considered delinquent and bear interest form the due date.”
Adherence to this language would provide a substantially different result than adherence to the obligation required in the language of 19 U.S.C. §1505(c). Thus, regardless of the length of time previous regulations have been in effect, they are no longer in effect where a new statute with persuasively clear language is now in force. The persuasiveness and clarity of the statutory language in this case lies in the clarity and divergence of the results that adherence to one over the other would cause.
In American Bayridge Corporation v. United States, 35 F. Supp. 2d 922 (1998), the Court of International Trade dealt with circumstances similar to the present case. In American Bayridge, Customs sought to do exactly what protestant seeks to do here, rely upon an old regulation to implement a new, amended, statute. The court was specific and clear. The court held, that “Customs cannot continue to use its old regulation to implement the new statute.” American Bayridge, supra. at 936, n.13. Neither may the protestant rely upon regulations superceded by a statutory amendment. As in American Bayridge, the new statute, (in this case 19 U.S.C. §1505(c)), is “neither ambiguous nor silent with respect to how Customs must proceed.” Id. Moreover, citing 19 U.S.C. §1624 (1994), the Court affirmed, that “[i]n addition to the specific powers conferred by this chapter the Secretary of the Treasury is authorized to make such rules and regulations as may be necessary to carry out the provisions of this chapter.” The Secretary of the Treasury has not promulgated additional implementing regulations and has the discretion to do so. Customs conclusion is that the amended statute is sufficiently clear in its application not to require, at this time, additional implementing regulations.
The courts have also ruled, that the application of Customs Modernization Act’s interest accrual provision to goods entered before, but reliquidated after, the Act’s effective date did not result in impermissible retroactive application, as the principal amount of overpayment was not known until reliquidation. Travenol Laboratories, Inc. v. U.S., C.A. Fed. 1997, 118 F.3d 749 (July 2, 1997). The Court recognized in Travenol, that even entries made before the Customs Modernization Act of 1993, would be subject to the amended statutory provisions of 19 U.S.C. §1505. Significantly, the Court held in Travenol, that it would apply the §1505 provision notwithstanding the absence of additional implementing regulations.
After the adoption of §1505(c) as amended, an importer is subject to interest on underpayments from the time of making entry to the date of liquidation or reliquidation. Prior to this amendment, there was no provision for interest for underpayments by an importer since the old section 1520(d) provided for interest on increased or additional duties resulting from reliquidation, date of payment would be after reliquidation.
HOLDING:
The protest is DENIED.
Title 19, U.S.C. §1505(c), as amended by section 642(a) of Title VI of the NAFTA Implementation Act, applies to entries filed on or after December 8, 1993, even absent the issuance of additional implementing regulations. Thus, in the present case, interest should be determined pursuant to the date of importation and entry of the merchandise, July 22, 1997.
In accordance with Section 3A(11)(b) of Customs Directive 099 355-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing 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, and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
John Durant, Director
Commercial Rulings Division