Customs Ruling HQ 230682 - Protest/Application for Further Review No. 0401-04-100149; 19 U.S.C. § 1520(c)(1); mistake of fact, clerical error, or other inadvertence; steel safeguard measures; retroactive exemption

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HQ 230682
Jan 20, 2006

Type : • HTSUS :
Related: 223755

LIQ-9-01
RR:CR:DR 230682 EMS

U.S. Customs and Border Protection
Boston Service Port
10 Causeway Street, Room 603
Boston, MA 02222
ATTN: Port Director

Re: Protest/Application for Further Review No. 0401-04-100149; 19 U.S.C. § 1520(c)(1); mistake of fact, clerical error, or other inadvertence; steel safeguard measures; retroactive exemption

Dear Port Director:

This is in reply to your memorandum dated August 27, 2004, requesting further review of Protest No. 0401-04-100149. Sharretts, Paley, Carter & Blauvet (Counsel) filed the protest on behalf of Voestalpine USA Corporation (formerly known as Voest-Alpine Steel Corporation).

This Protest concerns the denials of two identical § 520(c) petitions, each requesting the reliquidation of a single entry of hot rolled steel sheet in coils. U.S. Customs and Border Protection (CBP) liquidated these entries and assessed duties in accordance certain safeguard measures implemented by the President. The Protest challenges the denial of its request for reliquidation to apply a retroactive exemption from these section 201 duties. Our decision follows.

FACTS:

The importer made two entries of hot rolled steel sheet in coils on April 19, 2002 and, for each entry, its broker filed a CBP Form 7501 (Entry Summary) accompanied by the CBP Form 5520 (Special Summary Steel Invoice), commercial invoices, and test reports. On each Entry Summary, the subject merchandise was classified under subheadings 7208.27.0060 and 9903.72.80 of the Harmonized Tariff Schedule of the United States (HTSUS).

Subheading 7208.27.0060 covers flat-rolled products of iron or non-alloy steel, of a width of 60 millimeters or more, not clad, plated or coated, in coils, and of a thickness less than 3 millimeters, and which is other than high-strength steel, and imposed a dutiable rate of one percent ad valorem. At the time of entry, merchandise classified under this subheading was covered by certain safeguard measures, which temporarily augmented the duty rates for certain flat-rolled products of steel (other than stainless steel or tool steel) not further worked than hot rolled, the foregoing either (i) in coils or (ii) not in coils and of a thickness of less than 4.7 mm. For such merchandise entered during the period from March 20, 2002 through March 19, 2003, subheading 9903.72.80, HTSUS, imposed a 30% ad valorem rate of duty in addition to the rate provided in Chapter 72, HTSUS.

The New Haven Port of Entry liquidated the subject entries on February 28, 2003, assessing duties at a rate of 31% ad valorem, consistent with the importer’s proposed classification of the subject merchandise under subheadings 7208.27.0060 and 9903.72.80, HTSUS, as stated on the Entry Summaries. The broker challenged the liquidations on September 22, 2003 by filing two § 520(c) petitions, one covering each of the subject entries. According to these petitions, the broker sought reliquidation of the subject entries with a refund of the 30% ad valorem duties assessed pursuant to subheading 9903.72.80, HTSUS.

The § 520(c) petitions also alleged that the United States Trade Representative (USTR) specifically exempted the subject merchandise from the safeguard measures, commonly referred to as “section 201 duties,” imposed under this subheading. The USTR implemented the relevant exemption on July 12, 2002. The exemption modified U.S. Note 11 to subchapter III of Chapter 99 by deleting subdivision (b)(xx) Note 11 and replacing it with an exemption for flat-rolled, hot-rolled products designated X-116, described as follows:

Pickled and oiled products in coils, silicon-aluminum killed, grade 1050 mod. According to SAE J403-92; tolerances according to ASTM A568/91A, no welds, thickness tolerances # 0.13mm, thickness/width combinations: not over 1.98mm/927.10 mm or not over 2.28 mm/1146 mm; with chemical composition (percent by weight): aluminum 0.02 to 0.07, carbon 0.51 to 0.55, chromium not over 0.05, manganese 0.78 to 0.90, phosphorus 0.012 maximum, sulfur 0.003 maximum and silicon 0.20 to 0.30; cleanliness: inclusions not to exceed 15,000 per Wallace Barnes (approximately 12 maximum Stringer Type per ASTM); free of primary and secondary pipe, lamination, seams, laps, rolled in scale, harmful segregation (1/4 point) and other defects injurious to final product intergirty[.]

See 67 Fed. Reg. 46221, 46222 (July 12, 2002); U.S. Note 11(b)(xx)(D) to the HTSUS (2003). The USTR made this exemption retroactively effective for goods entered or withdrawn from warehouse for consumption on or after March 20, 2002. 67 Fed. Reg. 46221, 46222 (July 12, 2002). The § 520(c) petitions allege that, after the implementation of the exemption, the importer submitted requests for refunds of the duties assessed under the safeguard measures to its broker. Copies of the refund letters accompanied the § 520(c) petitions. These letters are signed by the President of Voestalpine and dated August 7, 2002. The address block for the intended recipient states “United States Customs Service,” but there is no address provided. The § 520(c) petitions also allege that the broker sent these letters, accompanied by cover letters, to the port of entry prior to liquidation of the subject entries. Neither the importer nor its broker has provided a copy of the cover letters or proof of mailing, nor does the port of entry have any record of receipt of this information.

The § 520(c) petitions request reliquidation of the subject entries and clearly identify the legal basis for granting this request as a “clerical error” which the broker alleged it committed when it “misplaced the file and could not file for the refund during the protest period of 90 days from the date of the liquidation.” In addition to the refund request described above, each § 520(c) petition was accompanied by a revised Entry Summary and a mill confirmation letter. The mill confirmation letters state that the subject entries are eligible for the exemption. These letters are signed by the President of Voestalpine and dated August 1, 2002. The Boston Service Port (the Port) concluded that neither the entry documentation nor the information accompanying the § 520(c) petitions satisfied the requirements of the exemption. The Port denied the § 520(c) petitions on March 16, 2004 because the broker’s “failure to file a timely protest is not correctable under 19 U.S.C. § 1520(c)(1).” Counsel then filed a CBP Form 19 (Protest) on June 7, 2004, claiming that “the relief sought by the broker filing the § 520(c) petitions was not the right to treat its letter as a protest[,] but rather the actual relief sought was that the entries should be reliquidated with refunds because the original liquidations were the result of a mistake of fact or other inadvertence.”

The Protest alleges that the classification of the subject merchandise under subheading 9903.72.80, HTSUS, is “solely due to a mistake of fact or an inadvertence” and claims that the importer is entitled to reliquidation under 19 U.S.C. § 1520(c)(1) because “Customs did not realize that the merchandise had been excluded and should have been liquidated accordingly,” i.e., without the assessment of the 30% ad valorem rate of duty. The Protest was accompanied by additional documentation, including revised test reports. The supplementary information sections of the revised test reports for each entry stated that the cleanliness specification of the exemption was met and that the steel was free of all defects that are injurious to final product integrity. This information was not contained in either the mill confirmation letters or the original test reports.

The Port contends that neither the documents included in the Entry Summary packages nor any of the subsequent submissions sufficiently support a claim for exclusion from the safeguard measures. It is the Port’s position that CBP’s liquidation of the subject entries with duties assessed under the safeguard measures was not a mistake of fact or other inadvertence because the data required for CBP to grant an exemption from the safeguard measures was not submitted with the Entry Summary Packages. See CBP Form 6445A (Customs Protest and Summons Information Report) dated August 27, 2004. The Port also concludes that the importer’s failure to timely protest the liquidations is not remediable under 19 U.S.C. § 1520(c)(1). The Port submitted an application for further review of the Protest to our office on August 27, 2004.

In consultation with the National Commodity Specialty Division of our office, we have determined that the information submitted at the time of entry was insufficient to establish that the subject merchandise satisfied the requirements of the exemption. We note that all of the necessary information was submitted at the time of entry except for documentation of compliance with two specification requirements that are unique to the exemption. However, the revised test reports that accompanied the Protest contained this documentation. Specifically, the supplementary information sections of the revised test reports for each entry stated that the cleanliness specification of the exemption was met and that the steel was free of all defects that are injurious to final product integrity. This information was not contained in either the mill confirmation letters or the original test reports.

Counsel made a supplemental submission in support of the Protest on May 5, 2005. This submission included an affidavit from the broker, who makes many of the same allegations already discussed above. The affidavit, dated May 3, 2005, alleges the factual circumstances surrounding the submissions of the refund requests, mill confirmations, and revised test reports. According to the affidavit, the mill confirmations accompanied the refund request letters that were allegedly sent to the port of entry prior to liquidation of the subject entries. Additionally, a statement from the President of Voestalpine was provided in the supplemental submission. There is no official seal on the statement and despite the fact that it is identified as an affidavit, there does not appear to be an authentication thereof. The statement, dated April 25, 2005, alleges that the importer provided the mill confirmations at the request of the broker for the purposes of demonstrating compliance with the exemption. We note that neither the importer’s statement nor the broker’s affidavit explains why the classification of the entry was not corrected prior to liquidation or why a Protest was not filed to challenge the liquidation, pursuant to 19 U.S.C. § 1514.

ISSUE:

Whether the liquidation of the merchandise in this case is remediable under 19 U.S.C. § 1520(c)(1)?

LEGAL ANALYSIS:

Initially, we note that the protest against the denial of the § 520(c) petitions was timely filed pursuant to 19 U.S.C. § 1514(c)(3)(B). These petitions were filed on September 22, 2003, under 19 U.S.C. § 1520(c)(1), to request the reliquidation of the subject entries. The Port denied the petitions on March 16, 2004, and Counsel protested the denial on June 7, 2004, within 90 days from the Port’s denials, as prescribed under 19 U.S.C. § 1514(c)(3)(B). Additionally, the criteria for granting a request for further review are set forth in 19 C.F.R. § 174.24 which states, in part, that further review will be accorded to the party filing an application which meets at least one of the criteria enumerated therein. Further review is justified because this protest involves questions of law and fact that have not been ruled upon, per 19 C.F.R. § 174.24(b). The protestant seeks reliquidation of the subject entries in its § 520(c) petitions. Section 520(c) of the Tariff Act of 1930, as codified at 19 U.S.C. § 1520(c), is an exception to the finality of the liquidation of an entry under 19 U.S.C. § 1514. Per 19 U.S.C. § 1520(c):

the Customs Service may, in accordance with regulations prescribed by the Secretary, reliquidate an entry or reconciliation to correct-- (1) a clerical error, mistake of fact, or other inadvertence, whether or not resulting from or contained in electronic transmission, not amounting to an error in the construction of a law, adverse to the importer and manifest from the record or established by documentary evidence, in any entry, liquidation, or other customs transaction, when the error, mistake, or inadvertence is brought to the attention of the Customs Service within one year after the date of liquidation or exaction . . . . Therefore, CBP may reliquidate the protested entries to correct a clerical error, mistake of fact, or other inadvertence if three requirements are satisfied: (1) the error is adverse to the importer's interest; (2) the error is manifest from the record or established by documentary evidence; and (3) the error is brought to CBP’s attention within one year of the date of liquidation.

We note that the broker timely filed the § 520(c) petition on September 22, 2003, which was within one year of February 28, 2003, the date of liquidation for the subject entries. In addition, the liquidation the subject entries under subheading 9903.72.80, HTSUS, dutiable at 30% ad valorem, is adverse to the importer, who alleges that the safeguard measures did not apply to the subject merchandise at the time of entry. In this case, our analysis focuses on whether the protestant has demonstrated that it is either manifest from the record or established by documentary evidence that the error that caused the liquidation of the subject merchandise without the benefit of the exemption from the safeguard measures is a mistake of fact, clerical error, or other inadvertence.

As a threshold matter, we examine the clerical error alleged in the § 520(c) petitions filed by the broker. In ITT Corp. v. United States, the Federal Circuit Court of Appeals found that reliquidation under this statute requires both notice and substantiation. Notice requires asserting the existence of a clerical error, mistake of fact, or other inadvertence "within the proper time and with sufficient particularity to allow remedial action." 24 F.3d 1384, 1387 (Fed. Cir. 1994). In this case, the notice requirement is not satisfied because the clerical error alleged in the § 520(c) petitions did not cause the incorrect liquidation of the subject entries. A broker’s failure to timely file a Protest, even if due to clerical error, is not remediable under 19 U.S.C. § 1520(c)(1). HQ 223755 dated October 13, 1992. The broker’s failure to file a Protest simply rendered the liquidation final and binding on both the Government and the importer, per 19 U.S.C. § 1514(a). Under these circumstances, the Port correctly denied the § 520(c) petitions. See ITT Corp., 24 F.3d at 1387 n.4.

The Protest attempts to overcome the inadequacy of the § 520(c) petitions by characterizing the broker’s position as “inarticulate” and emphasizing that the actual relief sought by the broker who filed these petitions was reliquidation with the benefit of the exemption and a refund of duties. We agree that the broker was seeking this relief, which is an integral component of a claim filed pursuant to 19 U.S.C. § 1520(c)(1), but this nature of the relief sought is not a proper foundation for the Protest raising a new argument that CBP’s liquidation of the subject merchandise without the benefit of the exemption was a mistake of fact or other inadvertence. This position is a clear departure from the § 520(c) petitions, which do not allege any error on the part of CBP.

Under 19 U.S.C. § 1520(c)(1), the alleged error must be brought to the attention of CBP within one year after the date of liquidation or exaction. Here, the only error brought to the attention of CBP within one year of the date of liquidation was that which was asserted in the petitions, i.e., the clerical error by the broker that failed to timely file a Protest. The allegation of a mistake of fact or other inadvertence whereby CBP liquidated the subject entries with additional duties because CBP was unaware of the existence of an exclusion from those duties was first raised in the Protest, filed on June 7, 2004, which is more than one year after the liquidations of the subject entries on February 28, 2003. While the error identified in the Protest is eligible for further review, it is not germane to § 520(c) petitions and cannot be the basis of a decision to reliquidate under the subject entries under 19 U.S.C. § 1520(c)(1).

Even assuming arguendo that the importer had provided notice of the error alleged in the Protest, the importer must also substantiate the error, showing that it is either manifest from the record or established by the documentary evidence. Manifest from the record means “apparent to Customs from a facial examination of the entry and the entry papers alone.” ITT Corp., 24 F.3d at 1387. CBP liquidated the subject merchandise with no change to the classification asserted by the importer when it made entry. The entry documents filed by the importer did not claim the exemption from duty nor did they contain sufficient information to demonstrate eligibility for the exemption. Therefore, it is not manifest from the record that CBP erred in the liquidation of the subject merchandise. Cf. Fujitsu Compound Semiconductor, Inc. v. United States, 246 F. Supp. 2d 1334, 1337, (Ct. Int’l Trade 2003), aff’d, 363 F.3d 1230 (Fed. Cir. 2004) (“For Customs to make a mistake in failing to take an action Plaintiff must show Customs was obligated to take that action.”).

CBP properly relied upon the truth and correctness of the importer’s proposed classification of the subject merchandise, and its supporting documentation, per 19 U.S.C. § 1485(a)(3), at the time CBP liquidated the subject merchandise. The importer’s failure to provide sufficient documentation of its eligibility for the exemption at the time of entry is the direct cause of the incorrect classification of the subject merchandise. Further, it is indisputable that the importer and its broker were aware of the existence of the exemption and the eligibility of the subject merchandise prior to liquidation. We note the broker’s allegation in the affidavit that it submitted requests for refunds and mill confirmations to the port of entry prior to liquidation. There is no proof of submission of a refund request to the port prior to liquidation of the subject entries and, in any event, this allegation has no bearing on our decision on the instant Protest.

Under circumstances where misclassification results from the importer’s failure to provide sufficient documentation, the burden is on the importer to substantiate that “the proper documentation did or would have existed at the time of entry and would have been filed, but for some mistake of fact or inadvertence at the time of entry.” Executone Info. Sys. v. United States, 96 F.3d 1383, 1389 (Fed. Cir. 1996). In this case, however, the importer’s failure to claim the exemption and provide documentation that the subject merchandise satisfied its requirements amounts a mistake in the construction of law. Such mistakes are expressly excluded from redress under 19 U.S.C. § 1520(c)(1). “An error in the construction of the law occurs when the facts are known, but the legal significance of those facts is not appreciated.” G & R Produce Co. v. United States, 381 F.3d 1328, 1332 (Fed. Cir. 2004) (citations omitted). Regardless of when the exemption became applicable to the subject merchandise, the importer’s determination that the subject merchandise was dutiable under the safeguard measures was a construction of law, see, e.g., Mattel, Inc. v. United States, 377 F. Supp. 955, 960-61 (1974), and not remediable under 19 U.S.C. § 520(c)(1).

Similar to Degussa Can. Ltd. v. United States, 87 F.3d 1301, 1304 (Fed. Cir. 1996), the incorrect classification of the subject merchandise as dutiable under the safeguard measures could have been corrected if a Protest had been timely filed, per 19 U.S.C. § 1514(a)(2). We note that 19 U.S.C. § 1520(c)(1) "does not afford a second bite at the apple" and its provisions are not intended to "excuse the failure to satisfy the requirements of § 1514." ITT Corp., 24 F.3d at 1387 n.4 (Fed. Cir. 1994). Degussa Can. Ltd., 87 F.3d at 1304.

HOLDING:

The Protest should be DENIED. The importer has not shown satisfied its burden of showing that it is manifest from the record or demonstrated by the documentary evidence that the liquidation of the merchandise as dutiable under the safeguard measures was a mistake of fact, clerical error, or other inadvertence remediable under 19 U.S.C. § 1520(c)(1).

In accordance with the Protest/Petition Processing Handbook (CIS HB, January 2002, pp. 18 and 21), 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 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 make the decision available to CBP personnel and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Myles B. Harmon, Director
Commercial and Trade Facilitation Division