• HQ H023201
• Sep 19, 2008

• Type : Protest • HTSUS :
•  Related:   M86029; 220965   

OT:RR:CTF:ER LIQ-7 H023201 RDC

RE: protest

Port Director Customs and Border Protection 103 South Gay Street Suite 715 Baltimore, MD 21202 Attn: Judy Winters

Re: Florida Crystals Food Corp., Protest # 1303-07-100089, sugar quota,

Dear Port Director:

Protest number 1303-07-100089 filed by Florida Crystals Food Corp. (FC), was sent to this office pursuant to an approved application for further review. We have considered the points made by the protestant and your office. Our decision follows.

FACTS:

On 1/27/2006, the Department Of Agriculture (USDA), Foreign Agricultural Service (FAS), published a Notice of: “Affirmation of Total Amounts of the Fiscal Year 2006 Tariff-Rate Quotas for Raw Cane Sugar and Certain Imported Sugars, Syrups, and Molasses (Refined Sugar).” (71 FR 4,557).

In a news release on 7/27/2006, the USDA announced that: “the specialty sugar TRQ is increased 9,921 STRV to 41,508 STRV. The specialty sugar TRQ will be opened on a first-come, first-served basis in two tranches of 4,960 STRV each, on August 17, 2006 and August 31, 2006. This specialty sugar must have a sucrose content, by weight in the dry state, corresponding to a polarimeter reading of 99.5 degrees or more. . . . . These TRQ tranches (the fifth and sixth of FY 2006) of 4,960 STRV are reserved for organic sugar and other specialty sugars not currently commercially produced in the United States or reasonably available from domestic sources. Only specialty sugar certificates which specify the FY 2006 fifth and/or sixth tranches will be accepted; previously issued FY 2006 certificates will not be valid. The protestant, FC is the importer for 3 entries of what is described as “dry (granulated) organic sugar produced from evaporating sugar cane juice, entered under subheading 1701.99.10, HTSUS. According to ACS, the three entries were made on 9/22/2006, and released on that date. The country of origin was Paraguay. The entries covered 439,085 kilograms (KG), 279,418 KG, and 199,584 KG, or approximately 439 metric tons (MT), 279 MT and 199 MT respectively. (1 KG equals 0.001 MT.) The sugar covered by the three entries was said to have a polarity of 99.75 deg, 99.74 deg. and 99.6 respectively. According to FC, its broker filed CBPF 3461s, entry and immediate delivery, for the sugar on 9/19/2006. Also on 9/19/2006, via the Automated Broker Interface (ABI) the broker filed the CBP Forms 3461 and 7501 as type “02” quota entries. Each entry contained a letter from the protestant’s broker which stated, in pertinent part:

Please note that the attached entry is being presented for the 6th Tranche Specialty Sugar. A USDA Specialty Sugar Certificate is attached.

We are respectfully requesting that the amount entered also be considered under the revised TRQ for refined sugar which may still be available.

The file appears to contain two copies of the three entries. The copies of the entries filed as exhibits to the protest do not contain copies of a USDA memorandum dated 9/22/2006 covering Fiscal Year 2007 Specialty Sugar Certificate applied for 8/10/2005. Since the protestant asserts that it filed the entries on 9/19/2006, it is unclear how a document dated 9/22/2006 could have been included in those filings. Both the protest and the CF 6445A contain a statement that the quotas filled on 9/15/2006. The concerned import specialist stated on the CF 6445A that the documents filed on 9/19/2006 did not constitute a “live entry”. By that statement, the import specialist apparently meant that the entry did not meet the requirements for quota status presentation under 19 CFR 132.11 and 132.11a. The CF 7501, block 4, which contains the entry date, for each entry has the typed date of 9/19/2006 crossed out and a handwritten notation of 9/22/2006, which would be consistent with the ACS entry record for each entry. The FC states that a “Speciality Sugar Certificate” from the U.S.D.A. was filed dated 9/22/2006, and provided:

“This certificate is valid for all 4 tranches of the FY 2007 specialty sugar TRQ, which open 10/24/2006, 11/07/2006, 2/5/2007 and 7/24/2007.” Use of the certificate was stated to be subject to named conditions and limitations among which was “the specialty sugar must be imported under HTS Nos. 1701.12.10; 1701.91.10; 1701.99.10; 1702.90.10; or 2106.90.44.”

The invoice reflects that the goods sold were “organic sugar certified organic evaporated cane juice.” The “Quality Certificate” is in Spanish except for “certified organic evaporated cane juice (ECJ).”Certified Organic ECJ is a fine granulated, general purpose sugar certified to be grown, milled and packaged free of prohibited substances in accordance with earth-friendly methods. It retains its golden tan color and subtle taste profile from the original cane juice. It is said to be an alternative to refined white sugar and substituted one for one for refined white sugar in any application.

A “quota notice” dated 10/11/2006, was sent to FC’s broker and advised that “this entry is being returned to you. “In the case of Absolute Quota, quota input by [CBP] has been deleted. You have the option of putting the cargo into a bonded warehouse, foreign trade zone or exporting or destroying the merchandise under [ CBP’s] supervision.”

By Notice of Action dated 12/5/2006, CBP advised the importer that the entry of the sugar under 1701.99.10, HTS, with a “free” rate of duty was “erroneous” and that the proper classification was [under subheading] 9904.17.15 and 2106.90.46 HTSUS, at 35.74 cents per kilogram. The entries were liquidated consistent with the notice of action on 12/22 and 12/29/2006.

ISSUES: 1. Whether the sugar was classified correctly on liquidation? 2. Whether CBP is obligated to notify an importer of merchandise that is subject to a quota of the quota status before it releases custody of the merchandise? 3. Whether CBP is obligated to demand redelivery of imported merchandise for the purpose of permitting the importer to enter the merchandise under a different form of entry?

LAW AND ANALYSIS:

We note initially that the instant protest was timely filed, i.e., within 180 days of the liquidations of the entries (19 U.S.C. § 1514(c)(3)(B)). Under 19 U.S.C. § 1514 “decisions of the Customs Service, including the legality of all orders and findings entering into the same, as to . . . the classification and rate and amount of duties chargeable. . . [or] “the liquidation” (§ 1514(a)(2), (5)) are final unless a protest of that decision is filed within 180 days of liquidation (§ 1514(c)(3)(B)). This Protest was filed on 5/9/2007, and the entries were liquidated on 12/22 and 12/29/2006.

The first issue is whether the sugar is classified correctly under subheading 2106.90.4600, HTSUS. In ruling M86029, CBP determined that an organic sugar obtained by evaporating organic cane juice is classified as a sugar in solid form rather than as syrup. The term “syrup” is not defined in either Chapter 17 or 21, HTSUS. In absence of a contrary legislative intent, tariff terms are to be construed according to their common meaning and it is appropriate to consult dictionaries as an aid to determine common meaning. See Sturm, A Manual of Customs Law , pages 202-209, +( 1974 ed.). Webster’s Third New International Dictionary (1993) defines “syrup” as 1a. a thick sticky liquid consisting of a concentrated solution of sugar and water with or without the addition of a flavoring agent or medicinal substance b. the concentrated juice of a fruit or plant; specif : the evaporated juice of the sugar cane as it occurs just prior to crystallization of the sugar in the process of manufacturing cane sugar. The entry papers for the three entries contain a Spanish language certificate of quality issued by the foreign supplier. The protestant has supplied translations of those certificates and a statement dated 5/28/2008 on the foreign supplier’s letterhead that the supplier produces only crystallized sugars, that the sugars covered by the certificates FLOES 7/ 2006, FLOES 8/2006 and 11/2006 ( which correspond to the entries) are composed of crystals ranging from .3 to .5 millimeters and exceed 65% of the substance. The translated certificates also indicate the granulometric analysis of the merchandise. Since there is no dispute that the entries were made no earlier than 9/19/2006 and that the quotas were filled by 9/15/2006, and are covered by USDA Specialty Sugar Cerifications, the proper classification of the sugars would be in subheading 1701.99.5010, HTSUS, and would be subject to the additional duties based on their value as described in subheadings 9904.17.08 to 9904.17.15, HTSUS.

While it is clear that the merchandise was misclassified, even if the misclassification had not occurred, because the quotas were filled by 9/15/2006, entry of the sugars at the low rate was precluded. This is not a situation similar to those in the cases of Esso Standard Oil Co. v. U.S., 30 Cust. Ct. 111 (1953) and Esso Standard Oil Co. v.U.S., 30 Cust. Ct. 386(1953). In those cases, the quotas were open when the entries were made. Thus, the incorrect liquidations at the high quota rates were determined by the court to be illegal and were ordered to be re-liquidated at the low quota rates. Here, the protestant does not dispute that the quotas were filled when it made the entries. Instead, the protestant argues that CBP had a legal obligation to inform the protestant that the quotas were filled, to give the protestant the opportunity to cancel its entries for consumption and to allow the protestant to substitute entries for warehousing in lieu of its entries for consumption.

The protestant relies on ruling 220965 in support of its proposition. That reliance is misplaced. Ruling 220965 concerned a situation in which an importer who had imported experimental drugs under temporary importation under bond entries entered the drug under a consumption entry. The importer in that case demonstrated that its employee who normally was responsible for its imports was on vacation and the employee who actually made the importation was not aware that the drug was solely for experimental purposes. Here, there is no evidence to show that the protestant had a practice of entering the sugars for warehouse rather than for consumption. On the contrary, the protestant instructed CBP to make an entry for consumption. Unlike the situation in 220965, there is no evidence that protestant’s employee who entered the merchandise was new to the job. The crux of the issue is whether CBP has a legal obligation to inform an importer who makes an entry for consumption of merchandise subject to a quota that the quota was filled.

Each person who imports merchandise is required by 19 USC 1484 to file information to enable CBP to determine if that merchandise can be released from CBP custody and to provide the proper classification of that merchandise. Since 1993, an importer is required to present that information and to properly classify imported merchandise using reasonable care. CBP is entitled to rely on the accuracy of the information and classification. See H. Rpt. 103-161(1) pg. 136 (Nov.15, 1993).

The protestant asserts that paragraphs 4.7.2, 4.8.1, 6.2 and 6.3 of Directive 3270-37A issued May 5, 1999, imposes an obligation on the Port Director of the port in which the entry is filed, to determine if a quota is filled and to notify an importer of that fact. Paragraphs 4.7.2 and 4.8.1 do not contain any language that imposes an obligation for a port director to notify an importer. The former paragraph defines the process by which quota priority and status are set. Paragraph 4.8.1 provides that only entry summaries filed at the opening are to be reported to CBP headquarters if CBP anticipates that a quota may fill on opening. Paragraph 6.2 instructs field officers to review quota applications for proper form. The protestant also relies on 19 CFR 132.5 (b) and ( c) for the proposition that an importer must be allowed to enter merchandise in excess of a low tariff-rate quota for warehousing. However, the actual words of the regulation simply state that merchandise in excess of a quota limitation may be entered into a warehouse rather than imposing an obligation on CBP to provide that option. The protestant objects that CBP authorized release of the sugar pursuant to the protestant’s entry for consumption rather than informing the protest that the quota was filled and informing the importer that the sugar to make a warehouse entry. That proposition is at odds with the change to shared responsibility under Customs modernization with the 1993 Act. There are no words in either the cited directive or regulations which impose an obligation on CBP to notify an importer who files an entry for consumption to that the quota is filled and to enter the merchandise for warehouse. The protestant elected to enter the sugar for consumption under which CBP is authorized to release the entered merchandise from its custody. The case of Fujitsu Compound Semiconductor, Inc. v. U.S., 246 F.Supp 2d.1334 (CIT, 2003), aff’d. 363 F.3d. 1230 (Fed. Cir. 2004), provides guidance for resolution of this situation. In that case, CBP did not exercise its discretionary authority under 19 USC 1501 to re-liquidate entries in order for the importer to get the benefit of a post-liquidation ruling. The court found that the statutory language of 19 USC 1501 (A liquidation … may be re-liquidated in any respect by the Customs Service..) did not obligate CBP to exercise that authority. Likewise, the regulatory language here (Merchandise imported in excess of either an absolute or tariff-rate quota may be held for the opening of the next quota period by … entering it for warehouse…) does not impose an obligation on CBP to inform a person who imports merchandise by means of a consumption entry that the merchandise instead be entered for warehousing. Under 19 USC 1484, an importer generally is obligated to enter the merchandise it imports either for consumption or for warehousing. Under 19 CFR 144.1 (c), only if imported merchandise remains in continuous CBP custody, an importer may switch the type of entry. Conversely, once that merchandise is released, the option to switch entry types is not available under that regulation. Moreover, under 19 CFR 141.67, an importer may recall the entry and entry summary documentation before the effective time for entry. The protestant did not exercise this option before CBP released custody to the importer on 9/22/2006.

The protestant asserts that 19 CFR 132.14(b)(2) gives an importer the right to have merchandise to have its merchandise redelivered to CBP custody and the right to substitute a warehouse entry for an entry for consumption. The regulation does not contain any such words. Moreover, while the regulation provides that estimated duties at the over-quota rate are to be deposited, the regulation does not provide a consequence if the merchandise is released before the estimated duties are deposited. As such, the regulation is directory rather than mandatory. The case of Intercargo Ins. Co. (Genauer) v. U.S., 83 F.3d. 391(Fed. Cir. 1996) provides guidance for this situation where merchandise was released before receipt of estimated duties at the over-quota rate. That case involved an interpretation of the words: “promptly shall notify the importer and surety” if liquidation of an entry was extended. In that case, the notice was defective. However, the court held that since the provision did not provide a consequence in the event of a failure to comply, the provision was directory only. There is no reason to interpret the regulation here differently. Moreover, duties at the over-quota rate are secured by the importer’s bond and that those duties can be collected under 19 USC 1505. The merchandise here which is subject to a tariff-rate quota, does not involve a question of admissibility. Instead, the sole consequence that flows from the release is the amount of duty involved. Consequently, the regulation does not provide a right of the importer to have CBP demand redelivery.

HOLDINGS: 1. The sugar is properly classified in subheading 1701.99.5010, HTSUS, and is subject to the additional duties based on their value in subheadings 9904.17.08 to 9904.15.15, HTSUS. 2. CBP is not obligated to notify an importer of the quota status of merchandise entered for consumption before CBP authorizes release from ITS CUSTODY. 3. CBP may, but is not obligated to, demand redelivery of merchandise entered for consumption if it releases tariff-rate quota merchandise without receipt of estimated duties at the over-quota rate. The Port Director is instructed to determine whether the correct classification of the merchandise will result in a refund of duties to the protestant. If the Port Director determines that re-liquidation of the entries at the correct classification will result in a refund of duties, the Port Director shall re-liquidate the entries and make the appropriate refunds. In all other respects, the Port Director shall deny the protest.

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 CBP 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 Harmon, Director
Commercial and Trade Facilitation Division