LIQ-4-01 OT:RR:CTF:ER H070919 RFA
Port Director
U.S. Customs and Border Protection
301 E. Ocean Blvd. Suite 1400 Long Beach, CA 90802
Re: AFR Protest No. 2704-09-100506; 19 U.S.C. §1504(d); Surety Bond Liability
Dear Port Director:
The following is our decision in response to your correspondence, dated July 23, 2009, whereby you forwarded an Application for Further Review (“AFR”) of Protest Number 2704-09-100506, filed on behalf of International Fidelity Insurance Company (“IFIC”), the Protestant. We have considered the facts and issues raised and our decision follows.
FACTS:
IFIC filed the above-referenced protest and application for further review (AFR) involving a formal demand on the surety on the liquidation of one entry of candles from China. The protest concerns the assessment of antidumping duties (“ADD”) on Entry No. NG1-xxxx859-6 imported by Home Scents, Inc., on October 17, 2006. According to the entry documents, the subject entry was made as Entry Type Code “01”. On January 25, 2007, CBP issued a Notice of Action to the importer stating that the merchandise was subject to Antidumping Duty Order A-570-504, and that estimated duties must be deposited in accordance with the antidumping duty rate of 108.3%.
According to CBP’s Automated Commercial System (“ACS”) records, CBP changed the entry code to Entry Type Code “03”, suspended the entry and sent notice of the suspension to the importer and IFIC on April 28, 2007. No single transaction bond was requested for the entries. Entry documents indicate that the surety was IFIC. ACS records indicate that IFIC issued a continuous transaction bond in the amount of up to $50,000 to the importer for the period of August 26, 2002, to August 25, 2007. The exporter of record was Xinxing Xiamen I.
On April 17, 2008, Commerce issued liquidation instructions (Message Number 8108212) directing CBP to liquidate the entries of merchandise exported from China, under Case No. A-570-504, and assess antidumping duties at 108.30% of the entered value and assess interest on underpayments of the required amounts deposited as estimated antidumping duties for merchandise entered during the period of August 1, 2006 through July 31, 2007. After 1 month and 26 days, CBP liquidated the subject entry on June 13, 2008, and assessed ADD and interest according to the liquidation instructions from Commerce.
In Message Number 8108212, Commerce stated that: “Notice of the lifting of suspension of liquidation of entries of [the] subject merchandise during the period of [August 1, 2006] through [July 31, 2007] occurred with the publication of the Notice of Initiation of Administrative Review (72 FR 54428, [September 25, 2007]).” The Federal Register notice cited by Commerce as notice of lifting of suspension of liquidation did not list the antidumping duty Case No. A-570-504, did not list the subject merchandise, and did not state that the suspension of liquidation of the entries was lifted. In 72 FR 54428, Commerce informed the public that “[it] has received requests to conduct administrative reviews of various antidumping and countervailing duty orders and findings with August anniversary dates. In accordance with [Commerce’s] regulations, we are initiating those administrative reviews.” In the notice, Commerce notified the public that it was initiating administrative reviews of a number of antidumping and countervailing duty orders and findings which did not include Case No. A-570-504. This notice did not cross-reference the Federal Register notice [72 FR 42383, dated August 2, 2007] which gave interested parties the opportunity to request administrative review of antidumping or countervailing orders, findings, or suspended investigations, which included Case No. A-570-504 on petroleum wax candles.
As CBP did not receive payment from the importer, CBP issued a demand for payment by the surety, IFIC, listed in the entry document on September 1, 2008. On February 18, 2009, IFIC timely filed Protest and AFR No. 2704-09-100506, claiming that:
CBP’s liquidation was untimely;
the surety bond contract does not cover third party beneficiaries (domestic parties) and that payment of antidumping duties to domestic industries under the Continued Dumping and Subsidy Offset Act of 2000 (“CDSOA” or referred to as the “Byrd Amendment”) is unconstitutional;
a reimbursement certificate was not filed as importer may have been out of business;
a continuous bond cannot be used to secure antidumping duties above 5% in accordance with T.D. 85-145;
the assessment of interest was unlawful; and
further review of the protest was appropriate pursuant to section 174.24 of the CBP Regulations [19 CFR 174.24].
ISSUES:
Whether the liquidation of the entry was timely under 19 U.S.C. §1504(d)? If so, whether the other claims cited by the protestant constitute grounds for granting the protest?
LAW AND ANALYSIS:
As entry was made after December 18, 2004, we initially find that the instant Protest was timely filed per 19 U.S.C. § 1514, i.e., within 180 days from the date of mailing to the surety of notice of demand for payment. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)).
Further review of the protest is warranted pursuant to 19 CFR §§174.24(b) and 174.25 as the protest is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Customs courts. Specifically, protestant claims that CBP’s liquidation of the entry was untimely under 19 U.S.C. § 1504(d) as the liquidation occurred more than 6 months after notice of the lifting of suspension by Commerce.
Timeliness of Liquidation:
19 U.S.C. § 1504(d) provides that:
Except as provided in section 1675(a)(3) of this title, when a suspension required by statute or court order is removed, the Customs Service shall liquidate the entry, unless liquidation is extended under subsection (b) of this section, within 6 months after receiving notice of the removal from the Department of Commerce, other agency, or a court with jurisdiction over the entry. Any entry (other than an entry with respect to which liquidation has been extended under subsection (b) of this section) not liquidated by the Customs Service within 6 months after receiving such notice shall be treated as having been liquidated at the rate of duty, value, quantity, and amount of duty asserted by the importer of record or (in the case of a drawback entry or claim) at the drawback amount asserted by the drawback claimant.
IFIC claims that CBP’s liquidation occurred more than 6 months after notice of suspension of liquidation was removed. In support of its position, IFIC relies on the Federal Register notice cited in Commerce’s instructions to CBP that notice of lifting of the suspension occurred on September 25, 2007. Therefore, IFIC claims that the entry should be treated as having been liquidated at the rate of duty and the amount of duty asserted by the importer of record at the time of entry.
In International Trading Co. v. United States, 412 F.3d 1303, 1313 (Fed. Cir. 2005), the court found that the period for deemed liquidation pursuant to § 1504(d) “was triggered when the final results of the third administrative review covering the entry was published in the Federal Register”. The Federal Circuit has also held that “[t]o be sufficient for purposes of § 1504(d), the ‘notice’ must be ‘unambiguous’ that the suspension of liquidation has been lifted, but does not need to include specific liquidation instructions from Commerce to Customs”. NEC Solutions (America), Inc. v. United States, 411 F.3d 1340, 1344 (Fed. Cir. 2005)(citations omitted). While there was no final results notice published in the Federal Register but an e-mail from Commerce to Customs indicating that there should be no unliquidated entries, the court concluded that the e-mail message was unambiguous if “a reasonable Customs official would have read the message to provide notification that any suspension of liquidation on the NEC entries had been removed”. Id. at 1346.
It is a long-standing principle that to be effective notice must be published or promulgated in such manner as to give notice to interested parties. See United States v. Leonard W. Moritz Co., et al v. United States, 7 Cust. Ct. 568 (1941), affd. 30 C.C.P.A 134 (1942). In Fujitsu General America, 283 F.3d 1364, 1381-82 (Fed. Cir. 2002), the court noted that “it is just as important that there be ‘an unambiguous and public starting point for the six-month period’ . . . when liquidation of entries is suspended pending an administrative review and thereafter the suspension is removed. . .” (See also American International Chemical, Inc. v. United States, 387 F. Supp. 2d 1258 (Ct. of Intl. Trade 2005) holding that messages posted to the Customs Electronic Bulletin Board regarding the lifting of suspension of liquidation constituted notice to Customs and the public). However, publication of a court decision in the Customs Bulletin does not constitute notice for the purpose of 19 U.S.C. § 1504(d). See Travelers Indemnity Co. v. United States, 580 F.Supp. 2d 1330 (Ct. of Intl. Trade 2008).
In the present case, the notice of the opportunity to request an administrative review (72 FR 42383) of August 2, 2007, listed six antidumping cases involving goods from China, including Case No. A-570-504. The notice on initiation of the further review of September 25, 2007, not only did not cross-reference the notice of August 2, 2007, but simply stated that with respect to two Chinese antidumping cases, Commerce would initiate reviews. The failure to cross-reference the earlier notice and the failure to list the relevant case in the notice of September 25, 2007, could not provide unambiguous notice from Commerce to CBP that suspension of liquidation on entries covered by Case No. A-570-504 was lifted.
A comparison of the language found to be unambiguous by the NEC Solutions court with the absence of language here demonstrates the ambiguity of the September 25, 2007 notice with regard to the lifting of the suspension of liquidation. The notice in NEC Solutions stated: “there should be no unliquidated entries of television receivers monochrome and color, from Japan (A-558-015) held by Customs for antidumping purposes during the period 03/10/1971 through 02/28/1999. . .” The notice identified the merchandise to which the notice applied, identified the antidumping case, identified the country, and identified the period of entry. The court found the words employed in the notice critical. That is, “there should be no unliquidated entries of that
merchandise” was held to convey the unambiguous message that there were no suspensions in place. In the present case, the message of September 25, 2007 was silent on each critical element: the merchandise, the country, the antidumping case number and the relevant period of entry. It also did not contain any words that would indicate the lifting of the suspension of liquidation. Therefore, we find that the deemed liquidation period did not start with the September 25, 2007 Federal Register notice, but when CBP received unambiguous liquidation instructions from Commerce to lift suspension of the entry and liquidate the entry. As Commerce issued unambiguous instructions on April 17, 2008, and CBP liquidated the subject entry on June 13, 2008, and assessed ADD and interest according to the liquidation instructions from Commerce, we find that CBP acted within the six month timeframe (1 month and 26 days) as required under § 1504(d). Therefore, the liquidation was timely and the entry was not liquidated by operation of law.
Whether Payment of CDSOA to Domestic Parties Is Unconstitutional or Breach of the Surety Contract:
In its request for AFR, IFIC claims that the payment of antidumping duties to domestic industries under the Continued Dumping and Subsidy Offset Act of 2000 (“CDSOA” or referred to as the “Byrd Amendment”) is unconstitutional. IFIC also claims that the distribution of the duties to domestic parties creates third-party beneficiaries which are a material alteration of the bond contract.
The enactment of the Continued Dumping and Subsidy Offset Act of 2000 (“CDSOA”) did not change the status of antidumping or countervailing duties as duties. See Huaiyin Foreign Trade Corp. (30) v. United States, 322 F. 3d 1369 (Fed. Cir. 2003). The ultimate distribution of any duties collected does not affect the duties’ status as duties, whether duties are refunded pursuant to a drawback claim, deposited in the general treasury of the United States, or deposited in a special account for the potential disbursement to qualified claimants or for return to the general treasury.
The existence of the CDSOA did not change the importer’s obligation to pay the duties it owes, nor did it change the surety’s liability for those duties. The CDSOA did not alter the contract between the importer and the surety: it did not expose the surety to any greater risk, it did not increase the surety’s contractual liability, nor did it alter the payment structure of the bond. See Bierce v. Waterhouse, 219 U.S. 230, 337 (1911); Washington Int’l Ins. Co. v. United States, 138 F. Supp. 2d 1314, 1331 (Ct. Int’l Trade 2001); Restatement (Third) of Suretyship and Guaranty §§ 37, 41. The CDSOA did not create “third party beneficiaries” to the bond. See Cemex, S.A. v. United States, 384 F.3d 1314, 1322 (Fed. Cir. 2004). Therefore, CBP denies IFIC’s claims on these points.
Reimbursement Certificate
IFIC asserts that CBP improperly doubled the antidumping duties for lack of a reimbursement certificate being filed by the importer. IFIC claims it has been unable to locate/contact the importer to verify whether they were reimbursed for the subject antidumping duties and that the importer was out of business before the date of liquidation of June 13, 2008. As evidence of the claim that the importer has gone out of business, IFIC indicates that the importer has not filed any documents with the Commonwealth of Massachusetts since its Annual Report on March 15, 2006. As no further annual reports were filed, IFIC presumes that the importer has ceased doing business sometime in 2006 or early 2007.
In HQ 230316, dated May 10, 2004, based on the guidance received from Commerce, CBP stated that if an importer goes out of business before the deadline for filing the certificate had passed prior to liquidation, CBP should not presume that reimbursement had occurred and if the importer goes out of business after the deadline for filing the certificate had passed after liquidation, CBP should presume that the reimbursement occurred. CBP further stated that in the absence of evidence to substantiate a claim that the importer went out of business prior to liquidation of the entry, CBP could not accept such assertion and the claims should be denied. See also HQ 226285, dated October 10, 1997, HQ 228840, dated August 21, 2000, HQ 225163, dated September 15, 1994.
Examination of the documents submitted from the Commonwealth of Massachusetts does not support the claim that the importer has gone out of business. There was no filing of an “Administrative Dissolution” by the importer. Further, the fact that the importer did not file an annual report for 2006, 2007, and 2008 is not evidence that the importer ceased doing business. The documents submitted show that the importer filed annual reports for 2000 and 2003 in October 2004, and annual reports for 1998 and 1998 in May 2005. As there is insufficient evidence that the importer was not actively engaged in business by the time the subject entries were liquidated, we find that the protestant is not relieved of its liability for the antidumping duty at double the rate applicable to the entries.
Liability of Surety:
IFIC claims that CBP billed the wrong surety in that CBP should collect from the surety that issued a single transaction bond and not from IFIC which issued a continuous bond. IFIC further claims that a continuous bond cannot be used to secure antidumping duties above 5% in accordance with T.D. 85-145.
According to the entry documents filed using ABI [Automated Broker Interface], IFIC’s continuous bond was the bond listed for the subject entries. It is well established that a continuous bond can be used to secure payment of antidumping duties up to the bond amount. In HQ 230339, the surety claimed that in accordance with T.D. 85-145, a continuous bond may not be used to secure antidumping duties over 5% ad valorem. In this ruling, CBP cited to the relevant portion of T.D. 85-145:
Unless specifically instructed by the Secretary of Commerce or a designee to accept another form of security or a cash deposit for estimated duties, [CBP] may accept, at its discretion, any one of the following forms of security for payment of estimated antidumping or countervailing duties, or both, on merchandise entered for consumption in the United States:
* * * * * (3) If the amount of the estimated antidumping or countervailing duty is less than 5 percent ad valorem (or the equivalent), a continuous basic importation and entry bond, as described in 19 C.F.R. 113.62, in an amount sufficient to cover the amount of the estimated antidumping or countervailing duty, or both, determined by the Secretary of Commerce, and all other entry bonding requirement; . . .
In this ruling, CBP concluded that the surety incorrectly construed T.D. 85-145 as the relevant language cited above did not limit the surety’s liability to antidumping duties of 5% ad valorem on a continuous bond as claimed. CBP found that the language “merely gives CBP the option of using a continuous basic importation and entry bond alone, i.e., without requiring an additional bond to secure antidumping duty, when the estimated antidumping due is small, that is less than five percent ad valorem. We see no basis, and [the surety] offers none, to construe the language of T.D. 85-145, to limit a surety’s liability independent of the liability amount contracted for and appearing on the face of the bond.” HQ 230339. In reaching this conclusion, CBP noted that in HQ 226215, CBP found that a continuous bond could be used to secure payment of antidumping duty up to the bond amount. A bond which guarantees payment of all duties covers antidumping duties as well. See United States vs. Gissel, 493 F.2d 27 (5th Cir. 1974), cert. denied 419 U.S. 1012 (1974)(finding that a bond with no restrictions covers all obligations of the principal). See also 19 C.F.R. §113.62(a)(1)(ii) in which a surety is jointly and severally liable to pay all additional duties, taxes, and charges subsequently found due and imposed on any entry secured by the bond. Given that the above-cited court case, ruling, and regulation address the claims raised by IFIC, we find that IFIC is liable under the terms and conditions of its bond.
Unlawful Assessment of Interest
You claim that CBP should not have charged interest from the time of entry to the date of liquidation because interest cannot be collected on dumping duties secured by a bond under the provisions of 19 U.S.C. § 1677(g). You cite to two court cases, Fujitsu General America v. United States, 110 F.Supp.2d 1061 (Ct. of Intl. Trade 2000), affd. 283 F.3d 1364 (Fed. Cir. 2002) and Timken Co. v. United States, 37 F.3d 1470 (Fed. Cir. 1994), as support for your argument that the interest provision does not apply to bonds posted for estimated antidumping duties. However, these cases do not stand for the position you have indicated.
In Fujitsu General America, the Court of International Trade, citing 19 U.S.C. §1673e(a)(3), indicated that bonds “act ‘as security for undetermined future payments’ during the pre-antidumping duty order, investigative phase. . . Therefore, the ‘amounts deposited’ language of §1677g(a) simply indicates that the existence of an antidumping duty order. . . triggers the application of the interest provision”. 110 F.Supp.2d, 1061, 1081. The court further determined that “[w]here a final assessed antidumping duty rate is greater than the rate at which an importer made deposits upon entry, the true intent of 19 U.S.C. §1677g is to require the assessment of interest on the underpayment of antidumping duties whether the underpayment is 100% or some lesser percentage of the final assessed rate.” Id. at 1082. The court concluded that as Fujitsu’s entries were subject to an antidumping duty finding in 1971, as a matter of law, CBP properly assessed interest on the difference between the amounts deposited by Fujitsu upon entry of its merchandise (zero) and the final antidumping duty rate assessed. Id. In the present case, the Federal Register Notice stated that the order which would trigger the estimated duty liability was issued on August 28, 1986 [see 72 FR 52355, September 13, 2007]. The candles entered by the importer became subject to the order as a result of the notice of final determination of circumvention published in 71 FR 59075, October 6, 2006. CBP finds that the entries of the merchandise were after the investigative phase of the order issued in 1986, and therefore as a matter of law, CBP properly assessed interest on the bond. This decision is consistent with a previous decision taken by CBP. See HQ 228840, dated August 21, 2000.
HOLDING:
For purposes of 19 U.S.C. §1504(d), the entry was timely liquidated. For the reasons set forth above, you are instructed to deny the protest in full.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), 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.
No later than 60 days from the date of this letter, the Office of International
Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP homepage 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