U.S. Department of Homeland Security
Washington, DC 20229
U.S. Customs and Border Protection
HQ H291184 May 11, 2021
PRO 2 OT:RR:CTF:ER H291184 KF
U.S. Customs and Border Protection Port of Houston
2323 S. Shepherd
Unit 1200
Houston, TX 77019
Re: Protest No. 5301-17-100216; Pluspetrol International, Inc. Dear Port Director:
This is in response to the application for further review of protest number 5301-17- 100216, received by our office on September 29, 2017. Pluspetrol International, Inc. (“Pluspetrol”) protests the refusal by your office to reliquidate entry no. xxx-xxxxx15-2 without antidumping and countervailing duties. We have considered the points raised by your office and the protestant. We affirm your office’s denial of the protest.
Pluspetrol seeks confidential treatment for information regarding its “business operations, the imported pipes, and pricing information and considerations” because this information constitutes confidential business information that would “cause harm to Pluspetrol’s competitive position” if disclosed. Inasmuch as this request conforms to the requirements of 19 C.F.R.
§ 177.2(b)(7), no confidential business information will be included in this decision.
FACTS:
Pluspetrol typically buys goods from U.S. vendors on behalf of affiliated companies and then exports the goods for use in its oil and gas projects in South America. The pipes at issue in this case were acquired to repair and improve sections of an aging oil pipeline maintained by Pluspetrol Norte S.A. (“PPN”), an affiliated company of Pluspetrol that is based in Peru.
On March 27, 2015, Pluspetrol purchased the pipes from MC Tubular Products, Inc. (“Tubular”), a vendor based in the United States. The purchase order describes the pipe specifications required, and stipulates to an FOB Port of Shanghai, People’s Republic of China
(“China”) delivery term. The commercial invoice issued by Tubular states that from “Shanghai Port, China,” the pipes would “ship to” to Houston, Texas, by vessel. The sales contract between Tubular and Pluspetrol identifies Jiangsu Valin-Xigang Special Steel Co., Ltd. (“JVX”) as the manufacturer of the pipes. JVX is a China-based manufacturer.
On April 10, 2015, PPN issued a purchase order to Pluspetrol for the pipes. On June 11, 2015, the pipes were shipped from Shanghai. The bill of lading notes in a section titled “Particulars Declared by the Shipper but Not Acknowledged by the Carrier” that the shipping containers were marked with PPN’s name and address in Peru. Pluspetrol indicates that it intended to ship the pipes directly from China to Peru, however, there were no established shipping routes between those two points. Accordingly, Pluspetrol decided to ship the pipes to Houston, TX and then change vessels in the United States to a Peruvian carrier specializing in navigating the Amazon River to the Peruvian destination. The transportation from China to Houston was arranged with Thorco Shipping America, Inc., and according to Pluspetrol, “[t]his first ‘leg’ in the carriage proceeded as planned.”
On July 16, 2015, Quality Customs Brokers Inc. (“QCB”) submitted an Importer Security Filing (“ISF”) to U.S. Customs and Border Protection (“CBP”) on Pluspetrol’s behalf. The ISF classified the pipes under subheading 7304.19, Harmonized Tariff Schedule of the United States (“HTSUS”). On August 2, 2015, the pipes arrived at the Port of Houston. QCB entered the pipes for consumption on August 5, 2015. The entry summary (CBP Form 7501) specified a “01” entry type. QCB classified the pipes under subheading 7304.11.0020, HTSUS. Based on this classification, the pipes were entered as duty free.
As part of the entry document package submitted to CBP, QCB included a hand annotated copy of the commercial invoice issued by Tubular. The annotation specified the same classification for the pipes as listed in the entry summary. Additionally, a handwritten note stated, “cleared customs to meet export deadline only pipe will remain on docks for 90 days to meet next [vessel] to Peru.” In the bottom left-hand corner was written: “98.74%.” The entry document package also included the mill certificates issued by JVX, detailing the pipes’ specifications.
The transportation from Houston to Peru was originally arranged with Naviera Yacu Taski (“Naviera”) and set to take place on August 19, 2015. Yet the pipes remained in storage within the United States into 2016. Pluspetrol explains that Naviera went bankrupt and despite hopes that Naviera would resume operations, due the money invested in their arrangement and communications received from Naviera, it ultimately had to seek other shipping arrangements. Pluspetrol states that exportation of the pipes was also delayed due to doubts over the financial viability of PPN’s pipeline repair project. Decreased oil prices had disincentivized further investment in the project, leading Pluspetrol to consider alternative uses for the pipes.
While the pipes were being stored in the United States, on February 2, 2016, CBP issued a Notice of Action (“NOA”) to Pluspetrol. The NOA explained that CBP had initiated an investigation of the entry due to possible underpayment of antidumping and countervailing duties (“AD/CVD”). On March 18, 2016, CBP issued another NOA, concluding the pipes had been misclassified under subheading 7304.11.0020, HTSUS. Pursuant to the specifications detailed in
the mill certificates, CBP classified the pipes under subheading 7304.19.1045, HTSUS. Based on this classification, CBP determined the pipes were subject to AD/CVD under case numbers A- 570-956-000 and C-570-657-000. Consequently, CBP modified the entry type to “03” and asked Pluspetrol to submit the corresponding AD/CVD deposits. CBP determined that the ADD rate for the pipes was 98.74 percent, and the CVD rate was 35.17 percent.
On April 4, 2016, eight months after the pipes entered the United States, Pluspetrol issued a commercial invoice to PPN. Pluspetrol was able to arrange delivery of the pipes with Industrial Maritime Carriers LLC, who issued a bill of lading on the same day. The merchandise departed the United States on April 6, 2016, and the pipes were ultimately delivered to PPN in Peru.
On June 9, 2017, CBP liquidated the entry subject to AD/CVD, pursuant to Message Nos.
6025302 (January 25, 2016) and 7032304 (February 1, 2017). Pluspetrol subsequently filed the present protest on July 10, 2017, raising three arguments. First, Pluspetrol contends that AD/CVD was improperly imposed on the pipes because they were never used or offered for sale in the United States. Second, Pluspetrol argues that assessment of AD/CVDs violates the Export Clause of the U.S. Constitution. Third, Pluspetrol seeks to substitute its consumption entry for a bonded entry on the basis that QCB failed to utilize bonded procedures in error, due to mistake of fact, or by inadvertence.
On September 21, 2017, the Port of Houston denied the protest. First, you determined that AD/CVD was properly assessed on goods entered for consumption, regardless of whether they were subsequently offered for sale or exported. Second, you determined the Export Clause was not implicated in this transaction because duties were assessed pursuant to the pipes’ importation. Third, you determined the evidentiary record did not substantiate Pluspetrol’s claim that but for QCB’s error, a bonded entry was intended for the pipes. You concluded that no substitution of the consumption entry, or remission of AD/CVD, was warranted. We affirm your conclusion.
ISSUES:
Whether goods must be used or offered for sale in the United States to be subject to AD/CVD.
Whether CBP’s assessment of AD/CVDs on the pipes violates the Export Clause of the U.S. Constitution.
Whether Pluspetrol may substitute its consumption entry for a bonded entry due to QCB’s alleged error, mistake of fact, or inadvertence, in filing the entry.
LAW AND ANALYSIS:
As an initial matter, we find that, pursuant to 19 U.S.C. § 1514(c)(3)(A), this protest was timely filed on July 10, 2017, within 180 days after the June 9, 2017, liquidation date for the subject entry. We also find that this protest meets the criteria for further review. Pursuant to 19
U.S.C. § 1514(a), a protestable issue was raised by challenging CBP’s decision regarding the duties that could lawfully be assessed against the pipes. Pursuant to 19 C.F.R. § 174.24(b), the protestable issue warrants further review because it involves a question of law which has not previously been ruled upon.
Whether goods must be used or offered for sale in the United States to be subject to AD/CVD.
Generally, antidumping duties properly assessed by CBP are not protestable, because CBP has “merely [a] ministerial role in liquidating antidumping duties.” Mitsubishi Elecs. Am., Inc. v. United States, 44 F.3d 973, 977 (Fed. Cir. 1994). CBP’s ministerial role is to follow the liquidation instructions issued by the U.S. Department of Commerce (“Commerce”), and compute the duty owed on imported goods by applying the AD/CVD rate set by Commerce to the goods’ appraised value. “[I]ncident to its ‘ministerial’ function of fixing the amount of duties chargeable, [CBP] must make factual findings to determine ‘what the merchandise is, and whether it is described in an order,’ and must decide whether to apply the order to the merchandise.” LDA Incorporado v. United States, 79 F. Supp. 3d 1331, 1339 (CIT 2015) (citing Xerox Corp. v. United States, 289 F.3d 792, 794-95 (Fed. Cir. 2002)). CBP’s factual findings and decisions in the execution of its ministerial role are protestable under 19 U.S.C. § 1514.
In the present protest, Pluspetrol does not dispute CBP’s factual finding that the imported pipes are classifiable under subheading 7304.19.1045, HTSUS, rendering them subject to AD/CVD under case numbers A-570-956-000 and C-570-657-000. Pluspetrol does not dispute CBP’s decision to liquidate the pipes in accordance with Commerce’s instructions in Message No.’s 6025302 and 7032304, nor CBP’s computation of the duties owed pursuant to these instructions. Pluspetrol therefore does not dispute any action taken by CBP in its ministerial role of liquidating the pipes subject to AD/CVD. Instead, Pluspetrol disputes whether the pipes fall within the statutory AD/CVD regime in light of their exportation from the United States without being offered for sale pursuant to Torrington Co. v. United States, 82 F.3d 1039 (Fed. Cir. 1996).
We find Pluspetrol’s reliance on Torrington Co. v. United States, 82 F.3d 1039 (Fed. Cir. 1996) unavailing. Pluspterol argues that Torrington held imported merchandise is not subject to AD/CVD if it is not used or offered for sale in the United States. In Torrington, the United States Court of Appeals for the Federal Circuit (“CAFC”) addressed the legality of Commerce’s decision not to “assess antidumping duties upon merchandise imported into the United States by a company related to the foreign manufacturer[,] which is then exported to a third country, when no sale of the merchandise takes place in the United States.” 82 F.3d at 1040. Commerce had used a sampling methodology to determine a representative dumping margin for antifriction bearings, and allowed the foreign manufacturer to not report information regarding imported bearings that were exported by related companies. Id. at 1042. Commerce explained that it could not calculate dumping margins on such imports because, in the absence of sales to the United
States, there was no basis to establish the price of the bearings. Id. The CAFC upheld Commerce’s decision, holding that it was not required to assess antidumping duties upon the exported bearings. Id. at 1045.
Upon reviewing Torrington, we disagree that it establishes goods must be used or offered for sale within the United States as a condition to becoming subject to AD/CVD. Rather, we find that Torrington holds Commerce may lawfully exclude particular types of transactions from its computation of a dumping margin. Torrington, thus, has no relevance to this protest.
Once goods are determined to be subject to an AD/CVD order, duties and liability for their payment accrue upon importation. HQ 224478 (June 18, 1993). Importation of merchandise is defined as the moment a vessel that arrives “within a Customs port with the intent then and there to unlade, or at the time of arrival within the Customs territory” if the goods arrive by other means. 19 C.F.R. § 141.1(a). As “[a]ntidumping duties are treated as regular customs duties, except with respect to drawback,” we find that duties on the subject pipes, and Pluspetrol’s liability for payment, accrued upon the pipes’ importation by vessel on August 2, 2015.
Pluspetrol’s liability for payment remains unaffected by whether the pipes were ultimately exported, or ever used or offered for sale in the United States. See HQ 224478 (June 18, 1993) (finding that the exportation of goods subject to antidumping duties did “not terminate a liability which accrued upon importation[, because a] liability which has accrued is vested (i.e., fixed, settled, or absolute)”). We thus find that Pluspetrol is liable for duties properly imposed by CBP in the execution of its ministerial role.
Whether CBP’s assessment of AD/CVDs on the pipes violates the Export Clause of the U.S. Constitution.
Pluspetrol claims that CBP violated the Export Clause of the United States Constitution, Art. 1, § 9, cl. 5, by imposing AD/CVD on exported goods. The Export Clause “prohibits taxes and duties that are targeted at exports or imposed on goods during ‘the course of exportation.’” Congressional Research Service, Export Clause: Limitation on Congress’s Taxing Power, Report No. R42780 (October 18, 2012). The Supreme Court of the United States has construed the Export Clause as prohibiting a tax or duty imposed “by reason or because of [goods’] exportation or intended exportation, or whilst they are being exported.” Turpin v. Burgess, 117 U.S. 504, 507 (1886).
The question is thus whether AD/CVD was imposed because of the pipes’ importation or exportation. The Court of International Trade clarified the difference between duties owed due to importation or exportation in Nufarm:
The constitutional prohibition of duties on exports ‘does not mean that articles exported are relieved from the prior ordinary burdens of taxation which rest upon all property similarly situated. The exemption attaches to the export and not to the article before its exportation.’
31 CIT 203, 209 (2007) (quoting Cornell v. Coyne, 192 U.S. 418, 427 (1904)). In Nufarm,
customs regulation 19 C.F.R. § 181.53 was challenged under the Export Clause for delaying
payment of duties owed on certain NAFTA products until their exportation from the United States. The court found that although duties were not assessed until exportation, the regulation did not violate the Export Clause because duties were imposed at the time that products were imported. Id. at 211 (citing Ammex, Inc. v. United States, 28 CIT 1208 (2004) (distinguishing “assessment,” meaning fixing of specific amounts of liability, from “imposition,” meaning the responsibility to pay a particular duty).
In accordance with the holding of Nufarm, we find that CBP’s imposition of AD/CVD on the pipes does not violate the Export Clause because duties were imposed by reason of the pipes’ importation and entry for consumption. See H224478 (June 18, 1993); 19 C.F.R. § 141.1(a); Message No.’s 6025302 and 703230. Pluspetrol’s assertion that the pipes were always intended to be exported, even at the moment of importation, is therefore not relevant to CBP’s imposition of AD/CVD.
Pluspetrol relies on United States v. Gosho Co., Inc., 23 F.2d 675 (5th Cir. 1928) to argue that once an export movement has commenced for goods, they are no longer subject to domestic duty or tax. Gosho involved the imposition of a railway transportation tax on domestically produced cotton that was being transported for purposes of exportation. The court stressed that all the cotton was “intended to go out of the country and w[as] on [its] way.” The court held that tax was unconstitutional because the function of the railway transportation was to facilitate the cotton’s exportation, such that the railway movement served to commence the export movement. The tax thus targeted exports of domestic goods in violation of the Export Clause.
The facts of this protest are distinct from Gosho. In the present case, duties were imposed on imported goods instead of domestic goods. This distinction is significant because, as previously stated, the triggering event for the imposition of AD/CVD was the pipes’ importation. See 19 C.F.R. § 141.1(b)(1) (“liability for duties, both regular and additional, attaching on importation, constitutes a personal debt due from the importer to the United States”). The pipes’ subsequent exportation does not relieve Pluspetrol “from the prior ordinary burden[] of” duties owed on imported goods. Nufarm, 31 CIT at 209. Consequently, CBP did not violate Pluspetrol’s constitutional rights under the Export Clause when AD/CVD were imposed on the subject pipes that Pluspetrol imported and entered for consumption into the United States.
Whether Pluspetrol may substitute its consumption entry for a bonded entry due QCB’s alleged error, mistake of fact, or inadvertence, in filing the entry.
Pursuant to 19 U.S.C. § 1514(a), relief from “any clerical error, mistake of fact, or other inadvertence, whether or not resulting from or contained in an electronic transmission, adverse to the importer, in any entry [or] liquidation” may be obtained by protest. Mistakes in the construction of law, however, are excluded as a basis of possible relief. See e.g. HQ 223452 (December 23, 1991) (“the mistake made must be one of fact not a mistake of law”); HQ H286298 (October 13, 2017).
A mistake of fact is “a mistake which takes place when some fact which indeed exists is unknown, or a fact which is thought to exist, in reality does not exist.” C.J. Tower & Sons of Buffalo, Inc. v United States, 68 Cust. Ct. 17, 22 (1972) (citations
omitted), aff'd by 499 F.2d 1277 (C.C.P.A. 1974) (citations omitted). A clerical error is
[a] “mistake by a subordinate, who does not have any duty to exercise judgment.” Xerox Corp. v. United States, 219 F. Supp. 2d 1345, 1348 (Ct. Int'l Trade 2002) (citations omitted). An “inadvertence” is even broader in scope, encompassing oversights or involuntary accidents, even mistakes resulting from inattention and carelessness. Hambro Automotive Corp. v. United States, 603 F.2d 850, 854 (C.C.P.A. 1979). In contrast, a mistake in the construction of law exists when “the facts are known, but their legal consequences are not known or believed to be different than they really are.” Id. at 855.
Pluspetrol seeks relief from AD/CVD liability on the basis that QCB acted in error, due to mistake of fact, or inadvertently, by entering the pipes for consumption instead of filing a bonded warehouse entry or seeking admission into a Foreign Trade Zone (“FTZ”). Merchandise entered for purposes other than consumption may be exempted from AD/CVD. See e.g. Timken Co. v. United States, 18 CIT 897, 904 (1994) (holding that merchandise admitted into a FTZ is not subject to antidumping duties until entered into the customs territory); USEC, Inc. v. United States, 25 CIT 459, 469 (2001) (“merchandise imported under TIB is not entered for consumption; therefore, antidumping duties cannot apply to such merchandise, and commodities imported under TIB are lawfully excluded from the scope of an antidumping investigation”).
The error, mistake, or inadvertence, alleged by Pluspetrol is that QCB did “not recognize that AD/CVD could be applicable” to the pipes. Pluspetrol also claims that seeking entry into a bonded warehouse or admission into an FTZ “had been originally discussed and intended,” and QCB failed to act accordingly.
CBP has previously ruled that “ignorance of the existence of an antidumping duty order is not a mistake of fact.” HQ H112456 (citing HQ 231702 (September 30, 2005)). Instead, ignorance of an applicable antidumping or countervailing duty order constitutes a mistake of law from which no relief is provided by 19 U.S.C. § 1514. Id.; see also HQ H248556 (July 23, 2015) (“Merchandise entered for regular consumption may not be converted to a TIB to avoid the application of AD/CVD duties.”). Pluspetrol may therefore not be relieved of AD/CVD liability by alleging QCB’s ignorance of the applicable duty orders. Additionally, we find that Pluspetrol’s allegation is contrary to the evidentiary record of this protest. Within the consumption entry package filed by QCB was a hand annotated copy of the commercial invoice issued by Tubular, marked with “98.74%.” This percentage reflects the antidumping duty rate for the pipes, and at a minimum evidences that QCB should have been aware of the applicable antidumping duty order. See 19 C.F.R. § 111.29(a) (requiring brokers to exercise “due diligence in… [the] filing of records relating to any customs business matter”).
Pluspetrol next claims that a warehouse entry or FTZ admission had been discussed with QCB, and QCB therefore erroneously acted contrary to the parties’ original intent by filing a consumption entry. Pluspetrol invokes HQ 725570 to argue that a consumption entry may be substituted for a Transportation and Exportation (“T&E”) entry due clerical error by a broker. In HQ 725570, a broker informed CBP that goods entered for consumption had been slated for immediate exportation to Mexico via a T&E entry. The evidentiary record included the following documents: a factory invoice and railway bill of lading identifying Mexico as the destination of
the merchandise, and Mexican landing and registration certificates. The broker explained that a railway employee had “mistakenly requested release against [its] bond.” CBP determined the transaction documents clearly demonstrated that but-for the railway employee’s clerical error, a T&E entry was intended to be filed. CBP concluded that it was manifest from the record the error was not caused by a misconstruction of the applicable law.
We are unable to reach a similar conclusion in this protest. Unlike the broker in HQ 725570, QCB has not acknowledged that any error occurred in filing the subject entry. In further contrast to HQ 725570, the documents from the present transaction contain no evidence that anything other than a consumption entry was ever contemplated. In fact, Pluspetrol provided no evidence whatsoever of any discussion with QCB concerning the type of entry intended for the pipes upon importation. Pluspetrol even states that the “first ‘leg’ in the [pipes’ transportation, the arrival in Houston,] proceeded as planned.”
We do not question that Pluspetrol’s initial intent was to ship the pipes to Peru, as demonstrated by the April 20, 2015, purchase order issued by PPN, and the placement of PPN’s name and address on Thorco’s shipping containers. However, by time the pipes were entered for consumption under a Type 01 entry on August 5, 2015, Pluspetrol chose to store the pipes in a non-bonded warehouse. Pluspetrol’s indicated it was unable to find a shipper capable of navigating the Amazon River and stated that decreased oil prices undermined the financial viability of PPN’s pipeline repair project in Peru. There is nothing in the record that suggests Pluspetrol intended for the pipes to be entered into a bonded warehouse or admitted into an FTZ or directed QCB to do so.
An email from QCB on May 26, 2016, nine months after the pipes were imported, acknowledged that “[w]ith the classification we used to file entry antidumping did not apply” and that “Customs changed the classification to one that is subject to anti-dumping.” QCB further stated that under a classification subject to AD/CVD “we wouldn’t have entered on 03 anyway, it would have gone into a bonded warehouse until ready to export.” This post hoc acknowledgment of what might have occurred had Pluspetrol known all along it would ultimately be able to find a shipper capable of navigating the Amazon River and that the viability of the pipeline repair project would be restored does not amount to evidence of inadvertence and falls squarely within a mistake in the construction of law when “the facts are known, but their legal consequences are not known or believed to be different that they really are.” Hambro Automotive Corp. v. United States, 603 F.2d 850, 855 (C.C.P.A. 1979).
Consequently, we find that Pluspetrol cannot substantiate that but-for QCB’s clerical error or inadvertence, a bonded entry or FTZ admission had been arranged and intended, but was not consummated. See HQ H060975 (September 3, 2010) (finding that a claim of broker error that is unsupported by entry documentation which establishes the inadvertence of the error will not merit a claim for relief). Since no relief from ignorance of AD/CVD liability is provided by 19 U.S.C. § 1514, we conclude that Pluspetrol is liable for all duties assessed by CBP for consumption entry no. xxx-xxxxx15-2.
HOLDING:
Based on the above, we find that: (I) liability for AD/CVD accrues upon importation, regardless of the disposition of the merchandise post-importation; (II) CBP did not violate Pluspetrol’s constitutional rights under the Export Clause by imposing AD/CVD on the subject pipes; and (III) there is no legal basis for converting a consumption entry into a bonded entry in order to avoid the application of AD/CVD. Protest No. 5301-17-100216 is DENIED in full.
Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (CROSS) at https://rulings.cbp.gov/ which can be found on the U.S. Customs and Border Protection website at http://www.cbp.gov and other methods of public distribution.
Sincerely,
GAIL G KAN
Digitally signed by GAIL G KAN
Date: 2021.05.11
16:41:09 -04'00'
for Craig T. Clark, Director
Commercial & Trade Facilitation Division