OT:RR:CTF:FTM H294004 JER
Port Director Service Port, Norfolk-Newport News
U.S. Customs and Border Protection 101 E. Main Street
Norfolk, VA 23510
RE: Application for Further Review of Protest No. 1401-17-100526; Beveragegrade undenatured alcohol; Miscalculation of proof liters contrary to U.S. Note 5 to Chapter 22
Dear Port Director,
This is in response to the Application for Further Review (“AFR”) of Protest No. 1401-17-00526, filed by Ernst & Young, LLP, on behalf of their client, Alcotra North America, Inc. (“Alcotra” or “Protestant”), against the liquidation of 2 entries. The protest was filed claiming that the broker’s error in filing the Post Summary Correction (“PSC”) resulted in a change of duty rate for imported ethyl alcohol, which was classified under subheading 2207.10.3000 of the Harmonized Tariff Schedule of the United States Annotated (“HTSUSA”).
FACTS:
Protest No. 1401-17-100526 involves two entries which were liquidated on March 3, 2017 (hereinafter referred to as Entry #1 and Entry #2). The merchandise at issue is beveragegrade undenatured alcohol (“ethyl alcohol”). According to Protestant, this protest concerns a mathematical error in the calculation of proof liters associated with imported ethyl alcohol. Protestant avers that the original quantity, specific rates of duty, and customs duties for the merchandise in each entry were correct. As such, Protestant claims that the entries should be reliquidated to reflect the correct quantities and the correct rate of duty applied to each entry, as initially claimed.
Protestant states that its broker, on behalf of Alcotra, filed two consumption entries for the above mentioned imports of ethyl alcohol under subheading 2207.10.3000, HTSUSA, which is dutiable at 18.9 ? per proof liter. Protestant provided one invoice, dated February 21, 2016, for both entries. This invoice pertained to 278,847 proof liters withdrawn on Entry #2 and 462,554 proof liters withdrawn on Entry #1. The duty collected for Entry #2 was $52,702.08, and the duty collected for Entry #1 was $87,422.71. The invoice reflected a total of “103.518, 170 U.S. gallon (“Gal”) 60° F” and total value of $732,203.88. In general, one U.S. gallon converts to 3.7854 liters, the 103.518,170 U.S. Gal converts to 391,857.68 liters when measured at 60° Fahrenheit.
According to Protestant, the broker believed that s/he had performed the mathematical conversions incorrectly and therefore believed that the “proof liter” was a reference to the volume of product imported. According to Protestant, this error led the broker to become confused as to the proper application of U.S. Note 5 to Chapter 22. Because the broker now thought the “proof liter” referred to the volume, s/he thought it needed to convert the specific rate of duty calculation to a figure as if the amount were 100 proof. In order to do so, Protestant states that the broker took the correct duty rate of 18.9 ? per proof liter, and multiplied it by the 189.2 proof and divided by 100, to yield a converted specific rate of duty of 35.7588 cents per proof liter. Protestant states that this conversion was mathematically incorrect, because no further conversion was necessary.
Based on this error, the broker then filed a PSC April 7, 2016. The PSC requested that CBP apply the higher, incorrect duty rate of 35.7588 cents/proof-liter, and increased the duties and fees from $87,422.71 to $165,403.86 (for Entry #1) and from $52,702.08 to $99,712.25 (for Entry #2). This resulted in a duty increase of $47,010.17 (for Entry #2) and $77,981.15 (for Entry #1). Protestant alleges that the PSC for Entry #1 and Entry #2 lists dollar amounts which were based on an incorrect reading of U.S. Note 5 to Chapter 22.
ISSUE:
Whether the Protestant has demonstrated that a Post Summary Correction contains a mathematical error in the calculation of proof liters associated with imported ethyl alcohol contrary to U.S. Note 5 to Chapter 22, HTSUS.
LAW AND ANALYSIS:
As an initial matter, we note that the protest was timely filed on August 28, 2017, within 180 days of liquidation of the entry on March 3, 2017, under the statutory provisions for protests. See 19 U.S.C. § 1514(c)(3). Further, since the protest involves questions of law or fact that have not previously been ruled upon, the criteria for further review by this office have been met per 19 C.F.R. § 174.24(b). Consequently, review of the protest is appropriate pursuant to 19 C.F.R. § 174.26(a).
Before the passage of the Miscellaneous Trade and Technical Corrections Act of 2004, an importer could not remedy a clerical error, mistake of fact, or other inadvertence by filing a protest under 19 U.S.C. § 1514. Instead, an importer was required to request a refund under 19 U.S.C. § 1520(c), which authorized the reliquidation of an entry to correct a clerical error, mistake of fact, or other inadvertence. The implementing regulations authorized reliquidation if the clerical error, mistake of fact, other inadvertence “(1) [did] not amount an error in the construction of a law; (2) [was] adverse to the importer; and (3) [was] manifest from the record or established by documentary evidence.” See 19 C.F.R. § 173.4(a).
The Miscellaneous Trade and Technical Corrections Act of 2004 repealed 19 U.S.C. § 1520(c) and amended 19 U.S.C. § 1514(a) to include “any clerical error, mistake of fact, or other inadvertence” that occurs in an “entry, liquidation, or reliquidation” as protestable events. See Pub. L. 108-429, Title II, § 2015, Dec. 3, 2004, 118 Stat. 2598.
Protestant claims that the filing of the PSC was a clerical error, mistake of fact and other inadvertences, which was based on the misunderstanding of how to apply U.S. Note 5 to Chapter 22. The mistake at issue here is more than a mere clerical error on entry documents. The broker may have made an error in calculating proof liters, however, that error led to an adjustment to duties owed, which created the additional question of whether the calculation of proof liters was in accordance with U.S. Note 5 to Chapter 22. Therefore, we must examine whether CBP should accept Protestant’s argument that the initial calculation (and not the one submitted via a PSC) of proof liters was correct and in accordance with U.S. Note 5 to Chapter 22.
Additional U.S. Note 5 to Chapter 22 provides as follows:
Where in heading 2204, 2206, 2207 or 2208, the rates shown in the rates of duty columns are in terms of a proof liter, proof liter shall mean a liter of liquid at 15.56°C (60°F) which contains 50 percent (100 proof) by volume of ethyl alcohol having a specific gravity of 0.7939 at 15.56°C (60°F) referred to water at 15.56°C (60°F) as unity or the alcoholic equivalent thereof.
We have reviewed the submitted documentation and agree that it supports the claim made by the Protestant. According to the information submitted by protestant, the initial calculations performed by the broker were correct in accordance with U.S. Note 5 to Chapter 22. The original declarations of the entries in question were as follows: Entry #1 - 259,770 kilograms; 462,554 proof liters; $456,818 value; and dutiable at 18.9 ? per proof liter (or $87,422.71); Entry #2 - 120,430 kilograms; 278,847 proof liters; $275,386 value; and dutiable at 18.9 ? per proof liter (or $52,702.08). The subject ethyl alcohol was classifiable under heading 2207, HTSUS, and were dutiable at 18.9 ? per proof liter. U.S. Note 5 to Chapter 22 requires that the rate of duty be calculated per proof liter rather than by volume. Protestant’s PSC erroneously calculated the duty rate which resulted in higher duties payable. However, based upon the entry and invoice documents submitted, the initially declared quantities, in proof liters were correct, and the original values were correct. Accordingly, the duties collected prior to the Post Summary Correction ($87,422.71 and $52,702.08, respectively), were correct.
HOLDING:
The protest should be approved. In accordance with the Protest/Petition Processing Handbook (CIS 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. Any reliquidation of the entry in accordance with this decision must be accomplished prior to mailing of the decision. 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,
For Craig T. Clark, Director
Commercial and Trade Facilitation Division