Customs Ruling HQ W231289 - Protest No. 4196-04-100105; 19 USC §§ 1504(a), 1514(a), 1515(c); 19 C.F.R. §§ 174.24; International Trading Co. v United States, 281 F.3d 1268 (Fed. Cir. 2002); Fujitsu Gen. America, Inc. v. United States, 110 F. Supp. 2d 1061 (Ct. Int’l Trade 2000), aff’d 283 F.3d 1364 (Fed. Cir. 2002); Pagoda Trading Co. v. United States, 617 F. Supp. 96 (Aug. 27, 1985); Rheem Metalurgica S/A v. United States, 951 F.Supp. 241 (Dec. 20, 1996), aff’d by 160 F.3d 1357 (Fed. Cir. 1998).

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HQ W231289
Oct 11, 2007

Type : Liquidation • HTSUS :
Related: 225121; 229421

LIQ – 1
LIQ – 4 – 01
OT: RR: CTF: ER 231289 MAS

Category: Liquidation

U.S. Customs and Border Protection
6747 Engle Road
Middleburg Heights, OH 44130

Re: Protest No. 4196-04-100105; 19 USC §§ 1504(a), 1514(a), 1515(c); 19 C.F.R. §§ 174.24; International Trading Co. v United States, 281 F.3d 1268 (Fed. Cir. 2002); Fujitsu Gen. America, Inc. v. United States, 110 F. Supp. 2d 1061 (Ct. Int’l Trade 2000), aff’d 283 F.3d 1364 (Fed. Cir. 2002); Pagoda Trading Co. v. United States, 617 F. Supp. 96 (Aug. 27, 1985); Rheem Metalurgica S/A v. United States, 951 F.Supp. 241 (Dec. 20, 1996), aff’d by 160 F.3d 1357 (Fed. Cir. 1998).

Dear Port Director:

The above-referenced protest was filed by Motorola Semiconductor HK (Protestant) against the liquidation of merchandise that the Protestant maintains had been liquidated by operation of law. Protestant also contests the classification of the imported entries and the assessment of antidumping duties.

FACTS

This protest concerns four entries – 582-1XXXXX1-3 (Entry 1), 582-1XXXXX9-7 (Entry 2), 582-1XXXX3-8 (Entry 3), and 582-1XXXXX8-1 (Entry 4). The merchandise is uniformly described as “other circuits” under 8542.11.0079, HTSUS, on the CF 7501 for all entries. The entry invoices described the merchandise as analog devices, microprocessors of 8-bits or less, and other microprocessors, and classified under 8542.19.00065, 8542.11.0066 and 8542.11.0072, respectively. Commerce case A580-812 covered DRAM classifiable under 8542.11.0001, 8542.11.0024, 8542.11.0026 8542.11.0034, 8471.91.0000 and 8473.30.4000. As a result, the Protestant was notified to enter either the merchandise as subject to the dumping case, tender the estimated dumping duties and provide a reimbursement certificate or complete one of the certifications set out in ACS message 3152111, dated June 4, 1993. The notice also stated that a failure to exercise either option would risk a determination that the merchandise was DRAM, subject to case A580-812. The Protestant failed to exercise either option.

The Port Director liquidated the merchandise as subject to the dumping case as a result of the Protestant’s failure to comply with the instructions in the notice, in as much as the Port Director determined that the Commerce instructions on the case indicated that covered merchandise was classified within subheading 8542.11, HTSUS. CBP has determined that the invoice information was insufficient to determine whether the entries comprised integrated circuits or DRAM.

One of the entry invoices for Entry 1 (582-1XXXXX1-3) is for part SC380026FB1. The file contains a dated July 2, 2004 statement of George Pratte, who identified himself as having various positions with Motorola Semiconductor Product Sector (SPS) such as a quality engineer and project manager, and explained that part SC380026FB1 was a simple timer with a low power buffer. Another of the entry invoices for Entry 1 is for part SC390064FU. A third invoice for that entry covers part SC390101FU. The file contains the statement of Donna Fulton, dated June 29, 2004, in which Ms. Fulton identifies herself as test and product engineer with Motorola who is familiar with Motorola’s semiconductor devices; Ms. Fulton advises that parts SC390064FU and SC390101FU are an audio processor chip and a switched capacitor integrated circuit, designed for use in mobile radio telephones.

Message No. 3303203 ordered the assessment of antidumping duties at the cash deposit rate in effect at the time of entry for Korean DRAM exported from Hong Kong (A582-212), imported by entities other than LG Semicon America or Hyundai Electronics, and entered or withdrawn from warehouse for consumption between October 29, 1992 and April 30, 1994. Message 3336201 clarified that certain Korean DRAM remained subject to the antidumping duty order and liquidation should continue to be suspended. According to the CBP Automated Commercial System (ACS) records, notices of suspension were sent for each entry on May 28, 1994.

Having received none of the information requested in the CF-29 and pursuant to liquidation instructions 3303203 and 3336201, the Port then liquidated Entries 1 and 2 on April 9, 2004, followed by the liquidation of Entries 3 and 4 on April 16, 2004.

On July 7, 2004, Protestant filed an Application for Further Review (AFR) pursuant to 19 CFR §§ 174.24 and 174.25, alleging the Port’s decision to liquidate the subject entries was inconsistent with prior Headquarters rulings and court decisions. The Port denied the AFR on June 22, 2005 for failure to provide sufficient information to substantiate a change in classification. Protestant subsequently requested that the denial of its AFR be set aside in accordance with 19 CFR § 1515(c) and on October 13, 2005, this Office found denial of further review was inconsistent with prior rulings – HQ 225121 (Mar. 30,1994) and HQ 229421 (Sept. 27, 2002), as well as with International Trading v. United States. 291 F.3d 1268 (Fed. Cir. 2002) – and concluded a sufficient basis for further review was merited pursuant to 19 CFR § 174.24(a).

ISSUES

Whether the subject entries liquidated by operation of law pursuant to 19 USC § 1504(a)?

Whether the subject merchandise was classified correctly?

LAW AND ANALYSIS

Initially we note that Motorola’s protest against the liquidation of imported merchandise and the assessment of antidumping duties was timely filed under the statutory and regulatory provision for protests. 19 USC § 1514 and 19 CFR Part 174. The protest was filed with the Port on July 7, 2004, within 90 days of the Port’s liquidations of the subject merchandise on April 9 and 16, 2004.

Protestant insists the antidumping duty orders in messages 3303203 and 3336201 do not apply to these entries because instructions relating to Korean DRAM do not cover its merchandise. George Pratte, Freescale, “Imported Product Information” (July 2, 2004) (attesting: “This device is not DRAM”). Therefore, Protestant maintains it was improper to liquidate these entries pursuant to the antidumping and countervailing duty orders.

The Port reasons these entries were appropriately liquidated as DRAM in accordance with 19 USC § 1516a(e) and liquidation message numbers 3303203 and 3336201. See CF 6445A (stating: “There was insufficient information provided to support any change in classification of the entered merchandise [from DRAM back to that claimed by Protestant] and the entries were liquidated in accordance with 19 USC 1516(e)”).

1. Whether the entries were liquidated by operation of law

Protestant contends that liquidation of the entries at issue is improper because the entries were “deemed liquidated” by operation of law. The controlling authority in deemed liquidations is 19 USC § 1504 (“liquidation statute”) and Part 159 of the Customs Regulations (1993). Public Law 95-410, the Customs Procedural Reform Act of 1978, added Section 504 to the Tariff Act of 1930. Congress enacted the liquidation statute in 1978 to “to bring the United States into conformity with international expectations interpreted to require that duty liabilities . . . be ascertained and fixed generally within [one] year after entry” and to provide importers with greater certainty regarding future exactions for which they would be obligated or possible refunds for which they would be entitled. See Ambassador Div. of Florsheim Shoe v. U.S., 748 F.2d 1560, 1562 (Fed. Cir. 1984) (describing the importance of bringing finality to liquidations for importers).

Section 504 requires entries that are not extended or suspended shall liquidate by operation of law within one year at the rate of duty, value, quantity and amount of duty asserted by the importer. 19 USC § 1504(a) (providing: “Except as [otherwise] provided…. an entry of merchandise not liquidated within one year from… the date of entry of such merchandise…. shall be deemed liquidated….”). When enacting subsection (d) of 1504 in 1993, Congress indicated its intent to limit the amount of time during which CBP would be permitted to liquidate entries in order to “increase certainty in the customs process for importers, surety companies, and other third parties….”. See International Trading Co. v. U.S., 412 F.3d 1303, 1310 (Fed. Cir. 2005) (noting a primary motivation behind the 1993 amendment was “to remove the government's unilateral ability to extend indefinitely the time for liquidating entries”). Because the merchandise entered on November 14 and December 5, 1993, the relevant formulation of the liquidation statute is as amended by Public Law 98-573, 98 Stat. 2971 (Oct. 30, 1984). It provides, in pertinent part, that:

“Except as provided in subsection (b) [extending liquidation] of this section, an entry of merchandise not liquidated within one year from: (1) the date of entry of such merchandise… shall be deemed liquidated at the rate of duty, value, quantity, and amount of duties asserted at the time of entry by the importer of record. Notwithstanding section 1500(e) of this title, notice of liquidation need not be given of an entry deemed liquidated.” – 19 USC § 1504(a)

In this case, the merchandise entered on November 14 and December 5, 1993, so the Port would have had to liquidate the merchandise within one year of the aforementioned dates of entry. The Port did not liquidate this merchandise, however, until many years later, in April 2004. As such, unless liquidation had been properly suspended or extended, the disputed entries would be considered to have liquidated by operation of law.

Liquidation may be extended beyond the one-year anniversary of entry if: “(1) [i]nformation needed for the proper appraisement or classification of the merchandise is not available; or (2) the importer requests an extension in writing before the statutory period expires and shows good cause why the extension should be granted.” 19 USC § 1504(b), 19 CFR § 159.12(a) [1993]. There was good cause in this case to extend liquidation because the name of the manufacturer was needed to properly classify the subject merchandise and this information was not included on the entry documents. Extending liquidation would not apply to the instant entries, however, because there is no record of notice of extension to the importer, a statutory and regulatory requirement for an extension to be valid and in effect. 19 USC § 1504(b)(2), 19 CFR § 159.12(b) [1993].

Liquidation may be suspended either by court order or by administrative review and, as with an extension on liquidation, the importer must also be provided with notice of a suspension on liquidation. See 19 USC § 1504(a) and (c), 19 CFR § 159.12(c) [1993] (requiring: “If the liquidation of an entry is suspended…. the district director promptly shall notify the importer or the consignee and his agent and surety on Customs Form 4333-A, appropriately modified, of the suspension”). Here, liquidation of Korean DRAM was suspended from May 1994, pursuant to Federal Register announcement of the Opportunity to Request Administrative Review, 59 Fed. Reg. 23051, until publication of Dynamic Random Access Memory Semiconductors of One Megabit or Above From the Republic of Korea; Final Results of Antidumping Duty Administrative Review, A-580-812, 61 Fed. Reg. 20216, on May 6, 1996, and then continuing until the issuance of liquidation instructions 3303203 and 33362010 in November and December 2003 respectively. Because the Port believed that the Protestant’s entries constituted DRAM and was subject to this suspension, it did not act to liquidate the entries until litigation surrounding Korean DRAM had concluded in April 2004, within six months of the issuance of the Korean DRAM liquidation instructions. Therefore, if it is assumed that the subject merchandise is DRAM from Korea, the Port’s actions would be timely under 19 USC § 1504(a) and the entries would not be deemed liquidated by operation of law. 19 USC §1504(a). If, however, the merchandise is classified as microprocessors, analog devices, or other integrated circuits, it would not be included in the DRAM administrative review nor would it be the subject of a court order, so suspension would not be applicable. Consequently, an assessment of whether the Port properly reclassified the entries as DRAM is warranted.

As noted above, the Port suspected the entries constituted DRAM, but there is nothing on record to show that it sought to clarify this impression by asking Protestant for samples, or an explanation of the parts numbers, or invoice descriptions. Although it would have been appropriate for the Port to establish an evidentiary basis for its conclusion that the entries did not consist of the merchandise claimed by the Protestant but was actually DRAM, the Port instead simply presumed its suspicion was correct, unless proven otherwise and issued the CF-29 on that basis alone. While the decisions of Customs officials are generally presumed correct, there must be a reasonable basis for their decision. 28 USC § 2639(a)(1) (stating: “…[I]n any civil action… the decision of …the administering authority …is presumed to be correct. The burden of proving otherwise shall rest upon the party challenging such decision”). See also Ford Motor Co. v. U.S., 25 CIT 775, 790 (Aug. 21, 2000) (holding: “[T]he decision[s] of [Customs] … [are] presumed correct”). See also Hale v. Dept. of Transp., FAA, 772 F.2d 882, 885 (Fed Cir. 1985) (stating: “[I]t may be presumed that the import specialist properly performed [his] duties”). To prevail in a 1504(a) case, it must be shown that the instructions clearly do not apply to the suspect merchandise. Pillsbury Co. v United States, 293 F. Supp. 2d 1351 (2003, CIT) (finding a decision by CBP that a company was not entitled to drawback claims was given statutory presumption of correctness, and burden of proving otherwise rested with company challenging decision); Ford Motor Co. v. U.S., 24 CIT 775, 796 (explaining that Customs’ application of liquidation instructions would be considered improper only where Customs’ classification could be considered unreasonable). Accordingly, for Protestant to overcome the presumption, evidence must demonstrate that the merchandise clearly could not be considered DRAM.

A review of the evidence on record reveals that the Port’s change of classification from “other circuits” to DRAM is without evidentiary support. By contrast, Protestant has provided invoices and product descriptions to substantiate its claims that the entries are not DRAM. Based upon information available on record, CBP’s Lab personnel determined that there is insufficient evidence on record to support a determination that the merchandise covered by the entries constitutes DRAM. Moreover, there are numerous statements on record from employees of the Protestant, avowing Protestant’s merchandise generally, and the subject entries specifically, do not constitute DRAM. For example, Ms. Fulton has explained parts labeled SC390064FU are an audio processor chip, a switch capacitor integrated circuit. Mr. Pratt advised parts number SC380026FU represent a simple time with a small low power buffer. Accordingly, it is evident that this merchandise has not been shown to be DRAM.

Protestant argues that the Port erred in when assessing antidumping and countervailing duties on its entries based upon the liquidation instructions because those instructions do not apply to its merchandise. When the application of instructions for the suspension of liquidation is misapplied, that suspension operates as a nullity because erroneous notice cannot create a deemed liquidation. LG Electronics USA v. United States, 21 CIT 142, 991 F. Supp. 668 (Dec. 31, 1997). See also Rheem Metalurgica S/A v. United States, 951 F.Supp. 241 (Dec. 20, 1996) (noting: “Customs’ mistake… does not excuse its failure to liquidate the entries”), aff’d by 160 F.3d 1357 (Fed. Cir. 1998). In this case, the Port misapplied DRAM instructions to the Protestant’s entries; therefore, the suspension has no effect.

Liquidation by operation of law is a direct mandate to Customs to act within a specific time or to adequately extend the time to act. Pagoda Trading Co. v. United States, 617 F. Supp. 96 (Aug. 27, 1985) (stating: “The statutory provision for liquidation by operation of law was designed for the benefit of importers”). The situation here is comparable to that in Pagoda in that in both, there is a challenge to the appraisement and classification decisions as invalid due to prior liquidation by operation of law. The court in Pagoda held: “[T]here was no proper basis for delay of liquidation…. [so] no type of notice could eliminate Customs' duty to liquidate. Therefore, plaintiff was, as a matter of law, prejudiced by failure to timely liquidate….” Similarly, liquidation was not adequately suspended nor extended in this case, so the Port had one year from time of entry in which to liquidate the merchandise. Accordingly, because the time for liquidation was not properly suspended here, liquidation is deemed to have occurred by operation of law one year from date of entry pursuant to 19 USC § 1504(a) – on November 14, 1994 for entries 1 and 2 and on December 5, 1994 for entries 3 and 4.

Whether the merchandise was classified correctly

Once it has been determined the entries in question were liquidated by operation of law, the remaining issue is the rate at which those entries deemed liquidated. The amount of duties "asserted at the time of entry by the importer" does not afford the importer unlimited discretion to declare duty rates. Instead, liquidation within the meaning of 19 USC § 1504(a) is what the importer is required by CBP officers to assert when filing the entry summary, not what the importer desires to assert upon entry. See Rheem Metalurgica S/A v. United States, 951 F.Supp. 241 (Dec. 20, 1996) (recalling: “The rate of duty corresponding t o the classification asserted ‘at the time of entry’ is that which is on the entry summary accepted by Customs and contains not what the importer, his consignee, or agent necessarily desire but rather what Customs insists upon as a condition precedent to release of the merchandise”), aff’d by 160 F.3d 1357 (Fed. Cir. 1998), American Permac, Inc. v. United States, 10 CIT 535, 642 F.Supp. 1187 (Aug 12, 1986).

In this case, Protestant relies upon invoices to support the assertion that the subject merchandise comprise analog devices [8542.19.0065, HTSUS], 8-bit microprocessors [8542.11.0066, HTSUS], and other microprocessors [8542.11.0072, HTSUS]. Under the 1993 U.S. Harmonized Tariff Schedule, the duty rate for analog devices, 8-bit microprocessors, and other microprocessors is “free”. See Harmonized Tariff Schedule of the United States (July 1, 1993). Although the Protestant urges the entries be classified as microprocessors and analog devices, the entry documents describe the merchandise as “other circuits”, 8542.11.0079, HTSUS and under 19 USC §1504, the classification of the merchandise as entered controls for entries liquidated by operation of law. Therefore, the assessment of antidumping/countervailing duties is not warranted. HOLDING:

For the reasons set forth above, the protest should be GRANTED on the issue that the assessment of antidumping duties was illegal and DENIED as to the assertion that the merchandise is classified under a provision other than subheading 8542.11.0079, HTSUS.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, 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 or entries in accordance with the decision must be accomplished prior to mailing the decision.

Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Myles Harmon, Director
Commercial and Trade Facilitation Division