PRO-2-06-CO:R:C:E 221603 GG
Director, Customs Information Exchange
U.S. Customs Service
Room 437
6 World Trade Center
New York, New York 10048
RE: Protest number 1401-4-000032; request for further review; 19
U.S.C. 1520(c)(1); failure to supply documentation supporting
reduced duty entry; 19 CFR 10.24; 19 CFR 10.112
Dear Sir:
This is response to your request for further review of the
protest referenced above.
FACTS:
Protestant filed 7 entries on automobiles it imported during
October and November, 1982. The automobiles were made in part
with American components, whose value or cost could have been
deducted from the full value of the finished automobiles under
item 807, Tariff Schedules of the United States (TSUS). However,
at the time of entry the protestant's broker did not have the
necessary information concerning the value of the American
components, and the automobiles were entered under the dutiable
item numbers 692.1010 and 692.1015, TSUS. The protestant
explains that the entries were made early in the model year,
after the item 807, TSUS data had been compiled by the
protestant, but before it had been made available to the broker.
At the time of entry, the import specialist asked the broker
to post a bond for the missing item 807, TSUS, documents;
apparently this was not done. Neither the importer nor the
broker requested that Customs withhold appraisement and
liquidation pending submission of the necessary information, and
the entries were liquidated, without benefit of item 807, TSUS,
duty deductions, during the period November 1982 through February
1983. On July 5, 1983, protestant filed a 19 U.S.C. 1520(c)(1)
request for reliquidation, with the missing information on the
value of the American components attached. Protestant's argument
was that the failure of its broker to present, at the time of
entry, documentation which would have proven that it was entitled
to a duty reduction, was a mistake of fact. Customs denied the
reliquidation request on January 17, 1984, on the grounds that
the failure to supply supporting documentation was due to
negligent inaction on the part of the importer and could only
have been protested under the provisions of 19 U.S.C. 1514. The
protestant filed the protest currently at issue on February 21,
1984, against Customs' refusal to reliquidate the entries under
19 U.S.C. 1520(c)(1).
ISSUE:
Whether the failure by the importer's broker to supply, at
entry, documents that were required to substantiate a reduction
of duties under item 807, TSUS, was an error that would permit
reliquidation under 19 U.S.C. 1520(c)(1)?
LAW AND ANALYSIS:
The protestant was required to file, in connection with its
entries, documents that would have established the eligibility of
its merchandise for a duty reduction under item 807, TSUS. See
19 CFR 10.24. Since the protestant did not file the necessary
documents at the time of entry, but submitted them approximately
5 months after the last entry was liquidated, the question arises
as to whether the documents' submission was "in connection with
the entries". The timeliness of filing is governed by
19 CFR 10.112, which provides that if the importer fails to file
the documents either at the time of entry or within the period
for which a bond has been posted for their production, but
failure to file was not due to willful negligence or fraudulent
intent, then they may be filed at any time prior to liquidation
of the entry, or if the entry has been liquidated, before the
liquidation becomes final.
As noted above, the documents were filed neither at the time
of entry nor prior to liquidation. It also appears that no bond
was filed which would have set the time for their production.
Therefore, under 19 CFR 10.112, the importer had the option of
filing the documents before the various liquidations became
final, if his earlier failure to file was not due to willful
negligence or fraudulent intent.
There is no evidence to show that the filing delay was
caused by either of those two factors. However, Customs in its
Protest and Summons Information Report dated November 6, 1984,
stated that "there is no indication that failure to make the
claim and supply supporting documentation for 807 treatment was
not due to negligent inaction (willful negligence)". The agency
appears to be confusing two different concepts: negligent
inaction and willful negligence. The relevancy of the former
will be discussed later. However, 19 CFR 10.112 makes reference
only to willful negligence. This type of negligence implies that
there was a deliberate determination not to perform a known duty,
or a reckless disregard of the safety or the rights of others, as
manifested by the conscious and intentional omission of the care
proper under the circumstances. See, e.g., Tyndall v. Rippon, 44
Del. 458, 61 A.2d 422 (1948); Wolters v. Venhaus, 350 Ill.App.
322, 112 N.E.2d 747 (1953). The protestant's explanation that
the documents were not filed at entry because the importations
occurred early in the model year before the documents had been
sent to the broker, argues against a finding that the
protestant's failure to file the documents was willful. Absent
specific proof showing that the failure to file the documents at
the time of entry was deliberate, it would be erroneous for
Customs to conclude that the protestant's failure was due to
willful negligence.
Since there is no evidence that either fraudulent intent or
willful negligence caused the filing delay, the protestant had
the option under 19 CFR 10.112 of submitting the documents
required to substantiate item 807, TSUS eligibility before the
liquidations of the entries became final. Generally, a
liquidation becomes final 90 days after the date of liquidation
unless a timely protest is filed. See 19 U.S.C. 1514(a);
19 CFR 159.9(c)(iii); Occidental Oil & Gas Co. v. United States,
Slip Op. 89-40 (CIT 1989). Under this rule, since no protest
against the liquidations was filed, all of the liquidations would
have been final by late May, 1983, which preceded the filing of
the missing documents by approximately one-and-one-half months.
A liquidation is not considered final, however, if a timely and
meritorious request for reliquidation is filed under Section
520(c)(1) of the Tariff Act of 1930, as amended
(19 U.S.C. 1520(c)(1)). See Customs Service Decision (C.S.D.)
84-42.
19 U.S.C. 1520(c)(1)) permits the reliquidation of an entry
to correct a clerical error, mistake of fact, or other
inadvertence not amounting to an error in the construction of a
law, adverse to the importer, manifest from the record or
established by documentary evidence, in any entry, liquidation,
or other customs transaction, when the error, mistake, or
inadvertence is brought to the attention of the appropriate
Customs officer within one year after the date of liquidation.
The protestant filed a timely request under this provision, whose
denial by Customs prompted the filing of the
19 U.S.C. 1514 protest currently under consideration. The
protest challenges the decision to deny and asserts that the
19 U.S.C. 1520(c)(1) reliquidation request had merit.
The protestant argued in its reliquidation request dated
June 27, 1983, that the failure to supply the necessary
documentation was a mistake of fact. In attempting to compare
its situation to that in C.J. Tower & Sons of Buffalo, Inc. v.
United States, 68 Cust.Ct. 17, C.D. 4327, 336 F.Supp 1395 (1972),
aff'd. 61 CCPA 90, C.A.D. 1129, 499 F.2d 1277 (1974), where
relief under 19 U.S.C. 1520(c)(1) was granted, the protestant
implied that reliquidation was allowed in C.J. Tower because "the
importer made a mistake of fact when it failed to present
documentation to Customs at the time of entry which would have
proven that the imported merchandise was entitled to duty free
entry". However, this is an oversimplification of the court's
rationale; a careful reading of the case reveals that the
ignorance of both the importer and Customs, until after
liquidation became final, of the fact that the merchandise
involved was emergency war material and was therefore eligible
for duty-free entry, constituted the mistake of fact. The court
defined a mistake of fact as "a mistake of fact 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, 336
F.Supp at 1399. In contrast to the circumstances in C.J. Tower,
there was no mistake of fact in the current case because both
Customs and the protestant knew at the time of entry that, but
for the missing documents, the automobiles were eligible for
reduced-duty treatment under item 807, TSUS. Customs' request
that the importer post a bond for the missing documents, and the
protestant's practice in prior years of claiming the duty
reduction, are evidence that both parties were aware of the
situation.
Customs denied the protestant's reliquidation request on
January 17, 1984, stating that "there is no indication that the
failure to make claim [sic] and supply supporting documentation
for 807.00 treatment was not due to negligent inaction (willful
negligence)". As we will discuss, the implicit finding of
"negligent inaction" means that Customs denied the request
because it determined that there was no clerical error, mistake
of fact, or other inadvertence in the entries or liquidations of
the protestant's merchandise.
In its current protest of Customs' denial of its
19 U.S.C. 1520(c)(1) reliquidation request, the protestant
reiterates its argument that "the inability to submit this
documentation constitutes a mistake of fact". In addition to
referencing its earlier submission on the applicability of the
C.J. Tower case, the protestant now cites Customs Service
Decision (C.S.D.) 80-250, both to support its position that there
was a mistake of fact, and to refute the charge of negligent
inaction.
C.S.D. 80-250 states that a failure to act may be
correctable under 19 U.S.C. 1520(c)(1), when it is coupled with
another significant factor, such as a misunderstanding of the
facts, or the inability of the importer to obtain proper
documentation to establish a claim. In that case, the importer
failed to respond to two notices sent by Customs, which requested
information concerning the use of assists. Apparently, the
information was available but was never submitted to Customs
because an employee of the importer had filed the requests
instead of responding to them. Customs liquidated the entries
based on an appraised value which included the assists. The
importer filed a 19 U.S.C. 1520(c)(1) reliquidation request,
which Customs denied for the reason that the protestant did have
the ability to obtain the proper documentation, and the only
significant factor present was his failure to perform a required
act, i.e., submitting information on the value of the assists.
This failure, concluded Customs, amounted to negligent inaction
on the part of the importer, and therefore, did not involve a
clerical error, mistake of fact, or inadvertence. The current
protestant attempts to distinguish its situation from that of the
importer in C.S.D. 80-250, by arguing that its case does not
involve a failure to respond to inquiries or requests from
Customs, but rather is simply one in which at the time of entry
"the importer was unable to obtain the documentation necessary to
establish its claim under item 807, TSUS."
Protestant's argument is not persuasive. The entry
summaries list the protestant, not its broker, as importer of
record. In its memorandum in support of its protest, the
protestant indicates that the 1983 item 807, TSUS data had been
compiled by the protestant but had not been made available to its
broker. This was not a case of the importer being unable to
obtain proper documentation to establish a claim; the importer
had this information, but had failed to supply it to Customs
through its own agent, the customhouse broker, in time to make
entry. The facts here are analogous to those in C.S.D. 80-250:
the protestant did have the ability to obtain the required
documents, indeed, it actually had them, and its failure to
submit them in a timely manner to Customs amounted to negligent
inaction, thereby ruling out the possibility that the filing
delay was caused by a clerical error, mistake of fact, or other
inadvertence.
On account of the lack of a clerical error, mistake of fact,
or other inadvertence, the liquidations at issue became final 90
days after the notices of such were posted.
19 U.S.C. 1514; see also Goldhofer Fahrzeugwerk GmbH & Co. v.
United States, 13 CIT , 706 F.Supp. 892, 895 (1989), aff'd, 885
F.2d 858 (Fed Cir. 1989). The protestant has failed to satisfy
the requirement, set down in 19 CFR 10.112, that reduced duty
documents must be filed before the liquidations became final.
Customs' original decision to deny the protestant's reliquidation
request was correct, since the liquidation of an entry at a
higher rate when the importer fails to document a reduced duty
claim in a timely manner, is not an arbitrary action on the part
of Customs or a violation of the law, but is a legal
determination not subject to reliquidation under
19 U.S.C. 1520(c)(1). See Occidental Oil, Slip Op. 89-40 at 45
(CIT 1989). Accordingly, the protest at issue must be DENIED.
HOLDING:
The importer's failure at the time of entry to submit to
Customs through its broker the documents that were necessary to
substantiate a duty reduction claim under item 807, TSUS, was not
a clerical error, mistake of fact, or other inadvertence which
would permit reliquidation under 19 U.S.C. 1520(c)(1), because
the importer did have the ability to obtain the proper documents
therefore its failure to file them with Customs constituted
negligent inaction.
Sincerely,
John Durant
Director, Commercial
Rulings Division