LIQ-9-01-CO:R:C:E 221887 C

District Director of Customs
U.S. Customs Service
477 Michigan Avenue
Detroit, MI 48226

RE: 19 U.S.C. 1520(c)(1); request for reliquidation and duty refund; correctable error must be manifest from the record or established by documentary evidence; protest No. 3801-8-002052

Dear District Director:

This case is a protest and application for further review submitted by your office under 19 CFR 174.26(b)(1)(i) (PRO-2- CO:CT KF; P9002052/TXTFRISC; April 25, 1989). The PROTESTANT protests a decision by you denying a request for reliquidation under 19 U.S.C. 1520(c)(1). You denied the request on the grounds that no error correctable under the statute occurred. We have reviewed the record of this case, including your decision, the opinion of the Customs Information Exchange, and the arguments submitted by the PROTESTANT. Our decision follows.

FACTS:

The record demonstrates that the PROTESTANT had been engaged in the importation of furniture and furniture components for a number of years. In this scenario, Sunarhauserman, LTD of Canada (LTD) is the foreign manufacturer/shipper, and Sunarhauserman, Inc. (U.S.), the PROTESTANT, is the importer. During late 1985 and early 1986, PROTESTANT and Customs were engaged in talks regarding various subjects, including intercompany transactions, invoices, and end-user pricing. To respond to Customs inquiries on these subjects, PROTESTANT formed a task force to evaluate the relationship between LTD and PROTESTANT, as such related to the sale of products in the United States, the commission arrangement between the companies, and the issue of customs duties. At that time, it appeared that PROTESTANT's invoicing practice, under the deductive value method of valuation, may have been producing erroneous duty assessments. Thus began a period characterized by efforts made by PROTESTANT and Customs designed to rectify these problems, efforts including the reevaluation of PROTESTANT's and LTD's relationship and pricing structure, as well as the construction of a formula or means by which accurate invoice prices could be determined for use in the entry of merchandise. This series of efforts extended from the above time frame (January - April 1986) through January of 1987, by which time PROTESTANT finally rectified the aforementioned problems and began submitting invoices that reflected accurate prices for duty assessment purposes. In the meantime, through December 1986, PROTESTANT, knowing fully the facts, continued to submit invoices that reflected incorrect prices.

As indicated, PROTESTANT became aware of the invoice pricing problem by early 1986. Rather than file a protest under 19 U.S.C. 1514 immediately, or a formal request for extension of liquidation under 19 CFR 152.12 - probably the course best suited to the circumstances, PROTESTANT continued to submit erroneous invoices while working to iron out its problems. By summer of 1986, PROTESTANT decided that it needed the assistance of an attorney to finally resolve its value problem, a problem that required revision of its relationship with the Canadian company; yet, it was not until October 1986 that PROTESTANT, through counsel, requested that liquidations be withheld, a more informal procedure. This request appears to have been made verbally to Customs at Champlain on October 1, 1986. It was made subsequently by letter, dated October 20, 1986, from PROTESTANT's counsel to Customs at Champlain, certified copy to Port Huron. PROTESTANT testifies that copies of this letter were sent subsequently (date unspecified) to Detroit and Buffalo. The copy sent to Detroit was returned as undeliverable and then sent again to a corrected address. Subsequent to the request, PROTESTANT believed that liquidations were being withheld. The record shows that, after the request, entries continued to liquidate automatically at the four offices involved: Champlain, Port Huron, Buffalo, and Detroit. Corrected prices were eventually calculated, and these were finally reflected in invoices in January 1987.

On July 10, 1987, subsequent to the discovery in June 1987 that entries had continued to liquidate, PROTESTANT filed requests for reliquidation under 19 U.S.C. 1520(c)(1) at the four offices involved. It was too late by then to file a protest for entries liquidated between July 1 and December 31, 1986. Customs at Champlain, in April 1988, denied PROTESTANT's reliquidation request for entries liquidated between July 1 and October 1, 1986, subsequently (the record suggests September 1988) approving a protest of such denial only for liquidations between October 1 and December 31, 1986. None of the other ports approved protestant's reliquidation requests. PROTESTANT filed this protest with your office, protesting your October 12, 1988, denial of its section 1520(c)(1) request and petitioning for reliquidation of entries liquidated at Detroit during the October-December 1986 period (hereinafter referred to as the referenced period). We understand that the other offices are awaiting the decision on this protest.

ISSUE:

On the facts of this case, has an error correctable under 19 U.S.C. 1520(c)(1) been established to the satisfaction of the statute's standard - manifest from the record or established by documentary evidence?

LAW AND ANALYSIS:

PROTESTANT advances two theories in support of its protest. First, Customs committed correctable error under the statute in failing to withhold liquidations, as PROTESTANT requested. Second, correctable error was committed in Customs failure to liquidate or reliquidate entries according to corrected invoice prices. The entries involved in this protest were liquidated during the referenced period.

PROTESTANT's second theory cannot be sustained. First, PROTESTANT asserts a failure to liquidate entries in accordance with corrected prices; yet, the liquidations in question occurred during the referenced period while corrected prices were not finally formulated until January 1987. The entries liquidated during the referenced period were liquidated on the basis of the information - invoices, etc. - submitted knowingly by PROTESTANT, such entries and invoices containing erroneous prices. There is no evidence that PROTESTANT, during or after the referenced period, submitted specific requests to liquidate specific entries, identified by entry number, according to corrected prices. Again, there were no corrected prices until January 1987.

Second, PROTESTANT asserts a failure by Customs to reliquidate liquidated entries according to corrected prices; yet, first, as above, there were no such prices until January 1987, and, second, there is no evidence that PROTESTANT submitted specific requests for reliquidation that identified specific entries and included corrected prices. In fact, PROTESTANT did not submit a request for reliquidation under 19 U.S.C. 1520(c)(1) until July 1987, the denial of which is the subject of this protest.

When an importer is aware that entries submitted contain erroneous information, he has several choices. Prior to liquidation, he can notify Customs of the problem and submit corrected information. When the information necessary to correct the erroneous entries is unavailable, the importer can file for extension of liquidation under 19 CFR 159.12. Subsequent to liquidation, the importer can notify Customs and Customs may reliquidate voluntarily under 19 U.S.C. 1501 on the basis of corrected or additional information. Customs voluntary action must take place within 90 days of liquidation. Alternatively, or if Customs chooses not to reliquidate voluntarily, he may file a protest under 19 U.S.C. 1514 within 90 days of the liquidation. In all of these cases, the importer must identify the entries to be liquidated or reliquidated and must submit corrected or additional information upon which Customs can perform the requested liquidation or reliquidation.

On the facts here, although PROTESTANT, at all times relevant, knew of the problem with the invoice prices, it neglected to avail itself of these procedures, waiting until October 1986 to make a request to withhold liquidations. Moreover, PROTESTANT cannot complain of a failure by Customs to liquidate or reliquidate in accordance with corrected prices when it failed to submit particular requests to liquidate or reliquidate that identified specific entries and contained corrected prices. Again, there were no corrected prices until January 1987.

PROTESTANT's first theory - that Customs at Detroit committed a clerical error or inadvertence correctable under 19 U.S.C. 1520(c)(1) in failing to withhold liquidations as requested - is sustainable only if it can be established that a request to withhold liquidations was made at Detroit and some error or mistake occurred to prevent the withholding. We have given PROTESTANT every opportunity to demonstrate that an error causing a failure to withhold liquidations occurred at Detroit, but we are unable to draw that conclusion.

PROTESTANT asserts that a copy of the October 20, 1986, letter to Champlain, which requested the withholding of liquidations, was sent to Detroit subsequent to its mailing to Champlain. The letter was returned as undeliverable and then sent again. The dates of these actions are unspecified. There is no evidence on this record to show that Detroit received the letter. There is no evidence to show that Customs Detroit acted on the letter one way or another - denying or approving the request. Despite PROTESTANT's assertions, there is no evidence on this record that Customs Detroit received a request to withhold liquidations in any form.

PROTESTANT also asserts that the import specialist at Champlain acted as "middleman" between PROTESTANT and the other Customs offices involved, including Detroit. Mr. Wayne Nystrom, the Champlain import specialist, currently retired, executed a sworn affidavit, dated March 30, 1991. In it he testifies that, subsequent to being contacted by PROTESTANT's counsel during October of 1986, he agreed to be the official to whom PROTESTANT could submit information pertaining to the value issue. Also, after receiving PROTESTANT's request to withhold liquidations in October 1986, he informed the import specialists at Buffalo and Detroit of his conclusion that the invoice values were not accurate reflections of the transaction value of the merchandise. Further, he states that the other import specialists involved agreed that he would receive value information from PROTESTANT, make a determination on the correct value of the transactions, and report his findings to them for their own review and determination. Mr. Nystrom acknowledges in the affidavit that liquidations were not withheld at Champlain "for some reason," and that invoice values were not finally corrected until January of 1987, at which time he accepted the values as accurate and after which time entries were liquidated according to corrected prices.

Mr. Nystrom does not state in his affidavit that the import specialists agreed to withhold liquidations at all ports involved. He does not state that he told the import specialist at Detroit that liquidations should be withheld or that PROTESTANT requested withholding. He does not indicate that he even discussed this particular matter with a Customs Detroit official.

By memorandum of June 3, 1991, we asked the Detroit Customs office to provide further information. Specifically, we asked whether or not Customs Detroit was requested by PROTESTANT to withhold liquidations and, if so, when and by what means was the request made. By memorandum of response from the Assistant District Director of Commercial Operations, dated July 31, 1991, Customs Detroit stated that, to the best of its knowledge, including what office records revealed, no request was made by PROTESTANT to withhold liquidations in 1986 because of a transaction value problem. Customs Detroit further explained that absent notification of a value problem or any indications of such on the entry summaries, the entries were liquidated "no change."

That Customs Champlain granted PROTESTANT's protest, and approved reliquidation and refund of duty for entries liquidated at Champlain during the referenced period, is not evidence that Customs Detroit knew of the request to withhold liquidation at that time. It is not evidence that Customs Detroit committed correctable error under the statute. While the record of this case demonstrates a basis for the granting of PROTESTANT's protest at Champlain, as such is viewed from a hindsight perspective, it does not demonstrate a basis for granting the instant protest at Detroit. The difference is that at Champlain, the director, in his discretion, determined on the record that a request for withholding had been made by PROTESTANT and received by Customs. Receipt of the request is verified by the affidavit of the Champlain import specialist. Apparently, the director determined that the withholding of liquidations, in accordance with PROTESTANT's request, was warranted in the circumstances, and that failure to implement withholding was due to a mistake or inadvertence by Customs. Contrarily, at Detroit, receipt of a withholding request is refuted and the position taken is that no correctable error occurred.

As stated, we recognize that, in some circumstances, a failure by Customs to withhold liquidations can be a correctable error under the statute. (See Esso Standard Oil Co. v. United States, 30 Cust. Ct. 111, C.D. 1506 (1953), where the record clearly demonstrates a failure by a Customs official to follow a Customs instruction to withhold liquidation. On these facts, there is clearly evident an intent by Customs to withhold liquidations and a failure to do so.) However, since the statute requires identification and establishment of a particular mistake, error, or inadvertence, reliquidation cannot be authorized on the basis of continued liquidations, after a withholding request, in the absence of sufficient evidence identifying and establishing the mistake, error, or inadvertence that occurred. As this principle relates to the instant case, we submit that before reliquidation can be authorized, a mistake or error must be identified; such mistake or error cannot be established unless it first is established that a request for withholding was made by PROTESTANT and received by Customs at Detroit. The record establishes the foregoing with respect to the protest at Champlain, as evidenced by the affidavit executed by the Champlain import specialist and the fact that the protest was approved by the district/port director. The record fails to establish the foregoing with respect to Detroit.

In Customs Service Decision (CSD) 79-386, we decided that a failure to withhold liquidations was an inadvertence correctable under 19 U.S.C. 1520(c)(1). 13 Cust. Bull. 1581 (1979). Two points must be made about this case. First, the facts of the instant case are distinguishable from the facts considered in CSD 79-386. There, the importer had been dealing directly with the Customs office involved, the office later alleged to have failed to withhold liquidations. There was an agreement between the importer and Customs that, pending resolution of the value problem, the importer would increase the transaction value of the entries by 25%. This further establishes that the two parties were engaged in arms length dealings with one another. Most significantly, Customs withheld liquidations of most of the entries made during the period when values were unresolved; there were only a few of numerous entries that were liquidated. This clearly indicates that it was Customs intention to withhold liquidations. Given this intention, inadvertence or mistake as the reason for the failure to withhold liquidation in the few cases is indicated.

On the facts of the instant case, it is clear that PROTESTANT and Customs Detroit did not communicate effectively. PROTESTANT was dealing primarily with the Customs Champlain office, mistakenly expecting that what was understood between it and Champlain was also understood between it and the other offices. In short, there was a communication problem involved in the instant case that was not evident on the facts of CSD 79- 386. Also, unlike CSD 79-386, where Customs withheld the liquidation of most entries as the importer there allegedly requested - such action clearly indicating an intent to withhold by Customs - there is no indication on the record in the instant case that Customs Detroit had intended to withhold liquidations but failed to do so through a mistake or inadvertence. Consequently, while there was a basis for ruling in favor of the importer in CSD 79-386, that basis is lacking on the facts of the instant case.

The second point to be made about CSD 79-386 pertains to its broad statement that a disagreement between an importer and Customs as to the existence of an agreement to withhold liquidations is, without more, a mistake of fact. As a general proposition, this statement is incorrect and the CSD is hereby clarified. Where a mistake of fact is evident from the facts, and it produces a failure to withhold liquidations, one will be recognized; however, the mere fact of a disagreement between Customs and an importer as to whether or not a request to withhold liquidations had been made is not conclusively indicative, by itself, of a mistake of fact. In determining whether or not there has been a mistake of fact, or some other correctable error, we are limited by the facts of the case. In the instant case, the evidence is insufficient to establish that Customs Detroit was aware of a request to withhold liquidations. In CSD 79-386, the broker was dealing with Customs officials in the district where the entries in question were filed and controlled. In the instant case, evidence demonstrating direct and persistent communication with Customs Detroit (where the entries in question were filed), during the relevant period, is lacking. Evidence establishing that PROTESTANT and Customs officials at Detroit discussed the withholding of liquidations is lacking. Communication with an import specialist at another port is not the equivalent of dealing directly with the port where entries are made and controlled. In CSD 79-386, it at least appeared that Customs and the broker agreed that some confusion existed regarding a request to withhold liquidations. On the facts here, Customs Detroit makes no such concession. Given that Customs Detroit was unaware of a request to withhold liquidations, its liquidation of entries was proper and bulletin notices of liquidation, absent protests, were final and conclusive.

In summary, the case for reliquidation under 19 U.S.C. 1520(c)(1) has not been made. Entries at Detroit were liquidated and bulletin notices were properly posted. The protest procedure under 19 U.S.C. 1514 provides the statutory remedy to correct erroneous liquidations, but protests were never filed. In some circumstances, a failure by Customs to withhold liquidations is correctable error under 19 U.S.C. 1520(c)(1), but PROTESTANT has not established, on the record of this case, that such an error occurred at Detroit. On this record, the protest must be denied.

HOLDING:

Reliquidation under 19 U.S.C. 1520(c)(1), to correct a clerical error, mistake of fact, or other inadvertence not amounting to an error in the construction of a law, may be made only when such clerical error, mistake of fact, or inadvertence is manifest from the record or established by documentary evidence. The burden of establishing correctable error is on the petitioner. When the alleged correctable error is a failure by Customs to withhold liquidation, the petitioner, in demonstrating that a correctable error occurred, must at least demonstrate that a request to withhold had been made and was received by an appropriate Customs officer. Where Customs refutes that a request was received, and the record lacks sufficient evidence to establish otherwise, the protest must be denied.

You are hereby instructed to deny the protest and to inform the PROTESTANT of this decision in accordance with 19 CFR 174.30(a).

Sincerely,

John Durant, Director
Commercial Rulings Division