Port of Boston
ATTN: Edward Szymczak
10 Caseway Street
Boston, MA 02222-1059
RE: Protest and AFR No. 0401-98-100153; The Rockport Co.; assessment of interest; 19 U.S.C. 1514; requirements for filing a protest
Dear Mr. Szymczak:
The above-referenced protest was forwarded to this office for further review. We have considered the facts and issues raised, and our decision follows.
Protestant, The Rockport Company, protests the assessment of interest by the U.S. Customs Service against entry number 110-xxxx562-8, by bill dated April 10, 1998. Protestant entered entry number 110-xxxx562-8 on July 2, 1997. According to the Customs records in the ACS system, that entry was scheduled to liquidate on May 15, 1998. After the value disclosure on October 8, 1997, Customs redlined the entry, and unset the liquidation date. Entry 110-xxxx562-8 liquidated on April 10, 1998 with the value of the disclosed assists included, plus interest.
According to the Protestant, the assessment of interest was based on an increase in value of $531,824. The increase represents a quarterly value disclosure made by Protestant by letter dated October 8, 1997. The disclosure concerns assists, principally molds, supplied to foreign vendors for the period July through September 1997. The value disclosure resulted in a duty
increase of $48, 898. Protestant states that the interest covers the period of July 2, 1997 to October 8, 1997. Protestant also states that Customs selected the first entry in the quarter as the vehicle against which to apply the value disclosure payment and interest was assessed from the date of entry pursuant to section 19 U.S.C. 1505(c).
Protestant states that it made a value disclosure for the third quarter 1997 on October 8, 1997, and that disclosure indicated that during that period it had made payments totaling over $380,000 to various vendors for molds and lasts and provided production materials valued over $150.000, including freight. Protestant states that these payments and assists are dutiable and are to be added to the price paid or payable in reaching statutory transaction value.
Protestant states that for its convenience and that of the Customs, Customs allocated the entire amount to the subject entry, filed July 2, 1997.
Protestant states that the value disclosure is made up principally of mold payments and material assists supplied to foreign vendors during the third quarter 1997. Protestant states that the mold payments were made and the materials supplied before production commenced. Thus, Protestant argues, it is unlikely that the footwear manufactured with the molds paid for or the materials supplied during the third quarter 1997 was imported during that same quarter. Protestant argues, without submitting supporting evidence that most of the footwear produced with the molds would have been importer later in the year and in 1998, and the same is for the footwear made with the material assists. Although, Protestant states, it is possible some of the footwear produced with these materials would have entered during the third quarter.
Protestant argues, that this being the case, the payment in October 1997 was made prior to the date when it would be required to pay estimated duties, i.e., on the date footwear made with the molds and materials would have been entered during the third quarter. Protestant argues that interest is not payable from the first day of the quarter. Protestant argues that mold payments are made and materials supplied during a quarter, and footwear made with the molds and materials will not be entered at the beginning of the same quarter.
Protestant argues that under the circumstances no interest is due, or, in the alternative, Customs should pick a date different than the first date of the quarter from which to assess interest.
Also attached to the file is letter to the Office of Regulations & Rulings from Protestant dated July 26, 1999. That letter reiterates the arguments in the protest, that it is inappropriate to charge interest beginning with the date of the earliest entry in the quarter for which the report was made. Protestant states that the quarterly reports reflect activities, principally assists in the form of molds, lasts, and production materials during the quarter. Protestant argues that these activities precede production, and that entries of merchandise whose value is affected by the quarterly report would not have been made during the quarter and, never in the first part of the quarter. Protestant also enclosed an August 29, 1986 letter from its counsel to the Port of Boston. The letter also states, “the disclosure was made on behalf of Highland Import Corporation, which at the time was a Company subsidiary. The letter refers to a voluntary disclosure dated March 28, 1986 and suggests that the reports covering subsequent periods were the consequence of an agreement between the Company and the responsible Customs official. The Company files contain no more specific information on the agreement.” Finally, Protestant states that pursuant to what appears to be an agreement with responsible port officials, quarterly assist reports have been made since the first quarter 1986.
The attached letter from Protestant’s counsel to the Port of Boston dated August 29, 1986, refers to a voluntary disclosure made on March 28, 1986 for certain assists. This letter established Protestant’s practice of making quarterly disclosures. The letter states that this shall constitute the first supplement to that disclosure and shall cover the period January 1, 1986 to March 31, 1986. The letter also states, “the second supplement, covering the period April 1, 1986 to June 30, 1986 in accordance with your instructions to this office and to Mr. Robert Weedon of Highland. Future supplements for each Highland quarter will be similarly filed.”
The Port of Boston states that while Protestant did not request that the value of the assists be attributed to one entry, it is the local customs policy that the assists be applied to one entry for collection purposes.
Has the Protestant met the requirements for filing a protest pursuant to 19 U.S.C. 1514?
LAW AND ANALYSIS:
First we note that a bill requesting the payment of interest may be a protestable issue under section 1514. The court in New Zealand Lamb Co. v. United States, 40 F.3d 377 (Fed. Cir. 1994) stated that Customs billing of New Zealand Lamb for interest, by virtue of section 1514(c)(2)(B), commenced the running of the 90-day limitation period. The court also stated that a bill for interest is a “charge or exaction” that falls under the purview of section 1514(a)(3).
The Court of Appeals for the Federal Circuit further articulated the requirements for protesting an interest bill in Castelazo & Associates, a/c Galaxy Tapes v. United States, 126 F.3d 1460 (Fed. Cir. 1997). In that case the Plaintiff’s entries were liquidated with antidumping duties on March 5, 1986. Following that liquidation on April 8, 1988, Customs billed the Plaintiff for interest from the date of entry until the date of liquidation. Plaintiff filed a protest contesting only the assessment of the antidumping duties on June 23, 1988. The interest was not protested at that time. Customs partially approved the protest on March 16, 1990, and the interest liability was recalculated. Within ninety days of the reliquidation, Plaintiff contested the interest assessment in the March 16, 1990 reliquidation. Customs denied the protest on August 17, 1990 holding that it was untimely because it was not filed within ninety days of the bills for interest issued on April 8, 1988. Plaintiff brought suit in the Court of International Trade to challenge the denial of its protest and recover the interest it had paid. The Court of International Trade granted summary judgment to the Plaintiff, which the Government appealed to the Court of Appeals.
The Court of Appeals reversed the lower court stating “Customs’ decisions on charges or exactions, such as assessed interest, are independent of its decisions on liquidation or reliquidation. Customs has made a decision as to interest when it ‘(I) informs the importer that interest is due and (ii) sets forth either the amount of interest due or the method for calculating that amount in terms of the rate.’ New Zealand Lamb (internal citations omitted)” Id. at 1463. The Court held that the interest assessment on April 8, 1988 was ripe for protest and Plaintiff had ninety days to protest that assessment of interest.
Therefore, the holdings in both New Zealand Lamb and Castelazo, do not decide whether the Customs demand for interest causes the protest period in section 1514 to start tolling. In both cases, the bill had been paid. The issue is when the period for filing a protest under 19 U.S.C. 1514(c)(3) starts.
Section 1514(c)(2) states in pertinent part, “Except as provided in section 1485(d) and 1557(b) of this title, protests may be filed with respect to merchandise which is the subject of a decision specified in subsection (a) of this section by—
the importers or consignees shown on the entry papers, or their sureties;
any person paying any charge or exaction;
any person seeking entry or redelivery;
any person filing a claim for drawback;
* * * *
Section 1514(a) list the seven decisions that are protestable under this section:
(1) the appraised value of merchandise;
(2) the classification and rate and amount of duties chargeable;
(3) all charges or exactions of whatever character within the jurisdiction of the Secretary of the Treasury;
(4) the exclusion of merchandise from entry or delivery or a demand for redelivery to customs custody under any provision of the customs laws, except a determination appealable under section1337 of this title;
(5) the liquidation or reliquidation of an entry, or reconciliation as to the issues contained therein, or any modification thereof;
(6) the refusal to pay a claim for drawback; or
(7) the refusal to reliquidate an entry under section 1520(c) of this title;
The subject matter of a protest is set by paragraph (a). Specifically, under 19 U.S.C. 1514(a)(3). The persons entitled to assert that subject matter are described in paragraph (c)(2). That is, importers, consignees shown on the entry papers, or their sureties, are entitled to assert the subject matter involved in the importation of goods: their appraised value, classification, rate and amount of duties chargeable. Paragraph (c)(3) sets the 90-day period in which to challenge a subject matter decision of paragraph (a) by a person entitled to do so under paragraph (c)(2).
In the case of imported merchandise, Customs fixes the appraised value, classification, rate and amount of duties owed by liquidation, and is required to give notice of that event. Paragraph (c)(2)(A) provides that subject matter may be challenged by protesting within, but not before, 90 days after the notice of liquidation. Protests with respect to the subject matter of paragraph (a)(1) filed before liquidation are ineffective. U.S. v. Reliable Chemical Co., 605 F.2d 1179, 66 CCPA 123, 127-128 (1979).
Likewise, as noted, the courts have interpreted the terms “charge or exaction” paragraph (a)(3) as covering interest. Congress limited, by paragraph (c)(2)(B), challenges to charges to any person paying the charge or exaction. Since liquidation of an entry under 19 U.S.C. 1500 does not involve interest assessments following the holdings in New Zealand Lamb and Castelazo, supra, the time period for filing a protest begins with the date of the decision, but not before that date, against which the protest is made. In order to give effect to each of the relevant texts of 19 U.S.C. 1514 set in paragraphs (a)(3), (c)(2)(B), and (c)(3)(B), the payment of the charge by the Protestant is a necessary element of entitlement to protest.
Additionally, this position has already been taken in HQ 227420, dated February 25, 1997. That case involved a request that the denial of its application for further review be set aside pursuant to 19 U.S.C. 1515(c). In that case, the requester sought to protest a Customs bill for a penalty under 1592(d), as a protestable “charge or exaction” under section 1514. The requester had not paid the bill under 1592(d). In denying the request to set aside the denial of the application for further review, we stated,
“Since no payment has been received on the demands, what is protested is the demands (note that under 19 U.S.C. 1514(c)(2)(B), protests against charges or exactions may be filed by ‘any person paying any charge or exaction’” (emphasis added).”
Therefore, based on the position already taken in HQ 227420, the plain language in section 1514, and the facts in both New Zealand Lamb, and Castelazo, we conclude that in order to protest a “charge or exaction” pursuant to section 1514(a)(3), the party so protesting must have paid that “charge or exaction.” The paying of a “charge or exaction” is a protestable event pursuant to section 1514(c)(2). The simple billing, without actual payment, of a “charge or exaction” does not satisfy section 1514(c)(2), which allows a party paying the “charge or exaction” to protest.
Protestant did not pay the bill for interest, and therefore failed to comply with the statutory requirements for a protest in section 1514, which under subsection 1514(c)(2)(B) allows a person paying such a charge or exaction to protest. Therefore, the protest is denied for failure to comply with all the requirements of filing a protest pursuant to section 1514.
The protest should be DENIED.
In accordance with Section 3A(11)(b) of Customs Directive 099 3550065, 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.gov, by means of the Freedom of Information Act, and other methods of public distribution.
John Durant, Director
Commercial Rulings Division