MAR-2-05 CO:R:C:V 734151 AT
Area Director, JFK Airport
Building 178
Jamaica, New York 11430
RE: Application for Further Review of Protest No. 1001-0-009702
Concerning Country of Origin Marking of Imported Leather Apparel;
Marking Duties; False Certification; 19 U.S.C. 1304(f)
Dear Sir:
This is in response to Protest no. 1001-0-009702 and the
Application for Further Review dated December 20, 1990, submitted
by Follick & Bessich, P.C. (counsel), on behalf of Club De
France, Ltd., Inc., the importer, against your decision to assess
marking duties in connection with an entry of imported leather
apparel.
FACTS:
Entry for 196 men's suede leather garments (137 jackets and
59 vests) imported from Turkey was made on June 21, 1990. On
June 26, 1990, a notice of marking/ redelivery (CF 4647) was
issued because there was no country of origin marking permanently
affixed to the imported garments as required by 19 U.S.C. 1304.
The importer signed the CF 4647 on July 6, 1990 and returned it
to Customs certifying that the merchandise had been properly
marked. However, on July 18, 1990, when Customs officers visited
the importer's warehouse to examine the subject merchandise,
examination revealed that the leather garments had not been
marked with the country of origin. Accordingly, the merchandise
was constructively seized on July 19, 1990, under authority of 19
U.S.C. 1595a(c) as having been introduced contrary to law (by
means of the false certification) for violation of 19 U.S.C.
1304. The record indicates that on August 18, 1990, the Trade
Enforcement Team examined the seized merchandise and determined
that it had now been properly marked with the country of origin
and was eligible for release. The merchandise was released on
August 31, 1990, upon payment of $2,190. The record indicates
that the entry in question was liquidated on September 28, 1990
with 10 percent marking duties.
Counsel claims that the assessment of marking duties was
improper because the merchandise in question was properly marked
with the country of origin after importation under Customs
supervision prior to liquidation of the entry, and therefore the
requirements provided in 19 U.S.C. 1304(f) were satisfied.
Counsel also claims that in submitting the certified marking
notice on July 6, 1990, Club De France incorrectly believed that
the certification could properly be issued while the marking of
the leather garments, which was to commence on that same day,
remained actively in process. Counsel states that on July 9,
1990, the assigned contract worker did not report to Club De
France's premises to continue marking the leather garments due to
the fact that she had severely fractured her leg in an accident
and could not return for several weeks. As a result, the
garments were not properly marked when Customs inspectional
personnel arrived at Club De France's premises on July 18, 1990,
to examine the merchandise resulting in the instant seizure.
Counsel further contends that after the seizure Club De France
immediately secured a second contract worker to complete the
marking process which was completed during the week of July 23,
1990 and verified by Customs by letter dated August 30, 1990.
ISSUES:
Whether the assessment of marking duties is proper in
this case.
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304, provides that, unless excepted, every article of foreign
origin imported in to the U.S. shall be marked in a conspicuous
place as legibly, indelibly, and permanently as the nature of the
article (or container) will permit, in such manner as to indicate
to the ultimate purchaser in the U.S. the English name of the
country of origin of the article. 19 U.S.C. 1304(f) provides
that 10 percent marking duties shall be levied, collected and
paid if an imported article is not properly marked with the
country of origin at the time of importation and such article is
not exported, destroyed or properly marked under Customs
supervision prior to liquidation. Under this provision, the
importer whose goods are found to be not legally marked is
afforded three choices. If he chooses not to correct marking
deficiencies he must export or destroy the goods under Customs
supervision. Otherwise, the goods must be marked in accordance
with the requirements of section 1304 and Part 134, Customs
Regulations (19 CFR Part 134), such marking to be accomplished
under Customs supervision prior to liquidation of the entry.
19 CFR Part 134, implements the country of origin marking
requirements and exceptions of 19 U.S.C. 1304. Section 134.51,
Customs Regulations (19 CFR 134.51), provides that when articles
or containers are found upon examination not to be legally
marked, the district director shall notify the importer on
Customs Form 4647 to arrange with the district director's office
to properly mark the article or container or to return all
released articles to Customs custody for marking, exportation or
destruction. This section further provides that the identity of
the imported article shall be established to the satisfaction of
the district director. Section 134.52, Customs Regulations (19
CFR 134.52), allows a district director to accept a certification
of marking supported by samples from the importer or actual owner
in lieu of marking under Customs supervision if specified
conditions are satisfied.
Here, by executing the certificate on the CF 4647 that the
merchandise had been properly marked, Club De France indicated to
Customs that its choice was to mark. While the choice between
exportation, destruction, and marking after importation is not in
all cases irrevocable, section 1304(f) provides that if one of
these three is not accomplished under Customs supervision prior
to liquidation of the entry covering the article the marking duty
shall be deemed to have accrued at the time of importation and
shall not be remitted in whole or in part nor shall payment be
avoidable for any cause. Therefore, as applied here, section
1304(f) would require Customs to collect marking duties upon the
failure of Club De France to mark the merchandise under Customs
supervision, such duties having accrued when Club De France made
entry and secured their release from Customs custody.
The record in this case indicates that Customs
constructively seized the merchandise on July 19, 1990, because
Club De France submitted a false certification in that the
merchandise was not properly marked with the country of origin in
accordance with the signed CF 4647. The record further
indicates that while the merchandise was under Customs custody as
a result of the constructive seizure, Club De France properly
marked the seized merchandise with the country of origin as
certified by a Customs inspection on August 15, 1990, prior to
liquidation of the entry on September 28, 1990. Thus, the
question presented in this case is whether it is proper to
assess marking duties under section 1304(f) if merchandise that
is constructively seized due to the submission of a false
certification by the importer, is later marked while the
merchandise is still under constructive seizure but prior to
liquidation of the entry.
In order to resolve this question a brief review of the
legislative history behind the enactment of section 1304(f)
(previously codified as section 304(b) of the Tariff Act of 1930,
and later amended in the Customs Administrative Act of 1938, as
section 304(c)), is in order.
Section 304(b) of the Tariff Act of 1930 provided for the
assessment of marking duties against an importer if at the time
of liquidation any article or its container was not properly
marked with the country of origin unless exported under Customs
supervision. Section 304(b) provided in part that:
if at the time of liquidation any article or its container
is not marked, stamped, branded, or labeled in accordance
with the requirements of this section, there shall be
levied, collected, and paid on such article, unless
exported under Customs supervision a duty of 10 percent
of the value of such article... (emphasis added)
Therefore, under the existing law an importer only had two
choices to avoid liability for marking duties which were either
to properly mark the merchandise with the country of origin or
export the merchandise under Customs supervision, prior to
liquidation.
However, when Congress enacted the Customs Administrative
Act of 1938, changes were made to section 304(b) in which
additional choices were provided to the importer for avoiding the
liability of marking duties. These additional choices were
written in section 304(c) of the 1938 Act and are emphasized by
the underlined portions below. As written, section 304(c)
provides in part that:
if at the time of importation of any article (or its
container, as provided in section (b)) is not marked)
in accordance with the requirements of this section, and
if such article is not exported or destroyed or the
article (or its container, as provided in section (b)
marked after importation in accordance with the require-
ments of this section (such exportation, destruction, or
marking to be accomplished under Customs supervision prior
to liquidation of the entry covering the article, and to
be allowed whether or not the article has remained in
continuous customs custody) there shall be levied,
collected, and paid upon such article a duty of 10 percent
ad valorem, which shall be deemed to have accrued at the
time of importation, shall not be construed to be penal,
and shall not be remitted wholly or in part nor shall
payment thereof be avoidable for any cause...
Section 304(c) of the 1938 Act contains identical language
to the present statute section 304(f) of the Tariff Act of 1930,
as amended. Congress' intent in making the above modifications
was to provide an importer additional choices to avoid liability
for marking duties and to limit the application of the additional
duty to those articles which go into the commerce of the U.S.
This is illustrated in a conversation between Senator David L.
Walsh (Chairman, Senate Subcommittee on Finance) and Stephen J.
Spingarn (Office of General Counsel, Department of the Treasury)
on Tuesday 25, 1938, during the Senate hearing on H.R. 8099
(House of Representative Bill to amend certain administrative
provisions of the Tariff Act of 1930) stated in part below:
Mr. Spingarn. Existing law provides for an additional
duty of 10 percent ad valorem on all articles when the
articles or their immediate containers are not marked at
the time of importation, unless the articles are exported.
Senator Walsh. What is the additional duty now?
Mr. Spingarn. Ten percent ad valorem.
Senator Walsh. That is exactly the same?
Mr. Spingarn. This is exactly the same, with the
exception that it limits the application of the additional
duty to those articles which go into channels of trade in
the United States without being marked as required by law
either before or after importation. In other words, at
present the article has got to be exported in order to avoid
the payment. Under the bill, if the goods are not marked on
arrival, in order to avoid the payment of the 10 percent
extra duty this marking may be performed under Customs
supervision at the expense of the importer. The goods can
then go into commerce without the payment of that 10 percent
additional marking duty. (Emphasis added).
Congress also intended that marking duties should not be
construed as penal. This is shown by the supplementary language
"which shall be deemed to have accrued at the time of
importation, shall not be construed to be penal, and shall not be
remitted wholly or in part nor shall payment thereof be avoidable
for any cause" which was added in section 304(c).
The United States Customs Court stated in A.N. Deringer,
Inc. v. United States, 51 Cust. Ct. 21, C.D. 2408 (1963), that
the conditions to impose liability for marking duties under
section 304(c) are two: First, that the article is not at the
time of importation marked as the statute requires; and second,
that if not so marked when imported, it has not prior to
liquidation been (a) marked properly under Customs supervision,
or (b) exported under Customs supervision, or (c) destroyed under
Customs supervision. When these two events concur, the marking
duty is imposed by section 304(c), and it shall not be remitted
wholly or in part nor shall payment thereof be avoidable for any
cause. The court stated that "those who import goods into the
United States accept certain responsibilities that have been laid
on them by Congress. One such responsibility, and an important
one, is to see that imported merchandise of foreign origin is
properly marked to show the country of origin, before it enters
into the commerce of the United States." (Emphasis added).
Customs also follows this construction with respect to the
assessment of marking duties. In HQ 731775 (November 3, 1988),
Customs ruled that two prerequisites must be present in order for
it to be proper to assess marking duties under 19 U.S.C. 1304(f).
These two prerequisites are:
1. the merchandise was not legally marked at the time
of importation, and
2. the merchandise was not subsequently exported,
destroyed or marked under Customs supervision prior to
liquidation. (Emphasis added).
In this case, the assessment of marking duties is not proper
due to the fact that the merchandise was properly marked under
Customs supervision (albeit under constructive seizure by
Customs) prior to liquidation of the entry. The record indicates
that the constructively seized merchandise was released from
Customs custody on August 31, 1990 properly marked with the
country of origin. The record also indicates that the entry for
this merchandise was liquidated on September 28, 1990 almost a
month after release of the merchandise. Therefore, the
merchandise entered the commerce of the U.S. properly marked with
the country of origin prior to liquidation of the entry.
Although the merchandise was properly marked while under
constructive seizure by Customs, we find that this still
satisfies the requisite of being marked under Customs
supervision. If we were to assess marking duties in this case,
we would be in conflict of Congress' intent for enacting section
304(c) which was to impose such duties only when not legally
marked merchandise entered the commerce of the U.S.
HOLDING:
The assessment of marking duties in this case was not proper
due to the fact that the constructively seized merchandise was
properly marked under Customs supervision with the country of
origin prior to liquidation of the entry. Accordingly, you are
directed to grant the protest. A copy of this decision should be
attached to the Customs Form 19, to be sent to the protestant.
Sincerely,
John Durant, Director