LIQ-11-RR:CR:DR 227145 LTO

Port Director
U.S. Customs Service
c/o Residual Liquidation and Protest Branch
6 World Trade Center
Room 761
New York, New York 10048-0945

RE: Protest 1001-93-109065; 19 U.S.C. 1504; 19 U.S.C. 1514(c)(3); 19 U.S.C. 1515(c); HQ 225819; surety protest; jewelry; deemed liquidation; canceled checks; 19 CFR 24.3; voluntary tender prior to liquidation

Dear Port Director:

This is in reference to Protest 1001-93-109065, filed by Washington International Insurance Company, concerning the importation of jewelry from the Dominican Republic and the liquidation of eleven entries (entry numbers 336-xxxx545-0, 336-xxxx490-9, 336-xxxx716-7, 336-xxxx871-2, 336-xxxx008-9, 336-xxxx518-8, 336-xxxx635-1, 336-xxxx195-5, 336-xxxx595-5, 336-xxxx704-4 and 336-xxxx821-6). The merchandise in question was entered between November 22, 1991 and January 16, 1992, and the entries were liquidated between May 21, 1993 and June 25, 1993 (incorrectly listed as July 17, 1993 in the Protest Supplement). The date of the formal demand on surety for all entries, including the eleven under consideration, was November 30, 1993 (incorrectly listed as September 30, 1993 in the Protest Supplement).

This protest was timely filed pursuant to 19 U.S.C. 1514(c)(2)(B) (1993) (currently, 19 U.S.C. 1514(c)(3)) on December 22, 1993, and was denied on September 16, 1994. Following the protest's denial, the protestant requested, by timely letter dated November 15, 1994, that we set aside the denial of the application for further review and void the denial of the protest, pursuant to 19 U.S.C. 1515(c). By letter dated January 12, 1995 (HQ 225819), we granted the protestant's request.

FACTS:

The protestant is the surety for the delinquent debtor, Yashie Dominicana Corp. (Yashie). The imported merchandise consists of finished jewelry made from castings in the Dominican Republic. Some of these castings were made in the United States. The imported articles were entered under subheading 7113.20.50, Harmonized Tariff Schedule of the United States (HTSUS), which provides for other articles of jewelry, of base metal clad with precious metal, and claimed to be duty-free under the Generalized System of Preferences (GSP), or partially exempt from duty under subheading 9802.00.50, HTSUS, which provides for articles exported for repairs or alterations.

By letters dated February 12, 1992 (received by Customs on March 12, 1992), Yashie attempted to tender additional duties on the eleven entry transactions under consideration. The letters indicate that the merchandise should have been entered under subheading 7113.11.50, HTSUS, which provides for other jewelry of precious metals. The rate of duty for articles of subheading 7113.11.50, HTSUS, was 6.5 percent ad valorem. According to the letters, Yashie submitted checks totaling $8,092.42 (according to the Protest Supplement, this figure represented the application of the 6.5 percent ad valorem duty rate and a claimed exemption under heading 9802, HTSUS, on the value attributable to the castings made in the United States). Copies of the checks, as written by Yashie were submitted with the Protest Attachment, Exhibit I. Copies of the canceled checks, however, were not provided.

Customs requested, by CF 28 "Request for Information," dated January 5, 1993, that Yashie provide, for all entries made from November 14, 1991 to January 5, 1993, the following: with reference to items sent to the Dominican Republic, "[c]opy of out-bound Air Way Bill; [c]opy of export declaration; copy of export invoice" and a description of all materials, ingredients and components furnished in the Dominican Republic, along with the country of origin of each. There is no evidence in the protest file indicating that the protestant responded to this request. The protestant, however, argues that the "CF 28 failed to identify and therefore inform the importer with sufficient particularity which entry transactions [sic] information was being sought."

On February 17, 1993, a CF 29 "Notice of Action" was issued to Yashie indicating that "[u]pon Import Specialist review it was determined that this merchandise does not fall within the purview of: A7113.11.50005/Free and 9802.00.50607/7113.11.50005/Free. The . . . entries [including the eleven under consideration] are being returned 7113.11.50005/6.5%." As stated above, the entries were liquidated between May 21, 1993 and July 16, 1993 (duty was assessed at the rate of 6.5 percent ad valorem on the full value of the imported articles). According to ACS entry records, the liquidation dates for the eleven entries in question had been extended on either August 31 or October 28, 1992 (by CF 4333-A).

On November 30, 1993, a formal demand on surety for all entries, including the eleven under consideration, was made. The demand indicated that the surety was responsible for $14,417.74 ($14,056.91, principal, plus $360.83, interest) for all entries, including the eleven under protest. The protestant contends that Customs failed to include the amounts tendered on March 12, 1992, when computing the total amount owed by the importer. According to Exhibit I, the total amount of duty assessed by Customs on the eleven entries was $10,200.53, and therefore, taking into account the amount claimed to have been paid by Yashie, the total amount outstanding was $2,108.41 (Exhibit I apparently contains an error, as $10,200.53 minus $8,092.42 equals $2,108.11, not $2,108.41).

Customs, by letter dated June 20, 1994, informed the protestant that the following information was necessary to give its protest claim full consideration: "CF's 5104 and/or canceled checks evidencing voluntary tenders." According to the protestant, Yashie has since ceased operations and cannot be located. Thus, the protestant states that it cannot obtain CF 5104s or the canceled checks. The protest was then denied on September 16, 1994.

The protestant also contends that entry numbers 336-xxxx716-7 and 336-xxxx382-6 were liquidated by operation of law, one year from the dates of entry (January 16 and March 6, 1992, respectively), and that the subsequent liquidations were improper (May 1 and June 18, 1993, respectively), pursuant to 19 U.S.C. 1504(a) and (b).

ISSUE:

1. Whether Customs, at liquidation, failed to take into account the payment of additional duties owed.

2. Whether the entries should have been deemed liquidated by operation of law, pursuant to 19 U.S.C. 1504.

LAW AND ANALYSIS:

1. Voluntary Tender of Duties Owed Prior to Liquidation

By letters dated February 12, 1992 (received by Customs on March 12, 1992), Yashie attempted to make a "voluntary tender" of duties on the eleven entry transactions under consideration. The letters indicate that the merchandise should have been entered under subheading 7113.11.50, HTSUS, with a rate of duty of 6.5 percent ad valorem. Yashie submitted checks (copies of which were submitted with the Protest Attachment) totaling $8,092.42. According to Exhibit I of the Protest Attachment, the total amount of duty assessed by Customs was $10,200.53, and therefore, taking into account the amount paid by Yashie, the total amount outstanding was $2,108.41 ($2,108.11).

The protestant contends that Customs failed to include the amounts tendered on March 12, 1992 when computing the total amount owed by the importer. The protestant points to a similar protest (protest 1001-94-101974) on another entry (entry number 173-xxxx780-4) which was approved. The CF 19 for that protest indicates that a "voluntary tender" by the importer was considered at liquidation ("bill for increase is in the amount of $170.43 ($13376 x 6.5% = $869.44 - 699.01 = 170.43)"). Copies of a letter dated February 12, 1992, and a copy of a check in the amount of $699.01 were submitted with the protest.

The relevant Customs Regulations regarding evidence of payment to Customs are found in 19 CFR 24.3. 19 CFR 24.3(b) provides that "[a] receipt for the payment of estimated Customs duties shall be provided a payer at the time of payment if he furnishes with his payment an additional copy of the documentation submitted in support of the payment. The appropriate Customs official shall validate the additional copy as paid and return it to the payer. Otherwise, a copy of the document filed by the payer and the payer's cancelled check shall constitute evidence of payment." 19 CFR 24.3(c) provides that "[a] copy of a Customs bill validated as paid will not normally be provided a payer. If a bill is paid by check, the copy of the Customs bill identified as 'Payer's Copy' and the payer's cancelled check shall constitute evidence of such payment to Customs."

In each instance (the eleven entries and the entry involved in protest 1001-94-101974), the protestant was unable to provide adequate proof that Customs had received and accepted the voluntarily tendered duties. The protestant has not provided validated copies of the documentation submitted in support of Yashie's alleged payments, nor copies of the documents filed or copies of the canceled checks, in accordance with section 24.3(b). The protestant has also not provided copies of the "Payer's Copy" of the bills or copies of the canceled checks, in accordance with section 24.3(c). As there is no evidence that payment of the additional duties was made to Customs, liquidation of the subject entries without subtracting the amounts of the alleged payments was proper.

2. Deemed Liquidation

The protestant contends that entry numbers 336-xxxx716-7 and 336-xxxx382-6 were liquidated by operation of law, one year from the dates of entry (January 16 and March 6, 1992, respectively), and that the subsequent liquidations were improper (May 1 and June 18, 1993, respectively), pursuant to 19 U.S.C. 1504(a) and (b). 19 U.S.C. 1504(a)(1), as amended (see section 641, Public Law 103-182; 107 Stat. 2204), provides that an entry not liquidated within one year from the date of entry 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, unless liquidation is extended, as provided in that section, or suspended as required by statute or Court order. 19 U.S.C. 1504(b) provides that "[t]he Secretary may extend the period in which to liquidate an entry if . . . the information needed for the proper appraisement or classification of the merchandise, or for insuring compliance with applicable law, is not available to the Customs Service." 19 U.S.C. 1504(b) also states that the Secretary shall provide notice of an extension to the importer of record and surety for the importer of record, and that such notice "shall be in such form and manner . . . as the Secretary shall by regulation prescribe." That regulation, 19 CFR 159.12(b), provides that "[i]f the port director extends the time for liquidation, as provided in paragraph (a)(1) of this section, he promptly shall notify the importer or the consignee and his agent and surety on Customs Form 4333-A, appropriately modified, that the time has been extended and the reasons for doing so." Failure to provide such notice results in liquidation by operation of law. See, e.g., Enron Oil Trading and Transportation Co. v. United States, 15 C.I.T. 511 (1991) (citing Pagoda Trading Co. V. United States, 9 CIT 407, 411, 617 F. Supp. 96, 99 (1985), aff'd, 804 F.2d 665 (Fed. Cir. 1986)).

In this case, the evidence in the file is sufficient to create the presumption that proper notice of extension was given (see e.g., International Cargo & Surety Insurance Co. (Data Memory Corp.) v. United States, 15 CIT 541, 779 F.Supp. 174 (1991)). As stated above, ACS entry records indicate the liquidation dates for the eleven entries in question, including entry numbers 336-xxxx716-7 and 336-xxxx382-6, were extended within one year from the date of entry on August 31 or October 28, 1992 (by CF 4333-A). Moreover, the record is devoid of any evidence substantiating the protestant's contention of unreasonableness on the part of the Customs in extending the liquidation date. See, e.g., St. Paul Fire & Marine Ins. Co. [Carreon] v. United States, 6 F.3d 763 (Fed. Cir. 1993) ("[A]n abuse of discretionary authority [by Customs in extending the liquidation date] may arise only when an extension is granted even following elimination of all possible grounds for such an extension"). Thus, the protestant's argument regarding the extensions is without merit. 3. Miscellaneous

The protestant also contends that the final appraised value of the imported articles is "unreasonable, unsupported and contrary to the guidelines set forth in 19 U.S.C.A. 1401a (1993 Supp.) and therefore the appraisement decisions were arbitrary, capricious, an abuse of discretion, and otherwise in violation of the law and the conditions of the bond."

Section 402(a) through (f) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA), codified at 19 U.S.C. 1401a, provides the hierarchy of methods used when appraising imported merchandise. The preferred method of appraisement is transaction value pursuant to section 402(b) of the TAA. Section 402(b)(1) of the TAA provides, in pertinent part, that the transaction value of imported merchandise is the "price actually paid or payable for the merchandise when sold for exportation to the United States," plus enumerated statutory additions.

Section 500 of the TAA, codified at 19 U.S.C. 1500, provides the general authority under which Customs appraises merchandise. Section 500(a) states that the appropriate Customs officer shall, under rules and regulations prescribed by the Secretary:

appraise merchandise by ascertaining or estimating the value thereof, under section 1401a of this title, by all reasonable ways and means in his power, any statement of cost of costs of production in any invoice, affidavit, declaration, other document to the contrary notwithstanding . . . . The Statement of Administrative Action further provides that: [s]ection 500 of the TAA allows Customs to consider the best evidence available in appraising merchandise . . . [It] authorize[s] the appraising officer to weigh the nature of the evidence before him in appraising the imported merchandise. This could be the invoice, the contract between the parties, or even the recordkeeping of either of the parties to the contract. The protestant has not provided any documentation or evidence indicating that Customs employed unreasonable ways and means to ascertain the value of the imported merchandise. Hence, it has not been demonstrated that the appraising officer under authority of section 500, apparently utilizing a method of appraisement in accordance with section 402, failed to appropriately consider all of the evidence made available by the protestant and to use "all reasonable ways and means in his power" to appraise the merchandise.

Finally, the protestant contends that if the bond issued by the protestant was issued to guarantee payment of increased duties on the subject entries, the protestant "is not obligated for the default of the importer in any amounts in excess of the principal amount of that bond." Insofar as the protestant's obligation for the default of the bond principal is concerned, we agree that the protestant is only bound for the amount, each year, equal to the principal amount of that bond. In this regard, we note that the language found on the Customs Bond, CF 301, provides that the principal and surety bind themselves in the amounts as set forth on the bond. See HQ 546057, dated March 14, 1996. Despite our request, your office has not provided us with the CF 301s for the entries in question. Thus, we are unable to determine whether the amount due exceeds the principal amount of the bonds in question.

HOLDING:

The protest should be DENIED. However, the amount due may not exceed the principal amount of the bonds in question.

In accordance with section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision, together with the Customs Form 19, should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to the mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director
Commercial Rulings Division