PRO-2-06/ENT-1-CO:R:C:E 220678 JR

District Director of Customs
101 East Main Street
Norfolk, Virginia 23510

RE: Allowance of Protest; Action to be Taken When Allowance Results in a Bill rather than a Refund; 19 U.S.C. 1515(a); 19 U.S.C. 1501; 19 U.S.C. 1514; Omni U.S.A., Inc. v. U.S.

Dear Sir:

Your office has requested a clarification of policy and procedure on an allowance of a protest.


The following situation was presented in your letter of July 29, 1986: An entry was made with a classification under item 379.3120, Tariff Schedules of the United States (TSUS), which called for a rate of duty of 34.2%; however, due to a clerical error, the broker multiplied the entered value ($165,000) by only 3.42% and, accordingly, paid $5,643.00 at entry. The entry was processed under the by-pass procedures and liquidated as entered. The importer timely filed a protest against the classification under item 379.31, TSUS, and claimed item 376.56, TSUS, as the proper classification. The District agreed with the importer that item 376.56, TSUS, was the correct classification and allowed the protest. Reliquidation at the 10.6% rate applicable to item 376.56, TSUS, resulted in a bill to the importer in the amount of $17,490.00. The importer paid the bill of $11,847.00, which was the difference between the amount previously paid and the correct rate of duty. Your position in this situation is that there is no prohibition in the statute or regulations to allowance of the protest and issuance of a bill for the additional duties due as a result of such allowance.


Basically, the issue presented is: Should the protest of a liquidation be accepted if it will result in increased liability for the importer (phrased another way, if acceptance will result in a decision adverse to the importer's financial interests)?


While we agree with your view that 19 U.S.C. 1515(a) does not explicitly state what action should be taken when the allowance of a protest would result in a bill, rather than a refund, to the importer, we disagree with you that if the importer protests, Customs can correct the errors even if they result in a higher rate of duty. This is not permissible. See generally Omni U.S.A., Inc. v. U.S., 840 F.2d 912, 914 (Fed. Cir. 1988) reh'g denied, 109 S.Ct. 405 (1988)(no correlative provision of 19 U.S.C. 1520(c)(1) exists for the increase of duties in case the clerical error was adverse to the government). Our construction of Section 1515(a) is that it provides for refunds of duties collected, not increases in duties assessed. See 19 U.S.C. 1515(a) which directs Customs to "review the protest" and "allow or deny ... in whole or in part," and pay refunds and drawbacks. Reading Sections 1515 and 1501, United States Code, together, it appears that the Government is time-barred after 90 days of the original liquidation from reliquidating an entry to correct any errors adverse to the Government. Moreover, 19 U.S.C. 1514 states that, except for certain specific situations (i.e., voluntary reliquidations under Section 1501; petitions under Section 1516 by domestic interested parties as defined in Section 1677(9)(C),(D), and (E); refunds or errors as defined in Section 1520; and fraud as covered by Section 1521), decisions of the Customs officer in liquidating entries shall be final and conclusive on all persons, "including the United States ...". Therefore, upon review of a protest, if Customs ascertains that the classification asserted by the importer is both correct and results in a duty increase over the liquidated amount, Customs cannot reliquidate the entry to the detriment of the importer if the period for voluntary reliquidation by Customs under Section 1501 has passed. The power to administratively correct errors by the Government is limited after the voluntary reliquidation period has expired. See generally Omni, supra. In that instance, when the correct classification results in a collection of higher duties pursuant to Section 1515(a), Customs must deny the protest. Of course, Customs would not refuse a voluntary tender of the withheld duties from the importer.

In general, our position is:

If Customs' decision on the protest is different from that advanced by the importer and if it results in a higher rate of duty than found in liquidation, the resulting decision can be used to collect additional duties only in a voluntary reliquidation by Customs within the 90-day period provided in 19 U.S.C. 1501.

We might also mention that a common occurrence is the filing of a protest alleging a different classification of merchandise which, when reviewed, discloses that a third classification is correct instead. If the protest is acted upon within 90 days, an increase in duties can equally be assessed in reliquidation. If more than 90 days has passed, the protest is merely denied in full.


No. A protest must be denied when the correct classification results in a duty increase over the liquidated amount pursuant to 19 U.S.C. 1515(a) unless the period for voluntary reliquidation by Customs under 19 U.S.C. 1501 has not expired.


John Durant, Director
Commercial Rulings Division