RR:CR:DR 229651 IDL
Area Director, JFK Area
c/o: Chief, Residual Liquidation & Protest Branch
Att: Lawrence Ryan
Bldg. 77, JFK International Airport
Jamaica, NY 11430
Re: Protest No. 1001-01-100543; 19 U.S.C. 1514; 19 U.S.C. 1520(c)
Dear Mr. Ryan:
This is in response to your correspondence dated September 20, 2002, concerning Merrill Lynch, Protest No. 1001-01-100543.
During the period of April 30 and June 26, 1998, Protestant Merrill Lynch made 6 entries of Gold, Nonmonetary, Unwrought, Bullion, 99.95% minimum purity, 7108.12.1013, HTSUS/Free. After Protestant failed to provide the port with additional information it requested, the port reclassified the entries and assessed a duty rate of 4.9%. Protestant claims that an inadvertent error occurred in failing to furnish the port timely with the requested information, resulting in reclassification of the entered merchandise by Customs. Therefore, Protestant filed request for reliquidation under 19 U.S.C. 1520(c)(1), which the port denied.
The table below illustrates entry information on the subject entries:
Entry Number Entry Date Liq. Date Reliq. Date
113-xxxx423-9 4-30-98 3-12-99 4-23-99
113-xxxx701-8 4-30-98 3-12-99 4-23-99
113-xxxx585-2 5-29-98 5-21-99 None
113-xxxx589-4 5-29-98 5-21-99 None
113-xxxx523-7 6-25-98 6-18-99 8-13-99
113-xxxx522-9 6-26-98 5-21-99 None
The CF 7501 lists the merchandise as “non-monetary gold bullion” under subheading 7108.12.1013, HTSUS. However, an entry invoice, sent to Merrill Lynch by Enami, of Chile, describes the merchandise as “electrolytic gold in bars”. On July 29, 1998, prior to issuing Notices of Action on the six entries, the port issued a CF 28, requesting from Protestant a copy of the complete purchase contract on the transaction, literature or information that described the merchandise and its uses, an explanation of electrolytic bars, and whether the imported bars contain any marks other than marks of purity or weight. Apparently, that information was necessary in order to determine the appropriate classification subheading under the HTSUS.
According to the affidavit of John Mulholland, dated August 11, 2000, Helaine Tishberg , a former employee of Protestant, forwarded some unidentified information to the import specialist in September 1998, but did not describe the merchandise.
On September 22, 1998, the import specialist sent a proposed Notice of Action to Protestant (CF 29) stating that the information supplied was insufficient to resolve the classification issue.
The import specialist sent another CF 29 on March 12, 1999, and another on April 6, 1999, repeating that the information was insufficient to resolve the classification dispute. The port liquidated two entries on March 12, 1999 and one entry on June 18, 1999. The liquidations of March 12, 1999 reliquidated under 19 U.S.C. 1501 on April 23, 1999. The liquidation of June 18, 1999 reliquidated on August 13, 1999. The port liquidated three of the remaining entries on May 21, 1999. No protest was filed against the liquidations or reliquidations of the 6 entries.
On April 12, 2000, Protestant filed 1520(c)(1) request for reliquidation of the subject entries. The petition appears to have included a flow chart entitled “Diagrama Planta de Metales Nobles”. The end block is labeled “Gold Bar 99.99% Au”. The chart illustrates at least three different paths by which the gold bars could be produced. The petition stated that the diagram was of the manufacturer’s plant and illustrated the “refining process through which the imported gold bars were submitted.” The petition stated that the electrolytic gold resulted from the process of using electrolysis to remove the gold from its source. The flow chart fails to address the nature of electrolytic bars, and the existence of any marks on the bars.
On June 15, 2000, the port again sent Counsel a request for information, including employee affidavits, an untranslated copy of the flow chart, documentation demonstrating Protestant’s difficulty in obtaining the flow chart and other evidence demonstrating that the entries were eligible for reliquidation under 19 U.S.C. 1520(c)(1).
In response, Counsel faxed to the port on August 11, 2000, three affidavits from Merrill Lynch employees concerning the events that led to the alleged inadvertent error, and an untranslated copy of the flow chart. On November 20, 2000, the port denied the 1520(c)(1) request for reliquidation, citing lack of evidence demonstrating inadvertent error occurred in failing to timely furnish the flow chart.
On February 6, 2001, Merrill Lynch filed Protest No. 1001-01-100543 with the port. Subsequently, Counsel amended its claim, submitting additional arguments and affidavits, dated December 20, 2002, by (1) Brian Hellmann, former analyst within the Precious Metals Operations department of Merrill Lynch; and (2) John Mulholland, former Director of Precious Metals Operations.
Mr. Hellmann states that after receiving a Notice of Action on March 16, 1999, he phoned Customs, and was advised that merchandise was being reclassified, because the information provided was insufficient. Mr. Hellmann states that he was transferred on April 1, 1999, and asked Mr. Timothy Graf to take over response to the Notice of Action. Over three months later, on July 9, 1999, Mr. Graf resigned, and it was not known whether Graf acted.
Mr. Mulholland states that on April 1, 1999, Mr. Hellmann had reported to him that Mr. Hellmann charged Mr. Graf with the responsibility of responding to Customs’ request. Mr. Mulholland states that he believed Mr. Graf would fulfill his duty to respond to the inquiry.
Whether the liquidations and reliquidations of the gold under subheading 7108.13.70, HTSUS, were due to a clerical error, mistake of fact or inadvertence correctable under 19 U.S.C. 1520(c)?
LAW AND ANALYSIS:
Initially, we note that the protest was timely filed under the statutory and regulatory provisions for protests (see 19 U.S.C. § 1514(c)(3)). The port denied the 1520(c) request for reliquidation on November 20, 2000, and Merrill Lynch filed protest on February 6, 2001, pursuant to 19 U.S.C. 1514(a)(7). Although the facts presented and issue raised involve questions of law or fact which have been addressed by Customs and the courts, we will again address the issue (see 19 CFR Part 174).
Counsel argues that:
the instant protest involves an incomplete response to a request by Customs for documentation;
Protestant’s failure to include the flow chart is analogous to the inadvertent failure to renew civil aviation certification in Aviall of Texas, Inc. v. United States, 70 F. 3d 1248, (Fed. Cir. 1995);
Merrill Lynch acted promptly upon becoming aware of the failure to provide the requested information;
the misclassification was due to inadvertence by the responsible employees in failing to provide the requested information to Customs and to notify Merrill Lynch of its obligation to do so;
the misclassification was due to mistake of fact, in that the responsible managers believed that Mr. Graf handled the request from Customs and responded within the time required;
the flow chart describing the manufacturing process establishes that the gold bars meet the criteria of 7108.12.1013;
it is not necessary for Protestant to establish that no further judgment
by the port would have been necessary had the flow chart been provided prior to reclassification.
The port cites C.S.D. 80-250 (discussed below) in arguing that the Protestant’s failure to respond adequately to Customs request for information and Notices of Action cannot be negated by such factors as office downsizing and personnel reassignment; that such factors are directly under the control of the importer; that the Protestant completely disregarded, or neglected to consider, its obligation to keep track of its entries and to satisfy Customs’ need for information relative thereto; that the importer was sufficiently responsive only several months after the liquidations or reliquidations had become final.
Protestant cites 19 U.S.C. 1520(c)(1) and Aviall, in arguing that its failure to provide the port with the information requested prior to liquidation amounted to inadvertent error, correctable under 19 U.S.C. 1520(c)(1).
19 U.S.C. 1520
(c) Reliquidation of entry or reconciliation
Notwithstanding a valid protest was not filed, the Customs Service may, in accordance with regulations prescribed by the Secretary, reliquidate an entry or reconciliation to correct-
(1) a clerical error, mistake of fact, or other inadvertence, whether or not resulting from or contained in electronic transmission, not amounting to an error in the construction of a law, adverse to the importer and manifest from the record or established by documentary evidence, in any entry, liquidation, or other Customs transaction, when the error, mistake, or inadvertence is brought to the attention of the Customs Service within one year after the date of liquidation or exaction;… 19 U.S.C. 1520(c)(1).
In Aviall, Plaintiff “had regularly renewed its blanket certification [of civil aircraft parts]. It received no notice of the expiration of the certification until after its lapse. At that point, Aviall immediately corrected the expired certification by filing protests with entry specific certifications on the same day that it received notice of the expired certification”. Furthermore, Plaintiff “submitted all entry summaries with a designation for civil aircraft to alert Customs that the parts fell within the duty-free provisions” of the Agreement on Trade in Civil Aircraft.
The court in Aviall ruled that the importer’s failure to renew blanket certification of use on civil aircraft parts amounted to inadvertence, as opposed to negligent inaction, which cannot be cured. However, the court in Aviall emphasized that the importer was not notified of the deadline to renew certification. It compared the facts in Aviall with those in AT&T Int’l v. United States, 861 F. Supp. 95 (Ct. Int’l Trade 1994) and Occidental Oil & Gas Co. v. United States, 13 C.I.T. 244 (1989), 861 F. Supp. at 99:
Customs sent form notices to AT&T and its broker requesting documentation. AT&T did not respond to these notices. Customs then sent a proposed rate advance notice. AT&T again did not respond. At length, Customs liquidated AT&T's entry at a higher duty. The Court of International Trade concluded that AT&T's repeated non-response did not constitute inadvertence within the meaning of the statute. Id. at 98. The AT&T court stated that the action before it was "analogous" to that of Occidental Oil.In Occidental Oil, Customs notified Occidental Oil on numerous occasions that documents had not been received and that the entry would be liquidated as dutiable. Occidental Oil repeatedly did not comply with Customs' requests and notices. Finally, Customs liquidated the entry. Customs stated that Occidental Oil's "failure to file required documents whose absence had been repeatedly called to [Occidental Oil's] attention constitutes negligent inaction, not correctable under [section 1520(c)(1)]." Id. at 245. The Court of International Trade agreed that this conduct was not inadvertence.This court agrees that repeated failures to respond to clear notice in the AT&T and Occidental cases fall outside of the scope of inadvertence. The AT&T and Occidental decisions reflect a balance between the liberal scope of correction in section 1520 and the responsibilities of an importer to comply with Custom's lawful requirements.
In the instant case, Protestant’s failure to respond to Customs’ information request is analogous to AT&T and Occidental Oil. The port repeatedly requested information from Protestant, and submitted Notices of Action on three separate occasions, informing that the merchandise was being rate advanced. Customs subsequently reclassified the merchandise. Nearly one year later, on April 12, 2000, Protestant finally submitted three affidavits and a flow chart, all of which failed to address the classification concerns raised by the port.
In addition, a Customs Decision was published on May 20, 1980, addressing whether the failure of an importer, after being requested by Customs to furnish additional information to aid Customs in determining the value of the merchandise, amounted to a clerical error, mistake of fact, or other inadvertence within the meaning of [19 U.S.C. 1520(c)(1)]”. 14 Cust. B. & Dec. 1176; C.S.D. 80-250, File: LIQ-8-01 RRUEE 712886 BM (May 20, 1980):
If an importer fails to respond to inquiries from Customs for further information,…Customs must liquidate the entry on the basis of the best information available to it. Where there is doubt…, Customs has an obligation to protect the revenue….
The Customs Decision held that the failure of the importer to furnish additional information amounted to negligent inaction, and was not subject to the provisions of 1520(c)(1). It reasoned that the port cannot allow itself to delay liquidation indefinitely, “whereby it might never be able to liquidate an entry because of the failure of the importer to provide Customs with additional information requested. Thus, such a transaction would never be finalized. This result would clearly be contrary to the intent of Congress, as evidenced by section 209 of Public Law 95-410…. With few exceptions noted, such entries must be liquidated within 1 year after the date of entry.” Id.
Further, examination of the employee affidavits reveals that Merrill Lynch employees were repeatedly notified that additional information was required, but repeatedly failed to comply with the requests. The evidence suggests that Protestant could have obtained the information sought by the port from Enami in a timely manner had the Protestant taken the appropriate measures. There is nothing in the record suggesting that Enami, or anyone outside the control of Protestant, caused the delay. The Protestant had ample opportunity to submit the flow chart prior to liquidation, but failed to do so. An error that does not directly cause an improper liquidation is not an error within the meaning of section 1520(c). HQ 227564 (March 5, 1998). Therefore, the failure of the Protestant to timely furnish the requested information amounted to negligent inaction.
In addition, Protestant alleges the merchandise is classifiable under subheading 7108.12.1013, HTSUS, which covers nonmonetary unwrought gold bullion. Subheading 7108.13.70, HTSUS, covers semimanufactured forms of gold other than gold leaf and other than “rectangular or near rectangular shapes containing 99.5 percent or more by weight of gold and not otherwise marked or decorated than with weight, purity, or other identifying information”.
The evidence presented suggests that the merchandise may have been properly reclassified under subheading 7108.13.70. The entry invoice describes the gold as being in bars. However, bars are not included within the definition of unwrought forms (i.e., falling under subheading 7108.12). Additional U.S. Note 1(a), Chapter 71, HTSUS, defines unwrought as “metals in the form of ingots, blocks, lumps, billets, cakes, slabs, pigs, cathodes, anodes, briquettes, cubes, sticks, grains, sponge, pellets, shot and similar manufactured primary forms, but does not cover rolled, forged, drawn or extruded products, tubular products or cast or sintered forms which have been machined or processed otherwise than by simple trimming, scalping or descaling….”
On the other hand, the HTSUS includes “bars” as one type of semimanufactured forms. Additional U.S. Note 1(b), Chapter 71, HTSUS, defines semimanufactured as “wrought metal products in the form of bars, rods, sections, etc.” Accordingly, if the merchandise fits the definition of being semimanufactured, other than gold leaf, and other than “rectangular…and not otherwise marked or decorated than with weight, purity or other identifying information”, it would be classifiable in subheading 7108.13.70, and not subheading 7108.12.1013.
Further, the affidavit of Mr. Mulholland described the dissolution of the Protestant’s metals purchasing unit, identified the Customs broker, and offered explanations as to the reasons for Protestant’s failure to answer Customs’ questions. However, it is silent as to the actual processing of the bars or their imported condition. The only statement that links the flow chart diagram with the imported merchandise is that of Counsel in the petition dated April 6, 2000. However, there is no indication that Counsel had personal knowledge of the refining process or whether the gold had been subjected to any process other than simple trimming, scalping, or descaling. The courts have held that statements by counsel are not evidence. Bar Bea Truck Leasing Co. v. United States, 5 C.I.T. 124 (1983).
On December 18, 2002, during a telephone conversation with ORR, Counsel claimed that the port would not have reclassified the merchandise had Protestant provided the requested information, suggesting that the flow chart clearly demonstrates that Protestant correctly classified the merchandise as entered, and that the failure to provide the information requested led to the reclassification of the merchandise.
However, the flow chart fails to address the nature of the electrolytic bars, whether any markings appear on the bars or any further processing occurs, which would have imparted value to the merchandise. Since the information describing the manufacturing process does not establish that the merchandise meets the criteria of classification under subheading 7108.12.1013, even Protestant’s timely provision of the flow chart to the port would not have prevented the port from exercising legal judgment in reclassifying the merchandise, regardless of any mistake of fact or inadvertence committed by Protestant.
Furthermore, we disagree with Protestant’s claim that it is not necessary for Protestant to establish that no further judgment by the port would have been necessary had the flow chart been provided prior to classification. An error in legal judgment involving reclassification of merchandise is correctable under 19 U.S.C. 1514, and not 1520(c)(1) (distinguishable from Taban Co. v. United States, 21 C.I.T. 230, 960 F. Supp. 326 (1997), and Zaki Corp. v. United States, 960 F.Supp. 350, U.S.C.I.T. (1997), where each plaintiff had satisfactorily demonstrated that mistakes committed by each plaintiff's broker and subsequently by Customs were not errors in the construction of a law).
Finally, with regard to the three affidavits submitted in August 2000 and December 2002, the affidavits fail to address the issues whether the goods are unmanufactured forms and were improperly described on the entry invoice (as bars which are semimanufactured articles), and whether the articles were marked other than with purity and weight. Further, the affiants make factual claims suggesting that a mistake of fact or inadvertence caused the reclassification. However, under 28 U.S.C. 2635, there is “discretion to refuse to admit the affidavits as an exception to the hearsay rule.” Evidence should be assessed in practical terms, considering such factors as completeness, adequacy of bases, and possible motives to deceive.” See Andy Mohan, Inc., v. United States, 63 C.C.P.A. 104; 537 F.2d 516 (1976).
Where an affidavit is not a record kept by the supplier in the regular course of regularly conducted business, as in the instant case, such affidavit is excludable hearsay evidence not falling within the purview of Federal Rules of Evidence, Rule 803(6). See Thom S. Zani v. United States, 86 F. Supp. 2d 1334 (Ct. Int’l Trade 2000).
Therefore, the liquidations and reliquidations of the gold under subheading 7108.13.70, HTSUS, were not correctable under 1520(c).
Accordingly, the protest should be DENIED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, 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.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Myles B. Harmon
Commercial Rulings Division