- Type : • HTSUS :
-
Related:
221669
PRO-2-05
ENT-13
ENT-1-03
OT:RR:CTF:ER H023131 DCC
Port Director
U.S. Customs and Border Protection
1100 Raymond Blvd., Room 502
Newark, NJ 07102
Attn: Patricia A. Diffley
Re: Protest and Application for Further Review 4601-06-100822
Dear Sir or Madam:
This letter is in response to the Application for Further Review ("AFR") of
Protest Number 4601-06-100822, filed on behalf of Brazil International, Inc. Our
decision follows.
FACTS:
The subject merchandise for Entry No. xxx-xxxx352-8 was 218 dozen men's jackets, classified as 6101.30.2010, HTSUS. The subject merchandise for Entry No. xxx-xxxx353-6 was 747 dozen men's pants, classified as 6103.43.1520, HTSUS, and 266 dozen men's jackets, classified as 6101.30.2010, HTSUS. Both shipments were entered on September 23, 2004.
Both shipments were unladen and entered at the Port of New York/Newark. According to the Entry/Immediate Delivery forms, CBP Form
3461, the shipments arrived on September 12, 2004, with Brazil International
indicated as the ultimate consignee. U.S. Customs and Border Protection
("CBP") selected the subject merchandise for examination and inspection. The
subject merchandise was found to have zippers bearing counterfeit versions of
"YKK" trademarks.
On September 14, 2004, Brazil International filed the entry summaries,
CBP Form 7501, for the two entries at the Port of Newark. For Entry No. xxx- xxxx352-8, CBP detained this merchandise on September 29, 2004, and seized
the merchandise on October 19, 2004. For Entry No. xxx-xxxx353-6, CBP
detained the merchandise on September 23, 2004, and seized the merchandise
on October 26, 2004. Prior to seizure, the merchandise covered by the two entries never left CBP's custody.
In two letters, dated November 5, 2004, from Edward P. Nagle, Director,
Fines, Penalties and Forfeitures, to Brazil International, CBP notified Brazil
International that CBP seized the articles described in Entry xxx-xxxx352-8 on
October 19, 2004, and the articles described in Entry xxx-xxxx353-6 on October
26, 2004, at the Port of Newark. The letters state:
The counterfeit merchandise was seized and is subject to forfeiture
under the provisions of Title 19, United States Code, section
1526(e) and Title 19, Code of Federal Regulation, section 133
because this merchandise is a counterfeit/unlicensed version of the
trademark protected products which are registered with the United
States Government.
Letter from Edward P. Nagle, Director, Office of Fines, Penalties and Forfeitures: CBP Newark/New York Area, to Brazil International Inc. (November 5, 2004).
On November 18, 2004, Brazil International filed an Election of
Proceedings by which it abandoned the seized merchandise and requested that
CBP begin administrative proceedings to forfeit the property. In that election,
Brazil International made the following statement:
I HEREBY ABANDON ALL SEIZED MERCHANDISE AND/OR I
REQUEST THAT THE CUSTOMS SERVICE BEGIN
ADMINISTRATIVE FORFEITURE PROCEEDINGS TO FORFEIT
THE PROPERTY. Please immediately begin publication of the
notice of seizure and intent to forfeit, and consider my petition or
offer, if any. I understand that within 20 days of the first publication
of the notice, I can request that you send the case to the U.S.
Attorney for court action.
In two letters dated February 15, 2005, the Port of Newark advised Brazil International's customs broker that its electronic petitions filed under section 520(c) concerning drawback entry numbers DJ9-0971486-1 and DJ9-0971914-2
were denied in full. The reason given for the denial was that duty on seized merchandise is not refundable.
Brazil International filed two post entry amendments ("PEAs") on April 21,
2005, and supplemental information letters ("SILs"), dated April 8 and 12, 2005,
requesting that the estimated duties and fees paid on the two entries be refunded pursuant to 19 C.F.R § 133.53. Subsequently, on September 15, 2005, Susan Masser, Supervisor, CBP Residual Liquidation Section, notified the import that its requests for refunds contained in its two April 2005 PEAs were still pending.
On October 28, 2005, CBP issued an Order to Destroy (CBF Form 4613),
thereby ordering the destruction of the seized merchandise. Pursuant to that
order, CBP destroyed the merchandise on November 16, 2005. The two entries
were liquidated by CBP with no refund of duties. On March 29, 2006, Brazil
International filed its protest against CBP's decision to liquidate the entries
without a refund of the duties paid. That protest was forwarded to this office for
further review on January 31, 2008.
ISSUE:
Whether the port properly liquidated the entries without a refund of duties
paid.
LAW AND ANALYSIS:
We note initially that the protest was timely because it was filed by Brazil
International within 90 days of the date of liquidation. CBP liquidated the subject
entries on March 3, 2006, and Brazil International filed its protest 20 days later on
March 23, 2006.
When merchandise is released from CBP's custody prior to exportation,
the customs statute authorizes the refund of ordinary duties under limited
circumstances. When an importer chooses to have the merchandise destroyed it
may decide to abandon officially the goods pursuant to the customs statute and
regulations. The statute, at 19 U.S.C. § 1506, provides as follows:
§ 1506. Allowance for abandonment and damage
Allowance shall be made in the estimation and liquidation of duties
under regulations prescribed by the Secretary of the Treasury in the
following cases:
(1) Abandonment within thirty days
Where the importer abandons to the United States, within
thirty days after entry in the case of merchandise released without
an examination, or within thirty days after the release in the case
of merchandise sent to the Customs Service for examination, any
imported merchandise representing 5 per centum or more of the
total value of all the merchandise of the same class or kind
entered in the invoice or entry in which the item appears, and
delivers, within the applicable thirty-day period, the portion so
abandoned to such place as the Customs Service directs unless
the Customs Service is satisfied that the merchandise is so far
destroyed as to be nondeliverable.
The regulations implementing 19 U.S.C. § 1506 provide as follows:
§ 158.42 Abandonment by importer within 30 days after entry.
Allowance in duties for merchandise abandoned to the Government
in accordance with section 506(1), Tariff Act of 1930, as amended
(19 U.S.C. 1506(1)), shall be subject to the following conditions:
(b) Application within 30 days. The importer shall file written notice
of abandonment with the director of the port where the entry was
filed within 30 days after the date of entry, or, in the case of
examination packages, within 30 days after release, whether or not
delivery is taken by the importer immediately after entry or release
as the case may be.
19 C.F.R. § 158.42
In denying Brazil International's protest, the Port of Newark explained that
the imported articles were not abandoned in a timely manner. The imported
articles were entered on September 23, 2004, but not abandoned until Brazil
International filed its Election of Proceedings on November 18, 2004, which was
more than thirty days after the date of entry. However, as explained below, we
find that Brazil International’s notice of abandonment was timely for purposes of
19 C.F.R. § 158.42(b).
Pursuant to 19 C.F.R. § 158.42(b), when merchandise is released without
an examination, the importer must notify CBP within 30 days of entry that it has
abandoned the merchandise. When imported merchandise is subject to
examination by CBP, however, the merchandise must be abandoned within 30
days of release. Id. In this case, the imported merchandise was subject to
examination when the entries were sent to team review. Consequently, the
importer had 30 days from the date of release to provide notice of abandonment.
Because the merchandise was never released by CBP, the 30-day clock for
providing notice never started and, therefore, Brazil International's notice of
abandonment on November 18, 2004, was timely.
The issue of the time limit for an importer to abandon merchandise under
19 U.S.C. § 1506(1) was addressed in a similar case decided by the U.S.
Customs Court in 1952. In Fan Co. v. U.S. National Carloading Corp., 29 Cust.
Ct. 231 (1952), the customs court reviewed a claim for a duty allowance under 19
U.S.C. 1506(1) for merchandise abandoned by the importer prior to its release
from Customs' custody. That case involved two cartons of bamboo mesh
wallpaper, entered as hanging paper, which was sent to a customs warehouse
for appraisement. Upon examination, CBP reclassified the merchandise and
determined it was subject to additional duty. The appraiser also noted that
wallpaper was mildewed. Because the rate advance was more than $50, the
merchandise was not released from Customs' custody. After the entry was
liquidated the importer received notice of the increased duty assessment. The
importer subsequently requested permission to abandon the imported wallpaper
and filed a protest challenging the assessment of additional duties on that
merchandise.
In analyzing the importer's claim, the customs court reviewed the
legislative history of section 506(1) of the Tariff Act of 1930. The court noted
that prior to enactment of the 1930 Tariff Act the customs statute provided for an
allowance in duties only when an importer abandoned the merchandise within
ten days after entry. See Section 505(1), Tariff Act of 1922; paragraph X, Tariff
Act of 1913; and section 22, Tariff Act of 1909. In revising the Tariff Act of 1922,
the House Ways and Means Committee reviewed court decisions affecting
implementation of the Tariff Act of 1922. See Memorandum of Court Decisions
Affecting Tariff Act of 1922, Committee on Ways and Means, U.S. House of
Representatives (1930) ("Memorandum of Court Decisions"). In that
Memorandum of Court Decisions, the Ways and Means Committee noted that:
in certain instances goods remain in customs custody more than
ten days and that the importer does not learn of conditions which
render abandonment desirable until it is too late to take advantage
of this provision.
Memorandum of Court Decisions, at 78.
The Customs Court explained in Fan Co. that:
It is clear, therefore, that the changes [to section 505 of the 1922
Tariff Act] were made in order to give importers more time in which
to examine their merchandise and file notices of abandonment. It
was contemplated that importers would wish to inspect the
merchandise received from the appraiser's stores before taking
action, but there appears to be no reason why abandonment could
not be made sooner if the importer so elected.
Fan Co., 29 Cust. Ct. at 234. Based on the legislative history and case law, 19
U.S.C. § 1506(1) authorizes claims for duty allowance for merchandise
abandoned by the importer prior to release of the merchandise from CBP's
custody even when the claim is made more than 30 days after entry.
In addition, the Port of Newark determined that the counterfeit
merchandise does not qualify for refund under 19 C.F.R. § 133.53 because the
merchandise was "restricted" rather than "prohibited" merchandise. The port
states that pursuant to section 133.53, refunds of duty paid on articles bearing a
counterfeit trademark may only be paid "upon exportation or destruction of the
prohibited articles in accordance with § 158.41 or § 158.45 of this chapter."
Relying on HQ 221669, dated September 3, 1991, the port notes that in order to
constitute prohibited merchandise, there must be no legal way to import the
product. Further, the port determined that because Brazil International could
have obtained consent from the trademark owner, the merchandise was
restricted merchandise, and therefore, not eligible for refund as prohibited
merchandise under section 133.53.
Based on the relevant statutes and regulations, we find that the jackets
bearing counterfeit trademarks are prohibited merchandise for purposes of 19
C.F.R. § 133.53. Under 19 C.F.R. § 133.53:
If a violation of the trademark or copyright laws is not discovered
until after entry and deposit of estimated duty, the entry shall be
endorsed with an appropriate notation and the duty refunded as an
erroneous collection upon exportation or destruction of the
prohibited articles in accordance with § 158.41 or § 158.45 of this
chapter.
19 C.F.R. § 133.53 (emphasis added). The imported jackets are prohibited
merchandise because the trademark owner never consented to the importation
of the infringing merchandise. Under 19 U.S.C. § 1526, as implemented by 19
C.F.R. § 133.21, importers of merchandise bearing a counterfeit trademark have
30 days from the date of the notification to obtain written consent from the
trademark owner. In the absence of receiving such timely consent, the
merchandise is prohibited merchandise and must be disposed of in accordance with section 133.52. See, e.g., United States v. Able Time, 545 F.3d 824, 829
(9th Cir 2008), cert. denied 129 S Ct. 2864 (2009) ("The Tariff Act prohibits the
importation of merchandise bearing a registered trademark without the
permission of the trademark owner . . . . "); K Mart Corp. v. Cartier, 486 U.S. 281
(1988), cited in Sakar Int'l v. United States, 516 F.3d 1340, 1348 (Fed. Cir. 2008)
("[T]he import prohibition created by section 1526(e) falls squarely within the
holding of K Mart” in that it does not constitute a governmentally imposed
quantitative limit on importation,” but rather is under the ultimate control of the
trademark owner).
Contrary to the port’s contention, HQ 221669 is inapposite. In that case,
the importer entered a shipment of peanut butter with labels that did not meet
FDA requirements. Because the importer made no attempt to bring the peanut
butter into conformity and resubmit the entry, the merchandise was "restricted"
merchandise, and therefore, not eligible for a duty allowance under 19 C.F.R.
§ 158.45(c). Unlike the situation described in HQ 221669, Brazil International
had limited time, prescribed by regulation, within which it could have obtained
consent of the trademark owner to enter the merchandise after obliterating the
counterfeit trademark. Once the 30-day period expired without the trademark
owner granting consent, the merchandise must be treated as prohibited
merchandise for purposes 19 C.F.R. 133.53, and was eligible, therefore, for a
refund of duties as erroneous collection.
HOLDING:
Consistent with the decision set forth above, you are hereby directed to
GRANT the protest in full and refund any overpayment.
You are to mail this decision to counsel for the inquirer no later than 60
days from the date of this letter. On that date, the Office of International Trade
will make the decision available to CBP personnel, and to the public on the CBP
Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom
of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division