DRA-2-02
OT:RR:CTF:ER
H286377 KF
U.S. Customs and Border Protection
Port of Long Beach
301 E. Ocean Blvd.
Suite 1400
Long Beach, CA 90802
Re: Application for further review of protest No. 2704-16-101570; Western Surety Company; GPX International Tire Corporation; liability for accrued interest; 19 U.S.C. § 1677(g)
Dear Port Director:
This is in response to the application for further review of protest number 2704-16-101570 (“protest”), received by our office on May 15, 2017. We have considered the points raised by your office and the protestant, Western Surety Company (“Western”). Our decision follows.
FACTS:
Western issued single transaction bonds to GPX International Tire Corporation (“GPX”) for entries of tires exported from the People’s Republic of China (“PRC”) by Hebei Starbright Tire Co., Ltd. (“Starbright”) and Tianjin United Tire & Rubber International Co., Ltd. (“United”). The tires were entered by GPX during the period of July 20, 2008, through December 16, 2009.
On December 17, 2007, the United States Department of Commerce (“Commerce”) made a preliminary affirmative determination in a countervailing duty investigation of certain pneumatic off-the-road tires exported from the PRC (“tires”) (Case No. C-570-913). See Certain New Pneumatic Off-the-Road Tires from the People's Republic of China: Preliminary Affirmative Countervailing Duty Determination, 72 Fed. Reg. 71360.
On January 10, 2008, Commerce instructed United States Customs and Border Protection (“CBP”) to suspend liquidation for all tires that were entered or withdrawn from warehouse for consumption on or after December 17, 2007. See Message No. 8010203. Commerce also notified CBP that cash deposits of estimated duties or bond posting was required for all entries effective December 17, 2007. Id.
On February 20, 2008, Commerce made a preliminary determination of sales at less than fair value in an antidumping duty investigation of the tires (Case No. A-570-912). See Certain New Pneumatic Off-the-Road Tires from the People's Republic of China: Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination, 73 Fed. Reg. 9278.
On March 13, 2008, Commerce instructed CBP to suspend liquidation for all tires that were entered or withdrawn from warehouse for consumption on or after February 20, 2008. See Message No. 8073203. Commerce also notified CBP that cash deposits or bond posting was required for all entries effective February 20, 2008. Id.
On July 15, 2008, Commerce made a final determination of sales at less than fair value for the tires. See Certain New Pneumatic Off-The-Road Tires from the PRC: Final Affirmative Determination of Sales at Less Than Fair Value and Partial Affirmative Determination of Critical Circumstances, 73 Fed. Reg. 40485 (July 15, 2008). Concurrently, Commerce made a final determination that countervailing subsidies were being provided to exporters of the tires. See Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Final Affirmative Countervailing Duty Determination and Final Negative Determination of Critical Circumstances, 73 Fed. Reg. 40480 (July 15, 2008).
On September 4, 2008, Commerce issued an antidumping and a countervailing duty order for the tires. See Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Countervailing Duty Order, 73 Fed. Reg. 51627; Certain New Pneumatic Off-the-Road Tires From the PRC: Notice of Amended Final Affirmative Determination of Sales at Less Than Fair Value and Antidumping Duty Order, 73 Fed. Reg. 51624. The antidumping duty order instructed CBP to require cash deposits of estimated duties, in lieu of bonds, effective the publication date of the International Trade Commission’s (“ITC”) final affirmative injury determination. 73 Fed. Reg. 51627. The ITC published its final affirmative injury determination on September 5, 2008. See Certain Off-the-Road Tires from the PRC: Determination, 73 Fed. Red. 51842 (September 5, 2008).
On September 18, 2008, Commerce instructed CBP, pursuant to the countervailing duty order, to resume suspension of liquidation for tires that were entered or withdrawn from warehouse for consumption on or after September 5, 2008. See Message No. 8262205. United and Starbright were specifically identified as exporters of tires for which liquidation had been suspended. Id. Commerce also notified CBP that cash deposits were required in lieu of a bond for all tires effective September 5, 2008. Id.
On October 27, 2009, GPX declared bankruptcy. See GPX International Tire Corporation Announces Chapter 11 Restructuring, Businesswire.com (October 27, 2009).
On August 17, 2010, Commerce instructed CBP to suspend liquidation for tires exported by United on or after December 17, 2007, pursuant to a court ordered injunction in the countervailing duty case. See Message No. 0229303 (United States Court of International Trade (“CIT”) Case No. 08-00285).
On May 11, 2011, Commerce instructed CBP to suspend liquidation for tires exported by Starbright from December 17, 2007, through December 31, 2008, pursuant to a court ordered injunction in the countervailing duty case. See Message No. 1131301 (CIT Case No. 11-00129).
On May 13, 2011, Commerce instructed CBP to suspend liquidation for tires exported by Starbright from February 20, 2008, through August 31, 2009, pursuant to a court ordered injunction in the antidumping duty case. See Message No. 1133301 (CIT Case No. 11-00128).
On June 8, 2012, Commerce instructed CBP to suspend liquidation for tires exported by United from September 1, 2009, through August 31, 2010, pursuant to a court ordered injunction in the antidumping duty case. See Message No. 2160301 (CIT Case No. 12-00101).
On August 29, 2012, Commerce instructed CBP to liquidate tires exported by United from September 1, 2009, through August 31, 2010, pursuant to the lifting of the court ordered injunction in the antidumping duty case. See Message No. 2242302.
On September 4, 2012, Commerce instructed CBP to liquidate tires exported by Starbright from February 20, 2008, through August 31, 2009, pursuant to the lifting of the court ordered injunction in the antidumping duty case. See Message No. 2248305.
On July 29, 2015, Commerce instructed CBP to liquidate tires exported by Starbright from December 17, 2007, through December 31, 2008, pursuant to the lifting of the court ordered injunction in the countervailing duty case. See Message No. 5210302.
On August 14, 2015, Commerce instructed CBP to liquidate tires exported by United from January 1, 2009, through December 31, 2009, pursuant to the lifting of the court ordered injunction in the countervailing duty case. See Message No. 5226302.
CBP liquidated all of the subject tire entries in January of 2016. Pursuant to the terms of the single transaction bonds issued by Western, on June 3, 2016, CBP made a formal demand on Western for payment of duties owed by GPX. The demand for payment included accrued interest. Your office clarified that interest was only charged on underpaid antidumping duties because all countervailing duties owed were overpaid and refunded, also with interest. Western filed the subject protest on November 30, 2016, to contest its liability for payment of the pre-liquidation interest amounts charged.
ISSUE:
Whether Western is liable for payment of pre-liquidation interest on the antidumping duties owed by GPX.
LAW AND ANALYSIS:
As an initial matter, we find that this protest meets the criteria for further review. We find that, pursuant to 19 U.S.C. § 1514(c)(3)(B), this protest was timely filed on November 30, 2016, “within 180 from the date of mailing of notice of demand for payment against its bond.” Pursuant to 19 U.S.C. § 1514, a protestable issue was raised by challenging a decision by CBP. Pursuant to 19 C.F.R. § 174.24(a), this protest qualifies for further review because it raises questions of fact regarding the inclusion of pre-liquidation interest in a demand for payment that have not been ruled upon by CBP.
The interest assessed on antidumping duties is protestable because it falls within CBP’s ministerial function of computing the total amount of duties owed in accordance with liquidation instructions issued by Commerce. See 19 U.S.C. § 1514(a)(3) (stating that the legality of “charges or exactions” may be protested); American Hi-Fi Int’l, Inc. v. United States, 19 C.I.T. 1340, 1341-45 (1995) (finding that pre-liquidation interest on underpaid antidumping duties constitutes a protestable charge or exaction); HQ H262512 (March 21, 2017) (“CBP’s ministerial role is to follow [Commerce’s] liquidation instructions and to compute the duty [and interest owed]”).
A surety is jointly and severally liable with an importer “for any duties, fees, and charges (including interest) owed, capped at the face amount of the bond.” See United States v. Am. Home Assur. Co., 100 F. Supp. 3d 1364, 1368 (C.I.T. 2015); 19 C.F.R. § 111.62(a) (“the obligors (principal and surety, jointly and severally liable) agree to….[pay] any duties, taxes, and charges imposed”). The “surety becomes liable for the principal's debt or duty to the third party obligee (here, the government)” once the duty is due and the principal has failed to pay the government. Id. (citing Ins. Co. of the West v. United States, 243 F.3d 1367, 1370 (Fed. Cir. 2001)). If the principal is insolvent, the government can issue a demand for payment directly to the surety. See Wash. Int'l Ins. Co. v. United States, 25 C.I.T. 207, 226 (2001); HQ 221886 (June 18, 1991).
Pursuant to 19 U.S.C. § 1677g(a), "[i]nterest [is] payable on overpayments and underpayments of amounts deposited on merchandise entered, or withdrawn from warehouse, for consumption on and after the date of publication of a countervailing or antidumping duty order… or the date of a finding under the Antidumping Act, 1921.” Interest should therefore not be assessed, and is not payable, until the publication of an order. See HQ 228787 (September 27, 2002). Additionally, the term “amounts deposited” in 19 U.S.C. § 1677g(a) limits the assessment of pre-liquidation interest to required cash deposits of estimated duties. See Timken Co. v. United States, 37 F.3d 1470, 1476 (Fed. Cir. 1994) (“‘amounts deposited’ in section 1677g(a) refers solely to cash deposits of estimated duties provided under sections 1671e(a)(4) and 1673e(a)(3)”). Pre-liquidation interest can therefore not be assessed on estimated duties secured by bond, where such bonds are permitted to be posted by Commerce, because 19 U.S.C. § 1677g(a) “does not encompass bonds.” Id.; Fujitsu General America, Inc. v. United States, 110 F. Supp. 2d 1061, 1081 (C.I.T. 2000) (“pursuant to 1677g(a), interest [is] assessable on payments of antidumping duties, but not on instruments serving as security for payments, such as a bond”); HQ 230339 (June 25, 2004) (“no interest is assessed on antidumping duty due when… no cash deposit of estimated duty was due and the payment of the antidumping duty was secured by bond”); HQ H097501 (July 14, 2014). Although Commerce may permit the posting of a bond prior to the publication of a duty order, “merchandise subject to an… order may be entered only upon the [cash] deposit of estimated antidumping duties.” Timken, 37 F.3d at 1475. Liability for pre-liquidation interest pursuant to 19 U.S.C. § 1677g(a) is thus contingent upon the occurrence of two events: (1) the requirement to submit cash deposits of estimated duties in lieu of a bond posting, and, (2) the publication of an antidumping or countervailing duty order, or a finding under the Antidumping Act of 1921.
Western contends that CBP contravened liquidation instructions from Commerce to not assess interest on tires entered prior to the publication of the final antidumping and countervailing duty orders (“final orders”) issued by Commerce. Western further contends that it is not liable for pre-liquidation interest because, pursuant to 19 U.S.C. § 1677g(a), the subject tires were entered prior to the publication of the final orders, and, the duties owed were permitted to be secured by single transaction bonds in lieu of cash deposits.
The liquidation instructions applicable to the protested entries are message numbers 2248305 and 2242302, for antidumping duties owed, and 5210302 and 5226302, for countervailing duties owed. The instruction to CBP shared by all four messages is that interest is “not applicable to cash or bonds posted as estimated…duties before the date of publication of the [final] order.” Id. A single transaction bond is posted or effective “on the date of the transaction identified” on the bond, i.e. the date of underlying entry. See 19 C.F.R. § 113.26(b). The protested entries occurred during the period of July 20, 2008, through December 16, 2009. The final antidumping duty order was published on September 4, 2008. See Certain New Pneumatic Off-the-Road Tires From the PRC: Notice of Amended Final Affirmative Determination of Sales at Less Than Fair Value and Antidumping Duty Order, 73 Fed. Reg. 51624. The final countervailing duty order was also published on September 4, 2008. See Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Countervailing Duty Order, 73 Fed. Reg. 51627. As some of the subject tires were entered prior to the date of publication of the final orders, we find that your office did act counter to Commerce’s liquidation instructions. Consequently, we find that Western is not liable for pre-liquidation interest for any entry made prior to September 4, 2008.
We turn to Western’s argument that no pre-liquidation should have been assessed pursuant to 19 U.S.C. § 1677g(a) because interest does not accrue on estimated duties secured by bond, where permitted, in lieu of cash deposits. See Timken Co., 37 F.3d at 1476; Fujitsu General America, Inc., 110 F. Supp. 2d at 1081; HQ H097501. CBP rulings have been consistent with the 1994 decision in Timken Co. v. United States that 19 U.S.C. § 1677g(a) limits the assessment of pre-liquidation interest to entries for which a cash deposit of estimated antidumping duties is required by Commerce. Id.; see e.g. HQ 224618 (May 26, 1994) (finding that interest was properly assessed because Commerce’s instructions made submitting a cash deposit a requirement, not an alternative to posting a bond); HQ 226263 (December 10, 1996) (“[t]he Timken decisions…make clear that… interest should only be assessed when cash deposits were required”); HQ 228330 (March 24, 1999); HQ 230339; HQ H218115 (August 28, 2014) (“[b]ecause a cash deposit was not required, the interest provisions of 19 U.S.C. §1677g do not apply”). Timken established that “[w]ithout an obligation to pay estimated duties, section 1677g(a) cannot apply.” 37 F.3d at 1477. An obligation to pay estimated duties arises when a cash deposit is required, because cash deposits serve as payment of duties, unlike bonds, which serve as security for future payment. Id.
Estimated duties are paid pursuant to the cash deposit rate in effect at the time of entry, which often varies from the final duty rate owed at liquidation. As explained in Am. Signature, Inc. v. United States, 31 C.I.T. 190, 191 (2007) (internal citations omitted) reversed on other grounds, 2007 U.S. App. LEXIS 27709 (Fed. Cir. Nov. 30, 2007):
[T]he United States uses a “retrospective” assessment system under which final liability for antidumping and countervailing duties is determined after merchandise is imported[.]… [D]uring the course of an antidumping duty investigation… Commerce may estimate at various times the rate of antidumping [or countervailing] duty that will ultimately be assessed[,]…. Commerce [then] instructs [Customs] to collect estimated duties, sometimes referred to as 'cash deposits,' on entries of the merchandise that is subject to investigation. At the completion of its investigation, Commerce issues a final determination, and [an] antidumping [or countervailing] duty order, in which it may (and frequently does) adjust its initial estimate.
Accordingly, if the cash deposits required by Commerce were paid at a lesser rate than the final rate owed at liquidation, the estimated duties owed were underpaid. Interest accrues on underpaid cash deposits from the date that an antidumping duty order is in place, and cash deposits of estimated duties are required in lieu of a bond. See Timken, 37 F.3d at 1476.
For the protested entries, the antidumping duty order was published on September 4, 2008. See Certain New Pneumatic Off-the-Road Tires From the PRC: Notice of Amended Final Affirmative Determination of Sales at Less Than Fair Value and Antidumping Duty Order, 73 Fed. Reg. 51624. Commerce initially permitted either the submission of cash deposits of estimated duties or a bond posting for all tires exported by Starbright and United on or after July 15, 2008. See Certain New Pneumatic Off-The-Road Tires from the PRC: Final Affirmative Determination of Sales at Less Than Fair Value and Partial Affirmative Determination of Critical Circumstances, 73 Fed. Reg. 40485 (July 15, 2008) (“[w]e will instruct CBP to continue to require a cash deposit or the posting of a bond for all companies”); Message No. 8210205 (July 28, 2008). However, Commerce revised its instructions to require submission of cash deposits, effective September 5, 2008, within the publication of the antidumping duty order. 73 Fed. Reg. 51624 (“[e]ffective on the date of the publication of the ITC’s final affirmative injury determination in the Federal Register, CBP… will require… a cash deposit”); Certain Off-the-Road Tires from the PRC: Determination, 73 Fed. Red. 51842 (September 5, 2008) (finding of final affirmative injury published by the ITC). Pursuant to 19 U.S.C. § 1677g(a), GPX was therefore liable for pre-liquidation interest on all tires exported by Starbright and United that were entered on or after September 5, 2008. Consequently, we find that your office properly assessed pre-liquidation interest on all entries which occurred on or after September 5, 2008.
We note that your office timely liquidated all the protested entries in January of 2016, within six months of receiving notice from Commerce that suspension of liquidation was lifted for entries subject to the countervailing duty order. See Message Nos. 5210302, 5226302. Although suspension of liquidation for entries subject to the antidumping duty order was lifted in 2012, CBP may not liquidate entries that remain suspended pursuant to another order from Commerce. See Message Nos. 2248305, 2242302; Mitsubishi Elecs. Am. v. United States, 44 F.3d 973, 977 (Fed. Cir. 1994) (“Customs merely follows Commerce's instructions in assessing and collecting duties…Customs cannot modify [or deviate from] Commerce’s determinations”); HQ 228570 (December 10, 2001) (finding that CBP could not liquidate an entry “until all of the instructions relevant to that entry were issued”). As the protested entries were subject to both an antidumping and a countervailing duty order, CBP could not liquidate the entries until suspension of liquidation was lifted for both orders.
Finally, pursuant to 19 U.S.C. § 1505(d), when a bill for duties owed is not paid in full within 30 days, “any unpaid balance shall be considered delinquent and bear [post-liquidation] interest by 30-day periods.” Accordingly, any post-liquidation interest accrued has been properly assessed, and will continue to accrue until the balance is paid in full.
HOLDING:
Western is liable for pre-liquidation interest accrued on the entries which occurred on or after September 5, 2008, and protest number 2704-16-101570 should be GRANTED in part, for all entries prior to September 5, 2008, and DENIED in part, for all entries on or after September 5, 2008.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. 60 days from the date of the decision, the Office Trade, Regulations and Rulings, 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 & Trade Facilitation Division