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HQ 223031


June 3, 1991

CON-9-13/LIQ-9-01-CO:R:C:E 223031 PH

CATEGORY: LIQUIDATION

Regional Commissioner of Customs
Pacific Region

RE: Protest 3004-90-000010; A TIB Entry May not be Converted to a Consumption Entry; Subheading 9813.00.55, HTSUSA; 19 U.S.C. 1514

Dear Sir:

The above-referenced protest was forwarded to this office for further review. We have considered the points raised by your office and the protestant. Our decision follows.

FACTS:

On July 18, 1989, the protestant imported certain computer equipment, entered as "automatic data processing machines" and described by the protestant as three "specially-equipped graphics workstations configured to manipulate GFIS (Geographic Facilities Information System)". The date of the entry was July 18, 1989. The date of the entry summary for the merchandise was July 25, 1989. The merchandise was initially entered under the Temporary Importation Bond (TIB) provision subheading 9813.00.50, Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

On July 27, 1989, Customs advised the protestant that "[t]here is no TIB provision which allows the foreign supplier to rent equipment to a U.S. firm without the payment of duty. Enter accordingly." On August 3, 1989, the protestant advised Customs that it was changing the TIB provision under which the merchandise had been entered to subheading 9813.00.55, HTSUSA, for which it (i.e., the protestant) believed the shipment qualified. The port of importation accepted the entry, according to documents in the file, and requested advice from the National Import Specialist (N.I.S.) on the classification of the merchandise. The N.I.S., in a report dated August 24, 1989, advised that the merchandise was not classifiable under the TIB provision (subheading 9813.00.55, HTSUSA) and should be classified under the appropriate provisions in Chapter 84, HTSUSA. According to the file, on October 17, 1989, Customs required the protestant to reclassify the merchandise accordingly.

On October 17, 1989, the protestant sent to Customs an amended entry summary to reflect the reclassification of the merchandise (under subheadings 8471.91.0020, 8471.92.2000, and 8471.92.4075, HTSUSA), with duty in the amount of $1,480.90. On October 26, 1989, the protestant wrote Customs to seek the refund of a portion of this duty under subheadings 9801.00.10 and 9802.00.80, HTSUSA. A refund in the amount of $881.75 was granted and the entry was liquidated on November 24, 1989. The protestant filed the protest under consideration on January 19, 1990.

The merchandise under consideration is described in the protest as computer "hardware", consisting of three IBM PS/2 Model 70 computers with dual asynchronous adapters, 8514 adapters, and extra memory. According to documentation in the file, the merchandise was used by the importer in the United States solely to remodel the cartographic data of the Canadian company which loaned the merchandise to the importer. At the time the protest was filed, two of the three workstations had been returned to the United States. Proof of exportation was included in the file and the protestant stated that when the third workstation was exported, proof of exportation for it would be available as well.

ISSUES:

(1) Does the computer equipment described in this case qualify for duty-free entry under 9813.00.55, HTSUSA?

(2) May Customs require an importer to convert the TIB entry under which merchandise has been entered to a consumption entry after the TIB entry has been accepted by Customs?

(3) May the protest under consideration in this case be granted?

LAW AND ANALYSIS:

Initially, we note that the protest, with application for further review, was timely filed under the statutory and regulatory provisions for protests (see 19 U.S.C. 1514 and 19 CFR Part 174).

Subheading 9813.00.55, HTSUSA, provides for free entry under bond, as prescribed in U.S. Note 1 of the subchapter in which the subheading is found (Subchapter XIII of Chapter 98), of:

Articles of special design for temporary use exclusively in connection with the manufacture or production of articles for export.

Pursuant to U.S. Note 1(a) of Subchapter XIII of Chapter 98:

The articles described in the provisions of this subchapter, when not imported for sale or for sale on approval, may be admitted into the United States without the payment of duty, under bond for their exportation within 1 year from the date of importation ....

This tariff provision has been the subject of a number of published rulings (see Customs Service Decisions (C.S.D.'s) 82- 158, 84-55, and 89-109). In C.S.D. 82-158, we reviewed the legislative history of this provision in holding that fish processing machines used to process fish for export could not be admitted temporarily free of duty under bond under item 864.55, Tariff Schedules of the United States (TSUS), the predecessor to subheading 9813.00.55, HTSUSA. In this ruling we stated:

We do not doubt that the fish processing machinery in issue is of limited manufacture, but we do not consider them to be "articles of special design" such as, say, a die or an engraving plate, any more than we would consider a die stamping machine or printing press in which the die or plate is used, to be an article of special design. It is the die or plate that is specially designed to produce or manufacture a particular thing and that is unique and possesses the unusual qualities necessary to be deemed an article of special design.

In C.S.D. 89-109, we adopted the reasoning of C.S.D. 82-158 to the "special design" requirement of subheading 9813.00.55, HTSUSA, in holding that a brine freezer unit used to freeze whole herring roe for export was not "an article of special design" and did not qualify for admission under the subheading.

Based on the foregoing, we conclude that the merchandise under consideration (standard computer hardware, according to the evidence in the file) may not be considered to be articles of special design, for purposes of subheading 9813.00.55, HTSUSA. Although computer software, specially configured to be temporarily used exclusively in connection with the production of products for export could possibly qualify for treatment as an article of special design for purposes of subheading 9813.00.55, HTSUSA, as would be true of a die or an engraving plate, the computer hardware used with such software, as is true with a die stamping machine or printing press in which a die or plate is used, is not "unique and [does not possess] the unusual qualities necessary to be deemed an article of special design" (see material quoted above from C.S.D. 82-158).

As an alternative basis for relief, the protestant contends that Customs improperly directed the protestant to change the TIB entry to a consumption entry and that the TIB entry should have been allowed to stand. As support for this contention, the protestant cites the "Temporary Importation under Bond Seminar" of November 1975, page 49, in which it is stated:

It often happens that after a TIB entry has been accepted and the articles released to the importer it is subsequently found that a temporary importation bond entry item would not be applicable. The practice has been for many years to let the entry stand if made in good faith. ...

Customs has ruled, in a published ruling (C.S.D. 82-109), that seminar notes which were not issued by an authorized employee and which were not issued under the procedures set forth in 19 CFR Part 177 are not decisions of the Customs Service. The cited seminar consists of such seminar notes. Therefore, the quoted material is not a decision of the Customs Service.

Customs actual position on this issue is as follows. TIB entries are considered entries. However, TIB entries shall not be liquidated (19 CFR 10.31(h)). Entries, once properly accepted, may not be rejected by Customs (see 19 CFR 141.64 and 141.68; see also ruling 222367, dated December 28, 1990). There is no authority for the conversion of a TIB entry which has been accepted by Customs to a consumption entry (T.D. 78-363; see also 19 CFR 10.31-10.40). The correct procedure for Customs to follow when a TIB entry is filed and accepted by Customs for merchandise subsequently found not to qualify for the TIB provision is to consider the bond breached and to assess liquidated damages (letter 723561/726002, dated August 13, 1984).

The TIB entry under consideration was accepted by Customs. The liquidation of the consumption entry which was substituted for the TIB entry was timely protested under 19 U.S.C. 1514. However, we note that Customs may not "unliquidate" a liquidation (see United States v. Utex International Inc., 6 Fed. Cir. (T) 166 (1988); see also ruling 221591, dated February 13, 1990, following Court decision). As stated above, TIB entries may not be liquidated, so the entry under consideration could not be reliquidated under subheading 9813.00.55, HTSUSA. We understand that the TIB bonds for the merchandise under consideration have been cancelled and that at least two of the three workstations have been exported. Accordingly, even if Customs could "unliquidate" the protested liquidation and "revive" the TIB entries, there would be no existent TIB bonds against which to assess liquidated damages. In view of the comments on the "void liquidation" theory by the Court in Omni U.S.A., Inc. v. United States, 6 Fed. Cir. (T) 99, 103, 840 F. 2d 912 (1988), cert. den., 488 U.S. 817 (1988), rehearing den., 488 U.S. 961 (1988), we believe that this is an instance in which what may seem to be a procedural nicety (i.e., that Customs cannot "unliquidate" a liquidation and that TIB entries may not be liquidated) results in the proper disposition of the case. We note that the liquidated damages which Customs should have assessed in this case would have been more than five times the amount of duty which is being protested (see 19 CFR 10.31(f)).

The protest is DENIED.

HOLDINGS:

(1) The computer equipment described in this case does not qualify for duty-free entry under 9813.00.55, HTSUSA, because the pieces of equipment are not "articles of special design" within the meaning of that provision.

(2) Customs has no authority to require an importer to convert the TIB entry under which merchandise has been entered to a consumption entry after the TIB entry has been accepted by Customs. The correct procedure for Customs to follow in such a circumstance when the merchandise is subsequently found not to qualify for the TIB provision is to consider the TIB bond breached and to assess liquidated damages.

(3) The protest under consideration in this case may not be granted because Customs may not "unliquidate" a liquidation and TIB entries may not be liquidated.

The protest is DENIED. A copy of this decision should be attached to the Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

John Durant, Director

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