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HQ 223835


July 24, 1992

PRO-5-09 CO:R:C:E 223835 C

CATEGORY: ENTRY LIQUIDATION

District Director of Customs
U.S. Customs Service
40 South Gay Street
Baltimore, MD 21202

RE: Protest and application for further review no. 1303-91- 100183; reliquidation with an increase after protest denial; 19 U.S.C. 1501; 19 U.S.C. 1514

Dear Sir:

This responds to the referenced protest. We have reviewed all relevant materials and our response follows.

FACTS:

On October 19, 1989, the Court of International Trade (CIT) decided the case of Eastalco Aluminum Co. v. United States, 13 CIT 864, 726 F. Supp. 1342 (1989). The court held that certain carbon blocks (used to line an aluminum reduction cell in which aluminum is produced) were properly classifiable under item 517.91 of the Tariff Schedules of the United States (TSUS), contrary to the classification urged by Eastalco Aluminum Co. (Eastalco) or the classification set by Customs at liquidation. Subsequently, on January 2, 1991, various protests that had been filed prior to the court's decision protesting Customs earlier classification of the merchandise under item 517.61, TSUS, were denied. These denials were based on the above court opinion. On February 15, February 22, and March 1, 1991, thirty entries covered by these denied protests were reliquidated at the duty rate applicable to item 517.91, TSUS, and Eastalco, PROTESTANT in the instant protest, was charged for increased duties relative thereto. PROTESTANT now protests Customs reliquidation of these thirty entries at rates higher than those set at the original liquidations. You contend that, with respect to seven of these thirty entries, the reliquidations with an increase were proper for the reason that they were covered by the Eastalco case and were reliquidated with an increase in accordance with that decision. PROTESTANT asserts that they were not covered by the Eastalco case and should not have been reliquidated with an increase.
ISSUE:

On the facts of this case, were the reliquidations of the thirty entries in question improper?

LAW AND ANALYSIS:

Initially, we note that this protest was timely filed on April 26, 1991 under 19 U.S.C. 1514(a)(5). The Customs decisions protested, the reliquidations of thirty entries, occurred on February 15, February 22, and March 1, 1991. This protest was filed within 90 days of those decisions in accordance with 19

Under 19 U.S.C. 1514, various Customs decisions are deemed final and binding on both importers and the Government unless they are formally objected to by the filing of a protest. Among the decisions that can be protested under section 1514 are decisions that are made in the liquidation of entries: classification, duty rate, valuation, etc. If the protest is filed within 90 days of the liquidation, and Customs finds that the objection is valid, the original liquidation can be reliquidated. A reliquidation performed pursuant to a protest decision in favor of a protesting party will often result in a refund of duties paid to that party. Unless the reliquidation pursuant to a protest decision that is unfavorable to a protesting party occurs within 90 days of the original liquidation, Customs cannot reliquidate with an increase in duties. This is so because Customs authority to reliquidate an entry with an increase in duties is limited (with the exception of 19 U.S.C. 1521 pertaining to fraud) to action taken under 19 U.S.C. 1501. Under this statute, Customs may voluntarily reliquidate an entry, with an increase or reduction in duties, for any reason within 90 days of the original liquidation, whether or not a protest has been filed. With the passage of that 90 day period, Customs authority to reliquidate with an increase terminates. Thus, Customs, in a protest action that extends beyond that 90 day period, can only deny a protest; it cannot determine that a higher duty rate should have been applied and then reliquidate accordingly, issuing a bill for increased duties.

The protests covering the thirty entries in question in the instant protest were denied, and Customs reliquidated the entries with an increase in duties. These reliquidations were performed after expiration of the 90 day period within which Customs is authorized to reliquidate with an increase. This is contrary to the general scheme explained above. Yet, you have contended that seven of the thirty entries were properly reliquidated with an increase, not because they were reliquidated within the 90 day period, as above, but because they were covered by the Eastalco case and the court's decision permits reliquidation with an increase in that instance. In other words, an exception to the general scheme exists: When protested entries are "covered" by a case being heard by the CIT, and the CIT's decision is against the protestant and holds that a classification carrying a higher duty rate applies to the contested entries, then, in accordance with the court's ruling, Customs may reliquidate such "covered" entries with an increase.

First, it is true that such an exception exists. Second, this exception does not apply to the thirty entries covered by the instant protest.

When entries covered by a protest are, by explicit inclusion, made part of the summons filed with the court, they may be reliquidated with an increase in accordance with the final judgment, depending on certain circumstances including whether or not there is a final judgment and what that judgment is. We have been advised by the Office of the Assistant Chief Counsel for International Trade Litigation, the office that handled the Eastalco litigation for the Customs Service, that two entries have been reliquidated with an increase as a direct consequence of the court's Eastalco decision and that various others are presently subject to an appeal of that decision. These latter entries may yet be reliquidated with an increase, depending on the outcome of that appeal. However, we are advised that the thirty entries subject of the instant protest were not placed in the appropriate status to be either reliquidated in accordance with the Eastalco decision or to be subject of the pending appeal. Therefore, the exception to the general scheme discussed above is inapplicable to these thirty entries and they should not have been reliquidated with an increase. In accordance with that general scheme, the protests should have been denied without reliquidation of the entries.

You cited a January 18, 1984, letter from the Assistant Chief Counsel for International Trade Litigation as evidence that the seven entries subject of protests 1303-3-000390 and 1303-3- 000420 had been made part of the Eastalco litigation. We have been advised that the action referenced in that letter - administrative suspension of those protests - did not have the effect of placing those entries in the appropriate status to permit their being reliquidated with an increase in accordance with the Eastalco decision or made subject of the pending appeal.

Based on the foregoing, we must conclude that the protests covering the thirty entries in question should simply have been denied; the entries should not have been reliquidated with an increase.

HOLDING:

The thirty entries subject of this protest should not have been reliquidated with an increase since they had not been placed in the appropriate status to be made a part of the litigation and thus subject to the authority of the court to order reliquidation at the higher duty rate.

You are hereby instructed to grant this protest and reliquidate the entries accordingly. Any appropriate refunds of duties should be made.

Sincerely,

John Durant, Director

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