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HQ 087097


July 23, 1990

CLA-2 CO:R:C:G 087097 JMH

CATEGORY: CLASSIFICATION

TARIFF NO.: 8704.31.00

District Director
U.S. Customs Director
111 West Huron St.
Buffalo, New York 14202

RE: Protest and Request for Further Review 0901-9-701322; Toyota 4-Runner SRS, two-door model; motor vehicle for the transport of goods; trucks; multi-purpose vehicles; sport utility vehicles; dual purpose vehicles

Dear Sir:

The following is our decision regarding the Protest and Request for Further Review No. 0901-9-701322, dated September 1, 1989. At issue is the classification under the Harmonized Tariff Schedule of the United States Annotated ("HTSUSA") for the Toyota 4-Runner SR5.

FACTS:

The article in question is one two-door Toyota 4-Runner SR5 motor vehicle imported by Superior Auto Sales, Inc. of Hamburg, New York. The 4-Runner was ordered in late 1988, received by the importer on December 31, 1988, and entered on January 5, 1989. Upon entry, the importer classified the 4-runner under heading 8703, HTSUSA, as "Motor cars and other motor vehicles principally designed for the transport of persons..." This classification requires a rate of duty of 2.5 percent ad valorem. The importer relied upon this classification since the same vehicles were classified under the corresponding heading in the Tariff Schedules of the United States ("TSUS"). The TSUS was replaced by the HTSUSA on January 1, 1989. The importer received notice by letter on January 25, 1989, that certain sport utility vehicles, including Toyota 4-Runners, were under further review and may be subject to reclassification. The notice included a warning regarding a possible further assessment of duties.

The notification the importer received was based upon Headquarters Ruling Letter 083081 ("HQ 083081"), originally dated December 30, 1989. HQ 083081 addressed the classification of
sport utility vehicles under the HTSUSA. The ruling addressed the Suzuki Samurai, but was also applicable to all other similar multi-purpose vehicles. HQ 083081 held that under the new HTSUSA these vehicles would be considered motor vehicles not principally designed for the transport of persons, and therefore, properly classified under heading 8704, HTSUSA. This classification requires a rate of duty of 25 percent ad valorem.

On January 4, 1989, Customs Headquarters sent a telex to all field personnel to notify the field of HQ 083081. This telex ordered the liquidation of all relevant entries to be withheld pending further instructions. On January 13, 1989, a second telex was sent to field personnel from Customs Headquarters informing the field that the classification of sport utility vehicles was under review. The field personnel were instructed to allow entry under heading 8703, but to withhold liquidation. The field personnel were also instructed to notify importers of the vehicles of the situation, that the possibility existed that an additional duty may be assessed and to suggest that they make the necessary financial arrangements. The effective date.of HQ 083081 was modified to be February 13, 1989. This second telex, resulted in the letter which was received by the importer on January 25, 1989.

In May 5, 1989, a third telex was sent to the Customs field personnel from Headquarters. This telex relayed the final position of Customs on the classification of sport utility vehicles under the new HTSUSA. Two-door models of the vehicles are to be classified in heading 8704 and four-door models are to be classified in heading 8703. This telex instructed the field to liquidate all entries entered on or after January 1, 1989, in accordance with the new principles. Since the importer entered a two-door model, it was classified under subheading 8704.31.00, HTSUSA, and assessed a 25 percent rate of duty.

The importer contends that the reclassification constitutes a change of practice by Customs. A change of practice requires notification of the change. Since he had no notice of the change in regulations prior to importation and entry of the vehicle, the importer asserts that the change in classification is not applicable to him. The importer also contends that the retroactive nature of the classification was improper.

ISSUE:

Issue 1: Whether the importer's lack of knowledge of the change in classification exempts the Toyota 4-Runner in question from the assessment of additional duty.

Issue 2: Whether the determination after the entry in question that certain vehicles are to be classified in heading 8704 may be applied retroactively to the Toyota 4-Runner.

LAW AND ANALYSIS:

Notice

When the U.S. Customs Service contemplates a change in its practice or position that will result in the assessment of a higher rate of duty, Customs must give notice by publishing in the Federal Register that it is reviewing the practice or position. Interested parties must be given an opportunity to comment. Customs Regulation 177.10(c), 19 C.F.R. 177.10(c). Publication in the Federal Register is required as it is impossible to personally notify every potential importer.

On June 1, 1988, Customs published a notice at 53 Fed. Reg. 19933 that stated Customs intent to review the classification under the TSUS of certain motor vehicles including sport utility vehicles. This review was caused by the blurring of the distinction between motor vehicles used for the transport of persons and motor vehicles used for the transport of goods.

On August 23, 1988, Congress passed the Omnibus Trade and Competitiveness Act, Pub. L. 100-418, codified at 19 U.S.C. 3004. The Omnibus Trade and Competitiveness Act incorporates the HTSUSA at section 1217. Congress required implementation of the HTSUSA on January 1, 1989. There is no requirement upon Customs to notify all potential importers of an act of law passed by Congress.

After passage of the Omnibus Trade and Competitiveness Act Customs published in the Federal Register notice that it was withdrawing the June 1, 1988 notice due to the enactment of the new trade act and the new tariff. 53 Fed. Reg. 46474 (November 17, 1988). Since the TSUS would be implemented for only a few more months it was unnecessary to review classification of motor vehicles under the TSUS. This publication stated the following:

The tariff nomenclature under the HTS is different from the TSUS nomenclature and will be interpreted according to all relevant rules of interpretation, legal notes, and if necessary, any relevant legislative history.

Because Customs will be addressing the classification of all motor vehicles under the HTS, rather than the TSUS, after January 1, 1989, review of
the criteria Customs should use in the future in classifying certain motor vehicles under the provisions of the TSUS is no longer necessary.

This publication acknowledges that after January 1, 1989, different classification rules will be implemented and that the analyses utilized under the TSUS may not apply to those under the HTSUSA.

The importers contention that the change in classification that occurred was a change in practice or position requiring prior notice is without merit. There could be no prior positions or practices of Customs as of January 1, 1989, since the new tariff had yet to be implemented. Thus, Customs was not required to give notice. Despite the lack of a notice requirement, the November 17, 1988 publication constitutes notice to the public that the rules of classification were changing. Customs met and exceeded its procedural notice requirements.

Retroactive Effect

The classification and rates of duty applicable to an entry are those in force at the time of entry. Since the Toyota 4 Runner was entered on January 5, 1989, the classification and rate of duty under the HTSUSA were applicable. Customs Regulation 152.17, 19 C.F.R. 152.17. When merchandise is entered Customs has a minimum of one year to liquidate the entry. Customs Regulation 159.11(a), 19 C.F.R. 159.11(a). The purpose of this year is to enable Customs to assess the correctness of the classification of the merchandise, its value, its quantity, etc. If an entry has been liquidated or an entry has been made under a binding ruling, then Customs may not alter the classification for that entry. See Customs Regulations part 159, 19 C.F.R. 159, and Customs Regulation 177.9(d), 19 C.F.R. 177.9(d).

The importer states that it took more than six months for its entry to be liquidated. This is well within the required time limit. The importer received notification twenty days after entry that the classification of the vehicle was being evaluated and that an additional duty may be assessed. That an additional duty was ultimately assessed against the entry in question does not create an unawful retroactive action. The entry had not been liquidated, nor had a binding ruling been issued to Superior Auto Sales concerning this Toyota 4-Runner. Customs followed its procedures as required by law.

HOLDING:

Customs published a notice in the Federal Register of the enactment of the Omnibus Trade and Competitiveness Act and the provision for the new tariff nomenclature, the HTSUSA. This
notice was all that customs was required by law to dispense. Customs is not required to distribute personal notices to all importers. The importer's contention that the lack of prior notice exempts him from the assessment of the additional duty is without merit.

Customs notified the importer by letter within twenty days of the entry of the evaluation of the classification of certain motor vehicles and that an additional duty may be assessed. Customs has a minimum of one year to liquidate an entry. Customs may use this year to determine the appropriate classification, value and origin of the merchandise. Since the entry had not been liquidated and a binding ruling had not been issued to the importer, the change in classification and the assessment of a higher rate of duty did not violate the Customs regulations.

The protest should be denied in full. A copy of this decision should be attached to the Form 19 Notice of Action for the protest. Enclosed please find the original Form 19.

Sincerely,

John Durant, Director
Commercial Rulings Division


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