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HQ 224893

April 21, 1994

ENT-1-03/LIQ-9-CO:R:C:E 224893 JRS


District Director of Customs
U.S. Customs Service
10 Causeway Street
Boston, Massachusetts 02222-1056

RE: Application for Further Review of Protest 0401-93-100314; Interest; 19 U.S.C. 1505; Kalan, Inc. v. United States

Dear Sir:

This is in response to your request for further review of the above-referenced protest. We have considered the points raised and our decision follows.


In this protest, the protestant challenges the fact that the Customs Service did not refund, with interest, the estimated duties deposited at entry, when Customs reliquidated the entries and refunded the liquidated duties on March 26, 1993, pursuant to its prior protest under 19 U.S.C. 1514(a)(2)(see AFR Protest No. 0401-92-100037, HQ 952525 and 951273, dated January 15, 1993).

On May 20, 1993, the protestant filed this instant protest against the reliquidations of 28 protested entries, contending that Customs' action of not paying interest on the refund of the entries is contrary to the holding in the leading case on the subject, Kalan, Inc. v. United States, 944 F.2d 847 (Fed. Cir. 1991). We note that 3 entries listed on the CF 19 by the protestant have not been input into the ACS Protest Trailer Record (PMBL) which covers only 25 of the protested entries. The dates of entry for the 3 entries are listed as September 12, 1991, January 8, 1992, and February 28, 1992.


Whether interest is due on the refund of duties?


We note that this protest is timely filed and is properly protestable under 19 U.S.C. 1514(a)(5).

Congress has recently amended section 505 of the Tariff Act of 1930, as amended (19 U.S.C. 1505), in the North American Free Trade Agreement Implementation Act (the "Act"), Pub. L. No. 103- 182, signed December 8, 1993. See section 642 of Title VI of the Act. However, this amendment has no application to this protest because the Act applies only to entries with an entry date on or after December 8, 1993. All the protested entries in this protest were entered during the years 1991 and 1992.

In Kalan, supra, the court interpreted the two relevant statutes (19 U.S.C. 1505 and 19 U.S.C. 1520(d)) concerning interest and held that excess estimated duties are refunded without interest. The Kalan court held that interest under section 520(d), Tariff Act of 1930, as amended (19 U.S.C. 1520(d)), may be paid only on "increased or additional duties" assessed at the time of liquidation and not on a refund of estimated duties paid at the time of entry summary filing. Neither section 1520(d) itself nor related sections 1505(a)-(c) clearly mandate the payment of interest on duties deposited at entry and subsequently refunded because those estimated duties are required by law to be deposited at the time of making entry. See 19 U.S.C. 1505(a); 19 CFR 141.64 and 141.103. Under Kalan, estimated duties never become duties due on liquidation. In this case, although Customs denied the prior protest in full and affirmed the classification of the merchandise at the time of entry as kraft paper under subheading 4804.39.6040, HTSUS (at the 4% duty rate), as being legally correct, Customs reliquidated the protested entries under subheading 4805.60.3000, HTSUS (at the free rate), based on 19 CFR 177.9(a). Since there was no further collection at liquidation beyond the amount deposited at the time of entry (4% ad valorem), no interest is due on refund.


Interest is not due on the refund of excess duties deposited at the time of entry under 19 U.S.C. 1505(a) in accordance with Kalan, supra. The protest should be denied in full.

This decision should be mailed by your office to the protestant no later than 60 days from the date of this letter; after 60 days from the date of the decision, the Office of Regulations and Rulings will take steps to make the decision available to customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other public access channels. See Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive.


John Durant, Director

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