HQ 546281 - Application for Further Review of Protest No. 5501-95-100452; buying commissions; 19 U.S.C. 1520(c) - United States International Trade Commision Rulings

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HQ 546281

September 23, 1996
VAL: RR:IT:VA 546281 RSD

CATEGORY: VALUATION

Port Director
United States Customs Service
Dallas/ Fort Worth Area Port
1205 Royal Lane
Dallas/Fort Worth Airport, Texas 75261

RE: Application for Further Review of Protest No. 5501-95-100452; buying commissions; 19 U.S.C. 1520(c)

Dear Director:

This is a decision on an application for further review of the above referenced protest filed on behalf of Bollinger Industries, Inc. (hereinafter Bollinger) on October 3, 1995, against your decision denying the reliquidation of entries pursuant to section 520(c)(1) of the Tariff Act of 1930, 19 U.S.C. 1520(c)(1). Bollinger alleges that there was a mistake of fact, clerical error or other inadvertence in appraising the imported invoice. Specifically, Bollinger claims that buying commissions were incorrectly included in the price of the imported merchandise.

FACTS:

Bollinger imported gym/playground exercise equipment made in Taiwan and China through the port of Dallas/Fort Worth. In procuring the merchandise, Bollinger claims to have used the services of two buying agents, Sanley Sport, Taiwan (hereinafter Sanley) and GRI Hong Kong (GRI). On May 7, 1990, Bollinger entered into buying agency agreements with Sanley and GRI. Under these buying agency agreements, Bollinger appointed the agents to act on its behalf in selection, negotiations, and the procurement of merchandise in a described geographic area. The specific duties of the agents were a) to gather, verify, and transmit to Bollinger all relevant information about merchandise within the agents' geographic area; b) quote prices for merchandise; c) facilitate Bollinger's access to and acquisition of merchandise of the type, quality, and in the quantities that Bollinger desires; d) upon Bollinger's instructions place orders for merchandise on Bollinger's behalf at the most favorable prices and terms possible. The agent's additional responsibilities include making inspections and investigating merchandise; furnishing properly executed certificates, certificates of inspections or progress reports; use all reasonable efforts necessary to expedite the shipments of merchandise Bollinger purchased; and deliver all documents, instruments, evidence and proofs that are necessary to import the merchandise to the United States and sell or consume any merchandise to a vendor in the agent's geographic area. In exchange for these services, Bollinger agreed to pay the agents a 6 percent commission. Customs appraised the imported merchandise under transaction value based on the invoice unit price that Bollinger paid the agents. Bollinger claims that in appraising the merchandise, Customs should have deducted amounts representing the buying commissions which were included in the unit prices. As evidence of the buying commission, Bollinger presented two sets of invoices for two particular shipments of merchandise. The first set of documents contains an invoice of a Taiwanese seller, LuLu Sports, issued to Sanley for 9216 sets of a product labeled as "Tone up 1-2-3". This invoice shows a unit price in US dollars and a total price. In a column labeled, marks & Nos. Bollinger Dallas is indicated. The second invoice in the set is one that Sanley prepared for Bollinger for various items. This invoice covers the 9216 sets of "Tone up 1-2-3", which is shown on lines numbers 6 and 11. Sanley's invoice shows a greater unit price for the "Tone up 1-2-3" than the price shown on the LuLu's Sport's invoice. The importer claims that the difference in Sanley's invoice price is due to the inclusion of the 6 percent buying commission that Sanley charged Bollinger for it services. Sanley's invoice, however, does not separately identify the buying commission and in fact there is no mention of a buying commission anywhere on the invoice.

The second group of invoices that Bollinger submitted was for 3440 sets of a product called "DA-5000 Manual Treadmill". The alleged seller, Tai-Wuu, prepared an invoice for Sanely which indicated that the total price of the merchandise purchase was $214,312. In turn, Sanley issued an invoice for the same merchandise to Bollinger in the amount of $227,040. Bollinger claims that the difference in price is also attributable to the 6 percent buying commission. Sanley's invoice to Bollinger, again, does not make any reference to buying commissions.

The entry documents do not make any reference to buying commissions or buying agents. The entries were liquidated as entered. Bollinger did not protest the liquidation of the entries, but requested that the entries be reliquidated under 19 U.S.C. 1520(c) claiming that there was a mistake of fact because buying commissions were mistakenly included in the value of the imported merchandise. When Customs denied the request reliquidation, Bollinger protested the denial of the reliquidation. In its petition, Bollinger alleges that Customs was mistaken as to fact that bona fide buying agents were involved in the purchase and the importation of the imported merchandise. Prior to the filing of the 19 U.S.C. 1520(c) claim, there is no indication that Customs was advised that there were buying agents or buying commissions involved in the purchase or importation of the imported merchandise.

ISSUES:

Was Customs' denial of the request for reliquidation under 19 U.S.C. 1520(c)(1) erroneous, such that this protest of that decision should be approved?

Whether alleged buying commissions which are not identified on the agent's invoices should be included in the transaction value of the subject merchandise?
LAW AND ANALYSIS:

In determining the merits of this protest, we must examine whether Customs was correct in denying Bollinger's request for reliquidation of the entry under 19 U.S.C. 1520 (c)(1). We note initially that the protest was timely filed under the statutory and regulatory provisions for protests, 19 U.S.C. 1514(c)(3)(B) and 19 CFR 174.12(e)(2). Bollinger's 19 U.S.C. 1520(c)(1) petition of May 5, 1995 was denied on July 5, 1995. The protest was received by Customs on October 3, 1995, which is 90 days after the denial of the petition.

We also note that the refusal to reliquidate an entry under 19 U.S.C. 1520(c) is a protestable issue pursuant to 19 U.S.C.

Under 19 U.S.C. 1520(c)(1), an entry may be reliquidated to correct a clerical error, mistake of fact, or other inadvertence not amounting to an error in the construction of the law. The statute provides that the error must be manifest from the record or established by documentary evidence and brought to the attention of Customs within one year from the date of liquidation.

Errors "manifest from the record" are those apparent to Customs from a facial examination of the entry and entry papers alone. "Documentary evidence" is all other evidence supporting the existence of the claimed error. The importer must inform Customs of the alleged error with sufficient particularity to allow remedial action. The importer must describe in detail the alleged error and prove that the error was not the result of a legal error rather than a factual error. An error correctable under 19 U.S.C. 1520(c)(1) must be established by the evidence and cannot be inferred from the circumstances.

In ITT Corporation v. United States, 24 F.3d 1384, 1387 (Fed. Cir. 1994), the court stated:

With regard to substantiation, ? 1520(c)(1) requires the importer to establish the asserted inadvertence through documentary evidence submitted to the appropriate customs officer, unless the inadvertence is manifest from the record. Inadvertences manifest from the record are those apparent to Customs from a facial examination of the entry and the entry papers alone, and thus require no further substantiation. While clerical errors likely compose the majority of such inadvertences, mistakes of fact nonetheless also can be manifest from the record that the entry and entry papers constitute. Mistakes of fact that are not manifest from such record, however, must be established by documentary evidence.

In PPG Industries, Inc. v. United States, 4 CIT 143, 147-148 (1982), the court stated (quoting in part from Hambro Automotive Corp. v. United States, 81 Cust. Ct. 29, 31 (1978)):

...[I]t is incumbent on the plaintiff to show by sufficient evidence the nature of the mistake of fact. The burden and duty is upon the plaintiff to inform the appropriate Customs official of the alleged mistake with "sufficient particularity to allow remedial action."

In United States v. Enrique C. Lineiro, 37 CCPA 5, 10 (1949), the court stated that "[d]etermination of issues in customs litigation may not be based on supposition."

In this matter, Bollinger has not set forth a valid claim for relief under 19 U.S.C. 1520(c)(1). A clerical error, mistake of fact, or other inadvertence is not manifest from the record, nor has such an occurrence been established by documentary evidence.

In its petition of May 5, 1995, the Bollinger states:

The mistakes of fact, clerical error or other inadvertence which we wish to correct is as follows:

(1) The District Director was mistaken as to the fact of whether or not a bona fide buying agent was involved in the purchase and importation of merchandise by Bollinger Industries for the period of time in question;

(2) The District Director was also mistaken as to whether or not a bona fide buying commission was included in the first cost stated on commercial invoices related to the entries in question.

(3) Because of such mistakes in fact, the importer has paid duty based on an entered value that is inflated by the amount of the buying commission. Since this commission is non-dutiable, the importer has overpaid duty and is entitled to a refund.

Bollinger has not established a mistake of fact upon the part of Customs. Although it is not totally clear from all of the documentation submitted, Bollinger appears to be claiming that because it did not deduct what it claims is a bona fide buying commission from the invoiced price of certain merchandise, and because there was no reference on the appropriate entry documents to such alleged bona fide buying commissions, Customs made a mistake of fact within the meaning of 19 U.S.C. 1520(c)(1) with respect to the appraisement of the subject merchandise.

We note that Customs cannot have made a mistake of fact within the meaning of 19 U.S.C. 1520(c)(1) with respect to an issue that was not placed before it, i.e., Bollinger did not inform Customs of the alleged buying commissions in order that Customs could make a determination as to the dutiability of the commission. The fact that the merchandise appears to have been appraised as entered militates strongly against the occurrence of a mistake of fact by
Customs within the meaning of 19 U.S.C. 1520(c)(1). Customs did not make a determination with respect to the alleged buying commission because Bollinger did not put the alleged buying commission at issue.

Bollinger has not shown that the liquidation was in error. Even assuming that the liquidation was in error in failing to allow a buying commission deduction from the appraised value, it has not shown that error was caused by its failure to provide copies of the relevant agency agreement to Customs.

Additionally, Bollinger's claim with respect to a six percent buying commission on the subject entries is not convincing. Bollinger has not linked the entries with the documentation which it provided with the protest, i.e., the agency agreements, etc. Moreover, the agency agreements (Article III) state that the cost of the merchandise shall be the actual ex-factory price, yet the invoices submitted by Bollinger do not reflect an ex-factory price.

Further, Bollinger has not established its claim by documentary evidence. The assertion that the District Director made a mistake of fact, without documentary evidence supporting such assertion, is a conclusion of law which is not helpful to Bollinger's efforts under 19 U.S.C. 1520(c)(1). See Degussa Canada Ltd. v. United States, 87 F.3d 1301 (C.A.F.C. 1996) where the court stated, with respect to 19 U.S.C. 1520(c)(1):

...those allegations track the language of the statute and therefore are conclusions of law that the court need not accept. See Fabrene, Inc. v. United States, 17 Ct. Int'l Trade 911, 913 (1993).

In Cavazos v. United States, 9 CIT 628 (1985), the court held that where an importer entered merchandise claiming duty-free status under item 800.00, TSUS ("American goods returned"), and failed to submit the required documentation for that provision, Customs' classification of the merchandise under a dutiable provision of the tariff schedule was a conclusion of law not remediable under 19 U.S.C. 1520(c)(1). The court held that since the importer did not supply the proper documentation, the appropriate Customs officer made a legal determination as to the classification of the merchandise on the basis of the facts presented.

Similarly, in this case, Bollinger appears to be claiming that the appraisement should have been different because it failed to advise Customs of the alleged buying commissions. The reasoning of Cavazos applies: since Bollinger may not have supplied the proper documentation, Customs made a legal determination as to the appraisement of the merchandise on the basis of the facts presented.

An error in appraisement or classification is generally a legal error, or a mistake of law, and is not a mistake of fact. Where it is a legal error, it is not correctable under 19 U.S.C. 1520(c)(1). However, relief may be granted under 19 U.S.C. 1520(c)(1) when it is established by sufficient evidence that merchandise has been wrongly classified or appraised due to a mistake of fact. (See PPG Industries, Inc., supra, 4 CIT at 147-148; see also Fabrene, Inc., supra, "A mistake sufficient to invoke the relief provided for by ? 1520(c)(1), is one which goes to the nature of the merchandise and is the underlying cause for its incorrect classification.' See Boast, Inc. v. United States, [17 CIT 114 (1993)])"

In Boast, supra, the court stated:

Thus, like the plaintiff in Fibrous Glass [63 Cust. Ct. 62, C.D. 3874 (1969)], plaintiff in this action is attempting to correct an error of judgement on the part of Customs in classifying the merchandise, which is a mistake in the applicable law, not correctable under 19 U.S.C. ? 1520(c)(1)...The alleged misclassification of the subject merchandise was not the result of a mistake of fact or other inadvertence correctable under 19 U.S.C. ? 1520(c)(1), but a mistake in the construction of law remediable only by filing a timely protest under 19 U.S.C. ? 1514.

Similarly, in Mattel, Inc. v. United States, 72 Cust. Ct. 257, 262, C.D. 4547 (1974), the court held that a determination with respect to the classification of merchandise is a conclusion of law, not a conclusion of fact. The court stated:

...a determination by customs officers as to the classification of merchandise is a conclusion of law. United States v. Imperial Wall Paper Co., 14 Ct. Cust. Appls. 280, 282, T.D. 41886 (1926). Therefore an erroneous classification of merchandise by the district director under the tariff statute is not a "clerical error, mistake of fact, or other inadvertence not amounting to an error in the construction of a law" within the meaning of section 520(c), but a mistake as to the applicable law which could only be remedied by filing a protest under section 514 within 60 [now 90] days after liquidation. Fibrous Glass Products, Inc. v. United States, 63 Cust. Ct. 62, C.D. 3874 (1969), appeal dismissed, 57 CCPA 141 (1970); United China & Glass Co. v. United States, 66 Cust. Ct. 207, 211, C.D. 4191 (1971).

Under the foregoing cases, a mistake in the appraisement or classification of merchandise may only be corrected under 19 U.S.C. 1520(c)(1) if the mistake goes to a factual matter and if that mistake is satisfactorily established (i.e., not only the mistake, but also that the mistake was factual in nature, must be established).

Bollinger has not established a mistake. Nor, of course, has it established that any mistake was factual.

In ITT Corporation, supra, at 1387 (n.4), the court stated:

Section 1520(c)(1) does not afford a second bite at the apple to importers who fail to challenge Customs' decision within the 90-day period set forth under ? 1514.

Thus, based upon all of the above, we find that the Bollinger has not met its burden under 19 U.S.C. 1520(c)(1).

Because Customs' denial of the request for reliquidation under 19 U.S.C. 1520(c)(1) was not erroneous, we need not address the issue of whether there were buying commissions, which should not have been included in the transaction value of the subject merchandise.

HOLDING:

You are directed to deny the protest. In the entries in question, Customs' denial of the request for reliquidation pursuant to 19 U.S.C. 1520(c)(1) was not erroneous.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-65, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the Protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty 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, ACS, and to the public via the Diskette Subscription, the Freedom of Information Act and other public access channels.

Sincerely,

Acting Director

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