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HQ 228887





April 3, 2002

DRA-4 LIQ - 9 - 01 RR:CR:DR
228887 RDC

CATEGORY: PROTEST

Port Director of Customs
2350 N. Sam Houston Parkway E.
Houston, Texas 77032
ATTN: Drawback Office, Vivian C. Yuan
Suite 900

RE: Protest number 5301-99-100411; Request for Further Review of Protest number 5301-99-200021; Petition for Re-Liquidation; Clerical Error, Mistake of Fact, or other Inadvertence; 19 U.S.C. § 1514; 19 U.S.C. § 1520(c)(1); 19 C.F.R. § 174.12; 19 C.F.R. § 174.24; 19 C.F.R. § 174.25; Unused merchandise drawback; asparagus; melon.

Dear Ms. Yuan:

Protest number 5301-99-100411 was forwarded to this office for further review. We have considered the evidence provided and the points raised by your office and the protestant. Our decision follows.

FACTS:

On December 14, 1998, the Protestant, Spencer Fruit Company (“Spencer”), through its counsel, Countryman and McDaniel, filed a Petition for Reliquidation pursuant to 19 U.S.C. § 1520(c), (Protest number 5301-99-200021), of drawback claim XXX-XXXX469-7. This drawback claim was denied and liquidated on December 19, 1997. Spencer states that its Petition for Reliquidation, was based on “the existence of multiple clerical errors and mistakes of fact in the entry, drawback and liquidation process.” On July 6, 1999, Spencer’s Petition was denied because the Houston drawback office could “find no evidence to establish a clerical error or other inadvertence correctable under 19 U.S.C. § 1520(c)”. The port stated the following explanation for denial of Protest number 5301-99-200021:

Claimant is filing unused direct identification. Based on shelf life issues; claim appears to be substitution which was eliminated to NAFTA countries or deterioration has occurred.

Additionally the Houston port stated that,
the drawback claim in issue, was disallowed because the imports / exports were ineligible for drawback without regard to any duties paid on the import entries. The spreadsheet provided by the Protestant in this protest [ ] would appear to resolve shelf life issues; however, the exports on the spreadsheet cannot be related to the Chronological Summary of Exports provided with the drawback claim and the Protestant’s inventory method cannot be identified.

It is unclear to which spreadsheet this comment refers; the Protestant includes numerous documents with its Protest. However, a letter dated December 23, 1999, to the Port from the Protestant’s counsel addresses the shelf life issues in that it has attached a spread sheet setting forth details of the - presumably - designated entries including the import and export dates.

This spread sheet lists, among other information the entry numbers, import dates and export dates and seems to address the shelf life issues. For example, the first entry, number 218-xxxx845-3 was imported on October 28 and exported on October 31, a period of four days. However, entry number 218-xxxx845-3 does not appear on the drawback claim at issue. The only entry imported on October 28 included on the drawback claim is 218-xxxx846-1 but this entry does not appear on the spreadsheet.

Spencer filed the subject Request for Further Review (Protest number 5301-99-100411) on October 7, 1999, wherein it requests further review of the denial of its Petition for Reliquidation of the disputed drawback entry. The Protestant states that this Petition was denied because of a “misunderstanding of the supporting documentation,” and that this decision was “not based on actual facts.” The Protestant further states that it will “provide additional information further establishing direct identification drawback.” An additional submission was supplied by the Protestant’s counsel on January 2, 2002, and at the request of this office, addresses the substantive issues regarding drawback requirements which it failed to meet.

It should be noted that Intercargo Insurance Company, the surety for Spencer, also filed a Protest (number 5301-98-100113) disputing the drawback claim in issue. Intercargo protested “the denial of substitution, same condition duty drawback on various exports of fresh fruit and vegetables imported and exported by the drawback claimant” for drawback claim XXX-XXXX469-7 which is the subject of the present Protest. Intercargo’s protest was denied by the port with the following explanation which is verbatim the same explanation used to deny Spencer’s Petition for reliquidation:

Claimant is filing unused direct identification. Based on shelf life issues; claim appears to be substitution which was eliminated to NAFTA countries or deterioration has occurred.

The protested drawback entry, number XXX-XXXX469-7, is described on the CF 7539 (Drawback Entry Covering Same Condition Merchandise) as “asparagus, [and] honeydew melons. The accelerated drawback is valued in box 36 as $43,680.36. The date and port of importation are listed as “various.” In box 41, where the import entry numbers are required, it states “see attached.” However, as received by this office the CF 7539 is labeled “Exhibit A” and there are no attachments. The CF 7539 also states that the merchandise was exported between October 1995 and April 1996.

The Protestant explains that the protested drawback entry consists of asparagus – no mention is made of honeydew melons - imported by Spencer from Mexico to the United States and subsequently exported to Canada. The following fact narrative is based solely on the Protestant’s statements. Further, it contains only those facts pertinent to protested drawback entry number XXX-XXXX469-7, dated January 9, 1997, when those facts could be discerned since the Protestant also discusses drawback entry number XXX-XXXX470-5 which is not part of the instant Protest (but of another Protest, number 5301-97-100355).

The weight of some the asparagus was inadvertently under-reported by Spencer at entry. Therefore, insufficient duty was inadvertently paid on the corresponding entries of asparagus; Spencer provided to US Customs “a spreadsheet identifying the subject entries, the amount of additional duty owed on each entry” together with a check for the additional duty owed. The spreadsheet states that the entries were made between October 28, 1995, and February 17, 1996; The additional duty paid to correct the under-reported asparagus weight was applied by Customs to three entries instead of pro rata to each entry associated with the drawback claim; Drawback entries were filed stating original incorrect amount of duty paid instead of reflecting corrected duty owed and paid; Customs paid drawback to Spencer on the drawback entries based on the original incorrect amount of duty paid; Spencer returned this drawback payment to Customs; Spencer filed a corrected drawback claim for the above entries which reflected the correct total duty paid; Customs paid drawback on the corrected claim and amount to Spencer; additional duty paid continued to be misapplied by Customs to three entries instead of to each entry associated with the drawback claim; Spencer returned payment for corrected drawback claim to Customs; Drawback entry number XXX-XXXX469-7 was liquidated on December 19, 1997, with zero drawback allowed.

According to the Protestant:

The first mistake occurred when, due to a computer error, the weight of the asparagus when imported was incorrectly reported as less than its actual weight and as a result the duty on the asparagus was underpaid. Subsequently, Spencer, Spencer’s customs broker, R. L. Jones (“Jones”), and a Customs’ representative mutually agreed that the additional duty owed would be considered by Customs as corrected duty, not a voluntary tender.

Jones then provided Customs with a spreadsheet identifying those entries with the wrong weights reported (and hence, requiring additional duty), the amount of additional duty owed on each entry and a check for the owed duty in the amount of $110,714.89. According to the Protest, Customs applied this payment to approximately three of those entries, instead of pro rata, i.e., to each individual entry requiring additional duty.

Jones then filed drawback claim numbers xxx-xxxxx792, xxx-xxxxx800, xxx-xxxxx883, for accelerated payment of unused merchandise drawback on the subject entries with the Houston drawback office. However the duty stated as paid on the claims was incorrect; the figure stated the original incorrect duty and did not include the additional duty paid. In September 1996 Customs paid the above drawback claims in the amounts of $4818.50 (xxx-xxxxx883), $75367.45 (xxx-xxxxx792), and $74377.56 (xxx-xxxxx800) which totaled $154,563.51. Protestant states that it returned these payments to Customs but attaches copies of checks in the amounts of $156,866.91 (dated April 23, 1997) and $44971.02 (dated sometime in 1998). These checks total $201837.93; however there is no explanation for the discrepancy in the amount or date of these checks.

In January 1997, Jones filed two corrected drawback claims, numbers xxx-xxxxx470-5 and xxx-xxxxx469-7, to replace the three incorrect claims explained above. Customs paid, as accelerated payments, $248,153.89 and $43,680.35, respectively, to Spencer based on these corrected drawback claims. However, since the additional duty paid by Spencer (to correct the original error in the weight of the asparagus) was not applied to each of the subject entries pro rata, the value and duty amounts on the corrected drawback claims did not correspond with the amounts in the Customs national database. Customs requested that Spencer return the accelerated drawback payments to Customs until the duty could be applied pro rata.

Drawback claim xxx-xxxxx697 was liquidated on December 19, 1997, for zero dollars and alone is the subject of the Petition for Reliquidation per 19 U.S.C. § 1520(c)(1) and the refund of $44,971.02 in duty to Spencer in the original Petition (number 5301-99-200021), the denial of which is the subject of the instant Protest, (number 5301-99-100411).

ISSUE:

Should the Petition for Reliquidation under 19 U.S.C. § 1520(c)(1) be granted?

LAW AND ANALYSIS:

It is the opinion of your office that this Protest meets the criteria for further review. We do not agree. Customs Regulations provide that a protesting party may seek further review of a protest in lieu of review by the District Director by filing an application for further review (19 CFR § 174.23). Such a request must be filed within 90 days from the date of liquidation or the date of the decision which is being protested (19 CFR § 174.12(e)). The subject Protest, number 5301-99-100411, protests “the refusal to reliquidate an entry under section 1520(c)” (19 USC § 1514(a)(7)). The AFR Protest Transmittal forwarded from your office on June 28, 2000, states, “criteria for further review has been met: Protest filed timely under 19 USC 1514, under refusal to refund duties on drawback claim.”

First, the Protestant did not meet the 90 day requirement of 19 USC § 1514(a)(6) as stated on the Transmittal because the protest was filed more than 90 days after the liquidation of the drawback claim (see 19 CFR § 174.12(e)). The subject Protest was in fact timely filed under the requirements of § 1514 and 19 CFR § 174.12(e), “the refusal to reliquidate an entry under section 1520(c)” because it was filed within 90 days, i.e., the Petition for reliquidation was denied on July 12, 1999; the instant protest was filed on October 7, 1999. In addition, the refusal to reliquidate an entry under 19 U.S.C. § 1520(c) is a decision subject to review per 19 C.F.R. § 174.11.

Further, timely filing alone does not qualify a protest for further review (see 19 C.F.R. §§ 174.24, 25). The criteria required for granting an application for further review are set forth in 19 C.F.R. § 174.24, which states, inter alia,

Further review of a protest which would otherwise be denied by the port director shall be accorded a party filing an application for further review which meets the requirements of §174.25 when the decision against which the protest was filed:

(a) is alleged to be inconsistent with a ruling of the Commissioner of Customs or his designee, or with a decision made at any port with respect to the same or substantially similar merchandise;

(b) Is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Customs courts; . . . .

Therefore, further review will be accorded to the party filing an application for further review which meets the requirements of § 174.25 and at least one of the criterion in § 174.24. Section 174.25 requires, inter alia, that

An application for further review shall contain the following information: A statement of any facts or additional legal arguments, not part of the record, upon which the protesting party relies, including the criterion set forth in § 174.24 which justifies further review.

174.25(b)(3). Spencer justifies its Application for Further Review by relying on 174.24(a) and (b). It states,

Further review is requested because Protestant’s 520(c) involves questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Customs Courts and is believed to be inconsistent with prior decisions of U.S. Customs concerning requests for reliqiudation.

The Protestant offers no specific ruling or decision with which the Port’s decision in the original reliquidation petition is inconsistent, nor what questions of law or fact have not been ruled upon previously. Nor does the transmitting port explain why this Protest is entitled to further review, other than that it is timely. Therefore this Application for Further Review does not meet the requirements of 19 CFR § 174.24 or § 174.25.

Section 1514 of 19 USC, Protest against decisions of Customs Service, provides in pertinent part,

(a) Finality of decisions . . . Except as provided in . . . section 1520 of this title (relating to refunds and errors), decisions of the Customs Service, including the legality of all orders and findings entering into the same, as to . . . (6) the refusal to pay a claim for drawback; shall be final and conclusive upon all persons (including the United States and any officer thereof) unless a protest is filed in accordance with this section . . . .

(19 USC § 1514 (a)). Thus, the denial of a claim for drawback is final unless a protest is filed per § 1514(c)(3), “within ninety days after but not before . . . the date of the decision as to which protest is made” or as provided in 19 USC § 1520(c). The subject protested drawback claim was denied and liquidated on December 19, 1997. No protest was filed within 90 days of that decision. However, on December 14, 1998, within the year required, a Petition for Reliquidation per 19 USC § 1520(c) was filed.

Section 1520(c) provides in pertinent part,

Notwithstanding a valid protest was not filed, the Customs Service may, in accordance with regulations prescribed by the Secretary, reliquidate an entry or reconciliation to correct - (1) a clerical error, mistake of fact, or other inadvertence, whether or not resulting from or contained in electronic transmission, not amounting to an error in the construction of a law, adverse to the importer and manifest from the record or established by documentary evidence, in any entry, liquidation, or other customs transaction, when the error, mistake, or inadvertence is brought to the attention of the Customs Service within one year after the date of liquidation or exaction . . . .

The conditions required to be met under 19 U.S.C. § 1520(c)(1) are that the clerical error, mistake of fact, or other inadvertence must be adverse to the importer, manifest from the record or established by documentary evidence, and brought to the attention of Customs within one year after the date of liquidation of the entry. The relief provided for in 19 U.S.C. § 1520(c)(1) is not an alternative to the relief provided for in the form of protests under 19 U.S.C. § 1514; § 1520(c)(1) only affords "limited relief in the situations defined therein" (Phillips Petroleum Company v. United States, 54 CCPA 7, 11, C.A.D. 893 (1966), quoted in Godchaux-Henderson Sugar Co., Inc., v. United States, 85 Cust. Ct. 68, 69, C.D. 4874, 496 F. Supp. 1326 (1980); see also, Computime, Inc. v. United States, 9 CIT 553, 555, 622 F. Supp. 1083 (1985) (cited by the protestant, see above), and Concentric Pumps, Ltd. v. United States, 10 CIT 505, 508, 643 F. Supp. 623 (1986)).

The Protestant argues that since it is both the importer and the drawback claimant it meets the requirement that a Petition for reliquidation per § 1520(c) must be “adverse to the importer.” However, Spencer does not here protest an entry of goods it imported. In this Protest Spencer is the drawback claimant, not the importer. It is immaterial to the requirements of § 1520(c) that the drawback claimant is also the importer; the denial of a drawback claim, by definition, is not adverse to the importer of the goods, but adverse only to the drawback claimant since there is no importer involved in a drawback claim. As such § 1520(c) cannot apply to drawback claims. In HQ 227627 (July 20, 1999), we held, “section 1520(c) (1) requires that the error be adverse to the importer. The drawback claimant is not the importer.” (See also HQ 227364 (January 11, 1999). Therefore, the Protestant does not meet the requirements of § 1520(c) and relief cannot be granted under this section. The Protestant’s remedy was a protest under 19 USC § 1514, which specifically states that the “refusal to pay a claim for drawback” is a protestable issue (§ 1514 (a)(6)) but such a protest was required to be filed within 90 days per § 1514(c)(3).

A drawback claim generally is liquidated only after the liquidation of the relevant import entry becomes final by virtue of 19 CFR § 191.81(a)(1) and (d). The exception for liquidation of a drawback claim based on estimated duties paid on an import entry is set in 19 CFR § 191.81(b). That provision requires a written agreement of the drawback claimant and the party responsible for paying the duty on the import entry to waive payment any other law but the drawback law. The other exceptions to that general rule are for voluntary tenders and other duty payments made after the liquidation of the import entry became final and are set in 19 CFR §§ 191.3 and 191.81(c). By virtue of 19 USC § 1514(a)(5), upon liquidation of an import entry, all decisions involved in the liquidation of that import entry become final and conclusive on all persons, including the Government. Consequently, there can be no action taken on liquidation of a drawback claim based on an import entry for which the liquidation has become final that can affect the importer with respect to that import entry.

In addition the events as stated by the Protestant do not meet the statutory requirements: though a clerical error, mistake of fact, or other inadvertence,” may have occurred during the processing of the disputed drawback claim the errors are neither adverse to the importer nor manifest from the record or established by documentary evidence as required (19 USC § 1520(c)(1)).

Spencer essentially argues that among many other errors, the pivotal and conclusive error which led to the denial of drawback on claim XXX-XXXX469-7 was that Customs did not properly apply the additional duty paid on a pro rata basis to the entries associated with the claim. First, that the additional duty was misapplied is neither manifest from the record nor established by documentary evidence. There is nothing in the large amount of documents filed by Spencer in support of its Protest to corroborate its assertion that the duty was in fact misapplied. There is also nothing in the record to support the assertion that this misapplication of duty cause the drawback claim to be denied. Even if the additional duty was misapplied it is not explained how this caused the denial of Spencer’s drawback claim.

The spreadsheet provided by the Protestant with its December 23, 1999 letter would appear to resolve the shelf life issues if the designated entries were actually included in the drawback claim. Further, the Protestant’s inventory method cannot be identified. Therefore this spreadsheet does not refute the port’s conclusion that the merchandise was not eligible for drawback. Additionally, though we have received the Protestant’s third submission, stating that “all of the subject inventory was of Mexican origin” there is still insufficient evidence to show that the goods imported were the actual goods exported.

HOLDING:

Denial of the Application for Reliquidation per 19 USC § 1520(c) was in accordance with law and regulations. The protest should be DENIED IN FULL.

Consistent with the decision set forth above, you are hereby directed to deny the subject protest. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, 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 in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director
Commercial Rulings Division


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