Application for Further Review of Protest No. 4909-97-100054; country of origin marking of bundled reinforcing steel bars ; 19 CFR 134.32(d); 19 CFR 134.32(h); 19 CFR 134.32(o)

HQ 561008 August 4, 1999 MAR-2 RR:CR:SM 561008 KSG CATEGORY: Marking Port Director U.S. Customs Service #1 La Puntilla San Juan, Puerto Rico 00901 RE: Application for Further Review of Protest No. 4909-97-100054; country of origin marking of bundled reinforcing steel bars ; 19 CFR 134.32(d); 19 CFR 134.32(h); 19 CFR 134.32(o) Dear Sir: This is in reference to a Protest and Application for Further Review filed by counsel on behalf of Stemcor U.S.A., Inc., contesting the assessment of marking duties on imported deformed bundled reinforcing steel bars from Turkey. At the request of counsel, a conference was held on the Protest at Customs Headquarters on February 25, 1999. An additional submission dated June 7, 1999, is also part of the record in this case. FACTS: This case involves the entry of 16,957 bundles of deformed concrete reinforcing steel bars from Turkey valued at $4,202,511 at the Port of San Juan. The entry was filed on July 18, 1996, by Stemcor USA, Inc. (“the protestant”). Stemcor is a provider of specialist services and material to the steel and metals industries including products, marketing, procurement, shipping, engineering and trade finance. The imported reinforcing bars were marked with the initials “TR” rolled in them. The bars were shipped in bundles tied with wires and metal straps. Each bundle was marked at opposite ends with a metal tag attached to the straps bearing the marking “Made in Turkey.” Counsel stated at the conference that all of the bars were sold by Stemcor in bundles but that subsequently, some of the bars might have been sold individually. The country of origin of the bars appears on the commercial invoices and the packing lists. The name of the manufacturer (which is Turkish) appears on the mill test certificate report submitted with the protest. Customs visited the premises of the protestant on August 13, 1996, and examined the marking of the imported bars. At that time, Customs determined that the bars violated 19 U.S.C. 1304 because the bars were not individually marked with the country of origin. The protestant received a Marking Notice (CF 4647) dated August 13, 1996. After Stemcor received the marking notice, it sent out letters dated August 22, 1996, to its customers that received shipments from the entry informing the customers that the bars were of Turkish origin and informing the customers that if they plan to re-sell the bars, they should indicate the Turkish origin of the goods on the commercial invoice accompanying the sale. Stemcor received a Notice of Action (CF 29) dated July 7, 1997, stating that marking duties had been assessed. Stemcor submitted its May 9, 1996, purchase agreement with Ekinciler Dis Ticaret A.S., the Turkish manufacturer, which states that the word “Turkey” will be rolled into the bars. Stemcor states that the manufacturer has two rollers for marking the country of origin; one with the initials “TR” for sale to the European Community and the other, which says “Made in Turkey” for sales to the U.S. Stemcor contends that an error was made and the wrong roller was used for the shipment in question. The protestant also submitted letters dated from September 24, 1997, to October 9, 1997, from the eight customers that received bars from the shipment. The customers indicated that they had received bundles of bars which had tags attached marked “Made in Turkey” and that they knew because of raised lettering on each bar reflecting the makers’ producer identification and the letters “TR” that the bars were of Turkish origin. Six of the customers stated in letters to Customs that they “always” sold the bars in the bundles with the attached tags showing the origin to be Turkey to contractors, builders and construction companies and “did not and do not resell any of the bars individually or to others who resell the bars.” One company, Gabriel Fuentes Jr. Construction Co. Inc., stated that they “further certify that they received and used the above described bars in the ordinary course of their business, which consists of ordinary construction, and that they sold to others in original unopened tied and wired bundles with the attached tags showing the origin.” The other company, Aceros del Caribe, Inc., stated that they “further certify that they received and used the above described bars in the ordinary course of their business, which consists of supplying material to individual contractors, builders and construction companies.” In Exhibit A of the submission dated June 7, 1999, counsel listed the eight customers and the quantity of bundles that each customer purchased. The submission included additional letters from seven of the customers dated from May 14,1999, to May 17, 1999, stating that “in the unusual event the bars had been separated from the banded bundles which were labeled to indicate the country of origin as Turkey, the actual purchaser/user would in the ordinary course of business have required and received a copy of the actual mill test certification which disclosed the country of origin to be Turkey.” The eighth customer, Raymond Pontani, Inc., stated in a letter dated April 30, 1999, that “all of the Turkish material we purchased from Stemcor was sold in its original bundled form to our regular buyers all of whom are contractors and or construction companies who would consume the material as end users.” According to the protestant’s Exhibit A, Pontani bought 2,117 bundles of the bars. With regard to the liquidation issue, Stemcor submitted an affidavit from the President of the company, Peter H. Blohm, and from his secretary, Judy Friedman, that they never received a Notice of Extension of the liquidation period from July 1, 1997, through July 31, 1997, for the entry in question. The record shows that a notice of extension was processed by Customs on June 14, 1997. The notice mailing address is identical to that of the Protestant shown on the entry papers and the protest (CF 19). The ACS record also shows that the same extension notice was sent to the Protestant’s surety on that same date. The protestant received a Notice of Action (CF 29), dated July 7, 1997, which indicated that marking duties of 10 percent had been assessed. The entry was liquidated on July 28, 1997. This protest was filed on October 14, 1997. ISSUES: 1. Whether the extension of the liquidation period was proper. 2. Whether the marking duties on the importation of reinforcing steel bars were properly assessed. LAW AND ANALYSIS: Liquidation Issue Initially, we note that the protest was timely filed (i.e., within 90 days of the date of liquidation and the assessment of additional duties) and the matter is protestable under 19 U.S.C. 1514(a)(5). According to 19 U.S.C. 1504(a)(1), as amended, an entry not liquidated within one year from the date of entry shall be deemed liquidated at the rate of duty, value, quantity and amount of duties asserted at the time of entry by the importer of record, unless liquidation is extended, as provided in that section, or suspended as required by statute or Court order. According to 19 U.S.C. 1504(b), the Secretary may extend the period in which to liquidate an entry if ... the information needed for the proper appraisement or classification of the merchandise, or for insuring compliance with applicable law, is not available to the Customs Service. The Secretary shall provide notice of an extension to the importer of record and surety for the importer of record, and that such notice shall be in such form and manner ... as the Secretary shall by regulation prescribe. Under 19 CFR 159.12(a)(1)(i), Customs Regulations, the port director may extend the one-year statutory period for liquidation for an additional period not to exceed 1 year if information needed by Customs for the proper appraisement or classification of the merchandise is not available. Under 19 CFR 159.12(b), if the port director extends the time for liquidation, as provided in paragraph (a)(1) of this section, he promptly shall notify the importer or the consignee and his agent and surety on Customs form 4333-A, appropriately modified, that the time has been extended and the reasons for doing so. The total time for which extensions may be granted by the port director may not exceed three years. See 19 CFR 159.12(e). Failure to provide such notice as required by 19 CFR 159.12(e), results in liquidation by operation of law. See Enron Oil Trading and Transportation Co. v. United States, 15 CIT 511 (1991) (citing Pagoda Trading Co. v. United States, 9 CIT 407, 411, 617 F. Supp. 96, 99 (1985), aff’d, 804 F.2d 665 (Fed. Cir. 1986)). In this case, Customs verification of its computerized tracking system, ACS, which states that June 14, 1997, is the date the notices of extension were sent to both the importer of record and the surety, is sufficient to create the presumption that proper notice of extension was given. See International Cargo & Surety Insurance Co. (Data Memory Corp.) v. United States, 15 CIT 541, 779 F. Supp. 174 (1991)). The protestant attempted to rebut the presumption that proper notices of extension were sent by Customs by including with the protest the two affidavits (the affidavit from the President of Stemcor USA, Inc. and the secretary for the President). However, these affidavits are not persuasive as Customs has no means of verifying the information with independent corroborating evidence. The president of Stemcor stated that his secretary opens all mail related to importations, and puts them on his desk. He also states that he maintains Stemcor’s import files. However, the affidavit fails to demonstrate the factual basis for those statements. Additionally, the affidavit fails to describe the contents of those files and whether those files are accessible to any other person. There was no assurance of the exclusive control of the files. Also, these two affidavits explicitly state that the affiants did not receive, nor open any mail, containing a notice of extension during the period of July 1, 1997, to July 31, 1997. The persuasiveness of the affidavits is undermined by this time frame since the ACS tracking system has the notice of extension as being sent on June 14, 1997. Furthermore, both affidavits are silent in regards to the notice of extension also sent to their surety. The affidavits do not state that the surety failed to receive the notice of extension, or if Stemcor even contacted their surety on this matter. In such a case when the protestant fails to rebut the presumption, the only issue to be decided is whether the extension was permissible under the statute. The protestant contends that the subject entry is deemed liquidated because Customs lacked statutory authority to extend liquidation. In St. Paul Fire & Marine Ins. Co. v. United States, 6 F.3d 763, 768 (Fed. Cir. 1993) (reversing the CIT decision at 16 CIT 663, 779 F. Supp. 120 (1992)), the court concluded: ... Customs may, for statutory purposes and with the requisite notice, employ up to four years to effect liquidation so long as the extensions it grants are not abusive of its discretionary authority. Such an abuse of discretionary authority may arise only when an extension is granted even following elimination of all possible grounds for such an extension. There is, in sum, a narrow limitation to Customs discretion to extend the period of liquidation. The court went on to state that “Customs decisions to extend are entitled to a presumption of legality unless [the plaintiff] can prove that these decisions were unreasonable.” Thus, the courts are in agreement that Customs has the discretion to extend liquidation pending receipt of additional information which is necessary for liquidation of the entry. The only limit imposed by the courts is that a legitimate need for extension must exist. As stated by the CAFC in St. Paul Fire, supra, Customs decision to extend liquidation is entitled to a presumption of legality unless the importer can prove that such decision was unreasonable. The protestant has not met its burden in this regard. There is no evidence in the file, other than allegations in its Memorandum of Fact and Law, submitted by the protestant or otherwise, proving that Customs decision was unreasonable and that all possible grounds for extension of liquidation had been eliminated. That is, there was evidence in the file that the protestant was aware, by notice from Customs that there was a question as to the country of origin marking of the bars and more information or action was needed to resolve the marking issue. The protestant even stated in its Memorandum of Fact and Law that, “on August 22, 1996, protestant responded in writing to Customs Notice to Mark and/or Redeliver where it asserted all of the elements of a claim for a marking exception under 19 CFR 134.32.” Under 19 CFR 159.12(a)(1)(i), a question regarding marking concerns appraisement and is therefore, a valid reason to extend the date of liquidation. Country of origin marking Issue Section 304 of the Tariff Act of 1930 (19 U.S.C. 1304), provides that unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Merchandise which is not legally marked is subject to a 10 percent ad valorem marking duty. Section 304(f) (1996) (now section 304(i)), provided, in pertinent part: If at the time of importation any article ... is not marked in accordance with the requirements of this section, and if such article is not exported or destroyed or the article ... marked after importation in accordance with the requirements of this section (such exportation, destruction, or marking to be accomplished under customs supervision prior to the liquidation of the entry covering the article, and to be allowed whether or not the article has remained in continuous customs custody), there shall be levied, collected, and paid upon such article a duty of 10 per centum ad valorem, which shall be deemed to have accrued at the time of importation, shall not be construed to be penal, and shall not be remitted wholly or in part nor shall payment thereof be avoidable for any cause. Such duty shall be levied, collected, and paid in addition to any other duty imposed by law and whether or not the article is exempt from the payment of ordinary Customs duties.... In addition, the Customs Regulations provide for the assessment of marking duties in 19 CFR 134.2 which states, in pertinent part: Articles not marked as required by this part shall be subject to additional duties of 10 percent of the final appraised value unless exported or destroyed under Customs supervision prior to liquidation of the entry.... The 10 percent additional duty is assessable for failure either to mark the article (or container) to indicate the English name of the country of origin of the article or to include words or symbols required to prevent deception or mistake. Pursuant to 19 CFR 134.32(d), an exception from individual marking is applicable where the marking of the containers of imported articles will reasonably indicate the origin of the articles. Articles are also excepted from the marking requirement pursuant to 19 CFR 134.32(h), where the ultimate purchaser must necessarily know, or in the case of a NAFTA country, must reasonably know, the country of origin by reason of the circumstances of their importation or by reason of the character of the articles even though they are not marked to indicate their origin. Section 134.32(o), excepts from marking articles which cannot be marked after importation except at an expense that would be economically prohibitive unless the importer, producer, seller, or shipper failed to mark the articles before importation to avoid meeting the requirements of the law. In Headquarters Ruling Letter (“HRL”) 731775, dated November 3, 1998, Customs ruled that two prerequisites must be present in order for it to be proper to assess marking duties: 1) the merchandise was not legally marked at the time of importation; and 2) the merchandise was not subsequently exported, destroyed or marked under Customs supervision prior to liquidation. In the instant case, both prerequisites for assessing marking duties are present. We have reviewed the file in this case and determined that the imported bars themselves were not properly marked with their country of origin. The letters “TR” do not constitute an acceptable abbreviation for Turkey for country of origin marking purposes. Since the bars were not properly marked as required by 19 U.S.C. 1304, the issue presented is whether there is an exception that applies. Customs has previously held that metal bands or straps used to secure wire rod are considered a container of that wire rod. See HRL 559244, dated March 12, 1996. In HRL 559976, dated June 30, 1997, Customs held that where steel coils were packed onto skids, the skid is the container of the coils and marking the skids with a country of origin tag would except the coils from individual marking pursuant to 19 CFR 134.32(d). Since the tags on the bundles of bars in this case are similar to both HRL 559244 and HRL 559976, we find that the wires and straps that tie the bars together are considered containers for the purposes of 19 CFR 134.32(d). With regard to the instances in which Customs has found that the exception set forth at 19 CFR 134.32(d) applies, Customs has clearly stated that the container may be marked in lieu of the article only if Customs is satisfied that the article will remain in its container until it reaches the ultimate purchaser. See HRL 559922, dated March 25, 1997. The term “ultimate purchaser” is defined in 19 CFR 134.1(d), in pertinent part, as: generally the last person in the United States who will receive the article in the form in which it was imported.... It is not feasible to state who will be the ‘ultimate purchaser’ in every circumstance. The following examples may be helpful: (1) If an imported article will be used in manufacture, the manufacturer may be the ‘ultimate purchaser’ if he subjects the imported article to a process which results in a substantial transformation of the article.... (2) If the manufacturing process is merely a minor one which leaves the identity of the imported article intact, the consumer or user of the article, who obtains the article after the processing, will be regarded as the ‘ultimate purchaser.’ (3) If an imported article is to be sold at retail in its imported form, the purchaser at retail is the ultimate purchaser.... We note that except for Raymond Pontani, Inc., the 1997 affidavits and the 1999 affidavits submitted are in conflict with regard to whether the customer “always” sold the bars in bundles or if there were “unusual events” in which the bars were separated. None of the customers that submitted affidavits indicated that they were the last person in the U.S. who would receive the bars in the form in which they were imported (they indicated that they resold the bars to contractors, builders and construction companies). Seven of the customers stated that “in the unusual event the bars had been separated from the banded bundles which were labeled to indicate the country of origin as Turkey, the actual purchaser/user would, in the ordinary course of business, have required and received a copy of the actual Mill Test Certification which disclosed the country of origin to be Turkey.” This indicates that with the exception of Raymond Pontani, the customers were not certain that all the bars reached ultimate purchasers in the marked bundles. Therefore, with the exception of bars sold to Raymond Pontani, we are not satisfied that all the imported bars reached the ultimate purchasers in the properly marked containers and find that the requirements of the exception set forth at 19 CFR 134.32(d) were not satisfied. Counsel also argued that since the country of origin appears on the mill test reports and all the customers receive the mill test reports, the bars are excepted from marking. We note that although the mill test report in the file identifies the manufacturer, it does not contain the country of origin. However, even if the mill test report did contain the country of origin, this would not substitute for marking the imported article itself. Marking the country of origin on invoices and packing slips also does not except the article from the marking requirements set forth in 19 U.S.C. 1304. Counsel contends that the bars are excepted from marking pursuant to 19 CFR 134.32(h). In support of that argument, counsel states that the commercial invoices list Turkey as the country of origin, the letters “TR” rolled into the bar identifies it as a product of Turkey, the mill test certification report lists a Turkish manufacturer and the customers stated in affidavits that they were aware of the Turkish origin of the goods. Generally speaking, Customs has required that the importer be the ultimate purchaser of the imported article and have direct contact with the foreign supplier for 19 CFR 134.32(h) to apply. See HRL 733781, dated April 11, 1991, and HRL 560327, dated July 28, 1997. Customs has held that it is not sufficient that the ultimate purchaser be advised personally, by advertising, or brochures of an article’s origin. See HRL 559671, dated June 7, 1996. Rather, an instance where an ultimate purchaser would necessarily know the country of origin from the character of an article would be where the merchandise is only produced in one country, for example, black diamonds from Brazil. See HRL 732362, dated May 26, 1989. In HRL 733291, dated July 23, 1990, Customs specifically determined that a letter by the ultimate purchaser of the article stating that they knew the country of origin of the imported article was not sufficient to grant a marking exception under 19 CFR 134.32(h). In this case, the ultimate purchaser is clearly not the importer and the ultimate purchaser does not have direct contact with the foreign supplier. There is nothing about the character of the article that would indicate to an ultimate purchaser that the bars could only be produced in Turkey. As stated above, the letters from the customers stating that they knew the country of origin of the bars is insufficient to justify the marking exception under 19 CFR 134.32(h). Therefore, we find that the articles are not excepted from marking pursuant to 19 CFR 134.32(h). The other exception that counsel raised in this case is 19 CFR 134.32(o), which excepts from marking articles which cannot be marked after importation except at an expense that would be economically prohibitive. This exception is not available if the failure to mark was to avoid meeting the requirements of the law. See also HRL 734585, dated October 31, 1992. The language of 19 U.S.C. 1304(f) clearly states that if the conditions for payment of marking duties exist, the marking duties “shall not be avoidable for any cause.” Since in this case, the goods were not properly marked when entered and the goods were not exported, destroyed, or re-marked under Customs supervision, we find that pursuant to 19 U.S.C. 1304(f) (1996), the exception set forth at 19 CFR 134.32(o) is inapplicable. As the steel bars, with the exception of those bundles shipped to Raymond Pontani (2117 bundles), were not unequivocally received by the ultimate purchaser with the proper country of origin marking, it is our opinion that marking duties were properly assessed. HOLDING: With regard to the liquidation issue, the protest is denied. We find that, with the exception of those steel bars (2117 bundles) sold to Raymond Pontani, the bars were not marked as required by 19 U.S.C. 1304 and marking duties were properly assessed. Therefore, the protest should be granted in part and denied in part. In accordance with Section 3a(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, you are to mail this decision, together with the Customs Form 19, 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 this decision. Sixty days from the date of this decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at ww.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, John Durant, Director Commercial Rulings Division