Protest and Application for Further Review 1001-91-000775; meaning of phrase "not intended to be applied retroactively" in modification and/or revocation rulings

HQ 953939 August 11, 1993 CLA-2 CO:R:C:T 953939 CMR CATEGORY: Classification Area Director, J.F.K. Airport U.S. Customs Service Building 178 Jamaica, New York 11430 RE: Protest and Application for Further Review 1001-91-000775; meaning of phrase "not intended to be applied retroactively" in modification and/or revocation rulings Dear Sir: This ruling is in response to protest 1001-91-000775 filed by the firm of Grunfeld, Desiderio, Lebowitz & Silverman, on behalf of their client, Katony Corporation, seeking application of HRL 087855 of November 30, 1990, to the entries at issue regarding their classification. FACTS: HRL 087855 of November 30, 1990 modified NYRL 853764 of July 1990. The merchandise at issue therein was style 59621, a women's 100 percent polyester knit blouse with extremely small mylar type circles applied to the outer surface at very close intervals creating a lame effect. Style 59621 and style 72621, a women's blouse made of the same type fabric, are the garments at issue in this protest. ISSUE: Does the language contained in HRL 087855 and 19 CFR 177.9(d)(2) regarding the retroactive application of a ruling letter which acts to modify or revoke an earlier ruling, preclude application of that modification or revocation ruling to past transactions which have not yet become final when such application is to the benefit of the importer? -2- LAW AND ANALYSIS: You have taken the position that due to the language in 19 CFR 177.9(d)(2) that "The modification or revocation of a ruling letter will not be applied retroactively * * *." Additionally, this language is repeated in HRL 087855 in the statement: "This modification is not to be applied retroactively to . . . and will not, therefore, affect the transaction for the importation of your merchandise under that ruling." This office understands the hesitancy of your port to follow HRL 087855 in this situation in part due to language in the ruling stating it is not to be applied retroactively and therefore will not affect past transactions for the importation of the merchandise at issue therein and in part due to the language of 19 CFR 177.9(d)(2). The language of 19 CFR 177.9(d)(2), should be read in conjunction with paragraph (v) which provides that there will be no retroactive application of a modification or revocation provided: All of the parties involved in the transaction acted in good faith in reliance upon the ruling and retroactive modification or revocation would be to their detriment. The language regarding the retroactive application of a ruling which has appeared in numerous Headquarter's modification and revocation rulings was never intended to prevent Customs from following the determination in a ruling in open matters such as unliquidated entries or other transactions which have not yet become final. The language is merely intended to alert the recipient of the ruling that Customs will not penalize him or her for following the ruling previously issued by Customs and now being revoked or modified. Due to the confusion caused by the wording regarding retroactivity, a change in that wording will be made to prevent further misunderstandings. HRL 087855 should be applied in determining the proper classification of the goods at issue. Protest 1001-91-000775 should be granted. A copy of this decision is to be attached to the CF 19 which is returned to protestant. Sincerely, John Durant, Director Commercial Rulings Division