Protest and AFR 1704-07-100078; Liquidation; antifriction bearings; focused assessment.

HQ H017110 June 29, 2009 LIQ-04-02 OT:RR:CTF:ER H017110 PTM CATEGORY: DUTIES Port Director. U.S. Customs and Border Protection 4341 International Parkway, Suite 600 Atlanta, Georgia 30354 RE: Protest and AFR 1704-07-100078; Liquidation; antifriction bearings; focused assessment. Dear Port Director: The above-referenced protest was forwarded to this office for further review. The protesting party is Sidel, Inc. (“Sidel”), who is protesting the liquidation of several entries of anti-friction ball bearings. Our decision follows. FACTS U.S. Customs and Border Protection (“CBP”) Office of Regulatory Audit, (herein “RA”) selected Sidel for a Preliminary Assessment Survey (“PAS”) of imports. The PAS determined that Sidel’s internal controls were inadequate to ensure that its customs activities were in compliance in the areas of transaction value, classification and antidumping duties, resulting in an unacceptable risk to CBP. The Charlotte Field Office of RA notified Sidel of these findings in Preliminary Assessment Survey Report Number 431-05-OFO-AU-19326, dated August 25, 2005. Based on the results of the PAS, RA conducted a follow-up assessment on Sidel. Sidel accepted the findings of the assessment and agreed to prepare and implement a Compliance Improvement Plan (“CIP”) consistent with the results of a focused assessment. Sidel also agreed to quantify the loss of revenue related to its value disclosure and antidumping duties. The scope of the review of Sidel in the assessment included imports for the review areas of transaction value, classification and AD duties. The scope period for calculating loss of revenue for AD duties was Sidel’s Fiscal Years 2002, 2003, and 2004. On January 28, 2005 Sidel submitted a disclosure for currency exchange rate errors occurring from January 2004 – January 2005. The exchange rate error occurred when Sidel’s broker converted invoice values from Euros to Dollars using a daily exchange rate, rather than the contractual exchange rate established between Sidel and a related company. In the focused assessment, RA determined that Sidel had made errors regarding the declared country of origin and manufacturers of the imported merchandise. Consequently, Sidel deposited antidumping (“AD”) duty for bearings that were not subject to AD duty, or deposited excess AD duties. Specifically, during fiscal years 2002-2004, RA attributed the cause of the errors to incorrect country of origin and manufacturers listed on the import invoices. Additionally, RA determined that Sidel did not have post-entry monitoring procedures to ensure that accurate AD duty case numbers and rates were reported to CBP.  In the audit, RA quantified a revenue loss of $179,766.97 in antidumping duties for fiscal year 2002 through fiscal year 2004 which Sidel tendered on June 28, 2005. Of this amount, $114,114.31 was based on a 100% review of Sidel’s entries during Fiscal Years 2002 and 2003. The calculated revenue loss for Fiscal Years 2002 and 2003 is not subject to this protest. For FY 2004, RA used a variable dollar unit sampling approach. RA used this approach because they considered it to be reliable, and because the sample results can be used to project revenue loss. Using this method, RA identified 27 antidumping duty errors in 31 sample lines (out of a total of 766 lines entered). Using the statistical projection, the total revenue impact of these errors was an AD duty underpayment of $65,652.66 for FY 2004. Although Sidel’s tender of $179,766.97 included payment of the $65,652.66, Sidel filed this protest to dispute the estimated underpayment for FY 2004. CBP liquidated the 2004 entries with rate advances based on the value and antidumping case references declared at the time of entry. In doing so, CBP liquidated the entries using the declared origin and manufacturer data reported at entry and collected the difference between final antidumping duties and deposits. It did not take into account the results of the focused assessment.   On March 1, 2007 Sidel protested the liquidation of the subject merchandise, stating “Sidel protests the liquidations of the entries . . . because the liquidations do not incorporate the results of the focused assessment covering the period during which Sidel filed these entries and because an error in the exchange rate used to calculate the entered values for the protested entries also resulted in an overpayment of duties.” The protestant argues that CBP should have used the sample generated during the focused assessment to determine the proper amount of regular duties and antidumping duties due on the protested entries. Sidel further asserts that the amount due should be offset by the $65,652.66 tendered during the focused assessment for FY 2004. ISSUE: Whether CBP properly liquidated the FY 2004 entries using declared origin and manufacturer data reported at entry. LAW AND ANALYSIS: As a preliminary matter, we note that the protest was timely filed pursuant to Tariff Act of 1930, 19 U.S.C § 1514(c)(3), which provides that protest must be made within 90 days of the decision protested for entries made before December 18, 2004. The entries were liquidated between December 1, 2006 and February 16, 2007 and the protest was filed on March 1, 2007. It is worth noting that March 1, 2007 is 91 days from the date of liquidation. The 90 day period provided for in 19 U.S.C § 1514(c)(3) does not begin to run until the date after liquidation. See, Tropicana Products, Inc. v. United States, 713 F. Supp. 415, 417 (Ct. Int'l Trade 1989), aff'd 909 F.2d 504 (Fed. Cir. 1990) As such, the protest is timely. The Customs Modernization Act, enacted as Title VI of the North American Free Trade Agreement Implementation Act (Pub. L. No. 103-182) requires importers to exercise reasonable care in providing entry information including the values, tariff classifications, quantities, and rate of duty applicable to their merchandise. The implementation of a system of internal controls can be an element of reasonable care for an importer carrying out its responsibility under Pub.L.No. 103-182. Absent a documented system of internal controls, CBP has no assurance that the information submitted is accurate. Here, RA completed a PAS of the importing processes of Sidel and determined that Sidel did not possess the adequate controls to ensure compliance. In the course of the assessment, the auditors conducted an antidumping review and determined that the information Sidel reported upon entry was incorrect. Despite the findings in the audit report, CBP liquidated the entries using the incorrect information provided at entry. As a result of using the erroneous entry information, the assessed AD duty is also incorrect. The more accurate calculation of the duties would be through the use of the model prepared during the focused assessment. The audit accounted for the errors in the country of origin and manufacturer data. Thus, using the statistical sample corrects the errors resulting from the incorrect data used to assess AD duty. In the response to the protest, the port indicated that “when Commerce issues specific liquidation instructions on bearings, CBP has no authority to use a statistical projection instead of following Commerce instructions.” Generally, the role of Customs in the antidumping process is "... simply to follow Commerce’s instructions in collecting deposits of estimated duties and in assessing antidumping duties, together with interest, at the time of liquidation." As noted by the U.S. Court of Appeals for the Federal Circuit in Mitsubishi Electronic America Inc. v. United States, 44 F.3d 973, 976, 977 (Fed. Cir. 1994): Section 1514(a) applies exclusively to Customs ‘decisions’ within the enumerated categories [and it] expressly refers to ‘decisions of the Customs service.’ Section 1514(a) does not embrace decisions by other agencies. Customs has a mere ministerial role in liquidating antidumping duties under 19 U.S.C. 1514(a)(5). Customs cannot ‘modify [Commerce’s] determinations, their underlying facts, or their enforcement.’ We do not agree with the premise that using the results of the audit to assess antidumping duties that CBP would be in derogation of Commerce’s instructions. Here, Commerce issued message No. 622 2201 with instructions to liquidate merchandise entered during the period May 1, 2004 – April 30, 2005. CBP liquidated the entries pursuant to the instructions but using the information provided by Sidel upon entry that was found subsequently to be erroneous during the course of the audit. CBP is required by 19 U.S.C. § 1500 (a) to “fix the final appraisement of merchandise by assessing or estimating the value thereof…by all reasonable ways and means in his power…” (emphasis added). Using the results of the focused assessment, as urged by the protestant, meets that requirement. As the instant protest is timely filed, 19 U.S.C. §1500(c) provides that “[t]he Customs Service shall, under rules and regulations prescribed by the Secretary—fix the final amount of duty to be paid on such merchandise and determine any increased or additional duties, taxes and fees due or any excess of duties, taxes and fees deposited.” This means that CBP has the statutory authority to rate advance the underpayments and refund the overpayments. Thus, the $65,652.66 tendered by Sidel as estimated AD duty underpayment should be credited toward the amount owed by Sidel upon final liquidation. Consistent with this decision, please refer to the spreadsheet in Attachment A. The spreadsheet uses data provided by CBP at the time the entries were liquidated. The worksheet shows data by entry number and entry line, for the entered value, the amount of AD duty deposited at entry assessed at liquidation. The spreadsheet has been expanded to reflect line by line refund amounts. Because one of the main errors revealed by RA was incorrect country of origin data, Sidel deposited AD duty on bearings that should not have been subject to the AD order issued by Commerce. Thus, there was no AD duty owed on these entries. For bearings not subject to AD duty, Sidel should have received a refund for the AD duty already collected upon liquidation. These totals are reflected in the columns “ADD Deposited at Entry” and “Bill Amount” on the spreadsheet. The sum of these amounts aggregated in the “Total ADD Due at Liquidation” column on the spreadsheet should be refunded to Sidel for those lines containing bearings not subject to AD duty. Sidel also alleges an exchange rate error. Specifically, Sidel claims CBP erroneously applied an incorrect exchange rate to convert commercial invoice values to U.S. Dollars, which caused an over-valuation of merchandise in the protested entries and resulted in an overpayment of ordinary and AD duties. It is the understanding of this office that the port accounted for some, but perhaps not all of these errors when the bearings were liquidated. Sidel is entitled to a refund of any ordinary and AD duties overpaid as a result of such errors on those entries, if any, which were entered without the appropriate correction. HOLDING: Consistent with the decision set forth above, you are hereby directed to GRANT the protest in full and refund any overpayment, plus interest. Sixty days from the date of the decision Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Myles B. Harmon, DirectorCommercial and Trade Facilitation Division