Hallmark Cards Inc. Protest number 4501-10-100008

HQ H118437 September 19, 2011 LIQ-1 OT:RR:CTF:ER H118437 GGK Port Director U.S. Customs and Border Protection POE—St. Louis 4477 Woodson Road St. Louis, MO 63134 Attn: Brenda Hall, Entry Specialist RE: Hallmark Cards Inc.: Protest number 4501-10-100008 Dear Port Director: This is in response to the application for further review (“AFR”) for Protest number 4501-10-100008 (“Protest”), filed by the Protestant, Hallmark Cards Inc. (“Hallmark”), on March 9, 2010. FACTS: On August 17, 2008, Hallmark imported various items, including “Christmas Ornaments” and “keepsakes,” that were entered at the Port of St. Louis (“Port”) on August 21, 2008. Subsequently, on March 30, 2009, Hallmark submitted a Post Entry Adjustment (“PEA”) for certain items covered by the entry. Upon receiving the PEA, the Port conducted an investigation and examination of all items covered by the entry. On August 21, 2009, the Port sent a Notice of Action to Hallmark, which proposed an increase in duties based on the results of the investigation. The Notice of Action further indicated that Hallmark had twenty days to contest the proposed duty increase and that liquidation would occur after that period. Upon receiving the Notice of Action, Hallmark contested the duty increase in writing and, consequently, the entry was not liquidated until September 11, 2009. Prior to liquidation, CBP did not send notices to Hallmark or its surety to extend the period of liquidation. Moreover, Hallmark did not make any requests to extend the period of liquidation. Hallmark filed its Protest challenging the liquidation of the entry on March 9, 2010. In its Protest, Hallmark argues that the entry deemed liquidated because CBP failed to properly extend the liquidation period. Moreover, Hallmark asserts that CBP’s tariff classification of certain items in the shipment is in error. In response to Hallmark’s arguments, the Port asserts that the PEA filed in this case constitutes a liquidation extension request and that its classifications are accurate. ISSUE: Whether the entry at issue is deemed liquidated pursuant to 19 U.S.C. § 1504(a)(1). LAW AND ANALYSIS: As an initial matter, we note that a claimant may protest the liquidation or reliquidation of an entry by CBP pursuant to 19 U.S.C. § 1514(a)(5). Hallmark timely filed its Protest on March 9, 2010, which is within 180 days of the date of liquidation on September 11, 2009. Moreover, upon review of the AFR, we find that Hallmark’s Protest alleges facts and legal arguments that were not considered at the time of the original ruling.  Therefore, further review is warranted pursuant to 19 C.F.R. § 174.24(b).  In protesting CBP’s liquidation of the entry, Hallmark asserts: 1) that the entry was deemed liquidated on August 21, 2009, because CBP failed to issue notices to extend liquidation; and 2) that if the entry is not deemed liquidated, then CBP erred in changing the tariff classification for certain items; thereby, increasing the duty owed by Hallmark. We note that if the entry liquidated by operation of law on August 21, 2009, then CBP’s change in the tariff classifications was improper, because it should have liquidated at the tariff rate asserted at the time of entry. See 19 U.S.C. § 1504(a)(1). Pursuant to 19 U.S.C. § 1504(a)(1), an entry of merchandise for consumption not liquidated within one year from the date of entry of such merchandise 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. CBP, however, may extend the liquidation of entries, if warranted, for one year increments up to a period not exceeding four years if proper notice is given. See 19 U.S.C. § 1504(b). Customs regulations governing the extension of liquidation is codified in 19 C.F.R. § 159.12. In particular, 19 C.F.R. § 159.12(a)(i) and (ii) allows the port director to extend the one-year statutory period for liquidation if more information is needed by CBP for proper appraisement or classification or if the importer makes a request for an extension in writing before the statutory period expires. When an extension is made, the port director must send notice of the extension to the importer, consignee or agent, as well as the surety, on Customs Form 4333-A. See 19 U.S.C. § 1504(b); 19 C.F.R. § 159.12(b). Absent the issuance of proper extension or suspension notices, entries not liquidated within one year are deemed liquidated by operation of law. See Pagoda Trading Corp. v. United States, 804 F.2d 665, 669 (Fed. Cir. 1986) (holding that the entries were deemed liquidated because no evidence existed showing that an authorized Customs official granted an extension, that there was a basis for an extension, or that the importer requested an extension). Here, Hallmark filed the entry on August 21, 2008. Consequently, CBP was required to liquidate the entry of merchandise within one year from that date unless a proper notice of extension was issued to both Hallmark and its surety extending the liquidation period. CBP records indicate that no extension notices were sent to Hallmark and its surety for the entry during the period of liquidation. Furthermore, CBP records indicate that Hallmark did not request any extension of the liquidation period for this entry within the liquidation timeframe. Therefore, in the absence of a notice to extend the liquidation period, the entry at issue was deemed liquidated on August 21, 2009, at the rate of duty, value, quantity, and amount of duties asserted at the time of entry. We note that the Port represents that liquidation of the entries was halted due to Hallmark’s PEA submission. Although the PEA submitted by Hallmark requested a correction to the original entry, as well as a refund of duty, the PEA did not include a request to extend liquidation as allowed under 19 U.S.C. § 1504(b) and 19 C.F.R. § 159.12(a)(1)(ii). Moreover, although the Port sent Hallmark a Notice of Action with a proposed rate advance on August 21, 2009, such notices are insufficient to constitute a proper notice to extend liquidation under 19 U.S.C. § 1504(b). See HQ 562130 (Jan. 7, 2002) (demonstrating that CBP Notice of Action forms and rate advance proceedings alone are insufficient to constitute proper notice of extension to avoid deemed liquidation by operation of law). HOLDING: The Protest is GRANTED due to the deemed liquidation of the underlying entry at the rate of duty, value, quantity, and amount of duties asserted at the time of entry. In addition, Hallmark’s Protest arguments alleging that CBP inaccurately classified certain items covered by the entry are moot. In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the Protestant no later than 60 days from the date of this letter. Sixty days from the date of the decision, the Office International Trade, 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