Application for Further Review of Protest No 5201-13-100147; Bonds; Antidumping Duties; Assessment of interest; Cancellation of bills

HQ H249804 April 3, 2017 ENT 1 OT:RR:CTF:ER HQ H249804 ABH Port Director U.S. Customs and Border Protection Port Everglades 6601 NW 25th Street Miami, FL 33122 Attn: Ms. Dawn Jones, Supervisory Entry Specialist Re: Application for Further Review of Protest No: 5201-13-100147; Bonds; Antidumping Duties; Assessment of interest; Cancellation of bills Dear Port Director: The purpose of this correspondence is to address the application for further review of Protest Number 5201-13-100147, dated May 24, 2013, filed by International Fidelity Insurance Company (“IFIC”). FACTS: Between March 9, 2006 and April 27, 2006, ACN International Trading, Inc. (“ACN”), made eight entries into Port Everglades. The eight entries at issue are XXX-XXXX400-2, XXX-XXXX413-5, XXX-XXXX608-0, XXX-XXXX651-0, XXX-XXXX607-2, XXX-XXXX653-6, XXX-XXXX652-8, and XXX-XXXX562-9. The entries consisted of garlic subject to the U.S. Department of Commerce’s (“Commerce”) antidumping duty order on fresh garlic from the People’s Republic of China pursuant to Case Number A-570-831. The CBP Form 7501 on the entries shows the importation of garlic and assessed antidumping duties at the rate of 376.67 percent. In connection with the subject entries, Hartford Fire Insurance Company (“HFIC”) issued single transaction bonds and IFIC issued continuous bonds. The garlic for the eight subject entries was sold to ACN from exporter Qingdao Camel Trading Co., Ltd. (“Qingdao Camel”) and produced by Jinxiang County Lufeng Agricultural Production Material Co., Ltd (“Lufeng”). Qingdao Camel requested a new shipper review and the U.S. Department of Commerce (“Commerce”) initiated a new shipper review with regard to Qingdao Camel on December 28, 2005. Fresh Garlic from the People’s Republic of China: Initiation of New Shipper Reviews, 70 Fed. Reg. 76,765 (Dep’t of Commerce Dec. 28, 2005) (“Initiation Notice”). Pursuant to the Initiation Notice, Commerce stated that “posting of a bond or security in lieu of a cash deposit” was permissible for subject merchandise “grown by Lufeng and exported by Qingdao Camel.” Id. at 76,766. On January 20, 2006, Commerce issued Message No. 6020205, which instructed U.S. Customs and Border Protection (“CBP”) to allow cash deposits or a bond for entries on or after December 28, 2005, from exporter Qingdao Camel and producer Lufeng. Commerce completed its new shipper review on June 22, 2007, assigning exporter Qingdao Camel and producer Lufeng an antidumping duty rate of 70.47 percent. Fresh Garlic from the People’s Republic of China: Final Results and Partial Rescission of the administrative Review and New Shipper Reviews, 72 Fed. Reg. 34,438, 34,440 (Dep’t of Commerce June 22, 2007). On July 10, 2007, Commerce issued Message No. 7191203, which instructed CBP to require cash deposits for entries on or after June 22, 2007 for exporter Qingdao Camel and producer Lufeng at the antidumping rate of 70.47 percent. In the final results of the twelfth administrative review of fresh garlic from China, which covered entries between November 1, 2005 and October 31, 2006, Commerce assigned a rate of 376.67 percent to exporter Qingdao Camel. Fresh Garlic from the People’s Republic of China: Final Results and Partial Rescission of the 12th Administrative Review, 73 Fed. Reg. 34,251, 34,252 (Dep’t of Commerce June 17, 2008). On July 3, 2008, Commerce issued liquidation instructions pursuant to Message No. 8185220, which instructed CBP to assess an antidumping duty liability of 376.67 percent for the exporter Qingdao Camel. On August 15, 2008 and October 10, 2008, CBP at Port Everglades liquidated the subject entries pursuant to Commerce’s liquidation instructions Message Number 8185220 at the antidumping duty rate of 376.67 percent ad valorem. ACN did not pay the antidumping duties owed. According to IFIC, on November 1, 2008 and January 1, 2009, CBP improperly made demand upon IFIC for the antidumping duties for the eight entries at issue. On May 1, 2009 and June 26, 2009, IFIC filed protest numbers 5201-09-100561 and 5201-09-100650, covering the entries at issue in this case and challenging the liquidation. IFIC asserted that CBP must first seek recovery of the antidumping duties from the single transaction bond surety company who undertook the specific obligation to bond these antidumping duties at the time of entry, namely HFIC. On June 9, 2009, CBP denied protest 5201-09-100561, which included one of the entries at issue in this case. On October 21, 2009, CBP approved protest 5201-09-100650, which included the remaining seven entries at issue in this case. IFIC states that the bills involving all eight entries were removed from CBP’s demand against IFIC. On December 31, 2009 and January 6, 2009, HFIC had protested the same eight entries at issue in this case under protest numbers 5201-10-100017 and 5201-10-100014 respectively. On March 23, 2009, HFIC withdrew protest number 5201-10-100014. On June 12, 2012, CBP denied protest 5201-10-100017 and suspended final liquidation of the entries pending HFIC’s litigation of the issues before the U.S. Court of International Trade pursuant to Case Numbers 07-00101 and 09-00058. Case Numbers 07-00101 and 09-00058 were voluntarily dismissed in January 2009 and November 2010 respectively. In October 2012, HFIC paid what it owed under the single transaction bonds for the entries at issue. At that time, collection was pursued against the continuous bond and the bills appeared on the October 2012, 612 report, which was mailed to IFIC on November 2, 2012. On January 25, 2013, IFIC filed protest number 5201-13-100047, challenging the bill with regard to seven entries and argues that CBP should not have assessed interest on the entry, as no cash deposit was required at the time of entry. IFIC asserts that the reinstatement of the bills on IFIC’s demand was unlawful because CBP approved protest number 5201-09-100650 and CBP has not rescinded that protest decision. Additionally, IFIC argues that the new bill amounts for each entry unlawfully includes the interest charged against the bond prior to liquidation as well as the interest accumulated since the time of liquidation. ISSUES: Whether CBP must cancel the bills of the seven entries at issue because protest number 5201-09-100650 was approved? Whether CBP unlawfully assessed interest on the collection of antidumping duties secured by bond on the entries at issue? LAW AND ANALYSIS: As a preliminary matter, this protest was timely filed. Pursuant to 19 U.S.C. § 1514(c)(3)(B), a protest must be filed “within 180 days after but not before – (B) . . . the date of the decision as to which protest is made.” A challenge to CBP’s demand for payment is a challenge to CBP’s “charge” that is protestable. 19 U.S.C. § 1514(a)(3); Hartford Fire Ins. Co. v. United States, 31 C.I.T. 1281, 1286 (2007); 19 C.F.R. § 174.12(e)(3) (“Protests must be filed . . . within 180 days of . . . [t]he date of mailing of notice of demand for payment against a bond in the case of a surety which has an unsatisfied legal claim under a bond written by the surety.”). CBP’s demand was mailed to IFIC on November 2, 2012, and IFIC filed its protest on January 25, 2013, within the 180-day limitation. It is the opinion of your office that this protest meets the criteria for further review; specifically, that this protest alleges questions of law and fact which have not been previously ruled upon. 19 C.F.R. § 174.24(b). We agree. Whether CBP must cancel the bills of the seven entries at issue because protest number 5201-09-100650 was approved? IFIC argues that CBP unlawfully reinstated the demand for payment with regard to seven entries that were subject to an approved protest. IFIC cites 19 C.F.R. § 173.3 for the proposition that CBP’s authority to reinstate the bills has expired. Section 173.3, however, relates to “voluntary reliquidation,” and provides that [w]ithin 90 days from the date notice of deemed liquidation or notice of the original liquidation is given to the importer, consignee, or agent, the port director may reliquidate on his own initiative a liquidation or reliquidation to correct errors in appraisement, classification, or any other element entering into liquidation or reliquidation, including errors based on misconstruction of applicable law. IFIC conflates the finality of CBP’s liquidation authority and CBP’s time for collection action against a bond. CBP’s right of action against a surety accrues within six years of the thirtieth day after liquidation “regardless of whether an importer’s or surety’s protest deprives the assessment of duties of its final effect.” United States v. Ataka Am., Inc. 826 F. Supp. 495, 503 (Ct. Int’l Trade 1993). Pursuant to 28 U.S.C. § 2415(a), “every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues.” It is the breach of any bond condition that gives CBP the right of action to sue on the bond, such as the bond condition to “pay, as demanded by [CBP], all additional duties, taxes, and charges.” 19 C.F.R. § 113.62(a)(ii). Generally, “bills for duties, taxes, fees, interest, or other charges are due and payable within 30 days of the date of issuance of the bill.” 19 C.F.R. § 24.3(e); 19 U.S.C. § 1505(d). The date of issuance of the bill is the date of liquidation. Thus, the government’s right of action against a surety typically accrues 31 days after issuance of the bill for additional duties, taxes, and charges, if the bill remains unpaid. In this case, the right of action arose 31 days after the first demand on the importer of record (the date of liquidation), i.e., 31 days after August 15, 2008 and October 10, 2008. CBP’s demand was mailed to IFIC on November 2, 2012 – well before the six-year time limitation had run. CBP’s authority to issue demands with regard to the entries at issue within the six year statute of limitation period is not altered by the fact that IFIC protested the entries and that CBP granted the protest with regard to seven of the entries at issue. The 2009 protest dealt with who should be billed first, the single transaction bond holder or the continuous bond holder. CBP agreed that IFIC should be billed first under the single transaction bonds. Such a determination, however, does not relieve IFIC from its obligation to pay pursuant to the continuous bond once accounts had been settled with IFIC. Nor is IFIC’s obligation altered by the fact that all the bills were removed from IFIC’s demands and then reinstated. Accordingly, CBP’s authority to reinstate the bills with regard to the entries at issue had not expired. Whether CBP unlawfully assessed interest on the collection of antidumping duties secured by bond on the entries at issue? IFIC asserts that CBP improperly assessed interest charged against the bond prior to liquidation as well as the interest accumulated since the time of liquidation. In support of its position IFIC relies on Fujitsu General America, Inc. v. United States, 110 F. Supp. 2d 1061 (Ct. Int’l Trade 2000) (noting that, “pursuant to [19 U.S.C.] § 1677g(a), interest [is] assessable on payments of antidumping duties, but not on instruments serving as security for payments, such as a bond”), and Timken Co. v. United States, 37 F.3d 1470 (Fed. Cir. 1994) (explaining that “‘amounts deposited’ in [19 U.S.C. §] 1677g(a) refers solely to cash deposits of estimated duties provided under sections 1671e(a)(4) [countervailing duty order] and 1673e(a)(3) [antidumping duty order]”). Because no cash deposit was made on the protested entries, IFIC argues that the entry should be reliquidated without interest. As explained below, we determine that because the subject merchandise was entered during the new shipper review of Qindao Camel, ACN was allowed to post a bond rather than a cash deposit, and therefore, interest should not have been assessed until the time of liquidation. Upon request, Commerce conducts reviews to establish individual weighted-average dumping margins for foreign exporters or producers of merchandise subject to an antidumping duty order who did not export subject merchandise during the period of investigation and are not affiliated with a producer or exporter who did so. See 19 U.S.C. § 1675(a)(2)(B). From January 1, 1995, the effective date of the statute authorizing new shipper reviews, until April 1, 2006, the antidumping law permitted “new shippers” to post bonds with CBP in lieu of cash deposits to serve, during the time required to conduct the review, as security for future payments of antidumping duties. See 19 U.S.C. § 1675(a)(2)(B)(iii) (suspended by the Pension Protection Act of 2006, Pub. L. No. 109-280, § 1632(a), 120 Stat. 780, 1165). In this case, ACN was allowed to post a bond in lieu of making a cash deposit during the new shipper administrative review. As discussed above, Commerce initiated a new shipper review with regard to exporter Qingdao Camel and producer Lufeng on December 28, 2005. On January 20, 2006, Commerce issued Message No. 6020205, which instructed U.S. Customs and Border Protection (“CBP”) to allow cash deposits or a bond for entries on or after December 28, 2005, from exporter Qingdao Camel and producer Lufeng. Commerce completed its new shipper review on June 22, 2007, and on July 10, 2007, Commerce issued Message No. 7191203, which instructed CBP to require cash deposits for entries on or after June 22, 2007 for exporter Qingdao Camel and producer Lufeng at the antidumping rate of 70.47 percent. According to the Automated Commerce System (“ACS”) records, the port calculated pre-liquidation and post-liquidation interested on the entries at issue. The courts have conclusively held that 19 U.S.C. § 1677g(a) requires pre-liquidation interest to be assessed only when a cash deposit of estimated antidumping duties is made or required. See Timken Co. v. United States, 37 F.3d 1470, 1472-73 (Fed. Cir. 1994) (noting that § 1677g(a) applies only to cash deposits of estimated duties); HQ H218115 (Aug. 28, 2014) (“Because a cash deposit was not required, the interest provisions of 19 U.S.C. § 1677g do not apply and [preliquidation] interest should not be assessed on the entry”); HQ H097501 (July 14, 2014) (“Because [the importer] did not make a cash deposit of antidumping duties, the interest provisions of 19 U.S.C. § 1677g(a) do not apply and [the surety] is not liable under its bond for interest on the unpaid antidumping duty prior to the date of liquidation.”). Because ACN did not make a cash deposit of antidumping duties and a bond in lieu of a cash deposit was permissible pursuant to Message No. 6020205, the interest provisions of 19 U.S.C. § 1677g(a) do not apply and IFIC is not liable under its bond for interest on the unpaid antidumping duty prior to the date of liquidation. We do find, however, that the port properly assessed interest that accrued after the date of liquidation. Pursuant to 19 U.S.C. § 1505(d), when a bill is not paid in full within 30 days, “any unpaid balance shall be considered delinquent and bear [post-liquidation] interest by 30-day periods.” Therefore, the port properly assessed interest from the date of liquidation and that interest will continue to accrue until the balance is paid in full. HOLDING: Based on the foregoing, CBP acted within its authority when it reinstated the demand and sought collection from IFIC on the entries at issue. IFIC, however, is not liable under its bond for pre-liquidation interest on the unpaid antidumping duty. Accordingly, the protest should be DENIED IN PART and CBP should recalculate interest accordingly and assess delinquency interest accrued after the date of liquidation pursuant to 19 U.S.C. § 1505(d). 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 of 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, Director Commercial & Trade Facilitation Division