"No-Change" Liquidation Letter to Customs--February 2, 2000

February 2, 2000

Stuart P. Seidel, Esq.
Assistant Commissioner
Office of Regulations and Rulings
United States Customs Service
1300 Pennsylvania Avenue, NW
Washington, DC 20229

Re: Protests Against "No-Change," Deemed and Automatic Liquidations

Dear Mr. Seidel:

As a result of reading recent news articles concerning a ruling issued by Customs, the Joint Industry Group (JIG) would greatly appreciate your written confirmation of the agency's position concerning the status of Protests filed against "no-change," deemed and automatic liquidations.

No-Change Liquidations:

In HQ 227594 dated April 21, 1999, the Customs Service issued a decision on Protest and Application for Further Review 2304-97-100137, in which, inter alia, it was held that entries liquidated by Customs, as entered, are not properly the subject of protests under 19 U.S.C. 1514. However, the actual disposition of this case was based on issues not related to this holding. We also understand that this Ruling was issued without your prior personal review.

Title 19 United States Code, Section 1500, requires, inter alia, that the Customs Service:

1) Fix the final appraisement of imported merchandise;
2) Fix the final classification and rate of duty applicable to the merchandise;
3) Fix the final amount of duty to be paid on merchandise and determine any increased or additional duties, taxes, and fees due or any excess of duties, taxes, and fees deposited, and;
4) Liquidate the entry and reconciliation of merchandise.

Title 19 United States Code, Section 1514, lists the types of decisions made by the Customs Service, which are final and conclusive unless a protest is filed in accordance with Section 1514. The listed decisions include those pertaining to value, classification and rate and amount of duties chargeable, charges and exactions within the jurisdiction of the Secretary of the Treasury, and the liquidation or reliquidation of entries or reconciliations as to the issues contained therein, or any modification thereof.

Under Title VI of the North American Free Trade Agreement Implementation Act (Pub. Law 103-182 of Dec. 8, 1993) [the Mod Act], importers are obliged to use "reasonable care" in ascertaining the classification and valuation of imported merchandise. "Reasonable care" includes obtaining binding rulings from the Customs Service, and entering merchandise in accordance with such rulings, even when an importer believes that a ruling is incorrect (19 CFR 177.8(a)(2)]. Also, where an importer is directed by Customs through a CF 29 or other means to enter goods under a particular HTS subsidiary, the importer is obligated to follow those instructions.

JIG is of the opinion that in the case of "no-change" liquidations Customs acts no differently under 19 U.S.C. 1500 than in the case of any other type of liquidation - i.e., Customs faxes the classification, valuation, rate of duty, etc. in the same manner as in all other liquidations. Additionally, the types of decisions listed in 19 U.S.C. 1514 subject to protest are exactly the same in "no-change" liquidations as those which are subject to liquidations in which the classification, valuation, etc. are changed by Customs. For these reasons, Customs should confirm that "no-change" liquidations are the subject of protests properly filed with the appropriate port personnel and that the holding in HQ 227594 was erroneous. Additionally, JIG believes that a decision that "no-change" liquidations are not protestable would be contrary to the spirit, if not the letter of the Mod Act, because it would result in importers being required to submit entries in accordance with rulings or instructions from Customs, which could not be contested if believed to be erroneous.

Deemed and Automatic Liquidations:

Although 19 U.S.C. 1500 requires the Customs Service to liquidate entries in accordance therewith, 19 U.S.C. 1504 mandates that if an entry is not properly the subject of an extension or suspension, it shall be deemed "liquidated." "Liquidation" is defined in 19 CFR 159.1 as, "the final computation or ascertainment of the duties or drawback accruing on an entry." Additionally, 19 CFR 159.2 requires that all entries (other than those for temporary importation under bond and those for transportation under bond) shall be liquidated.

Based on the above, it is clear that liquidation, whether performed by Customs or by operation of law, is defined as an affirmative act of computation or ascertainment. It follows that if an entry is deemed liquidated by operation of law, the effect is the same as if Customs had made an affirmative computation or ascertainment of the duties or drawback accruing on an entry. For this reason, the legal effect to be given to entries in which Customs has not acted affirmatively or in which Customs liquidates automatically is the same as if it had made an affirmative decision concerning the proper computation of duty. Moreover, any determination to the contrary would result in an entire class of entries not being subject to protest or judicial review depending on the nature of the action (or inaction) taken by Customs to liquidate them.

Clearly, there is no indication that Congress ever intended to remove jurisdiction of the courts in instances in which the Customs Service decides not to affirmatively liquidate or in which it automatically liquidates entries. Such a determination would run contrary to Congressional intent to provide importers with a viable means to judicially contest the decisions made by the Customs Service. Accordingly, as with "no-change" liquidations, JIG respectfully requests that Customs confirm that deemed liquidations and automatic liquidations are subject to protest properly filed with the appropriate port personnel.

Very truly yours,

Richard Abbey Chairman,
Import Programs Committee