Prosegur, Inc. v. United States

Slip Op. 01-50

United States Court of International Trade

PROSEGUR, INC.,

Plaintiff,

v. Before: Pogue, Judge

Consol. Court No. 94-08-00486

UNITED STATES,

Defendant.

[Defendant’s motion for summary judgment granted.]

Decided: April 18, 2001

Peter S. Herrick, for Plaintiff.

Stuart E. Schiffer, Acting Assistant Attorney General, Joseph I.

Liebman, Attorney-in-Charge, International Trade Field Office, John

J. Mahon, Attorney, Commercial Litigation Branch, Civil Division,

U.S. Department of Justice; and Yelena Slepak, Office of Assistant

Chief Counsel, International Trade Litigation, U. S. Customs

Service, Of Counsel, for Defendant.

OPINION

Pogue, Judge: Plaintiff, Prosegur, Inc. (“Prosegur”), challenges

the refusal of the United States Customs Service (“Customs”) to

reliquidate certain jewelry entered at the port of Miami, Florida. 1

Prosegur contends that the imported merchandise should have been

1

This action, Consolidated Court No. 94-08-00486, includes

Court No. 95-10-01305. Defendant’s summary judgment requests the

severance and dismissal of only part of the action, Court No. 95-

10-01305.

Court No. 95-10-01305 Page 2

classified under subheading 9801.00.10,2 Harmonized Tariff Schedule

of the United States (“HTSUS”), free of duty, rather than under

subheading 7113.19,3 HTSUS. Merchandise classified under

subheading 7113.19, HTSUS, is dutiable at 6.5% ad valorem.

Pursuant to USCIT Rule 56, Customs requests dismissal of Court No.

95-10-01305 for lack of jurisdiction and/or failure to state a

claim on which relief could be granted. Prosegur opposes the

motion, claiming that factual disputes preclude the grant of

summary judgment.

Background

On April 3, 1992, Prosegur imported jewelry under entry number

459-0101159-8. Prosegur attached a “Declaration for Free Entry of

Returned American Products” to the entry form. Nonetheless,

Customs liquidated the goods on August 13, 1993, under subheading

7113.19, HTSUS, assessing a duty of 6.5% ad valorem.

In a letter dated March 18, 1994, Prosegur notified Customs

that, according to Prosegur, Customs did not properly liquidate the

goods. Customs treated the letter as a “protest,” and denied it as

untimely as it was filed more than ninety days after the August

2

Subheading 9801.00.10 refers to, “Products of the United

States when returned after having been exported without having

been advanced in value or improved in condition by any process of

manufacture or other means while abroad.” 9801.00.10, HTSUS.

3

Subheading 7113.19 refers to, “Articles of jewelry and

parts thereof, of precious metals or of metal clad with precious

metals.” 7113.19, HTSUS.

Court No. 95-10-01305 Page 3

13th liquidation. See 19 U.S.C. §§ 1514(a), (c).4 Pursuant to 19

U.S.C. § 1520(c)(1), Prosegur then filed a claim for

reliquidation. 5

4

19 U.S.C. § 1514(a) states, in relevant part:

(a) Finality of decisions; return of papers

. . .

[D]ecisions of the appropriate customs officer,

including the legality of all orders and findings

entering into the same, as to –

. . .

(2) the classification and rate and amount of

duties chargeable;

. . .

(5) the liquidation or reliquidation of an

entry, or any modification thereof;

. . .

shall be final and conclusive upon all persons . .

. unless a protest is filed in accordance with this

section . . . .

19 U.S.C. § 1514(a)(1988).

According to 19 U.S.C. § 1514(c)(2), “[a] protest of a

decision, order, or finding described in subsection (a) of this

section shall be filed with such Customs officer within ninety days

after but not before – (A) notice of liquidation or reliquidation

. . . .” 19 U.S.C. § 1514(c)(2)(1988)(redesignated 1514(c)(3) in

1993).

5

19 U.S.C. § 1520(c)(1) states:

Notwithstanding a valid protest was not filed, the

appropriate customs officer may, in accordance with

regulations prescribed by the Secretary, reliquidate

an entry or reconciliation to correct –

(1) a clerical error, mistake of fact, or other

inadvertence not amounting to an error in the

construction of a law, adverse to the importer

and manifest from the record or established by

documentary evidence, in any entry, liquidation,

or other customs transaction, when the error,

mistake, or inadvertence is brought to the

Court No. 95-10-01305 Page 4

Prosegur appears to make two arguments; first, that Customs

did not act to extend the period of liquidation. As a result,

Prosegur argues that the imported goods were deemed liquidated by

law one year after their entry at the rate asserted at the time of

entry, in this case duty free. See 19 U.S.C. § 1504(a). 6 Prosegur

also appears to argue that Customs, through a mistake of fact,

misclassified the goods as dutiable, rather than duty free, as

supported by Prosegur’s declaration of the duty free nature of the

goods.

Customs, on the other hand, argues that it extended the period

of liquidation twice. It also claims that Prosegur was notified,

prior to liquidation, that the information on the duty free nature

of the goods was incomplete. As a result, Customs contends that it

attention of the appropriate customs officer

within one year after the date of liquidation or

exaction . . . .

19 U.S.C. § 1520(c)(1)(1988).

6

Prosegur relies on section 1504(a)(“Liquidation”), which

states, in relevant part:

(a) Liquidation

Except as provided in subsection (b) of this

section, an entry of merchandise not liquidated

within one year from:

(1) 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.

19 U.S.C. § 1504(a)(1988)(sections (2) and (3) omitted).

Court No. 95-10-01305 Page 5

properly extended the liquidation period, and that it did not

commit a mistake of fact by classifying the goods as dutiable.

Rather, according to Customs, it considered two available options

-- classifying the goods as American Goods Returned; or denying

that classification and choosing instead subheading 7113.19 because

of insufficient documentation -- and chose the classification it

found more appropriate. In Customs’ view, the appropriate manner

of contesting the classification was for Prosegur to file a valid

protest under 19 U.S.C. § 1514(a), which Prosegur failed to do.

Standard of Review

Summary judgment is appropriate when “the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with affidavits, if any, show there is no genuine issue as

to any material fact and the moving party is entitled to judgment

as a matter of law.” USCIT Rule 56. A dispute is genuine “if the

evidence is such that [the trier of fact] could return a verdict

for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 248 (1986).

The court resolves any doubt over material factual issues in

favor of the nonmoving party, and draws all reasonable inferences

in its favor. See Anderson, 477 U.S. at 255; Mingus Constructors,

Inc. v. United States, 812 F.2d 1387, 1390-91 (Fed. Cir. 1987).

Nevertheless, “[w]hen a motion for summary judgment is made and

supported . . . an adverse party may not rest upon the mere

Court No. 95-10-01305 Page 6

allegations or denials of the adverse party’s pleading, but . . .

must set forth specific facts showing that there is a genuine issue

for trial.” USCIT Rule 56(e).

There are two issues in this case: (1) whether Prosegur makes

the minimum showing that Customs did not extend the period of

liquidation, and (2) whether the criteria for relief under section

1520(c)(1) can be met. Here, Prosegur failed to set forth any fact

from which the court could infer that the liquidation period was

not extended, and, therefore, did not offer evidence from which the

court could rebut the presumption that Customs satisfactorily

performed its duties. In addition, if the claimed

misclassification of the imported jewelry as dutiable rather than

duty free was an error, it was an error in the construction of law,

not a mistake of fact. As a result, there are no genuine issues of

material fact in dispute and, therefore, summary judgment is

appropriate.

Discussion

A. Customs Properly Extended the Period of Liquidation

1. Notice of Extension of Liquidation

Unless Customs extends the period of liquidation,7 imported

7

Liquidation is “the final computation or ascertainment of

the duties or drawback accruing on an entry.” 19 CFR 159.1

(1994). It is intended to be the final determination of all

issues relating to the admissibility and dutiability of goods.

See United States v. Utex Int’l, Inc., 857 F.2d 1408, 1409 (Fed.

Cir. 1988).

Court No. 95-10-01305 Page 7

merchandise is to be liquidated within one year of its entry date.

Otherwise, the imported goods are deemed liquidated at the rate

asserted by the importer of record at the time of entry. See 19

U.S.C. § 1504(a). Customs extends the time within which it may

liquidate goods by giving notice to the importer of record in

accordance with section 1504(b). Customs may only extend the

period of liquidation under three specific circumstances, including

when “information needed for the proper appraisement or

classification of the merchandise is not available to the

appropriate customs officer.” 19 U.S.C. § 1504(b)(1). 8

Prosegur argues that Customs never extended the liquidation

period. Consequently, according to Prosegur, the goods were deemed

liquidated by law on April 3, 1993, one year after the goods were

entered into the United States, as duty free, the rate Prosegur

asserted at the time of entry. Prosegur rests its argument

entirely on information it received from Customs, pursuant to the

Freedom of Information Act (“FOIA”). Prosegur requested copies of

the entry summary, commercial invoices, packing lists, Customs

Forms (“CF”) 28 and 29,9 and all other documents pertaining to the

8

The other two circumstances under which Customs can extend

the period of liquidation -- when “liquidation is suspended as

required by statute or court order” and when “the importer of

record requests such extension and shows good cause therefore” –

are not at issue here. 19 U.S.C. § 1504(b)(2)-(3).

9

CF 28 is used by the district director to notify the

importer if the entered rate or value of the merchandise is too

low, specifying the difference in value on the notice. CF 29 is

a notice of action that alerts the importer of a proposed change

to the classification.

Court No. 95-10-01305 Page 8

imported merchandise at issue. See Letter from Peter S. Herrick,

at Pl.’s Mem. Opp’n to Mot. Summ. J., Composite Ex. A. Customs

responded to Prosegur’s FOIA request, but did not send a copy of

the electronic history file, which contains records of extension

notices, CF 28s and 29s. Prosegur argues that the court should

infer from the lack of a copy of the electronic history file that

the extension notices were never mailed.

Customs officials are “entitled to a presumption that their

duties are performed in the manner required by law.” International

Cargo & Sur. Ins. Co. v. United States, 15 CIT 541, 544, 779 F.

Supp. 174, 177 (1991). In this case, the presumption arises that

Customs sent notices extending the period of liquidation to the

importer, Prosegur. This presumption can be “rebutted by a

declaration or other evidence indicating that notice was not

received.” Id. Previously, “this court found that an affidavit

from the importer’s recordkeeper, stating that an extension notice

had not been received, was sufficient to rebut the presumption.”

Id. (referring to Enron Oil Trading & Transp. Co. v. United States,

15 CIT 511, 516 (1991)). A mere “naked assertion,” however, that

the notice was not received does not rebut the presumption. Id. at

544-45, 779 F. Supp. at 177-78.

Defendant United States submitted affidavits from customs

officials, a copy of the electronic history file containing the

notices of extension, and a copy of the CF 29 sent to Prosegur.

Arthur Versich, Project Leader of the Entry Processing Team, in his

Court No. 95-10-01305 Page 9

affidavit, described Customs’ computerized database, the Automated

Commercial System (“ACS”), used to generate extension notices.

Versich explained that, due to the volume of extension and

suspension notices, Customs does not maintain paper copies of

notices sent to importers. See Affidavit of Arthur Versich ¶ 5, at

Def.’s Mem. Supp. Mot. Summ. J., Collective Ex. A. Rather, the

information is stored in a computer file, known as the

extension/suspension history file. Id.

Roger Odom, team leader in the Production Management Section

of the Computer Operations Division of the Office of Information

and Technology, described in his affidavit the process used to

format, print, and send the extension notices. According to Odom,

the computer and printing rooms are manned and operated twenty-four

hours a day, seven days a week, and are closely supervised. See

Affidavit of Roger Odom ¶ 4, at Def.’s Mem. Supp. Mot. Summ. J.,

Collective Ex. A. Customs runs a group of programs each week,

after the end of the work week. These programs are known as “end-

of-week” programs. Extension notices are one such end-of-week

process. Every Sunday, extension notices, or CF 4333As, are

printed. See id. at ¶ 5. The printed CF 4333As are then brought

to the Reports Distribution area. See id. at ¶ 8. After a final

check for defects, the notices are placed in Postal Service trays.

See id. at ¶ 10. Within twenty-four hours of printing, the notices

are then delivered to the post office.

The printing and mailing of the extension notices are

Court No. 95-10-01305 Page 10

operations that the data center “must perform every week.” Id. at

¶ 11 (emphasis in original). Therefore, “there is no doubt that

where Customs has a record of a notice, the notice was printed at

or about the time indicated by the run data.” Affidavit of Arthur

Versich ¶ 16, at Def.’s Mem. Supp. Mot. Summ. J., Collective Ex. A.

Here, Customs’ automated system records indicate that notices

were sent to Prosegur. Id. at ¶ 7. Specifically, two extension

notices are listed in Prosegur’s file, dated January 16, 1993, and

July 17, 1993. See Print-out of History File, at Def.’s Mem. Supp.

Mot. Summ. J., Collective Ex. A. These notices would have extended

the period of liquidation to include the August liquidation data at

issue.

Prosegur does not even make a “naked assertion” that the

notices of extension were not received. Prosegur submits no

statement or affidavit, e.g., of recordkeepers, that could raise an

inference that it never received the notices. Rather, Prosegur

asks the court to infer from an incomplete file obtained through a

FOIA request, made some 6 months after the liquidation of the

goods, that the extension notices were not sent.

Whatever the reasons why the history file was not included in

the set of documents requested by Prosegur, 10 the court cannot infer

10

For example, as argued by Customs, the official in charge

of gathering the documents pursuant to Prosegur’s FOIA request

may not have conducted a thorough review of the file for the

merchandise at issue. See Def.’s Reply Mem. Supp. Mot. Summ. J.

at 6.

Court No. 95-10-01305 Page 11

from the failure to include the history file in the FOIA response,

without any more evidence presented by Prosegur, that the extension

notices and customs forms were never sent. See St. Paul Fire &

Marine Ins. Co. v. United States, 21 CIT 953, 955 (1997)(quoting

Avia Group Int’l, Inc. v. L.A. Gear California, Inc., 853 F.2d

1557, 1560 (Fed. Cir. 1988)(noting that to survive summary judgment

“a nonmovant must do more than merely raise some doubt as to the

existence of a fact; evidence must be forthcoming from the

nonmovant . . . ”)). The FOIA response simply does not provide a

basis for such an inference.

Customs’ history file indicates that two notices of extension

were sent. The routine office practice of mailing notices of

extension within one week after the notices are generated, in the

absence of any evidence that Prosegur never received its notices,

is sufficient evidence of mailing in this case. Nothing in the

affidavits submitted by Prosegur raise an inference that the

notices were not sent or received. Therefore, Prosegur has failed

to rebut the presumption that Customs properly produced and mailed

the extension notices. Accordingly, the court finds that there is

no genuine issue of material fact regarding this issue.

2. Validity of the Extensions

In order to uphold Customs’ decision to extend the time of

liquidation, the extension must be for a reason provided within 19

U.S.C. § 1504(b), specifically here, that “information . . . for

Court No. 95-10-01305 Page 12

the proper appraisement or classification of the merchandise is not

available to the appropriate customs officer.” 19 U.S.C. §

1504(b)(1). The decision to extend the period of liquidation will

be upheld as long as it is “proper under the statute, and is not

arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law.” International Cargo, 15 CIT at 542, 779 F.

Supp. at 176.

“Information,” under the statute, is “construed to include

whatever is reasonably necessary for proper appraisement or

classification of the merchandise involved.” Detroit Zoological

Soc’y v. United States, 10 CIT 133, 138, 630 F. Supp. 1350, 1356

(1986). At the time of entry, Prosegur did not submit information

on the manufacturer of the imported goods.11 Nor does Prosegur

claim to have provided this information. As such, Customs was

unable to determine whether the subject merchandise was American

Goods Returned. The manufacturer of the goods, in this case, was

necessary to properly classify the merchandise. See Mi-Scott

Int’l, Ltd. v. United States, 13 CIT 1046, 1047 (1989). Customs’

extension of the time for liquidation was, therefore, justified.

11

In the CF 29, Customs alerted Prosegur that “[b]ased on

the entry documentation submitted, including the CF 3311, you

have failed to substantiate that the articles being returned are

‘U.S. Goods.’ You have indicated that you have no information on

the manufacturer. Unless you comply with the entry requirements

of section 10.1, your U.S. claim will be disallowed and the entry

will be rate advanced.” CF 29, at Def.’s Reply Mem. Supp. Mot.

Summ. J., Ex. D (emphasis in original).

Court No. 95-10-01305 Page 13

B. Classification of the Goods as Dutiable was a Mistake of Law

1. Section 1520(c)

Generally Customs’ decisions are considered “final and

conclusive upon all persons . . . unless a protest is filed in

accordance with” the ninety-day period set forth in section 1514(a)

and (c). 19 U.S.C. §§ 1514(a), (c). Section 1520(c) is a limited

exception to section 1514's protest procedures, used only to

correct inadvertences in the filing. See Chrysler Corp. v. United

States, 24 CIT __, __, 87 F. Supp. 2d 1339, 1347-48 n.8

(2000)(“[A]lthough ’Congress clearly envisioned a liberal mechanism

for the correction of inadvertences under section 1520(c)(1)’, §

1520(c)(1) is nevertheless a narrow exception to the rule that a

Customs classification decision is final unless a protest is filed

within ninety days following liquidation.”)(internal citations

omitted). This section allows for reliquidation of an entry

“[n]otwithstanding a valid protest was not filed,” as long as

reliquidation is requested within a year of liquidation. 19 U.S.C.

§ 1520(c); but see ITT Corp., 24 F.3d at 1387 (“Section 1520(c)(1)

[is not to be used to] afford a second bite at the apple to

importers who fail to challenge Customs’ decision within the

[ninety] day period set forth in § 1514.”). Under section

1520(c)(1), reliquidation is used to correct “a clerical error,

mistake of fact, or other advertence . . . not amounting to an

error in the construction of the law.” 19 U.S.C. § 1520(c)(1).

Here, Prosegur argues that Customs committed a mistake of

Court No. 95-10-01305 Page 14

fact.12 The distinction between a mistake of fact and error of law

is clearly stated in our case law. Mistakes of fact are generally

defined as mistakes that “take . . . place when some fact which

indeed exists is unknown, or a fact which is thought to exist, in

reality does not exist.” C. J. Tower & Sons, Inc. v. United

States, 336 F. Supp. 1395, 1399 (1972), aff’d, 499 F.2d 1277

(1974), see also Executone Info. Sys. v. United States, 96 F.3d

1383, 1386 (Fed. Cir. 1996). “Mistakes of law, on the other hand,

occur where the facts are known, but their legal consequences are

not known or are believed to be different than they really are.”

Chrysler Corp., 24 CIT at __, 87 F. Supp. 2d at 1344.

The court distinguishes between “decisional mistakes,” which

must be challenged under section 1514, and “ignorant mistakes,”

which are remediable under section 1520(c). See, e.g., Id. at __,

87 F. Supp. 2d at 1347. “Decisional mistakes” are legal mistakes

and occur when “a party makes the wrong choice between two known,

alternative sets of facts.” Universal Coops., Inc. v. United

States, 13 CIT 516, 518, 715 F. Supp. 1113, 1114 (1989). In

comparison, an “ignorant mistake” is one “in which a party is

unaware of the existence of the correct, alternative set of facts.”

Id. In order for the goods to be reliquidated under 1520(c)(1),

the alleged mistake of fact must be an ignorant mistake.

12

Therefore, it is unnecessary to consider whether Customs’

actions amounted to a clerical error or other inadvertence in

accordance with section 1520(c)(1).

Court No. 95-10-01305 Page 15

2. Application of 1520(c)

Customs argues that Prosegur’s submission of a claim under

section 1520(c) is an attempt to circumvent a failure to file a

timely protest under section 1514 of Customs’ classification

decision. We agree. See, e.g., ITT Corporation, 24 F.3d at 1387

n.4 (“We emphasize that under no circumstances may the provisions

of § 1520(c)(1) be employed to excuse the failure to satisfy the

requirements of § 1514.”). Prosegur disagrees with Customs’

decision to classify the imported jewelry under subheading 7113.9,

HTSUS, at 6.5% ad valorem. It is well settled, however, that a

challenge to the classification of merchandise is an issue of law.

See Executone, 96 F.3d at 1387; AT&T Int’l v. United States, 18 CIT

721, 726, 861 F. Supp. 95, 100 (1994); Universal Coops., Inc., 13

CIT at 518, 715 F. Supp. at 1114; Occidental Oil & Gas Co. v.

United States, 13 CIT 244, 247 (1989); Cavazos v. United States, 9

CIT 628, 630 (1985).

Prosegur, in an attempt to characterize the classification of

the goods under subheading 7113.19, HTSUS, as a mistake of fact,

argues that “Customs did not know the merchandise was American

Goods Returned at the time of liquidation.” Complaint at ¶ 19.

Prosegur supports this argument by claiming that, “[i]f Customs had

doubts as to whether the merchandise qualified as American Goods,

then the information they needed for making their classification

decision could be obtained through a CF 28 or a CF 29[,]” and the

record does not show that Customs ever requested such

Court No. 95-10-01305 Page 16

documentation. Pl.’s Mem. Opp’n to Mot. Part. Summ. J. at 8.

As previously discussed, the evidence supports a finding that

Customs did notify Prosegur as to the deficiencies in its

documents, even sending a CF 29. See CF 29, at Def.’s Reply Mem.

Supp. Mot. Summ. J., Ex. D. Specifically, Customs informed

Prosegur that its documentation did not indicate the manufacturer

of the goods, making it impossible to classify the goods as

American Goods Returned. See id. Prosegur has produced no

evidence from which we could infer otherwise. Moreover, Customs

knew that Prosegur was attempting to enter the goods as American

Goods Returned. Nonetheless, because of Prosegur’s limited

documentation, Customs determined it had insufficient information

to support classifying the goods as American Goods Returned.

Customs did not commit an ignorant mistake of fact, which is

the case where “a party is unaware of the existence of the correct,

alternative set of facts.” Chrylsler Corp., 24 CIT at __, 87 F.

Supp. 2d at 1347. Customs was aware of the alternative set of

facts, i.e., Prosegur’s claim that the goods were American Goods

Returned. That Customs may have been wrong with regard to the

underlying fact of the place of manufacture of the goods is

irrelevant because the place of manufacture was not the basis for

the decision. Rather, it was the failure of documentation that was

the basis for the decision. Customs chose not to classify the

goods as American Goods Returned, but rather to classify them as

dutiable, because of the inadequacy of Prosegur’s documentation.

Court No. 95-10-01305 Page 17

It is similarly irrelevant that Prosegur may have erred in failing

to submit timely documentation of the American manufacturer.

Prosegur’s error was a failure to comply with CFR § 10.1, a mistake

of law, not fact. As discussed in Chrysler Corporation, “although

’Customs may have been mistaken as to the correct state of the

facts,’ all relevant positions as to the facts were known by

Customs prior to liquidation; thus creating an error in the

construction of a law which cannot be challenged under §

1520(c)(1).” Chrysler Corporation, 24 CIT at __, 87 F. Supp. 2d at

1346.

In this case all relevant claims as to the facts were known by

Customs prior to liquidation. Therefore, Prosegur’s claimed

classification was denied, not because of a mistake of fact, but

because of Prosegur’s failure to prove that the merchandise was

American Goods Returned in compliance with 19 C.F.R. § 10.1. See,

e.g., Occidental Oil, 13 CIT at 248 (holding “that since the

plaintiff did not supply the proper documentation, ’the appropriate

customs officer made a legal determination as to the classification

of the merchandise on the basis of the facts presented, and in

light of plaintiff’s claimed classification.’”)(quoting Cavazos, 9

CIT at 631). Customs’ classification of the goods is, therefore,

appropriate.

Court No. 95-10-01305 Page 18

Conclusion

For the foregoing reasons, Plaintiff’s opposition to

Defendant’s motion for partial summary judgment is denied.

Defendant’s motion for partial summary judgment as to Court No. 95-

10-01305 is granted.

Donald C. Pogue

Judge

Dated: April 18, 2001

New York, New York

ERRATUM

Slip Op. 01-50, issued April 18, 2001

Prosegur, Inc. v. United States

This case involved a motion for partial summary judgment. The

judgment caption should read as follows :

[Defendant’s motion for partial summary judgment as to Court No.

95-10-01305 is granted.]

April 20, 2001