Interest on Underpayments and Overpayments of Customs Duties, Taxes, Fees and Interest

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Parts 24, 159 and 174

[T.D. 99-75]

RIN 1515-AB76

Interest on Underpayments and Overpayments of Customs Duties,

Taxes, Fees and Interest

AGENCY: U.S. Customs Service, Department of the Treasury.

ACTION: Interim rule.

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SUMMARY: This document conforms the Customs Regulations to existing

statutory provisions and judicial precedent regarding the assessment of

interest due to underpayments or overpayments to Customs of duties,

taxes and fees pertaining to imported merchandise, including interest

thereon. The majority of the conforming changes reflect the terms of

section 505 of the Tariff Act of 1930 (19 U.S.C. 1505), as amended by

section 642(a) within the Customs Modernization provisions of the North

American Free Trade Agreement Implementation Act. Under that statute,

interest accrues initially from the date the duties, taxes, fees and

interest are deposited with Customs in the case of overpayments, or are

required to be deposited with Customs in the case of underpayments, but

in either case not beyond the date of liquidation or reliquidation of

the applicable entry or reconciliation. Also under the statute and

applicable judicial precedent, all bills issued by Customs for

underpayments of duties, taxes, fees and interest are due within 15 or

30 days of issuance. In addition, the document conforms the Customs

Regulations to other changes to 19 U.S.C. 1505 and to section 321 of

the Tariff Act of 1930 (19 U.S.C. 1321) regarding interest that were

made by sections 2(a) and 3(a)(12) of the Miscellaneous Trade and

Technical Corrections Act of 1996.

DATES: Interim rule effective October 20, 1999. Comments must be

received on or before December 20, 1999.

ADDRESSES: Written comments (preferably in triplicate) may be addressed

to the Regulations Branch, Office of Regulations and Rulings, U.S.

Customs Service, 1300 Pennsylvania Avenue, N.W., Washington, D.C.

20229. Comments submitted may be inspected at the Regulations Branch,

Office of Regulations and Rulings, U.S. Customs Service 1300

Pennsylvania Avenue, N.W., 3rd Floor, Washington, D.C.

FOR FURTHER INFORMATION CONTACT: Robert Reiley, Financial Management

Division (202-927-1504).

SUPPLEMENTARY INFORMATION:

Background

Present Regulatory Provisions

The regulatory provisions amended by this document are as follows:

Section 24.1 of the Customs Regulations (19 CFR 24.1) sets forth

general procedures governing the collection of ``Customs duties, taxes,

and other charges,'' including the permissible methods of payment.

Section 24.3 of the Customs Regulations (19 CFR 24.3) sets forth

general provisions regarding the rendering and payment of bills or

accounts for money due the United States and the issuance of receipts

therefor. Paragraph (e) of that section provides that (1) a bill for

increased or additional duties determined to be due upon a liquidation

or reliquidation is due 15 days from the date of such liquidation or

reliquidation and (2) all other bills are due and payable upon the bill

date appearing on the bill.

[[Page 56434]]

Section 24.3a of the Customs Regulations (19 CFR 24.3a) contains

detailed provisions regarding Customs bills for supplemental duties

(increased or additional duties assessed upon liquidation or

reliquidation), reimbursable services, and miscellaneous amounts (bills

other than duties, taxes, reimbursable services, liquidated damages,

fines, and penalties), including interest thereon.

Section 24.11 of the Customs Regulations (19 CFR 24.11) concerns

the issuance of bills for ``increased or additional duties or taxes

found due upon liquidation'' and provides for issuance of such bills to

the importer of record or, in certain circumstances, to the actual

owner.

Section 24.25 of the Customs Regulations (19 CFR 24.25) concerns

statement processing and automated clearinghouse filing and payment

procedures and, in the second sentence of paragraph (a), refers to a

single payment of ``duties, taxes and fees.''

Section 24.36 of the Customs Regulations (19 CFR 24.36) concerns

refunds of excessive duties or taxes, and paragraph (a) thereof

specifically provides for preparation of a refund ``[w]hen it is found

on liquidation or reliquidation of an entry that a refund of excessive

duties or taxes, or both, is due.''

Section 159.6 of the Customs Regulations (19 CFR 159.6) concerns

the treatment by Customs of differences of less than $20 and $20 or

more, between estimated deposits and amounts assessed on liquidation.

This section specifically refers in these contexts to ``duties, fees,

and taxes'' or to ``duties and fees and internal revenue taxes.''

Section 174.11 of the Customs Regulations (19 CFR 174.11) sets

forth the matters that may be the subject of an administrative protest.

Paragraph (c) of that section specifically refers to ``charges or

exactions'' of whatever character within the jurisdiction of the

Secretary of the Treasury.

Section 174.12 of the Customs Regulations (19 CFR 174.12) sets

forth the procedures for filing a protest. Paragraph (a)(2) of that

section provides that a protest may be filed by any person ``paying any

charge or exaction.''

Customs Modernization Statutory Changes

The Customs Modernization provisions contained in Title VI of the

North American Free Trade Agreement Implementation Act (``the Act''),

Public Law 103-182, 107 Stat. 2057, included, in section 642(a), an

extensive amendment of section 505 of the Tariff Act of 1930 (19 U.S.C.

1505). Prior to this amendment, section 505 consisted of three

subsections covering the deposit of estimated duties (subsection (a)),

the collection of increased or additional duties and the refund of

excess duties deposited as determined on a liquidation or reliquidation

(subsection (b)), and the due date for duties determined to be due upon

liquidation or reliquidation, delinquency, and interest on delinquent

duty payments (subsection (c)). Section 505, as amended by section

642(a) of the Act, now contains the following provisions:

1. Subsection (a) of amended section 505 requires the importer of

record to deposit with Customs, at the time of making entry or at such

later time as the Secretary of the Treasury may prescribe by

regulation, the amount of duties ``and fees'' estimated to be payable

on the entry. In addition, subsection (a) now provides (1) that the

regulations prescribed by the Secretary may provide that estimated

duties and fees shall be deposited before or at the time an import

activity summary statement is filed and (2) that if an import activity

summary statement is filed, the estimated duties and fees shall be

deposited together with interest, at a rate determined by the Secretary

of the Treasury, accruing from the first date of the month the

statement is required to be filed until the date such statement is

actually filed. (An import activity summary statement is a filing

procedure provided for in section 484 of the Tariff Act of 1930, as

amended [19 U.S.C. 1484], and was added by section 637(a) of the Act to

permit the filing of a single statement, covering entry or warehouse

withdrawal transactions made during a calendar month, within such time

period as prescribed by the Secretary of the Treasury by regulation but

not later than the 20th day following such calendar month.

Implementation of the import activity summary statement procedure will

be the subject of a separate regulatory action and thus is not dealt

with in this document.) Thus, in order to avoid a potential conflict

with the import activity summary statement procedure, subsection (a),

as amended, no longer contains a 30-day limitation on the authority of

the Secretary of the Treasury to prescribe by regulation for the

deposit of estimated duties after the date of entry.

2. Subsection (b) of amended section 505 requires Customs to

collect any increased or additional duties ``and fees due, together

with interest thereon,'' and to ``refund any excess moneys deposited,

together with interest thereon,'' as determined on a liquidation or

reliquidation. In addition, subsection (b) now provides (1) that

duties, fees, and interest determined to be due upon liquidation or

reliquidation are due 30 days after issuance of the bill for payment

and (2) that refunds of excess moneys deposited, together with interest

thereon, shall be paid within 30 days of liquidation or reliquidation.

Thus, in addition to the inclusion of new references to the collection

of fees and interest, to the refund of excess ``moneys'' (which would

include fees) and interest thereon, and to a due date based on the

issuance of a bill, section 505, as amended, prescribes a specific time

limit for the payment of refunds and no longer provides that duties

determined to be due upon liquidation or reliquidation shall be due 15

days after the date of that liquidation or reliquidation (see also the

discussion of subsection (d) below).

3. Subsection (c) of amended section 505 is essentially new and

provides (1) that interest assessed due to an underpayment of duties,

fees, or interest shall accrue, at a rate determined by the Secretary

of the Treasury, from the date the importer of record is required to

deposit estimated duties, fees, and interest to the date of liquidation

or reliquidation of the applicable entry or reconciliation and (2) that

interest on excess moneys deposited shall accrue, at a rate determined

by the Secretary of the Treasury, from the date the importer of record

deposits estimated duties, fees, and interest to the date of

liquidation or reliquidation of the applicable entry or reconciliation.

(Reconciliation is a procedure provided for in section 484 of the

Tariff Act of 1930, as amended [19 U.S.C. 1484], and was added by

section 637(a) of the Act to allow elements of an electronic entry

summary or electronic import activity summary statement [other than

those elements related to the admissibility of the merchandise], if

undetermined at the time the summary or statement is filed, to be

provided to Customs at a later time. Reconciliation will be implemented

by separate regulatory action and thus is not substantively addressed

in this document.) Thus, the importer of record is liable for interest

on underpaid amounts from the date those amounts should have been paid

to Customs, and, conversely, the importer of record is entitled to

interest on refunds of payments made to Customs in excess of the amount

properly due.

4. Finally, subsection (d) of amended section 505 provides (1) that

if duties, fees, and interest determined to be due or refunded are not

paid in full within the 30-day period specified in subsection (b), any

unpaid balance shall be considered delinquent and bear

[[Page 56435]]

interest by 30-day periods, at a rate determined by the Secretary of

the Treasury, from the date of liquidation or reliquidation until the

full balance is paid and (2) that no interest shall accrue during the

30-day period in which payment is actually made. In addition,

subsection (d) of amended section 505 reflects the terms of present

Sec. 24.3a(c)(3) of the regulations in that it provides for a 30-day

period for payment both before and once a delinquency occurs, during

which period no additional interest (that is, on any outstanding

principal amount, plus interest thereon) will accrue so long as full

payment of the amount outstanding is made during that current 30-day

period. Thus, section 505 no longer allows for delinquency and interest

accrual only after 45 days following liquidation or reliquidation. This

is because the statutory delinquency period is now 30 days and because

under the statute initial interest accrual on underpayments runs from

the date of required deposit of moneys rather than only when a

delinquency has occurred.

Customs has determined that the changes to section 505 effected by

section 642(a) of the Act as described above require a number of

conforming changes to the provisions of Secs. 24.1, 24.3, 24.3a, 24.11,

24.25 and 24.36 of the regulations. These changes, which are explained

in more detail below, concern principally the inclusion of references

to the following: the collection or deposit of (estimated) fees and

interest; the collection of increased or additional fees; the refund of

excess fees deposited; the accrual of interest on underpaid and

overpaid duties, fees and interest from the date of required (including

actual) deposit to the date of liquidation or reliquidation and the

collection or refund of such accrued interest; and the 30-day due date

periods for payments or refunds of underpaid or overpaid duties, fees

and interest as determined on liquidation or reliquidation. In

addition, some of these regulatory provisions, as well as Secs. 174.11

and 174.12 of the regulations, are in need of additional wording

changes, involving principally the addition of references to

``interest'' or ``taxes'' or ``refunds,'' in order to conform the

regulatory texts to the principles reflected in applicable judicial

decisions; these changes are also explained in more detail below.

Additional Statutory Changes Regarding Interest

Subsequent to the changes to section 505 effected by section 642(a)

of the Act as discussed above, additional statutory changes regarding

interest were enacted as part of the Miscellaneous Trade and Technical

Corrections Act of 1996 (``the Miscellaneous Act''), Public Law 104-

295, 110 Stat. 3514. These statutory changes, which require conforming

regulatory changes, were as follows:

1. Section 2(a) of the Miscellaneous Act amended section 505(c) to

provide that, in the case of a claim under 19 U.S.C. 1520(d) (that is,

a NAFTA post-importation claim for a refund of duty), interest on the

excess money deposited shall accrue from the date on which the claim is

made; under section 2(b) of the Miscellaneous Act, the section 2(a)

amendment applies to claims made on or after June 7, 1996. Since this

statutory amendment relates only to interest on excess deposits,

Customs believes that it should be reflected in the Sec. 24.36 refund

provisions.

2. Section 3(a)(12) of the Miscellaneous Act amended section 321(a)

of the Tariff Act of 1930 (19 U.S.C. 1321(a)) by the addition of

several references to ``interest.'' The addition of these references

extends the authority of the Secretary of the Treasury to include

interest in determining what is a de minimis amount when providing by

regulation for waiving the collection of de minimis amounts on entered

merchandise and for disregarding de minimis differences between the

total estimated deposit or tentatively assessed amount and the total

amount actually accruing on an entry of merchandise; under section 3(b)

of the Miscellaneous Act, the section 3(a)(12) amendments apply as of

December 8, 1993. Customs believes that the statutory amendment

pertaining to the disregarding of differences between the total

estimated deposit or tentatively assessed amount (that is, of duties,

fees, and taxes) and the total amount (of duties, fees, taxes, and

interest) actually accruing (which is normally determined upon

liquidation of the entry) should be reflected in Sec. 159.6 of the

regulations which implements this aspect of the section 321(a)

provisions.

Explanation of Amendments

The specific regulatory amendments set forth in this document are

explained in more detail below.

Section 24.1

The amendments to Sec. 24.1 involve the addition of references to

``fees'' and ``interest'' in various paragraphs under the section. This

is simply intended to reflect the inclusion of these terms in the text

of section 505 as amended by section 642(a) of the Act. Since Sec. 24.1

sets forth general rules for collection (including payment method) of

funds due Customs and thus covers both initial payments and

supplemental payments pursuant to a bill issued by Customs, the added

``interest'' references are intended to cover (1) any interest that may

be initially due on estimated duties and fees under the import activity

summary statement procedure mentioned above to be implemented later and

(2) any interest assessed on underpayments and delinquent payments of

principal amounts and interest thereon under Sec. 24.3a. However, no

reference to ``interest'' has been added in paragraph (a)(7) of

Sec. 24.1 because this paragraph concerns initial credit or charge card

payments on non-commercial transactions, which would never involve an

interest payment.

Section 24.3

The first sentence of Sec. 24.3(b) is amended by adding references

to the payment of estimated ``fees'' and ``interest'' in order to align

the text on the terminology used in amended section 505. The words ``if

applicable'' have been included after the added ``interest'' reference

in recognition of the fact that interest would be required in an

estimated payment circumstance only in some cases. A reference to the

payment of estimated ``taxes'' has also been added to this regulatory

text in order to reflect the fact that Customs collects taxes (e.g.

harbor maintenance taxes) at the time of entry as part of the entry/

liquidation process. Prior to the United States Supreme Court decision

in United States Shoe Corp. v. United States, 118 S. Ct. 1290 (1998),

Customs considered such harbor maintenance assessments to be ``fees.''

However, the Supreme Court held that such assessments are ``taxes.''

Since Customs continues to be required by law to collect such

assessments and other taxes, the regulations are being amended to

reflect accurately the fact that Customs collects taxes at entry.

In addition, the text of Sec. 24.3(e) has been revised. The text

revision involves the following changes: (1) in the first sentence, the

addition of references to bills for ``fees'' and ``interest'' and the

inclusion of a statement that bills are due and payable ``within 30

days of the date of issuance of the bill''; (2) the elimination of the

outdated second sentence (which provided that a bill for increased or

additional duties is due 15 days from the date of liquidation or

reliquidation); and (3) the inclusion of an exception for bills

resulting from dishonored checks or from dishonored Automated

Clearinghouse (ACH) transactions, for which the revised text prescribes

a 15-day bill payment period

[[Page 56436]]

(see also the changes to Sec. 24.3a regarding debit vouchers as

discussed and set forth below). The last change reflects Customs'

practice of requiring that bills for dishonored checks or dishonored

ACH transactions be paid within 15 days of issuance of the bill.

Interest assessments on such dishonored payments are provided for in

the amendments to Sec. 24.3a and are authorized because there is no

statutory provision to the contrary. See Billings v. United States, 232

U.S. 261 (1914) and United States v. Goodman, 572 F. Supp. 1284 (CIT

1983).

Section 24.3a

In Sec. 24.3a, the paragraph (a) discussion of supplemental duties

has been modified to align on the terminology used in subsection (b) of

amended section 505 and to reflect the considerations regarding taxes

set forth above. Specifically, the words ``taxes and fees'' have been

included after ``duties'' in two places, the words ``increased or''

have been included before ``additional duties'' within the parentheses,

and the words ``together with interest thereon,'' have been included

after the parenthetical reference.

In addition, paragraph (b)(2) of Sec. 24.3a has been revised to

conform to the terms of amended section 505 regarding the accrual of

interest on underpayments of duties, fees, and interest. In the revised

text, paragraph (b)(2)(i), which concerns interest on initial

underpayments and relates to subsection (c) of section 505,

incorporates a number of illustrative examples and is further

subdivided into subparagraphs (A), (B) and (C) in order to cover

factual situations that arise under current Customs transaction

practices and that of necessity will result in variations in the

interest computation period under the basic statutory rule:

subparagraph (A) concerns pre-liquidation excessive refunds;

subparagraph (B) describes three scenarios involving pre-liquidation

additional deposits; and subparagraph (C) concerns cases in which

Customs receives a debit voucher indicating that a payment to Customs

was not made because of a dishonored check or ACH transaction.

Paragraph (b)(2)(ii) concerns interest on overdue bills and is based on

subsection (d) of section 505.

Section 24.11

Section 24.11 has been modified by removing former paragraph (b)

which affected only internal Customs procedures that are not

appropriate for regulatory treatment. In addition, the remaining text

(former paragraph (a)) has been simplified and references to increased

or additional ``fees'' and ``interest'' have been inserted in the text

and in the section heading.

Section 24.25

In Sec. 24.25, the second sentence of paragraph (a) has been

amended to reflect that interest may be due on a statement processing

transaction.

Section 24.36

Section 24.36 is amended by revising the first sentence of

paragraph (a), by adding a new sentence at the end of paragraph (a)

followed by new paragraphs (a)(1)-(a)(3), by making wording changes in

the first sentence of paragraph (b), and by making similar wording

changes in paragraph (c). These changes reflect the amended section 505

provisions regarding the refund of excess moneys deposited and thus

include the addition of references to the refund of excessive ``fees''

and ``interest'' and to the 30-day deadline for timely refunds, as

provided for in section 505(b). Similar to the approach taken in

Sec. 24.3a(b)(2)(i) as discussed above, the modified Sec. 24.36 text

incorporates a number of illustrative examples and sets forth several

scenarios, involving pre-liquidation additional excess deposits and

pre-liquidation refunds, that arise in practice and require variations

to the interest computation period under the basic statutory rule. The

modified Sec. 24.36 text also includes a specific reference to interest

accrual in the case of a claim for a refund filed under 19 U.S.C.

1520(d) and Subpart D of Part 181 of the Customs Regulations; this

change reflects the amendment to section 505(c) effected by section

2(a) of the Miscellaneous Act as discussed above. Finally, the changes

incorporate the 30-day interest period provisions for delinquent

refunds as provided for in section 505(d).

Section 159.6

A reference to ``interest'' has been added in each place where

reference is made to duties, fees, and taxes assessed or found due in a

liquidation or reliquidation context, to reflect the change to section

321(a) effected by section 3(a)(12) of the Miscellaneous Act as

discussed above.

Sections 174.11 and 174.12

In Sec. 174.11, a specific reference to the accrual of interest has

been added in paragraph (c) to reflect that interest is a charge or

exaction subject to protest within 90 days of the decision concerning

such accrual. See New Zealand Lamb Co. Inc. v. United States, 40 F.3d

377 (Fed. Cir. 1994); Syva Co. v. United States, 681 F. Supp. 885 (CIT

1988); and Travenol Laboratories Inc. v. United States, 118 F.3d 749

(Fed. Cir. 1997). In addition, a reference to receiving a refund has

been added in paragraph (a)(2) of Sec. 174.12. These two changes

clarify that both the assessment and the refund (or non-refund) of

interest are protestable decisions.

Comments

Before adopting these interim regulations as a final rule,

consideration will be given to any written comments timely submitted to

Customs, including comments on the clarity of this interim rule and how

it may be made easier to understand. Comments submitted will be

available for public inspection in accordance with the Freedom of

Information Act (5 U.S.C. 552), Sec. 1.4, Treasury Department

Regulations (31 CFR 1.4), and Sec. 103.11(b), Customs Regulations (19

CFR 103.11(b)), on normal business days between the hours of 9 a.m. and

4:30 p.m. at the Regulations Branch, Office of Regulations and Rulings,

U.S. Customs Service, 1300 Pennsylvania Avenue, N.W., 3rd Floor,

Washington, D.C.

Inapplicability of Prior Public Notice and Comment Procedures and

Delayed Effective Date Requirements

Pursuant to the provisions of 5 U.S.C. 553(b)(B), Customs has

determined that prior public notice and comment procedures on these

regulations are unnecessary and contrary to the public interest. The

regulatory changes correct the Customs Regulations by conforming them

to the terms of statutory provisions, and to the principles reflected

in judicial decisions, that are currently in effect. In addition, in

some cases, the changes conform the regulatory provisions to

longstanding Customs administrative procedures and practices that

confer benefits on, or otherwise militate in favor of, the general

public. For the same reasons, pursuant to the provisions of 5 U.S.C.

553(d)(1) and (3), Customs finds that there is good cause for

dispensing with a delayed effective date.

Executive Order 12866

This document does not meet the criteria for a ``significant

regulatory action'' as specified in E.O. 12866.

Regulatory Flexibility Act

Because no notice of proposed rulemaking is required for interim

regulations, the provisions of the Regulatory Flexibility Act (5 U.S.C.

601 et seq.) do not apply.

[[Page 56437]]

List of Subjects

19 CFR Part 24

Accounting, Claims, Customs duties and inspection, Interest, Taxes,

User fees, Wages.

19 CFR Part 159

Computer technology, Customs duties and inspection, Entry, Imports,

Liquidation.

19 CFR Part 174

Administrative practice and procedure, Customs duties and

inspection, Protests.

Amendments to the Regulations

For the reasons stated in the preamble, Parts 24, 159 and 174 of

the Customs Regulations (19 CFR Parts 24, 159 and 174) are amended as

set forth below.

PART 24--CUSTOMS FINANCIAL AND ACCOUNTING PROCEDURE

1-2. The general authority citation for Part 24 is revised, and the

specific authority citation for Sec. 24.24 is removed, and the specific

authority citations for Secs. 24.1, 24.11 and 24.36 continue to read as

follows:

Authority: 5 U.S.C. 301; 19 U.S.C. 58a-58c, 66, 1202 (General

Note 20, Harmonized Tariff Schedule of the United States), 1505,

1624; 26 U.S.C. 4461, 4462; 31 U.S.C. 9701.

Section 24.1 also issued under 19 U.S.C. 197, 198, 1648;

* * * * *

Section 24.11 also issued under 19 U.S.C. 1485(d);

* * * * *

Section 24.36 also issued under 26 U.S.C. 6423.

Sec. 24.1 [Amended]

3. In Sec. 24.1:

a. The section heading is amended by adding ``fees, interest,''

after ``taxes,'';

b. The introductory text of paragraph (a) is amended by adding

``fees, interest,'' after ``taxes,'';

c. The first sentence of paragraph (a)(3)(i) is amended by adding

``fees, interest,'' after ``taxes,'';

d. The first sentence of paragraph (a)(7) is amended by adding ``,

fees,'' after ``taxes'';

e. The first sentence of the introductory text of paragraph (b) is

amended by adding ``fees, interest,'' after ``taxes,'';

f. Paragraph (b)(3) is amended by adding ``fees,'' after

``taxes,'';

g. Paragraph (d) is amended by adding ``fees, interest,'' after

``taxes,''; and

h. In paragraph (e), the first sentence is amended by adding ``,

interest,'' after ``fees'' and the second sentence is amended by adding

``, fees, interest,'' after ``taxes''.

4. In Sec. 24.3, the first sentence of paragraph (b) is amended by

adding ``, taxes, fees, and interest, if applicable,'' after ``duties''

and paragraph (e) is revised to read as follows:

Sec. 24.3 Bills and accounts; receipts.

* * * * *

(e) Except for bills resulting from dishonored checks or dishonored

Automated Clearinghouse (ACH) transactions, all other bills for duties,

taxes, fees, interest, or other charges are due and payable within 30

days of the date of issuance of the bill. Bills resulting from

dishonored checks or dishonored ACH transactions are due within 15 days

of the date of issuance of the bill.

5. In Sec. 24.3a:

a. The section heading is revised;

b. Paragraph (a) is amended by removing the words ``Supplemental

duties (additional duties assessed upon liquidation or

reliquidation),'' and adding, in their place, the words ``supplemental

duties, taxes and fees (increased or additional duties, taxes and fees

assessed upon liquidation or reliquidation) together with interest

thereon,''; and

c. Paragraph (b)(2) is revised.

The revisions read as follows:

Sec. 24.3a Customs bills; interest assessment; delinquency; notice to

principal and surety.

* * * * *

(b) * * *

(2) Interest on supplemental duties, taxes, fees, and interest--(i)

Initial interest accrual. Except as otherwise provided in paragraphs

(b)(2)(i)(A) through (b)(2)(i)(C) of this section, interest assessed

due to an underpayment of duties, taxes, fees, or interest shall accrue

from the date the importer of record is required to deposit estimated

duties, taxes, fees, and interest to the date of liquidation or

reliquidation of the applicable entry or reconciliation. An example

follows:

Example: Entry underpaid as determined upon liquidation

[GRAPHIC] [TIFF OMITTED] TR20OC99.000

Importer owes $500 plus interest as follows:

The importer makes a $1,000 initial deposit on the required date

(January 1) and the entry liquidates for $1,500 (December 1). Upon

liquidation, the importer will be billed for $500 plus interest. The

interest will accrue from the date payment was due (January 1) to

date of liquidation (December 1).

(A) If a refund of duties, taxes, fees, or interest was made prior

to liquidation or reliquidation and is determined upon liquidation or

reliquidation to be excessive, in addition to any other interest

accrued under this paragraph (b)(2)(i), interest also shall accrue on

the excess amount refunded from the date of the refund to the date of

liquidation or reliquidation of the applicable entry or reconciliation.

An example follows:

Example: Pre-liquidation refund but entry liquidates for an

increase

[GRAPHIC] [TIFF OMITTED] TR20OC99.001

[[Page 56438]]

Importer owes $800 plus interest as follows:

The importer makes a $1,000 initial deposit on the required date

(January 1) and receives a pre-liquidation refund of $300 (May 1)

and the entry liquidates for $1,500 (December 1). Upon liquidation,

the importer will be billed for $800 plus interest. The interest

accrues in two segments: (1) On the original underpayment ($500)

from the date of deposit (January 1) to the date of liquidation

(December 1); and (2) on the pre-liquidation refund ($300) from the

date of the refund (May 1) to the date of liquidation (December 1).

(B) The following rules shall apply in the case of an additional

deposit of duties, taxes, fees, or interest made prior to liquidation

or reliquidation:

(1) If the additional deposit is determined upon liquidation or

reliquidation of the applicable entry or reconciliation to constitute

the correct remaining balance that was required to be deposited on the

date the deposit was due, interest shall accrue on the amount of the

additional deposit only from the date of the initial deposit until the

date the additional deposit was made. An example follows:

Example: Additional deposit made and entry liquidates for total

amount deposited

[GRAPHIC] [TIFF OMITTED] TR20OC99.002

Importer owes interest on $200 as follows:

The importer makes a $1,000 initial deposit on the required date

(January 1) and an additional pre-liquidation deposit of $200 (May

1) and the entry liquidates for $1,200 (December 1). Upon

liquidation, the importer will be billed for interest on the

original $200 underpayment from the date of the initial deposit

(January 1) to the date of the additional deposit (May 1).

(2) If the additional deposit is determined upon liquidation or

reliquidation of the applicable entry or reconciliation to be less than

the full balance owed on the amount initially required to be deposited,

in addition to any other interest accrued under this paragraph

(b)(2)(i), interest also shall accrue on the remaining unpaid balance

from the date deposit was initially required to the date of liquidation

or reliquidation. An example follows:

Example: Additional deposit made and entry underpaid as

determined upon liquidation

[GRAPHIC] [TIFF OMITTED] TR20OC99.003

Importer owes $300 plus interest as follows:

The importer makes a $1,000 initial deposit on the required date

(January 1) and an additional pre-liquidation deposit of $200 (May

1) and the entry liquidates for $1,500 (December 1). Upon

liquidation, the importer will be billed for $300 plus interest. The

interest accrues in two segments: (1) on the additional deposit

($200), from the date deposit was required (January 1) to the date

of the additional deposit (May 1); and (2) on the remaining

underpayment ($300), from the date deposit was required (January 1),

to the date of liquidation (December 1).

(3) If an entry or reconciliation is determined upon liquidation or

reliquidation to involve both an excess deposit and an excess refund

made prior to liquidation or reliquidation, interest in each case shall

be computed separately and the resulting amounts shall be netted for

purposes of determining the final amount of interest to be reflected in

the underpaid amount. An example follows:

Example: Excess pre-liquidation deposit and excess pre-

liquidation refund

[GRAPHIC] [TIFF OMITTED] TR20OC99.004

Importer owes $200 plus or minus net interest as follows:

The importer makes a $1,000 initial deposit on the required date

(January 1) and receives a pre-liquidation refund of $300 (May 1)

and the entry liquidates for $900 (December 1). Upon liquidation,

the importer will be billed for $200 plus or minus net interest. The

interest accrues in two segments: (1) Interest accrues in favor of

the importer on the initial overpayment ($100) from the date of

deposit (January 1) to the date of the refund (May 1); and (2)

interest accrues in favor of the Government on the refund

overpayment ($200) from the date of the refund (May 1) to the date

of liquidation (December 1).

(4) If the additional deposit or any portion thereof is determined

upon liquidation or reliquidation of the applicable entry or

reconciliation to constitute a payment in excess of the amount

initially required to be deposited, the excess deposit shall be treated

as a refundable amount on which interest also may be payable (see

Sec. 24.36).

(C) If a depository bank notifies Customs by a debit voucher that a

Customs account is being debited due to a dishonored check or

dishonored Automated Clearinghouse (ACH) transaction, interest shall

accrue on the debited amount from the date of the debit voucher to

either the date of payment of the debt represented by the debit voucher

or the date of issuance of a bill for payment, whichever date is

earlier.

[[Page 56439]]

(ii) Interest on overdue bills. If duties, taxes, fees, and

interest are not paid in full within the applicable period specified in

Sec. 24.3(e), any unpaid balance shall be considered delinquent and

shall bear interest until the full balance is paid.

6. Section 24.11 is revised to read as follows:

Sec. 24.11 Notice to importer or owner of increased or additional

duties, taxes, fees and interest.

Any increased or additional duties, taxes, fees or interest found

due upon liquidation or reliquidation shall be billed to the importer

of record, or to the actual owner if the following have been filed with

Customs:

(a) A declaration of the actual owner in accordance with section

485(d), Tariff Act of 1930, as amended (19 U.S.C. 1485(d)), and

Sec. 141.20 of this chapter; and

(b) A bond on Customs Form 301 in accordance with Sec. 141.20 of

this chapter.

Sec. 24.25 [Amended]

7. In Sec. 24.25, the second sentence of paragraph (a) is amended

by removing the words ``and fees'' and adding, in their place, the

words ``, fees, and interest''.

8. In Sec. 24.36:

a. Paragraph (a) is amended by revising the first sentence, adding

a new sentence at the end and adding new paragraphs (a)(1) through

(a)(3);

b. The first sentence of paragraph (b) is amended by removing the

words ``duties or taxes'' and adding, in their place, the words

``duties, taxes, fees or interest''; and

c. Paragraph (c) is amended by removing the words ``duties or

internal revenue taxes'' and adding, in their place, the words

``duties, taxes, fees or interest''.

The revisions and additions read as follows:

Sec. 24.36 Refunds of excessive duties, taxes, etc.

(a) When it is found upon, or prior to, liquidation or

reliquidation of an entry or reconciliation that a refund of excessive

duties, taxes, fees or interest (at the rate determined in accordance

with Sec. 24.3a(c)(1)) is due, a refund shall be prepared in the name

of the person to whom the refund is due, as determined under paragraphs

(b) and (c) of this section. * * * For purposes of this section:

(1) Except as otherwise provided in paragraphs (a)(1)(i) through

(a)(1)(iii) of this section, the refund shall include interest on the

excess moneys deposited with Customs, and such interest shall accrue

from the date the duties, taxes, fees or interest were deposited or, in

a case in which a proper claim is filed under 19 U.S.C. 1520(d) and

subpart D of Part 181 of this chapter, from the date such claim is

filed, to the date of liquidation or reliquidation of the applicable

entry or reconciliation. An example follows:

Example: Entry liquidates for a refund

[GRAPHIC] [TIFF OMITTED] TR20OC99.005

Importer is owed a refund of $600 plus interest as follows:

The importer makes a $1,000 initial deposit (January 1) and the

entry liquidates for $400 (December 1). Upon liquidation, the

importer will be owed a refund of $600 plus interest. The interest

will accrue from the date of deposit (January 1) to the date of

liquidation (December 1).

(i) If an additional deposit of duties, taxes, fees or interest was

made prior to liquidation or reliquidation and if any portion of that

additional deposit was in excess of the amount required to be

deposited, in addition to any other interest accrued under this

paragraph (a)(1), the refund also shall include interest accrued on the

excess additional deposit from the date of the additional deposit to

the date of liquidation or reliquidation of the applicable entry or

reconciliation. An example follows:

Example: Additional deposit made and entry liquidates for a

refund

[GRAPHIC] [TIFF OMITTED] TR20OC99.006

Importer is owed a refund of $900 plus interest as follows:

The importer makes a $1,000 initial deposit (January 1) and an

additional pre-liquidation deposit of $200 (May 1) and the entry

liquidates for $300 (December 1). Upon liquidation, the importer

will be refunded $900 plus interest. The interest accrues in two

segments: (1) On the additional deposit overpayment ($200), from the

date of the additional deposit (May 1) to the date of liquidation

(December 1); and (2) on the initial deposit overpayment ($700),

from the date of deposit (January 1) to the date of liquidation

(December 1).

(ii) In the case of a refund of duties, taxes, fees or interest

made prior to liquidation, such a refund will include only principal

amounts and not any interest thereon. Interest on such principal

amounts will be computed at the time of liquidation or reliquidation

and shall accrue as follows:

(A) Interest shall only accrue on the amount refunded from the date

the duties, taxes, fees or interest were deposited to the date of the

refund if the amount refunded is determined upon liquidation or

reliquidation of the applicable entry or reconciliation to constitute

the true excess amount deposited with Customs. An example follows:

Example: Pre-liquidation refund and entry liquidates for net

amount collected

[[Page 56440]]

[GRAPHIC] [TIFF OMITTED] TR20OC99.007

Importer is owed a refund of interest on $200 as follows:

The importer makes a $1,000 initial deposit (January 1) and receives

a pre-liquidation refund of $200 (May 1) and the entry liquidates

for $800 (December 1). Upon liquidation, the importer will be

refunded interest on the $200 overpayment from the date of the

initial deposit (January 1) to the date of the pre-liquidation

refund (May 1).

(B) If the amount refunded is determined upon liquidation or

reliquidation of the applicable entry or reconciliation to constitute

less than the true excess amount deposited with Customs, in addition to

any other interest accrued under this paragraph (a)(1), interest also

shall accrue on the remaining excess deposit from the date the duties,

taxes, fees or interest were deposited to the date of liquidation or

reliquidation. An example follows:

Example: Pre-liquidation refund and entry liquidates for an

additional refund

[GRAPHIC] [TIFF OMITTED] TR20OC99.008

Importer is owed a refund of $700 plus interest as follows:

The importer makes a $1,000 initial deposit (January 1) and receives

a pre-liquidation refund of $200 (May 1) and the entry liquidates

for $100 (December 1). Upon liquidation, the importer will be

refunded $700 plus interest. The interest accrues in two segments:

(1) On the pre-liquidation refund ($200), from the date of deposit

(January 1) to the date of the pre-liquidation refund (May 1); and

(2) on the remaining overpayment ($700), from the date of deposit

(January 1) to the date of liquidation (December 1).

(C) If an entry or reconciliation is determined upon liquidation or

reliquidation to involve both an initial underpayment and an additional

excess deposit, interest in each case shall be computed separately and

the resulting amounts shall be netted for purposes of determining the

final amount of interest to be reflected in the refund. An example

follows:

Example: Additional deposit made and entry liquidates for a

refund

[GRAPHIC] [TIFF OMITTED] TR20OC99.009

Importer is owed a refund of $200 plus or minus net interest as

follows:

The importer makes a $1,000 initial deposit on the required date

(January 1) and an additional pre-liquidation deposit of $300 (May

1) and the entry liquidates for $1,100 (December 1). Upon

liquidation, the importer will be refunded $200 plus or minus net

interest. The interest accrues in two segments: (1) Interest accrues

in favor of the Government on the initial underpayment ($100) from

the date deposit was required (January 1) to the date of the

additional deposit (May 1); and (2) interest accrues in favor of the

importer on the overpayment ($200) from the date of the additional

deposit (May 1) to the date of liquidation (December 1).

(D) If the amount refunded or any portion thereof exceeds the

amount properly refundable as determined upon liquidation or

reliquidation of the applicable entry or reliquidation, the excess

amount refunded shall be treated as an underpayment of duties, taxes,

fees or interest on which interest shall accrue as provided in

Sec. 24.3a.

(2) A refund determined to be due upon liquidation or

reliquidation, including a refund consisting only of interest that has

accrued in accordance with paragraph (a)(1)(ii) of this section, shall

be paid within 30 days of the date of liquidation or reliquidation of

the applicable entry or reconciliation.

(3) If a refund, including any interest thereon, is not paid in

full within the applicable 30-day period specified in paragraph (a)(2)

of this section, the refund shall be considered delinquent thereafter

and interest shall accrue on the unpaid balance by 30-day periods until

the full balance is paid. However, no interest will accrue during the

30-day period in which the refund is paid.

* * * * *

PART 159--LIQUIDATION OF DUTIES

1. The authority citation for Part 159 is revised to read as

follows:

Authority: 19 U.S.C. 66, 1500, 1504, 1624. Subpart C also issued

under 31 U.S.C. 5151.

Sections 159.4, 159.5, and 159.21 also issued under 19 U.S.C. 1315;

Section 159.6 also issued under 19 U.S.C. 1321, 1505;

Section 159.7 also issued under 19 U.S.C. 1557;

Section 159.22 also issued under 19 U.S.C. 1507;

Section 159.44 also issued under 15 U.S.C. 73, 74;

Section 159.46 also issued under 19 U.S.C. 1304;

Section 159.55 also issued under 19 U.S.C. 1558;

Section 159.57 also issued under 19 U.S.C. 1516;

Secs. 159.4, 159.6, 159.7, 159.21, 159.22, 159.44, 159.46, 159.55,

159.57 [Amended]

2. The parenthetical authority citations at the end of Secs. 159.4,

159.5, 159.6, 159.7, 159.21, 159.22, 159.44, 159.46, 159.55, and 159.57

are removed.

3. In Sec. 159.6:

a. The first sentence of paragraph (a) is amended by removing the

words ``and taxes'' the first time they appear and

[[Page 56441]]

adding, in their place, the words ``taxes, and interest'';

b. The introductory text of paragraph (b) is amended by removing

the words ``and taxes'' wherever they appear and adding, in their

place, the words ``taxes, and interest'';

c. Paragraph (c) is amended by removing the words ``and taxes

assessed in the liquidation'' and adding, in their place, the words

``taxes, and interest assessed in the liquidation'' and by removing the

words ``and taxes assessed in the reliquidation'' and adding, in their

place, the words ``taxes, and interest assessed in the reliquidation'';

and

d. In paragraph (d), the paragraph heading and the paragraph text

are amended by adding ``and interest'' after ``taxes''.

PART 174--PROTESTS

1. The authority citation for Part 174 continues to read as

follows:

Authority: 19 U.S.C. 66, 1514, 1515, 1624.

Sec. 174.11 [Amended]

2. In Sec. 174.11, paragraph (c) is amended by adding ``, including

the accrual of interest,'' after ``character''.

Sec. 174.12 [Amended]

3. In Sec. 174.12, paragraph (a)(2) is amended by adding '', or

receiving a refund of,'' after ``paying'.

Approved: July 28, 1999.

Raymond W. Kelly,

Commissioner of Customs.

Dennis M. O'Connell,

Acting Deputy Assistant Secretary of the Treasury.

[FR Doc. 99-26882 Filed 10-19-99; 8:45 am]

BILLING CODE 4820-02-P