HQ 222493: Application for further review of Protest No. 2704-90- 001288 under 19 U.S.C. 1504; 19 U.S.C. 1671b; 19 U.S.C. 1677g

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 222493

                        October 15, 1990

LIQ-11-CO:R:C:E  222493 CB

CATEGORY:  Liquidation

Regional Commissioner
U.S. Customs Service
300 N. Los Angeles Street
Suite 7401
Los Angeles, CA  90012

RE:  Application for further review of Protest No. 2704-90-
     001288 under 19 U.S.C. 1504; 19 U.S.C. 1671b;
     19 U.S.C. 1677g

Dear Sir:

     The above-referenced protest was forwarded to this office
for further review.  We have considered the points raised and our
decision follows.

FACTS:

     Protestant-surety, Old Republic Insurance Co., claims that
suspension of liquidation beyond four years was invalid and that
the subject entries liquidated "As Entered" by operation of law
on the fourth anniversary of the entry date.

     In June of 1984 a "Suspension of Liquidation
(Countervailing Duty) Instructions", C.I.E. 84/113, was issued.
The instructional telex advised the Customs field offices that
the Commerce Department had made a final determination that the
Brazilian government was providing certain subsidies within the
meaning of countervailing duty law to the manufacturers,
producers, or exporters in Brazil of hot-rolled carbon steel
plate in coil, hot-rolled carbon steel sheet, and cold-rolled
carbon steel sheet.  The Commerce Department also determined that
critical circumstances existed with respect to these products and
that, with respect to imports of these products from Brazil, a
suspension of liquidation applied to unliquidated entries of
merchandise entered, or withdrawn from warehouse, for
consumption, on or after November 12, 1983.

     Customs field offices were instructed to suspend liquidation
on all unliquidated entries from Brazil that were entered, or
withdrawn from warehouse, for consumption on or after November
12, 1983, and require importers to post a cash deposit or bond
                               -2-


equal to the net ad valorem subsidy shown.  The schedule listed
a general ad valorem rate for all manufacturers/producers/
exporters and specific rates for Companhia Siderurgica Paulista
(COSIPA), Companhia Siderurgica Nacional (C.S.N.), and Usinas
Siderurgicas de Minas Gerais (USIMINAS).  The telex also provided
that when the producer and the exporter were not the same, and
the producer was known, the rate for that producer shall be used
in determining the cash deposit.

     The Suspension of Liquidation Instructions was modified by
a Liquidation Order dated June 22, 1987, C.I.E. 87/199, which was
supplemented (regarding the assessment of interest) on September
4, 1987.  The Liquidation Order provided that the Suspension of
Liquidation Instructions applied only to entries of certain
carbon steel products exported by COSIPA and CSN.  Customs field
offices were instructed to liquidate all shipments of this
merchandise from other exporters entered, or withdrawn from
warehouse, for consumption on or after February 10, 1984 and on
or before September 30, 1984.  An ad valorem rate of 21.13 per
cent was designated for all manufacturers/producers/exporters
other than USIMINAS and MAXITRADE.  The Suspension of Liquidation
of all entries exported by COSIPA and CSN was not lifted until
November of 1988.  At that time, the Customs field offices were
instructed to liquidate all entries at the designated rate.
Entries made by CSN between February 10, 1984 and April 25, 1984,
were to be liquidated at an ad valorem rate of 27.42 per cent.
Entries between April 26, 1984 and September 30, 1984, were to be
liquidated at an ad valorem rate of 39.98 per cent.

     In the instant case, the seller and exporter of the
merchandise covered by each of the subject entries was Duferco, a
trading company in Brazil.  The merchandise was manufactured by
CSN which was subject to the Suspension of Liquidation Order.
When the subject entries were liquidated, Customs assessed
countervailing duties at the rate of 27.42 per cent ad valorem.
It is the protestant-surety's contention that the assessed rate
of 27.42 per cent is the preliminary rate applicable to
merchandise exported by CSN.  The merchandise covered by the
subject entries were exported by Duferco and therefore, according
to the protestant, were subject to immediate liquidation at the
ad valorem rate of 21.13 per cent as set forth in the Liquidation
Order of June 22, 1987.

     It is the protestant-surety's position that Customs erred in
failing to note that the subject merchandise was exported by
Duferco and incorrectly re-initiated suspension of liquidation as
if the merchandise had been exported by CSN.  Therefore,
                               -3-



according to the protestant-surety, since the merchandise was
incorrectly suspended the suspension was null and void, and each
entry had to liquidate by operation of law on its fourth
anniversary.  Moreover, since no countervailing duties had been
assessed in manual liquidation by the fourth anniversary of each
entry, the entries liquidated by operation of law "as entered"
without the assessment of countervailing duties.

     Additionally, protestant-surety claims that no interest is
due, if any is contemplated or assessed by Customs, on any
calculation of countervailing duties as each entry was made
between the February 10, 1984 preliminary determination, and the
June 10, 1984 countervailing duty order.  Protestant-surety also
contends that no countervailing duty bond was ever filed to cover
the subject entry.  Therefore, protestant-surety cannot be held
liable for duties and that it did not undertake any obligation
for duties on a General Term Bond after publication of the
countervailing duty order.

ISSUES:

     1)  Whether there was a legal basis to continue the
suspension of liquidation against the importer?

     2)  Whether the subject entries were deemed liquidated by
operation of law?

     3)  Whether interest is owed on the countervailing duties
imposed?

     4)  Whether a claim can be made against a general term bond
for countervailing duties owed and not covered by a single entry
bond?

LAW AND ANALYSIS:

     Liquidation of an entry of merchandise constitutes the
final computation by Customs of all duties accruing on that
entry.  As provided in section 504, Tariff Act of 1930, as
amended (19 U.S.C. 1504 (1988)) if Customs fails to liquidate an
entry within one year from the date of entry or final withdrawal
from warehouse, that entry is deemed liquidated at the rate of
duty, value, quantity and amount of duties asserted at the time
of entry by the importer, his consignee, or agent.  Customs is
permitted to extend the one year period, under 19 U.S.C. 1504(b)
in certain circumstances:  (1) if additional information is
needed to classify the goods, (2) liquidation is suspended
                               -4-


by statute or court order, or (3) the importer, consignee, or his
agent requests an extension.  Customs must provide the importer
with notice of the extension.  Any entry not liquidated at the
expiration of four years from the date of entry or withdrawal
from warehouse is deemed liquidated at the rate of duty, value,
quantity, and amount of duty asserted at the time of entry by the
importer, unless liquidation continues to be suspended.

Issue 1

     Protestant-surety claims that the subject entries of
merchandise exported by Duferco were subject to the Liquidation
Order dated June 22, 1987, and that the district incorrectly re-
initiated suspension as if the merchandise had been exported by
CSN.

     In order to address this issue, we must look at a
chronological order of events:

Nov. 12, 1983-          90 days before Commerce's Preliminary
Mar. 16, 1984           Determination of February 24, 1984, one
                        entry of hot-rolled steel sheet produced
                        by CSN and exported by Duferco
                        was made.  SAE 1008

Apr. 19, 1984           Two entries are made of hot-rolled steel
                        sheet produced by CSN and exported by
                        Duferco.  SAE 1008

Apr. 26, 1984           ITA issues its Final Determination
                        stating it had initiated a subsidy
                        investigation on November 22, 1983 and
                        determined a net subsidy of 62.18 per
                        cent was provided to CSN for certain
                        carbon steel products.  49 Fed. Reg.
                        17,988

                        ITA continues to suspend liquidation of
                        all other entries.  C-351-021, 49 Fed.
                        Reg. 17,988

June 22, 1984           ITA publishes its countervailing duty
                        (CVD) order.  49 Fed. Reg. 25,655

Sept. 6, 1985           ITA revoked its CVD order retroactive to
                        October 1, 1984, as to entries made after
                        that date.  The notice does not cover
                        entries made before October 1, 1984.
                        50 Fed. Reg. 36,460

                               -5-



                        ITA agrees to conduct an administrative
                        review, if requested to do so, of mer-
                        chandise entered between February 10,
                        1984, and October 1, 1984.  50 Fed. Reg.
                        36,460

Sept. 30, 1985          The Brazilian government and three
                        importers request such an administrative
                        review.

                        The ITA published its preliminary deter-
                        mination in the administrative review.
                        ITA found that equity investments in CSN
                        and COSIPA made by the government were
                        countervailable subsidies.  51 Fed. Reg.
                        39,776

Jan. 9, 1987            ITA reaffirmed its preliminary findings
                        on all issues, including the subsidy to
                        CSN and determined the value of overall
                        net subsidy to be 39.98 per cent ad
                        valorem.  52 Fed. Reg. 829

Nov. 9, 1988            Court of International Trade affirms the
                        equity determination made by the ITA and
                        the method of calculating benefits.
                        Allowed parties to file statements on
                        subsidy rates for trading companies.

     At the time the suspension of liquidation instructions were
issued, Customs was instructed that where the producer was not
the exporter, and the producer was known, the rate for that
producer should be used in determining the cash deposit.  The
subject merchandise was produced by CSN and exported by Duferco.
When the June 22, 1987, Liquidation Order was issued Customs was
instructed to liquidate all entries made by all other exporters.
However, entries of merchandise exported by CSN were under a
preliminary injunction issued by the Court of International
Trade.  See Companhia Siderurgica Paulista, S.A., et al, v.
United States, 12 CIT ___, Slip Op. 88-158 (November 9, 1988).
CSN had brought an action contesting the results of the
administrative review of the countervailing duty order issued by
Commerce.  In the instant case, although the exporter was
Duferco, the merchandise was manufactured by CSN.  If Customs had
liquidated these entries, it would have defeated the intent of
the countervailing duty laws.  It is well established that any
merchandise subject to a countervailing duty order or
                               -6-



investigation is deemed to have benefited if such bounty or grant
has been paid upon the manufacturer, producer, or exporter of
such merchandise.  Consequently, Customs could not proceed to
liquidate the subject entries until such time as the court lifted
the injunction and the Commission established the ad valorem rate
required for merchandise produced by CSN.

     Customs correctly continued the suspension of the subject
entries and the importer was notified accordingly.  It has
already been held, under similar circumstances, that such
suspension could be based on 19 U.S.C. 1504(b)(1).  In American
Permac, Inc. and Boewe Maschinenfabrik, GmbH v. United States, 10
CIT 535, 642 F. Supp. 1187 (1986), the Court of International
Trade concluded that suspension of liquidation could be based
on 1504(b)(1) if Customs has to wait for the ITA to furnish
information regarding countervailing duties liability.  The court
found that so long as suspension of liquidation continues to be
required by statute, or court order, it may continue
indefinitely.

     The Federal Circuit Court reached the same conclusion in
Pagoda Trading Corp. v. United States, 804 F.2d 665 (Fed. Cir.
1986), where it held that liquidation cannot be extended when
there is no basis, such as a lack of information available to
Customs, to extend liquidation.  In the instant case, Customs
lacked the information necessary to liquidate the subject
entries, i.e. the ad valorem rate for merchandise manufactured by
CSN.  Moreover, litigation which affected these entries was still
pending before the Court of International Trade.

     The issue of whether there is statutory authority for a
suspension beyond the four year limit, provided for in
19 U.S.C. 1504, was addressed in the American Permac case. The
court held that as long as a suspension continues to be required
by statute, it may continue indefinitely.  In the instant case,
suspension of liquidation is required by 19 U.S.C. 1671b.  The
court also noted that statutory time limits on administrative
acts are directory, rather than mandatory, if the statute does
not specify adverse consequences if the time limit is not met.
See also Phillip Brothers, Inc. v. United States, 10 CIT 76, 630
F. Supp. 1317 (1986).  A similar conclusion was reached in
Canadian Fur Trappers Corp. v. United States, 884 F.2d 563 (Fed.
Cir. 1989).  The Federal Circuit Court concluded that the lack of
consequential language in the latter part of 1504(d) means that
this part of the section is to be only directory.  Therefore, it
is Customs conclusion that there was a valid basis for suspension
of liquidation.

                               -7-



Issue 2

     Protestant-surety's primary contention is related to Issue
1.  The protestant contends that since the merchandise was
incorrectly suspended, the suspension was null and void, and each
entry had to liquidate by operation of law on its fourth
anniversary pursuant to 19 U.S.C. 1504.  We do not agree.
Customs authority to suspend liquidation of all entries of
merchandise subject to a countervailing duty investigation is
derived from 19 U.S.C. 1671b(d)(1).  That section provides that
if the administering authority makes an affirmative preliminary
determination, the administering authority shall order the
suspension of liquidation of all entries of merchandise subject
to the determination.

     The Suspension of Liquidation Instructions issued by the
Customs Service implemented a suspension of liquidation
determination published by the Department of Commerce.  At the
time the countervailing duty determinations were published by
Commerce, all manufacturers, producers and exporters of the
subject merchandise were subject to the suspension of liquidation
order.  Customs original suspension is not invalidated by the
fact that the ITA later modified its original instructions to
suspend liquidation.  Customs properly suspended liquidation of
the subject merchandise exported by Duferco as provided for in
19 U.S.C. 1671b.  Therefore, as previously discussed, the
continuation of the suspension of liquidation was valid and the
subject entries are not deemed liquidated by operation of law.

Issue 3

     Protestant-surety claims that no interest is due on any
countervailing duties imposed because the subject entries were
made between the time the preliminary determination and the final
countervailing duty order were issued.  Section 778 of the Trade
Agreements Act of 1979 (19 U.S.C. 1677g (1979)) (the 1979 Act)
provided that interest was payable on amounts deposited on
merchandise entered, or withdrawn from warehouse, for consumption
on and after the date on which notice of an affirmative
determination by the Commission was published.  The 1979 Act was
amended by section 621 of the Trade and Tariff Act of 1984 (the
1984 amendment) to provide that interest shall be payable on
amounts deposited on merchandise entered, or withdrawn from
warehouse, for consumption on and after the date of publication
of a countervailing or antidumping duty order.  The interest was
generally payable at the rate in effect under section 6621 of
title 26.  Section 6622 of title 26, provides that interest
calculated under section 6621 must be compounded.  Thus, this
amendment provided that interest be compounded and payable at the

                               -8-



IRS rate for any period of time during which the entries were
suspended.  Therefore, the interest payable would vary in
accordance with the interest set forth under section 6621 for the
periods of suspension.  The 1984 amendment did not take effect
until October 30, 1984.

     In 1986, Congress clarified the effective date of the 1984
amendment by indicating that the 1984 amendment should apply to
all entries unliquidated on or after November 4, 1984.  Note
(b)(4) to 19 U.S.C. 1671 (Supp. 1988).  Thus, pursuant to this
amendment, the entries involved here, since they were
unliquidated on November 4, 1984, and still unliquidated at the
time the 1986 amendment was enacted should be liquidated in
accordance with the 1986 amendment.  This conclusion is in
harmony with the Court of International Trade decision in
Canadian Fur Trappers.  In that case, the court held that "the
1984 amendment cannot be applied for interest accruing before the
effective date of that amendment."  In the subject case, the
entries were unliquidated as of the date of the 1986 amendment.
Therefore, it is Customs position that the entries are subject to
interest in accordance with the 1984 amendment, i.e. compound
interest at the varying IRS rate.

Issue 4

     Protestant-surety alleges that no countervailing duty bond
was ever filed to cover one of the three subject entries and
therefore it cannot be held liable for duties attached to said
entry.   Additionally, that protestant did not undertake any
obligation for duties under a general term bond after publication
of the countervailing duty order.  Protestant relies on TD 82-56
which authorizes the Customs Service to accept single consumption
entry bonds in the amount of the estimated net subsidy.  We agree
with the protestant with respect to liability on the single entry
bond.  However, protestant remains liable for countervailing
duties under the general term bond.

     An entry bond is required as part of the entry
documentation.  The bond protects the government from losses as a
result of non-compliance with Customs regulations.  Antidumping
and countervailing duties are treated in many respects as normal
duties.  Therefore, Customs can charge a general term bond which
guarantees the payment of duties.  When countervailing duties are
imposed and the district director believes the current bond is in
an amount insufficient to cover potential liability, a single
entry bond can be required.  However, the posting of the single
entry bond does not relieve the surety of liability for duties
under the general term bond.  The basic importation bond is broad
enough in scope to cover countervailing duties when imposed by
Commerce.
                               -9-



     Customs interpretation of a surety contract was set forth in
C.S.D. 87-20.  In said ruling, it was determined that a Customs
bond given to secure the payment of duties also secures the
payment of interest on those duties.  As stated, "the contract of
a surety is interpreted according to the standards that govern
the interpretation of contracts in general....  Contracts are
construed most strictly against a compensated surety and in favor
of the indemnity."   A surety's obligation under the contract is
construed by reading together all of the instruments, statutes
and regulations underlying the transaction.  St. Paul Fire and
Marine Insurance Co. v. Commodity Credit Corporation, 474 F.2d
192 (5th Cir. 1973).  In the instant case, the statutes and
regulations require that countervailing duties be paid on the
subject entry.  Surety undertook to pay all duties owed by
importer for entries made between February 12, 1984, and
February 11, 1985.  The subject entries were made during the
stated time period.  Therefore, countervailing duties can be
charged against the general term bond.

HOLDING:

     1)  There was a valid basis for extension of the liquidation
suspension.  The subject entries were properly liquidated at the
27.42 per cent ad valorem rate.

     2)  There was a proper suspension of liquidation of the
subject entries as provided for in 19 U.S.C. 1671b.

     3)  The entries are subject to interest in accordance with
section 621 of the Trade and Tariff Act of 1984.

     4)  Countervailing duties can be charged against the general
term bond.

     You should DENY this protest.

                                Sincerely,




                                John Durant, Director
                                Commercial Rulings Division

cc:  C.I.E., N.Y. Seaport