HQ 222836: Application for further review of Protest No. 2304-9-000083 under 19 U.S.C. 1504(a)

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 222836

                        January 30, 1991

LIQ-11-CO:R:C:E 222836 CB

CATEGORY:  Entry/Protest

Regional Commissioner
U.S. Customs Service
Southwest Region
Suite 500
5850 San Felipe Street
Houston, TX  77057-3012

RE:  Application for further review of Protest No. 2304-9-000083
     under 19 U.S.C. 1504(a)

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:

     This protest involves a surety's request for relief from
payment of supplemental duties assessed.  Protestant is the
surety for the principal on two bonds covering said releases. 
Each bond has a liability limit of $50,000.00 and was cancelled
by protestant in March of 1986.  The 13 entries being protested
are part of 68 releases during the period of September 1983
through August 1984.  Entry numbers and dates were assigned at
the time of release. 

     The importer of record failed to present sixty-eight (68)
entry summaries against sixty-eight (68) releases.  Liquidated
damages were assessed for value plus estimated duty based on
information derived from the CF 3461.  The protestant/surety sent
two checks for a total of $36,242.48 which was the amount of duty
shown on the CF 5955-A.  On July 22, 1986, the entry numbers
originally assigned to the releases were cancelled.  A letter was
issued to the importer of record demanding presentation of the
entry summaries for the purpose of applying estimated duties to
these releases.  

     Entry summaries were presented on August 29,1986, for sixty-
seven (67) entries.  One entry was held pending correct
classification because the shipment was seized.  Payment was not
included with the entry summaries.  The entry summaries were back
dated and new entry numbers were assigned.  The thirteen (13)
entries being protested were liquidated for increased duties
based on the information contained in the entry summaries.   -2-


Demand was made on the protestant/surety for the additional
duties on June 16, 1989.  Protestant/surety claims that the
entries liquidated by operation of law pursuant to 19
U.S.C. 1504(a).

ISSUES:

     1)  Whether the subject merchandise was released under an
immediate delivery permit or an entry release?

     2)  Whether a surety remains liable for additional duties
assessed after liquidation if the bond used to obtain release
expires before an entry summary is filed?

LAW AND ANALYSIS:

     It is the protestant/surety's position that the merchandise
was entered during the period of September 1983 through August
1984. Therefore, because Customs failed to liquidate the entries
within one year of entry, all of said entries were liquidated by
operation of law.  We agree with protestant/surety's claim that
the merchandise was entered at the time of release and that
Customs is precluded from assessing additional duties.  

     Liquidation of an entry of merchandise constitutes the final
computation by Customs of all duties accruing on that entry.  See
generally, Ambassador Division of Florsheim Shoes v. United
States, 748 F.2d 1562 (Fed. Cir. 1984).  Section 504, Tariff Act
of 1930, as amended (19 U.S.C. 1504 (1988)), provides that 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), if additional information is
needed to classify the goods, liquidation is suspended by statute
or court order, or if the importer, consignee, or his agent
requests an extension.  Customs must provide the importer with
notice of the extension.  

     Section 448, of the Tariff Act of 1930, as amended (19
U.S.C. 1448(b)), and the Customs Regulations issued thereunder,
provides that the Secretary of the Treasury is authorized to
provide for the issuance of special permits for special delivery
(immediate delivery), prior to formal entry therefor.  Customs 
administration of the special delivery (immediate delivery)
statute is governed by 19 CFR 141.68(c) which provides as
follows:
                               -3-



          When merchandise is released under the immediate
          delivery procedure - The time of entry of merchandise
          released under the immediate delivery procedure shall
          be the time the entry summary is filed in proper form,
          with estimated duties attached. 


     However, in the instant case, the record indicates that
entry releases were made rather than immediate delivery releases. 
The immediate delivery application (CF 3461) for eleven of the
releases show it as a Code "01" entry.  The Entry Record (CF
5101) show it as a free or dutiable consumption entry.  Code "01"
is such an entry under Customs Directive 3550-03 of September 28,
1984.  Paragraph 2 of the Instructions for Preparation of CF
7501.

     Under 19 CFR 141.61(d) (1979 ed.) a CF 5101 is completed
only when an entry is made.  See also the corresponding
regulations for immediate delivery 19 CFR 142.1-142.16. 
Likewise, the Customs Manual, Section 8.8, (In effect unless
superseded per Manual Supplement 2114-02 of September 10, 1979.) 
instructs Customs Officers as to the purpose of the CF 5101. 
Compare with Section 8.59 of that same Manual.  Additionally, all
of the entries are recorded as entry releases for which no entry
summaries have been filed on a Customs Report dated December 7,
1985.  Therefore, protestant/surety's contention that these
entries liquidated by operation of law is correct.  The subject
merchandise was released under an entry release during the period
of September 1983 through August 1984.  Customs failed to extend
liquidation of the entries as provided for in 19 U.S.C. 1504. 
Consequently, Customs may not assess supplemental duties based on
the entry summaries filed in August of 1986.

     Protestant/surety's alternate claim is that if entry was not
effected until 1986, they were not covered by the bonds. 
Furthermore, that if Customs maintains that entry was in 1986,
then the bonds were not effective for these entries at any time
and Customs should refund the estimated duties and liquidated
damages previously paid by protestant/surety.  We disagree with
this contention.  The subject releases were covered by an
Immediate Delivery and Consumption Entry Bond (CF 7553) as
indicated by the record.  The bond protects the government from
losses as a result of non-compliance with Customs regulations. 
The regulations provide that the entry summary shall be filed
within 10 working days after the time of entry.  19 CFR
142.12(b).  Customs interpretation of a surety contract was set  -4-



forth in C.S.D. 87-20.  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."  

     One of the conditions included in said bond is the
principal's obligation to make or complete entry.  See 19 CFR
113.62.  If the principal defaults in this condition, the obligor
agrees to pay liquidated damages.  A surety's obligations 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,
19 CFR 142.12(b) provides that the applicable entry documentation
must be filed within 10 working days after the time of entry.  
As stated by the Court of International Trade in United States v.
Atkinson, 6 CIT 257, 575 F. Supp. 791 (1983), a surety is
financially obligated under the immediate delivery consumption
entry bond to pay liquidated damages when the principal fails to
comply with Customs requirements.  In the instant case,
protestant's liability accrued on the eleventh day when the bond
was breached because of failure to file the entry summaries
timely.

     The regulations also provide that the district director
shall make an immediate demand for liquidated damages in the case
of failure to file documetation timely.  19 CFR 142.15. 
Regarding the subject protest, liquidated damages were issued
against the entries on December 23, 1985.  Protestant/surety
contends that it is entitled to a refund of the estimated duties
and liquidated damages paid.  As stated by the Court of
International Trade, in Halperin Shipping Co., Inc. v. United
States, 24 Cust. B. & Dec. No. 29, p. 81, Slip Op. No. 90-63 (CIT
July 2, 1990), "[u]pon receipt of the notice demanding payment of
estimated duties and liquidated damages, any right...to contest
the amount of duties due or any other matters relating to the
liquidation of the merchandise at issue had expired when the
items were liquidated, or as appears the case here, deemed
liquidated by statute, and the time to protest had
lapsed....[Plaintiff] is thus precluded from contesting the
amount of estimated duties it paid."  In other words,
protestant/surety should have filed a 19 U.S.C. 1514 protest
within 90 days after liquidated damages were assessed.

     Therefore, Customs demand on the surety/protestant for
payment of estimated duties and liquidated damages was proper. 
However, protestant/surety's obligation under the terms of the
bond ceased with the payment of said estimated duties and
liquidated damages.  The subject bonds had been cancelled on -5-



March 6, 1986.  The subject entries were mistakenly liquidated by
Customs in November of 1986.  Consequently, protestant/surety is
not liable for additional duties assessed upon liquidation.  

HOLDING:

     The subject merchandise was released under an entry release. 
Customs failed to liquidate the subject entries within one year
from the date of entry.  Therefore, the entries liquidated by
operation of law.  However, Customs demand on the
surety/protestant for payment of estimated duties and liquidated
damages was proper.   You should deny protestant's claim for
reimbursement of estimated duties and liquidated damages.  At the
same time, protestant/surety's obligation under the bond ceased
upon the payment of estimated duties and liquidated damages. 
Therefore, you should approve protestant's request for relief
from payment of supplemental duties assessed.


                                   Sincerely,




                                   John Durant, Director
                                   Commercial Rulings Division