Czarnikow-Rionda Company v. United States

• Decision Date: 08 June 1971
• Docket Number: C.D. 4229,68/39658-18980.,Protest No. 68/39657-18979
• Citation: Czarnikow-Rionda Company v. United States, 328 F.Supp. 487, 66 Cust. Ct. 431 (Cust. Ct. 1971)
• Parties: CZARNIKOW-RIONDA COMPANY v. UNITED STATES.
• Court: U.S. Court of Customs and Patent Appeals (CCPA)

328 F. Supp. 487

66 Cust. Ct. 431

CZARNIKOW-RIONDA COMPANY v.UNITED STATES.

C.D. 4229; Protest Nos. 68/39657-18979, 68/39658-18980.

United States Customs Court, Third Division.

June 8, 1971.

Barnes, Richardson & Colburn, New York City(Rufus E. Jarman, Jr., New York City, of counsel), for plaintiff.

L. Patrick Gray, III, Asst. Atty. Gen. (Andrew P. Vance and Frederick L. Ikenson, New York City, trial attorneys), for defendant.

Before RICHARDSON and LANDIS, Judges, and ROSENSTEIN, Senior Judge.

ROSENSTEIN, Judge:

The merchandise involved in the two consolidated protests herein consists of two shipments, totaling 13,247,590 pounds, of raw Philippine sugar entered at the port of New Orleans in November 1964.Plaintiff does not dispute the classification and assessment for duty of the importations under TSUS item 155.20 as "Sugars * * *" at $0.0010173 and $0.0010184 per pound based upon the sugar degree content as determined by polariscopic test; however, it challenges the assessment of additional duties of $0.0053 per pound under TSUS item 901.00 which provides for "Sugars, * * * provided for in items 155.20 * * *, if not to be further refined or otherwise improved in quality, * *", at a rate of duty "The same as the tax imposed under sec. 4501, I.R.C.Internal Revenue Code."¹

Defendant's position is that item 901.00 is governed by General InterpretativeRule 10(e)(ii) of TSUS, which states:

For the purposes of these schedules—

* * * * * *

(e) in the absence of special language or context which otherwise requires—

* * * * * *

(ii) a tariff classification controlled by the actual use to which an imported article is put in the United States is satisfied only if such use is intended at the time of importation, the article is so used, and proof thereof is furnished within 3 years after the date the article is entered;

and that plaintiff failed to comply with this rule by furnishing within the prescribed three year period proof that the merchandise was further refined or otherwise improved.Defendant also contends that, even if the rule were inapplicable hereto, plaintiff has failed to prove that the sugar was in fact further processed after importation.

Plaintiff claims that Rule 10(e)(ii) is not applicable to item 901.00; that it has established, via stipulation (set out infra) and evidence adduced at the trial, that the merchandise was further processed after importation; and that the government's position herein, if sustained would result in "double taxation".

Plaintiff conceded at the hearing that no processing certificate was filed within three years after the date of entry with respect to 12,356,870 pounds of sugar and, after submission of the case, conceded in the brief that it had presented no proof of such filing within that same period for the remaining 890,720 pounds of sugar under protest.

The parties stipulated at the trial that—

* * * statements of processing have been prepared and furnished defendant which indicate that 11,094,560 pounds of sugar from entry 6724 of November 25, 1964, and 1,228,240 pounds of sugar from entry 6950, of November 30, 1964, were subject to the usual refining processes of a cane sugar refinery, including centrifuging, washing, melting and filtering, which statements would have satisfied the defendant that such sugar was refined or otherwise improved in quality within the meaning of Item 901.00 of the Tariff Schedules of the United States had said statements been filed within the three year period which defendant claims is required by General Headnote10(e)(ii), Tariff Schedules of the United States.

Plaintiff called four witnesses who testified relative to the purchase, shipment, and treatment subsequent to importation of the subject merchandise, and to the payment of internal revenue tax thereon.Defendant placed in evidence copies of two receipts, a voucher and a tax return, all dated 1965, of Godchaux Sugar Refining Company, which had purchased some of the raw sugar from the importer.

The pertinent provisions of the Tariff Schedules of the United States are as follows:

APPENDIX TO THE TARIFF SCHEDULES

Appendix Headnotes:

1.The provisions of this Appendix relate to legislation and to executive and administrative actions pursuant to duly constituted authority under which—

(a) one or more of the provisions in schedules 1 through 8 are temporarily amended or modified, or

(b) additional duties or other import restrictions are imposed by, or pursuant to, collateral legislation.

2.Unless the context requires otherwise, the general headnotes and rules of interpretation and the respective schedule, part, and subpart headnotes in schedules 1 through 8 apply to the provisions of this Appendix.

PART 1.TEMPORARY LEGISLATION

Subpart A. Temporary Provisions for Additional Duties

Subpart A headnotes:

1.The duties provided for in this subpart are cumulative duties which apply in addition to the duties, if any, otherwise imposed on the articles involved.The duties provided for in this subpart apply only with respect to articles entered during the period specified in the last column.

2.Sections 336and350 of this Act(the so-called flexible tariff and trade-agreements provisions, respectively) shall not apply with respect to the duty provided for in item 901.00.

3.With respect to any articles upon which the duty imposed under item 901.00 has been paid and which, on the date of termination of the tax provided for in section 4501, I.R.C., are held by the importer and intended for sale or other disposition, there shall be refunded (without interest) to such importer an amount equal to the duty paid on such articles under item 901.00, if claim for such refund is filed with the Secretary or his delegate within 90 days after the date of termination of the tax.

901.00 Sugars, sirups, and molasses provided for in items 155.20 to 155.31 inclusive, of part 10A of schedule 1, if not to be further refined or otherwise improved in quality, and articles of sugars, sirups and molasses of the kinds described in such items, all the foregoing (except sugars, sirups molasses, or articles to be used as livestock feed, or in the production of livestock feed or for the distillation of alcohol) ................ The same as the tax imposed under sec. 4501 I.R.C.

Plaintiff asserts the inapplicability of Rule 10(e)(ii) on the grounds that the challenged assessment is an excise tax and not a "regular" customs duty, and that item 901.00 is neither a "tariff classification" nor an "actual use" provision (brief, 14, 16).

We do not agree.

Item 901.00 is derived, as plaintiff notes, from I.R.C. § 4501(b)(26 U.S.C. § 4501(b)), which imposed a tax on manufactured sugar,² or articles in chief value thereof, imported into the United States.This provision, which was a nonpermanent legislative measure, was assimilated with other temporary legislation in the appendix to the tariff schedules as part of the Tariff Commission's scheme to merge into a single document the provisions of the Tariff Act of 1930"and all related provisions found in the Internal Revenue Code and elsewhere under which imported articles are classified for tariff purposes, * * *."³

Whether the revenue obtained under item 901.00 be denominated a "duty," as it is in the tariff schedules (Appendix, Part 1, Subpart A headnotes, supra) or a "tax," as plaintiff refers to it, is irrelevant for customs purposes.Regardless of how taxes may be designated by Congress, if they are imposed on goods while in customs custody, i. e., while they retain their distinctive character as imports, they are essentially customs duties, Faber, Coe & Gregg, Inc. v. United States, 97 F.2d 115, 26 CCPA 95, T.D. 49638 (1938);Faber, Coe & Gregg, Inc. v. United States, 19 CCPA 8, T.D. 44851 (1931);Shaw & Co. et al. v. United States, 11 Ct.Cust.Appls. 226, T.D. 38990(1922);United States v. Shallus &Co., 9 Ct.Cust.Appls. 168, T.D. 37999(1919);The Best Foods, Inc. v. United States, 50 Cust.Ct. 94, C.D. 2396, 218 F.Supp. 576(1963), modified on other grounds, 51 CCPA 1, C.A.D. 827 (1963); and they are treated procedurally as duties.⁴Harold S. Lazar v. United States, 38 Cust.Ct. 23, C.D. 1838(1957);Bercut-Vandervoort & Co., Inc. v. United States, 35 Cust.Ct. 113, C.D. 1730(1955).See alsoMarianao Sugar Trading Corp. v. United States, 41 CCPA 236, C.A.D. 557 (1954).

Furthermore, a determination as to assessment of duties under item 901.00 involves a classifying function which is based upon the character of the merchandise and its use subsequent to importation.An analogous situation arose in Bradford Co. et al. (United States impleaded)v. American LithographicCo., 12 Ct.Cust.Appls. 318, T.D. 40318(1924), wherein the appellant-importer contended that the collector's determination as to whether or not merchandise was legally marked under the provisions of section 304(a) of the Tariff Act of 1922 did not amount to classification of the merchandise and, therefore, was not a protestable action under section 516(b) of that act which allowed an American manufacturer under certain conditions to protest the classification of imported merchandise and the rate of duty assessed thereon.The appellate court disposed of this argument thusly:

Classification of imported merchandise is the process or act of grouping, or arranging merchandise into classes; it is a process which may be based upon the use to which the article has been dedicated, its commercial designation, its similarity to other merchandise, the condition in which it is imported, and other equally important considerations, the purpose of which is to determine what provisions of the tariff laws are applicable thereto.

Section 304(a), supra, requires that every article imported into the United States, which is capable of being marked, without injury, at the time of its manufacture, shall be marked in as permanent a manner as the nature of the article will permit, in a

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