St. Paul Fire & Marine Ins. Co. v. U.S.

• Decision Date: 01 October 1993
• Docket Number: No. 93-1029,93-1029
• Citation: 6 F.3d 763
• Parties: ST. PAUL FIRE & MARINE INSURANCE CO. (Surety for Carreon, Inc.), Plaintiff-Appellee, v. The UNITED STATES, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 763

6 F.3d 763

15 ITRD 1841

ST. PAUL FIRE & MARINE INSURANCE CO. (Surety for Carreon, Inc.), Plaintiff-Appellee, v. The UNITED STATES, Defendant-Appellant.

No. 93-1029.

United States Court of Appeals, Federal Circuit.

Oct. 1, 1993.

Rehearing Denied Nov. 30, 1993.

T. Randolph Ferguson, Glad & Ferguson, San Francisco, CA, argued for plaintiff-appellee. With him on the brief was John M. Daley, Law Office of John M. Daley, of San Francisco, CA, of counsel.

Barbara M. Epstein, Attorney, Commercial Litigation Branch, Dept. of Justice, New York City, argued for defendant-appellant. With her on the brief were Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen, Director and Joseph I. Liebman, Attorney in Charge, Intern. Trade Field Office. Also on the brief was Edward N. Maurer, Office of Asst. Chief Counsel, U.S. Customs Service, of counsel.

Before ARCHER, CLEVENGER and SCHALL, Circuit Judges.

CLEVENGER, Circuit Judge.

The United States, on behalf of its Customs Service (Customs), appeals from the summary judgment of the United States Court of International Trade in favor of St. Paul Fire & Marine Insurance Co. St. Paul Fire & Marine Ins. Co. v. United States, 799 F.Supp. 120 (Ct.Int'l Trade 1992). The judgment appealed holds that 41 entries of merchandise with respect to which St. Paul stands as surety must be liquidated duty-free as entered by operation of law under 19 U.S.C. Sec. 1504(a) (1988). In so holding, the Court of International Trade decided that Customs unlawfully extended the time period for liquidation of the entries in question. Because the court erred in so holding, we reverse and remand.

I

Carreon Management Services, Inc. made 41 entries of merchandise at El Paso, Texas between July 14, 1981 and August 24, 1982. Carreon asserted duty-free treatment for the merchandise under Item 807.00 of the Tariff Schedules of the United States, which accords duty-free treatment to articles assembled abroad from components produced in the United States. In order to obtain such duty-free treatment, however, the importer must supply Customs with detailed documentation including, inter alia, invoices, certificates of origin, foreign assemblers' declarations and actual cost data.

Section 1504(a) of Title 19 provides that if an entry of merchandise is not liquidated by Customs within one year from the date of entry, the entry will be "deemed liquidated" at the rate of duty, value, quantity and amount of duties asserted by the importer at the time of entry. 19 U.S.C. Sec. 1504(a). Subsection (b) of section 1504, however, provides that the one-year period for liquidation may be extended, among other reasons, if Customs needs additional information for the proper appraisement or classification of the merchandise, provided that Customs gives "notice of such extension to the importer, his consignee or agent in such form and manner as [Customs] shall prescribe in regulations." 19 U.S.C. Sec. 1504(b) (1982), amended by 19 U.S.C. Sec. 1504(b) (Supp. IV 1986). Subsection (d) of section 1504 expressly limits Customs' subsection (b) authority to extend the one-year period for liquidation set forth in subsection (a), by stating that any entry not liquidated within four years from entry shall be "deemed liquidated" as specified above. The only exception to this absolute four-year time period relates to further extensions of liquidation times that are compelled either by statute or court order, neither of which are present in this case. 19 U.S.C. Sec. 1504(d) (1988).

II

As to each of the 41 entries at issue, Carreon asserted duty-free treatment under Item 807.00 and supplied Customs at entry certain of the information required to support the treatment asserted, including estimated costs, invoices and foreign assemblers' certificates. Carreon did not submit the required actual cost data and country of origin certificates, and without them Customs could not accept Carreon's duty-free assertions. Rather than liquidate the entries on some other basis, Customs withheld liquidation and released the merchandise to Carreon, who with its surety St. Paul, executed a bond promising that they would be jointly and severally liable for any additional duties subsequently found due upon liquidation.

Customs extended the time for liquidation of the 41 entries two or three times because "information [was] needed for the proper appraisement or classification of the merchandise [which was] not available to the appropriate customs officer." 19 U.S.C. Sec. 1504(b)(1) (1988). No individual extension exceeded one year and the total time of extensions for each of the entries did not exceed four years from the date of each entry. Although Customs did not retain copies of the extension notices, Customs produced a computer printout with codes at trial indicating the issuance of and the reasons for the extensions. For seven of the entries, the printout fails to show an extension of the first anniversary of the dates of entry, but notes extensions for such entries on their second and third anniversaries. For three other entries the printout shows extensions on the first and where applicable the third anniversaries, but no extension on the second anniversary. Customs has no written record or oral evidence to prove that discussions occurred between Customs officials and Carreon personnel concerning the reasons why Carreon failed to produce the required information. Customs did present evidence, however, establishing that it is customary for Customs officials to have verbal communications with importers about the submission of cost data although such communications might not be reflected in the written records.

On April 4 and October 10, 1984, Customs issued to Carreon formal requests for information on Customs Form 28 seeking the required missing documentary information. Carreon did not respond to those requests and Customs, on January 4, 1985, liquidated the 41 entries. In so doing, Customs denied Carreon's request for duty-free treatment and instead assessed additional duties of $273,944.44 based on the full invoice value of the merchandise. On March 3, 1985, Customs issued a demand for payment of the additional duties to St. Paul. At that time, the surety discovered that Carreon had discontinued its business and would not pay the duties. ¹ On May 8, 1985, St. Paul protested the validity of the liquidations. When Customs denied the protest, St. Paul paid the duties and brought suit demanding refund of the duties paid.

III

The Court of International Trade held a trial de novo regarding the contested protest denial and rendered a decision on the basis of the record created before it. 28 U.S.C. Sec. 2640(a)(1) (1988); H.R.Rep. No. 1235, 96th Cong., 2d Sess. 59 (1980) (House Report pertaining to Customs Courts Act of 1980, Pub.L. No. 96-417, 94 Stat. 1727), reprinted in 1980 U.S.C.C.A.N. 3729, 3770 (trial de novo of Customs protest decisions); S.Rep. No. 466, 96th Cong., 1st Sess. 19 (1979) (same). St. Paul argued on its summary judgment motion that the second and third extensions were unlawful because Customs lacked authority to extend the liquidation period after the first one-year extension period expired. Consequently, because no entry was liquidated within one year from the expiration of the first one-year extension time, all the entries necessarily had to be "deemed liquidated" duty-free as entered under section 1504(a). St. Paul also asserted that the total length of time taken to liquidate the entries, ranging from eleven to twenty-nine months, was so unreasonable under the circumstances that it invalidated the liquidations. The United States, on cross-motion for summary judgment, argued that since the total time for all extensions for each of the entries did not exceed the four-year statutory time limit, and since Customs, while awaiting receipt of information required to support an asserted appraisement or classification, has the discretion to determine whether to issue a particular extension of up to one year, the various extensions issued are lawful. For these reasons, Customs contended that it correctly denied Carreon's request for duty-free treatment and properly liquidated the entries on January 4, 1985. In addition, the parties disputed whether proper notices of extensions had been issued by Customs with regard to the ten entries which lack documentary evidence of sequential anniversary date extensions. Absent proper notice, an extension lacks authority under section 1504(b) and the applicable regulations.

IV

The Court of International Trade framed the questions before it on the cross-motions for summary judgment as whether it was reasonable for Customs to have issued the extensions of liquidation. The court noted that although it

should ordinarily "defer to Customs' determination that it needs additional information to liquidate an entry and therefore requires an extension of the statutory period," ... [t]he extension period granted must be "for a reasonable period of time relative to the situation," and it cannot be "so great as to constitute an abuse of discretion."

St. Paul Fire & Marine, 799 F.Supp. at 124 (quoting Detroit Zoological Soc'y v. United States, 630 F.Supp. 1350, 1357 (Ct.Int'l Trade 1986)) (emphasis in original). The court reasoned therefore that the number of one-year extensions granted by Customs, i.e., the total extension period, also must be reasonable in light of the circumstances. Id.

Because Customs' first one-year extensions of liquidation were each made to enable Carreon to supply required information to support its asserted claim to duty-free treatment, the court held each of the first one-year extensions reasonable. That holding is unchallenged in this appeal. The reasonableness of the remaining extensions, according to the court, must be assessed "in the light of the circumstances." Id. Those circumstances particularly included the regulations pursuant to which Customs sought the additional...