VAL OT:RR:CTF:VS H234186 EE
Port Director
U.S. Customs and Border Protection
11099 S. La Cienaga Blvd.
Los Angeles, CA 90045
RE: Application for Further Review of Protest No. 2720-12-100406; Eligibility of Certain Gold Jewelry Under the United States – Oman Free Trade Agreement
Dear Port Director:
This is in response to an Application for Further Review (“AFR”) of Protest No. 2720-12-100406, timely filed by counsel on July 12, 2012, on behalf of the importer, Forever Jewelry (hereinafter, the “protestant”), concerning the eligibility of certain gold jewelry for duty-free treatment under the United States – Oman Free Trade Agreement (“OFTA”). A meeting was held with the counsel for the protestant on June 16, 2014.
FACTS:
The merchandise subject to the protest at issue, 16,921 pieces of gold jewelry, valued at $654,377.86, was entered on June 17, 2010 by the protestant duty-free under subheadings 7113.19.50 and 7113.19.29, Harmonized Tariff Schedule of the United States (“HTSUS”) as eligible for preferential tariff treatment under the OFTA. On May 11, 2011, the Port issued a Request for Information (CBP Form 28) to the protestant requesting supporting documentation to substantiate the claim for preferential treatment including a certification of origin, bill of materials, cost data, as well as production and manufacturing records. On October 6, 2011, the Port requested the physical address of the manufacturing/production facility in Oman. In response to the U.S. Customs and Border Protection (“CBP”) inquiries the protestant provided several documents. The protestant provided a hand written purchase order, dated May 27, 2010, signed by “Mr. Law”. The purchase order lists as one example “10 karat earrings (1.8 grams – 2.9 grams), total: 13 kilograms”. It is not indicated who is the recipient of the purchase order. It lists a delivery date of June 14-16, 2010. The protestant submitted three payment vouchers issued by the protestant to Farida Bint Mohammed Trading (“Farida”) dated June 1, 2010, June 9, 2010, and June 22, 2010. The payment vouchers are for “gold payments”. They list the weight and purity of the gold. As one example, “gold payment, 9,000 grams, 24 karat purity” is listed. The price is not listed on the vouchers. A sales invoice, dated June 12, 2010, was provided, issued by Farida to the protestant for the merchandise at issue. As one example, “earrings 10 karat, 8,968 pieces, 12,837.45 grams, in the amount of $217,979.90” is listed. The total amount on the invoice is 16,921 pieces, weighing 32,421.640 grams, in the amount of $654,377.86. A document issued by Farida, dated November 18, 2011, was provided, which lists its address as: P.O. Box No: 3213, Postal Code 112, Ruwi, Sultanate of Oman. A Certificate of Origin was provided, issued by the Oman Chamber of Commerce & Industry stating that the goods are made in the Sultanate of Oman. The Certificate of Origin states that the signature and stamp (of Farida) have been attested without the chamber bearing any responsibility on the contents of the certificate. Mr. Law Chin Seng’s itinerary from Muscat, Oman to Los Angeles, CA leaving on June 16, 2010 and arriving on June 17, 2010 was submitted. Lastly, an undated email from Law Chin Seng to the Port was provided, stating that the address of the protestant in the U.S. is 431 West Seventh Street, Los Angeles, CA 90014 which is the address of the Los Angeles Athletic Club Hotel where Law Chin Seng stayed for one night.
On December 15, 2011, April 3, 2012, and May 4, 2012, CBP issued Notices of Action (CBP Form 29) advising the protestant that since sufficient information had not been provided to CBP, and a false U.S. address was listed on CBP entry documents and the Certificate of Origin, the OFTA claim would be denied. Subsequently, CBP liquidated the entries on June 29, 2012, denying OFTA treatment. Counsel for the protestant timely filed a protest on July 12, 2012, claiming that the imported merchandise qualifies for duty-free treatment under the OFTA.
As an attachment to its memorandum in support of protest and AFR, counsel for the protestant submitted an undated letter from Farida to CBP which lists the name and location of the suppliers of the alloy and gold, the price for both materials, and the description of the processing in Oman. Al Khabail Trading Est., located in Muttrah Gold Souq, is listed as the supplier for the alloy. The price of the alloy is listed as $0.0405 per gram. LaxmilDas Tharia, which is located in Muscat-Oman’s Local Market, is listed as the supplier for the gold. The price of the gold is listed as $38.962 per gram. The street address is not stated for either supplier.
Attachment A to the letter is labeled “summary of cost data” and lists the description of the processing operations, an amount for direct costs of processing operations, description of material production process, cost or value of the materials, and the selling price of the gold jewelry. The description of the processing operations for the gold jewelry is stated as “casting gold roll into wire plate, annealing, fire and leave to cold, wire and plate, cut to size, stamping, fixing, fine soldering, polishing, cleaning, drying etc.” The direct costs of processing operations are broken down for each type of jewelry (10 karat or 14 karat earrings, bangles, or necklaces) on the commercial invoice from Farida to the protestant. For example, the direct costs of processing operations for 8,968 pieces of 10 karat earrings is $7,080.60. The description of material production process is similar for each type of jewelry listed on the commercial invoice from Farida to the protestant. For example, for 8,968 pieces of 10 karat earrings, the description indicates “processed in Oman, pure gold melted with alloy to form 10 karat, gold = 41.70%”. The cost or value of material is listed as $208,570.05. The selling price is listed as $217,979.90. Attachment B to the letter lists general expenses which include an amount for workers’ salary, utilities expenses, stationery, and office rental expenses.
On January 31, 2014, counsel for the protestant submitted additional information including Farida’s address; an invoice, dated May 14, 2010, from Al Khabail Trading Co. to Farida for certain materials to produce the gold jewelry such as alloy, polish powder, wax, copper, silver etc. The total price listed on the invoice is 1,657 Omani Rial (OMR). Counsel for the protestant submitted an invoice, dated May 16, 2010, from Fursan Al Suwaiq Al Dhahabiya LLC to Farida for 24 karat pure gold. The total price listed on the invoice is 224,421.00 OMR. Counsel for the protestant also submitted production calculations indicating the amount of gold and alloy processed; summary of total hours employees worked in June 2010; and vouchers dated June 16, 2010 and June 30, 2010 issued to each employee which list a total amount due to the employee. Counsel for the protestant stated that specific records of tasks performed could not be cross-referenced into payroll because such records are not created or maintained in the ordinary course of business in Oman. On May 15, 2014, counsel for the protestant submitted a tenancy agreement which lists Farida as the tenant; a business license issued by the Sultanate of Oman, Ministry of Commerce and Industry; photographs of Farida’s facility; and a letter from Farida listing the equipment in its factory.
Additionally, counsel for the protestant submitted documents for subsequent entries which are the subject of other protests. The manufacturer in these transactions is Farida; however, the importer of record is not Forever Jewelry, the protestant at issue here. The documents include purchase orders, commercial invoices, communication between the various parties involved, purchase vouchers, air waybills, copies of passports of two employees, a payment voucher, cash memos, tenancy agreement, business registration, photographs, summary of production calculations, a certificate of origin, and a wire transfer confirmation. These documents are not helpful for the purposes of this AFR as is involves a different importer of record and does not clarify the discrepancy found in the documents submitted with the instant protest and AFR.
ISSUE:
Whether the gold jewelry imported from Oman is eligible for duty-free treatment under the OFTA.
LAW AND ANALYSIS:
The United States-Oman Free Trade Agreement (OFTA) was signed by the Governments of the Oman and the United States on January 19, 2006. The OFTA was approved by the U.S. Congress with the enactment on September 26, 2006, of the OFTA Implementation Act (the Act), Pub. L. 109-283, 120 Stat. 1191 (19 USC 3805). GN 31 of the Harmonized Tariff Schedule of the United States (“HTSUS”) implements the OFTA. GN 31(b) sets forth the criteria for determining whether a good is an originating good for purposes of the OFTA. GN 31(b) states:
For the purposes of this note, subject to the provisions of subdivisions (c), (d), (e), (g) and (h) thereof, a good imported into the
United States is eligible for treatment as an originating good of a UOFTA country under the terms of this note only if --
the good is a good wholly the growth, product or manufacture of Oman or of the United States, or both;
for goods not covered by subdivision (iii) below, the good is a new or different article of commerce that has been grown, produced or manufactured in the territory of Oman or of the United States, or both, and the sum of --
A. the value of each material produced in the territory of Oman or of the United States, or both, and
B. the direct costs of processing operations performed in the territory of Oman or of the United States, or both, is not less than 35 percent of the appraised value of the good at the time the good is entered into the territory of the United States; or
the good falls in a heading or subheading covered by a provision set forth subdivision (h) of this note and—
A. each of the nonoriginating materials used in the production of the good undergoes an applicable change in tariff classification specified in such subdivision (h) as a result of production occurring entirely in the territory of Oman or of the United States, or both; or
B. the good otherwise satisfies the requirements specified in such subdivision (h);
…
In the instant case, it is not disputed that when 24 karat gold and alloy is manufactured into gold jewelry, the gold and the alloy are substantially transformed. Further, it is also not disputed that the gold ingots and the alloy would undergo a double substantial transformation when processed initially into strips, wire or plate which would then be substantially transformed into rings, bracelets and necklaces. See Headquarters Ruling Letter (“HQ”) 562725, dated May 28, 2003, wherein CBP determined that imported gold and silver ingots underwent a double substantial transformation in the GSP country when made into wire, and the wire was made into continuous lengths of chain links and necklaces. See also HQ 555210, dated April 26, 1989.
At issue is the verification whether the gold jewelry was manufactured in Oman. The Port stated that the physical address of the actual manufacturing/production facility in Oman was never submitted; rather, only a PO Box was provided. The Port noted that the physical address was requested to allow CBP to verify the existence of an actual manufacturing facility in Oman capable of producing the volume of jewelry imported by the protestant.
CBP Regulations applicable to the OFTA are contained in 19 C.F.R. § 10.861 to § 10.890. The issue of verification is addressed in 19 C.F.R. § 10.887 which provides in paragraph (a) that:
A claim for preferential treatment made under § 10.863 or § 10.870 of this subpart, including any declaration or other information submitted to CBP in support of the claim, will be subject to such verification as the port director deems necessary. In the event that the port director is provided with insufficient information to verify or substantiate the claim, the port director may deny the claim for preferential treatment.
As clearly set forth above, the port director may deny the OFTA claim if insufficient information was provided to substantiate the claim that the gold jewelry was manufactured in Oman. Based on our review, the protestant has not submitted sufficient documentation to establish that the gold jewelry was produced in Oman.
As previously noted, the protestant submitted certain commercial documents related to the purchase and sale of the materials and the gold jewelry. These include a purchase order from the protestant to an unidentified party listing the gold jewelry. The purchase order merely lists the unit of purity for the gold (10 or 14 karat), the type of merchandise (earrings, bangles or necklaces), and the approximate weight of the merchandise. The purchase order does not describe in detail each type of jewelry or a style number. Similarly, the commercial invoice from Farida to the protestant does not describe in any detail each type of jewelry or provide a style number. The payment vouchers from the protestant to Farida are for “gold payments” for 24 karat gold. The payment vouchers do not list the total price paid for the gold. They also do not refer to the purchase order or the commercial invoice. It is not clear why the protestant made a payment to Farida for 24 karat gold when the merchandise purchased consists of 10 karat and 14 karat gold jewelry. The protestant also submitted an invoice from Al Khabail Trading Co. to Farida for certain materials, including alloy, to produce the gold jewelry and an invoice from Fursan Al Suwaiq Al Dhahabiya to Farida for 24 karat pure gold. The amount of the materials or the gold listed on these invoices do not correspond to the figures listed in the production calculations. The protestant stated that the gold invoices cover the bulk of the 24 karat gold needed, the balance (slightly over 1000 grams) was from Farida’s inventory. However, no documents to evidence the gold used from Farida’s inventory was submitted. Further, the amount of alloy purchased from Al Khabail Trading Co. does not correspond to the amount of alloy used in making the gold jewelry. It is also unclear how much gold is purchased from LaxmilDas Tharia which was referred to in the attachment to the protestant’s memorandum in support of protest and AFR. A comparison of the total price for the merchandise with the cost of the 24 karat gold indicate that the total price for the merchandise does not even cover the cost of the gold. This is inconsistent with the statement by the protestant that “the amount of profit derived by a markup of approximately $0.20 per gram to $0.35 per gram”. In conclusion, these documents do not sufficiently correspond with each other. Even if we were to find that these documents were consistent with the facts stated, they are merely indicative of the purchase and sale of the materials and the gold jewelry; thus, they do not demonstrate that the gold jewelry was actually manufactured in Oman. Further, the purchase order is dated May 27, 2010. The commercial invoice is dated June 12, 2010. The merchandise was entered on June 17, 2010. It is unclear how 16,921 pieces of jewelry were manufactured by 18 employees in such a brief time period.
As noted in the facts section of the AFR, the protestant also submitted a summary of the cost data; list of general expenses; production calculations; summary of total hours employees worked in June 2010; and vouchers issued to each employee for that time period. The information provided in these documents is not sufficiently specific. The summary of cost data lists lump sum amounts for direct costs of processing operations and costs or value of materials. General expenses list total amounts for workers’ salary, utilities expenses, stationery, and office rental expenses. The documents concerning labor costs do not indicate the employees’ responsibilities as they relate to manufacturing of the merchandise. The summary of total employee hours simply lists the hours worked each day for in June 2010 (e.g. Wahab worked eight hours on June 1, 2010). The last names of the employees are not listed. Similarly, the vouchers issued to the employees merely state the name of the employee, the date it was issued and the salary amount. These documents do not provide detailed breakdowns for the cost of labor.
The information we received concerning the factory includes a tenancy agreement and a business license. The tenancy agreement, which is valid from September 1, 2013 to August 3, 2014, lists Farida as the tenant, its business license number and address of Postal Code 112, Ruwi, Sultanate of Oman. However, the address stated in the section titled “property details” is Shop no: 1496, Muttrah, Way: 1427, block no: 114. Further this address is listed as the caption at the bottom of the photo submitted of the factory entrance. The list of machinery includes a casting machine, a rolling press, and a gold melting unit. The protestant did not submit purchase receipts for the machinery or any information concerning maintenance records. The protestant listed the names of two employees who melt the gold, convert it to plates or wires, and cast the gold. However, the names of these employees are not listed in the payroll records which were submitted on January 31, 2014.
Considering the large quantity of jewelry pieces and the value of $654,377.86, we would expect to see documentation that is more sufficiently detailed to demonstrate that the processing of the gold actually occurred in Oman. As such, the Port found and we agree that there is inadequate supporting documentation that the gold jewelry was manufactured in Oman. Further, it is concerning that the address in the U.S. used by the protestant in the entry documents, the Certificate of Origin, and the payment vouchers issued to Farida was that of the Los Angeles Athletic Club in Los Angeles, CA. In response to CBP’s CF 28, dated May 11 2011, a representative of the Athletic Club responded that “as a policy, the LA Athletic Club does not allow members or non-members to use our mailing address for any purpose. We did not give Mr. Lee permission to use our address and we are not aware of any shipments received at our address.” Accordingly, we find that the gold jewelry is not eligible for duty-free treatment under the OFTA.
HOLDING:
Based on the information provided, the protestant has not demonstrated that the imported gold jewelry was manufactured in Oman. Therefore, the gold jewelry is not eligible for duty-free treatment under the OFTA.
In conformity with the foregoing, the protest should be DENIED.
In accordance with the Protest/Petition Processing Handbook (CIS HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than sixty days from the date of this letter. Sixty days from the date of the decision Regulations and Rulings of the Office of International Trade will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division