MAR-2-05 RR:IA 561933 RFC
Port Director of Customs
U.S. Customs Service
3600 Paisano, Bldg. D
El Paso, TX 79905
RE: Protest and Application for Review No. 2402-00-100024; NAFTA; Section
520(d) Claim
Dear Sir or Madam:
This is in reference to a Protest and Application for Further Review (number 2402-00-100024) filed by San Saba Pecan, Inc., contesting the denial of a North American Free Trade Agreement (NAFTA) claim for preferential tariff treatment under General Note 12 of the Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
The merchandise was imported and entered on January 26, 2000. The merchandise was liquidated on May 5, 2000. The importer made a NAFTA claim for preferential tariff treatment at the time of entry (by including the symbol “MX” as a prefix to the HTSUS subheading number on the entry summary). On February 28, 2000, the port sent the protestant a Request for Information (CF 28) regarding the entry under consideration. In this request, it stated:
In accordance with 19 CFR 181.22(b), please provide a NAFTA certificate of origin for the entry/invoice cited above.…Respond within 30 days from the date of this notice.
On April 10, 2000, the port issued a Notice of Action (CF 29) to the protestant. In this notice, it stated:
In accordance with 19 CFR 181.23(b), due to your failure to supply the NAFTA certificate of origin that corresponds to this entry, requested on 022800, this office is denying your NAFTA claim for preferential duty treatment. The general rate of duty, 8.8 cents/kilogram for the pecans will apply. Additional duty in the amount of $ 1506.56 and MPF of $ 72.42 will be due. Total owed will be $ 1578.98. This is not a bill.
On July 17, 2000, a protest was filed against the rate of duty. The protest contends that the merchandise should have been liquidated at the preferential rate of duty (MX0802.90.1000/free) rather than at the column 1 general rate of duty (0802.90.1000/8.8 cents/kilogram). Two NAFTA certificates of origin were attached to the protest (CF 19). The signature date on each certificate is 22 January 2000 (22 Enero 2002). On the top portion of the two certificates received by this office is a facsimile number with the date “04/11/2002” and the designation “BROWN, ALCANTAR & BROWN.”
The protest was filed in a timely manner within ninety days from the date of liquidation.
ISSUES:
Whether a NAFTA claim for preferential tariff treatment can be denied for failure to submit a NAFTA certificate of origin upon request.
Whether the denial of a claim for NAFTA preferential tariff treatment for failure to submit a certificate of origin upon request may be properly protested.
Whether an importer must substantiate or provide proof that it had a valid certificate of origin in its possession when a NAFTA claim for preferential tariff treatment was made if the certificate has not been provided in the required time period when requested by the Customs Service.
LAW AND ANALYSIS:
Denial of NAFTA Claim for Failure to Submit a Certificate upon Request
The requirements for filing a claim and declaration for NAFTA preferential tariff treatment have their genesis in the agreement itself. Set forth in Article 502 of the agreement is the explicit requirement that an importer making a claim and declaration for preferential tariff treatment have a valid certificate of origin in its possession at the time the declaration is made and that a copy of the certificate be provided upon request. Also set forth in that article is a provision allowing a party to the agreement to deny preferential tariff treatment to a good if the importer fails to have a valid certificate in its possession at the time the declaration is made:
Article 502: Obligations Regarding Importations
1. Except as otherwise provided in this Chapter, each Party shall require an importer in its territory that claims preferential tariff treatment for a good imported into its territory from the territory of another Party to:
(a) make a written declaration, based on a valid Certificate of Origin, that the good qualifies as an originating good;
(b) have the Certificate in its possession at the time the declaration is made;
(c) provide, on the request of that Party's customs administration, a copy of the Certificate (emphasis added); and
(d) promptly make a corrected declaration and pay any duties owing where the importer has reason to believe that a Certificate on which a declaration was based contains information that is not correct.
2. Each Party shall provide that, where an importer in its territory claims preferential tariff treatment for a good imported into its territory from the territory of another Party:
(a) the Party may deny preferential tariff treatment to the good if the importer fails to comply with any requirement under this Chapter; (emphasis added) and
(b) the importer shall not be subject to penalties for the making of an incorrect declaration, if it voluntarily makes a corrected declaration pursuant to paragraph 1(d).
Article 502, North American Free Trade Agreement, December 17, 1992, Can-Mex-U.S., 32 I.L.M. 289 (1993).
The Statement of Administrative Action to the North American Free Trade Agreement Implementation Act references the requirement in Article 502 of the NAFTA that an importer possess, at the time a claim for preferential treatment is made, a valid certificate of origin completed by the exporter of the goods.
Article 501 calls for the three governments to create a uniform “certificate of origin” for claims that particular goods “originate” in the NAFTA region and thus qualify for the special tariff treatment provided under the Agreement. In order to obtain preferential NAFTA tariff treatment, an importer must possess, at the time a claim for preferential treatment is made, a valid certificate of origin completed by the exporter of the goods. The importer may then declare to the customs administration of the importing country, on the basis of that certificate, that the goods are “originating” goods and thus qualify for special NAFTA tariff rates. (Emphasis added.)
The North American Free Trade Agreement Act Statement of Administrative Action, H.R. Doc. No. 103-159, vol. 1, at 450, 499 (103d Cong., 1st Sess. 1993).
The use of NAFTA certificates of origin to certify that a good qualifies as originating under the agreement has been referenced in U.S. statutory law:
(B) The term 'NAFTA Certificate of Origin' means the certification, established under article 501 of the North American Free Trade Agreement, that a good qualifies as an originating good under such Agreement."(2) Exports to nafta countries.--"(A) In general.--Any person who completes and signs a NAFTA Certificate of Origin for a good for which preferential treatment under the North American Free Trade Agreement is claimed shall make, keep, and render for examination and inspection all records relating to the origin of the good (including the Certificate or copies thereof) and the associated records. (Emphasis added.)
Section 205, North American Free Trade Agreement Implementation Act (Pub. L. 103-182) (December 8, 1993) (19 U.S.C. § 1508(b)).]
The legislative history to the North American Free Trade Agreement Implementation Act discusses the use of NAFTA certificates of origin to certify that a good qualifies as originating under the agreement
Explanation of provision
Section 205(a) of H.R. 3450 sets forth the basic enforcement and recordkeeping requirements relating to customs administration of the NAFTA. The section amends section 508 of the Tariff Act of 1930 to require a NAFTA Certificate of Origin for goods for which preferential tariff treatment is claimed. The section defines the term NAFTA Certificate of Origin to mean the certification, established under NAFTA Article 502, that a good qualifies as an originating good.
The section further requires that any person who completes and signs a NAFTA Certificate of Origin (the "Certificate") for a good must make, keep, and render for examination and inspection all records relating to the origin of a good, including the Certificate. These records must be kept for a maximum of 5 years from the date a Certificate was signed. (Emphasis added.)
Reasons for change
The amendments made by section 205 of H.R. 3450 enact changes to U.S. customs laws to implement and facilitate the enforcement and administration of the NAFTA. Generally, the section implements U.S. commitments under NAFTA Chapter 5, Customs Procedures. This chapter sets forth procedures and obligations for each government's customs administration to carry out with respect to North American trade.
The Committee notes that Article 501 obligates the NAFTA Parties to establish a uniform Certificate of Origin by January 1, 1994, to certify that goods imported into their territories qualify for preferential tariff treatment accorded by the NAFTA. The establishment of a common Certificate of Origin will greatly facilitate the flow of goods between the NAFTA Parties. Other Articles in Chapter 5 of the NAFTA set forth obligations regarding importations, recordkeeping, origin verifications, and customs penalties.
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Section 205 of H.R. Doc. No. 103-316, 103rd Cong., 1st Sess. (1993).
The Customs Service’s regulations require that an importer who makes a claim and declaration for NAFTA preferential tariff treatment must have a certificate of origin in its possession when the declaration is made upon importation and must present the certificate upon request--and the port director may deny preferential treatment to the imported good involved if the certificate was not in the possession of the importer when the declaration was made or the certificate is not presented upon request:
Sec.181.21 Filing of claim for preferential tariff treatment upon importation.
(a) Declaration. In connection with a claim for preferential tariff treatment for a good under the NAFTA, the U.S. importer shall make a written declaration that the good qualifies for such treatment. The written declaration may be made by including on the entry summary, or equivalent documentation, the symbol ``CA'' for a good of Canada, or the symbol ``MX'' for a good of Mexico, as a prefix to the subheading of the HTSUS under which each qualifying good is classified. Except as otherwise provided in Sec. 181.22 of this part and except in the case of a good to which appendix 6.B. to Annex 300-B of the NAFTA applies (see, however, Sec. 12.132 of this chapter), the declaration shall be based on a complete and properly executed original Certificate of Origin, or copy thereof, which is in the possession of the importer and which covers the good being imported. (Emphasis added.)
Sec. 181.22 Maintenance of records and submission of Certificate by importer.
(a) Maintenance of records. Each importer claiming preferential tariff treatment for a good imported into the United States shall maintain in the United States, for five years after the date of entry of the good, all documentation relating to the importation of the good. Such documentation shall include a copy of the Certificate of Origin and any other relevant records as specified in Sec. 163.1(a) of this chapter.
(b) Submission of Certificate. An importer who claims preferential tariff treatment on a good under Sec. 181.21 of this part shall provide, at the request of the port director, a copy of each Certificate of Origin pertaining to the good which is in the possession of the importer. (Emphasis added.)
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Sec. 181.23 Effect of noncompliance; failure to provide documentation regarding transshipment. (a) Effect of noncompliance. If the importer fails to comply with any requirement under this part, including submission of a Certificate of Origin under Sec. 181.22(b) or submission of a corrected Certificate under Sec. 181.22(c), the port director may deny preferential tariff treatment to the imported good. (Emphasis added.)
19 CFR § 181.21-23
In light of the above, an importer who makes a claim and declaration for NAFTA preferential tariff treatment upon importation must have a properly executed and valid certificate of origin in its possession at the time the claim and declaration are made and must present the certificate upon request. Therefore, if an importer did not have a properly executed and valid certificate of origin in its possession at the time its claim and declaration were made for NAFTA preferential tariff treatment or did not present the certificate upon request, the port director may deny preferential tariff treatment to the imported goods covered by the claim and declaration.
In the instant case, no certificate of origin was provided upon request within the required time period in which to submit the certificate. Accordingly, the NAFTA claim for preferential tariff treatment was properly denied by the port at the expiration of the time period given to the importer in which to submit the certificate. Whether the denial can be properly protested by the importer is considered below.
Protesting Denial of NAFTA Claim
The Customs Service’s regulations identify matters that are subject to being protested under the provisions of section 514, Tariff Act of 1930, as amended (19 U.S.C. 1514):
Sec. 174.11 Matters subject to protest.
The following decisions of the port director, including the legality of all orders and findings entering into the same, may be protested under the provisions of section 514, Tariff Act of 1930, as amended (19 U.S.C. 1514):
(a) The appraised value of merchandise;
(b) The classification and rate and amount of duties chargeable;
(c) All charges or exactions of whatever character including the accrural of interest within the jurisdiction of the Secretary of the Treasury;
(d) The exclusion of merchandise from entry or delivery under any provision of the Customs laws;
(e) The liquidation or reliquidation of an entry, or any modification thereof;
(f) The refusal to pay a claim for drawback; and
(g) The refusal to reliquidate an entry under section 520(c), Tariff Act of 1930, as amended (19 U.S.C. 1520(c)).
19 CFR § 174.11
Decisions relating to the classification and rate and amount of duties chargeable for merchandise may be protested by an importer. In the instant case, as the decision to deny a NAFTA claim for preferential tariff treatment relates to the rate and amount of duties chargeable for the merchandise covered by the claim, it is a decision of the Customs Service that may be properly protested. Moreover, the importer protested in a timely manner the decision by the Customs Service to deny the claim. Whether the protest should be granted is considered below.
Proof That Certificates Were in Possession of Importer when Claim Made
In previous rulings, the Customs Service has held that an importer must substantiate or provide some proof that it had a valid certificate of origin in its possession when a NAFTA claim for preferential tariff treatment was made if the certificate has not been provided in the required time period when so requested. See HQ 228506 (June 7, 2000), HQ 561901 (January 24, 2001), HQ 561862 (February 22, 2001) and HQ 561991 (March 29, 2001).
In the instant case, no evidence has been submitted to substantiate or prove that the importer had the requested certificates of origin in its possession when the NAFTA claim for preferential treatment was made. Therefore, the protest should be denied.
Finally, the issue has been raised as to whether protesting a denial of a NAFTA claim of preferential tariff treatment made upon importation constitutes the filing of a post-importation claim (post-importation duty refund claim) for NAFTA preferential tariff treatment under 19 U.S.C. § 1520 (d): Protesting a denial of a NAFTA claim of preferential tariff treatment made upon importation is not equivalent to filing a post-importation claim for NAFTA preferential tariff treatment under 19 U.S.C. § 1520 (d). In the instant case, the importer properly protested the Customs Service’s decision to deny the importer’s NAFTA claim for preferential tariff treatment made at the time of importation of the goods. The protest, however, is being denied for the above-mentioned reason.
HOLDING:
Although the NAFTA claim for preferential tariff treatment was properly denied by the port, the importer has properly protested that decision. The protest is denied, however, because no evidence has been submitted to substantiate or prove that the importer had the requested certificates of origin in its possession when the NAFTA claim for preferential treatment was made.
In accordance with section 3 A (11) (b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject Revised Protest Directive, you are to mail this decision, together with Customs Form 19, to the protestant no later than sixty (60) days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty (60) days from the date of this decision, the Office of Regulations and Rulings will make the decision available to U.S. Customs Service personnel, and to the public on the U.S. Custom Service web site (ww.customs.gov), by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Acting Director
Commercial Rulings Division