MAR-2-05 RR:IA 562517 RFC
Port Director of Customs
U.S. Customs Service
2nd & Chestnut Streets
Philadelphia, PA 19106
RE: Protest and Application for Review No. 1101-00-100058; NAFTA
Certificate of Origin
Dear Sir or Madam:
This is in reference to a Protest and Application for Further Review (number 1101-00-100058) filed by Sunoco, 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) for certain crude oil.
FACTS:
The facts as presented are as follows: The merchandise was imported and entered on January 20, 2000 and February 3, 2000. The entries were liquidated on November 13, 2000 and December 15, 2000. At the time of each entry, a NAFTA claim for preferential tariff treatment under General Note 12 was made through a declaration that the crude oil was a product of Canada (i.e., including the symbol “CA” as a prefix to the HTSUS subheading number on the entry summary).
The port requested a NAFTA certificate of origin for Sunoco’s claims and declarations for preferential tariff treatment for the imported crude oil. The record reflects that the certificates that were received by the port were dated April 13, April 17, and April 26, 2000 and May 25, 2000 (counsel for the protestant contends in a December 27, 2000, submission that certificates were submitted with the following dates: April 1, 2000 and July 28, 2000). The port denied the claims because the certificates were not in the possession of the importer when the declarations were made (as the dates of the certificates were after the dates of entry and the dates of the declarations that the oil qualified for preferential tariff treatment).
The port received the protest on January 4, 2001. Therefore, the protest was filed in a timely manner within 90 days from the date of liquidation.
In a December 27, 2000, submission, counsel for the protestant makes several arguments in favor of its position that the protestant satisfied the applicable laws and regulations to establish that the crude oil is entitled to NAFTA preferential tariff treatment as a product of Canada. Included is the argument that:
[G]iven the overall framework of the NAFTA regulations, the only reasonable interpretation of section 181.21(a) is to permit U.S. importers to receive from Canadian and Mexican suppliers NAFTA Certificates of Origin after the time of entry, provided all other regulatory criteria with respect to the origin of imported goods and the execution and completion of Certificates are satisfied. NAFTA declarations made at the time of entry must be considered continuous claims for preferential duty treatment, and importers must be permitted sufficient time to support such claims and perfect their rights.
In this same submission, counsel states that “Sunoco admittedly did have the Certificates in its possession at the time the entries subject to this protest were filed.”
ISSUE:
Whether a properly executed and valid NAFTA certificate of origin must be in the possession of an importer at the time a claim and declaration for preferential tariff treatment are made.
LAW AND ANALYSIS:
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; 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; (emphasis added)
(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.
Section 205 of 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 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:
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. A Certificate of Origin submitted to Customs under this paragraph or under Sec. 181.32(b)(3) of this part: (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. 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, the port director may deny preferential tariff treatment to the imported goods covered by the claim and declaration.
In the instant case, the certificates were not in the possession of the importer when the claims and declarations were made (as the certificates are dated after the dates of entry and the dates of the declarations that the oil qualified for NAFTA preferential tariff treatment). Therefore, the importer did not satisfy the requirement that it have in its possession a properly executed and valid certificate of origin at the time its NAFTA claims and declarations were made. Thus, the NAFTA claim for preferential tariff treatment was properly denied by the port.
In a December 27, 2000, submission, counsel for the protestant cites 19 CFR § 10.112 and states that this provision directs that the Customs Service accept the certificates submitted by the protestant and accord duty free treatment to the protested entries. This provision deals with the filing of “free of entry documents or reduced duty documents after entry.” As discussed above, the instant case concerns whether the importer had in its possession a properly executed and valid certificate of origin at the time its claim and declaration were made for NAFTA preferential tariff treatment. It does not concern whether “a free entry or reduced duty document, form, or statement required to be filed in connection with the entry” was filed at the time of entry. Therefore, 19 CFR § 10.112 is not relevant to the instant case or to the issue raised in this protest.
Finally, as referenced and quoted above, in its December 27, 2000, submission, counsel for the protestant contends that section 181.21(a) of the Customs Service’s regulations should be interpreted “to permit U.S. importers to receive from Canadian and Mexican suppliers NAFTA Certificates of Origin after the time of entry.” Counsel also contends that “NAFTA declarations made at the time of entry must be considered continuous claims for preferential duty treatment, and importers must be permitted sufficient time to support such claims and perfect their rights.” In fact, the provisions of the NAFTA and of U.S. statutory and regulatory law provide for the filing of post-importation NAFTA claims for preferential tariff treatment (or post-importation duty refund claims) by U.S. importers. See Paragraph 3 to Article 502, North American Free Trade Agreement, December 17, 1992, Can-Mex-U.S., 32 I.L.M. 289 (1993); 19 U.S. C. § 1520 (d) and 19 CFR § 181.31. This is to allow the filing of such claims when, for example, a certificate of origin is not in the possession of an importer at the time the goods involved are imported. In the instant case, the importer did not avail itself of this mechanism for filing a post-importation NAFTA claim for preferential tariff treatment. Rather, it made a claim and declaration for NAFTA preferential tariff treatment at the time of importation of the goods involved despite not having a properly executed and valid certificate of origin in its possession.
HOLDING:
The importer did not satisfy the requirement that it have in its possession a properly executed and valid certificate of origin at the time its NAFTA claims and declarations were made. Accordingly, the protest should be denied in full.
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