CLA-02 RR:CR:SM 562740 KKV
Port Director of Customs
200 East Bay Street Charleston, SC 29401
RE: Application for Review and Protest No. 1601-0201-00295; Eligibility of imported vehicle tires for preferential tariff treatment under the Generalized System of Preferences (GSP)
Dear Sir or Madam:
This is in response to your memorandum dated April 22, 2003, which forwards for our review an Application for Further Review of Protest No. 1601-0201-00295. The protest, timely filed by counsel on behalf of Continental General Tire, involves the eligibility of certain truck tires for preferential tariff treatment under the Generalized System of Preferences (GSP).
FACTS:
At issue is the eligibility of a shipment of truck tires for preferential tariff treatment under the GSP. The merchandise, imported from Slovakia, was entered at the port of Charleston, South Carolina on June 30, 2001. The entry was liquidated on May 10, 2002. The subject protest was timely filed on August 6, 2002.
ISSUE:
Whether the subject merchandise is eligible for preferential tariff treatment pursuant to the GSP.
LAW AND ANALYSIS:
Under the Generalized System of Preferences, eligible articles the growth, product or manufacture of a beneficiary developing country (“BDC”), which are imported directly into the customs territory of the U.S. from a BDC, may receive duty-free treatment if the sum of (1) the cost or value of material produced in the BDC, plus (2) the direct costs of the processing operations in the BDC, is equivalent to at least 35% of the appraised value of the article at the time of entry into the United States. See section 10.176(a), Customs Regulations (19 CFR 10.176(a)).
General Note 3(a)(iii), Harmonized Tariff Schedule of the United States (HTSUS), states that special rates of duty under one or more of the special tariff treatment programs (including the GSP) apply to those products which are classified under a provision for which a special rate is indicated in the "Special" subcolumn and for which all of the legal requirements for such program(s) have been met. For an article to be eligible to receive duty-free treatment under the GSP, it must be imported from a designated BDC and classified under a tariff provision for which a rate of duty of "Free" appears in the "Special" subcolumn followed by the symbol “A” or “A*.” As provided in General Note 4(a), Harmonized Tariff Schedule of the United States (HTSUS), Slovakia is a designated BDC.
It is uncontested that the three articles in question are classified in subheading 4011.20.1015. Articles provided for in this provision are eligible for duty-free treatment under the GSP provided that they are a “product of” a BDC, meet the value-content requirement, and are “imported directly” into the United States.
It is also uncontested that the articles were imported directly into the U.S. from Slovakia. However, as noted, this is only one of several criteria for eligibility under the GSP. In addition to being “imported directly” into the U.S., the articles must be a “product of” a designated BDC in order to be eligible for preferential treatment under the GSP. Where an article is produced from materials imported into the BDC, the article is considered to be a “product of” the BDC for purposes of the GSP only if those materials are substantially transformed into a new and different article of commerce. See 19 CFR 10.177(a)(2) and Azteca Milling Co. v. United States, 703 F.Supp. 949 (CIT 1988), aff'd, 890 F.2d 1150 (Fed. Cir. 1989). The courts have stated that a substantial transformation occurs “when an article emerges from a manufacturing process with a name, character, or use which differs from those of the original material subjected to the process.” Texas Instruments Inc. v. United States, 69 CCPA 152, 156, 681 F.2d 778, 782 (1982).
In addition to the “imported directly” and “product of” requirements, to be eligible for duty-free treatment under the GSP statute, merchandise must also satisfy a 35% value-content requirement. If an article consists of materials which are imported into a BDC, the cost or value of these materials may be counted toward the 35% value-content requirement only if they undergo a double substantial transformation in the BDC. See 19 CFR 177.(a)(2).
With regard to the “product of” and “value content” requirements, the protestant has submitted additional cost and material documentation in support of its protest. Upon review, our office is satisfied that the materials used in making the tires (i.e., rubber, carbon, steel and fabric) undergo a double substantial transformation and the value of these materials may be counted towards the 35% value-content requirement, in accordance with Customs Service Decision (C.S.D.) 85-12, dated August 8, 1984. We note, however, that the documentation submitted includes information on some model tires for entries connected to protests which are not currently before us. The substantiating documentation for the same model tires involved in this protest and imported during a comparable time period, appear to establish that those tires satisfy the 35% value-content requirement. If your office is satisfied that the tires involved in the subject protest also satisfy the 35% requirement, and that the terms and conditions of 19 CFR 173-178 have been met, you are hereby instructed to grant the protest.
HOLDING:
Based on the information provided, substantiating documentation submitted for the same model tires involved in this protest and imported during a comparable time period appears to establish that those tires satisfy the 35% value-content requirement. If your office is satisifed that the tires involved in the subject protest also satisfy the 35% value-content requirement, and that the terms and conditions of 10.173-178 have been met, you are hereby instructed to grant the protest.
In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the protestant attached to the Form 19, Notice of Action, no later than 60 days from the date of this letter. Any reliquidation of the entries in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to customs personnel via the Customs Ruling Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.
Sincerely,
Myles B. Harmon
Director
Commercial Rulings Division