CLA-2 OT:RR:CTF:TCM H013199 KSH
Port Director
U.S. Customs and Border Protection
P.O. Box 3130
Laredo, TX 78044-3130
RE: Application for Further Review of Protest 2304-06-100093
Dear Port Director: This is in reply to your correspondence dated June 18, 2007, forwarding the Application for Further Review of Protest (AFR) 2304-06-100093, filed by
Rode & Qualey on behalf of its client, A.R.B., Inc. The protest is against Customs and Border Protection’s (CBP) denial of preferential tariff treatment under the North American Free Trade Agreement (NAFTA) for five entries of men’s and women’s jackets, vests, coveralls, overalls and hoods. In addition to the arguments and documentation presented with the protest, we have given consideration to additional submissions dated Match 7, 2007 and March 30, 2007.
FACTS:
Between August 1, 2005 and September 28, 2005, protestant entered the subject merchandise in headings 6201, 6202, 6203 and 6217 of the Harmonized Tariff Schedule of the United States ( HTSUS). The entries claimed duty free treatment under the NAFTA as Mexican originating merchandise. On May 4, 2006, CBP issued a CBP Form 28, “Request for Information”, and a CBP Form 446, “NAFTA Verification Questionnaire”, to the Mexican exporter named in the Country of Origin Certificate. Based on exporter’s failure to respond, on June 7, 2006, CBP issued a proposed “Notice of Action”, CBP Form 29, to both the exporter and the protestant. The proposed Notice of Action advised that preferential treatment would be denied for the merchandise due to a lack of sufficient information to complete the verification of the merchandise’s origin pursuant to 19 CFR 181.72 of the CBP Regulations. The notice further advised that the “documentation provided was insufficient and irreconcilable” and “production records (cutting/sewing tickets) were not provided, export documents were illegible, and no documents to substantiate the fabric/yarn were originating were provided.” On June 22, 2006, the protestant submitted documentation in response to the proposed Notice of Action. On July 12, 2006, CBP issued a final Notice of Action to both the protestant and the exporter denying preferential treatment. The notice stated the country of origin “verification revealed that the goods do not qualify for preferential treatment pursuant to General Note 12(ii & t), HTSUS[,] specifically, [ ], because no response was provided by the exporter after various attempts were made by this office to communicate with them (via phone, fax and registered mail).” The entries were liquidated on September 1, 2006, as NAFTA ineligible and subject to duties. On December 13, 2006, protestant filed a protest and application for further review. The protest was timely filed. On March 27, 2007, protestant’s AFR request and protest were denied. On April 18, 2007, protestant filed a request to set aside the denial of further review and void denial of the protest pursuant to 19 U.S.C. 1515(c). On May 1, 2007, CBP granted protestant’s request.
The merchandise at issue consists of twelve styles of men’s, women’s and unisex jackets, vests, coveralls, overalls and hoods. Style WT34NVB/3400 is a men’s 100% cotton jacket. Style WT32NVB/3200 is a men’s 100% cotton jacket. Style Q435NVB/4351 is a men’s 3-in-1 jacket composed of 65% polyester and 35% cotton. Style WT35NVB/3500 is a women’s jacket composed of 65% polyester and 35% cotton. Style WT62NVB/6200 is a women’s 100% cotton jacket. Style TA 3001 is a 100% nylon unisex jacket. Style WT84NVB/8400 are unisex overalls composed of 65% polyester and 35% cotton. Style WT80NVB/8000 are unisex coveralls composed of 65% polyester and 35% cotton. Style WT77NVB/7700 is a hood composed of 65% polyester and 35% cotton. Style WT70NVB/7000 is a 100% cotton hood. Style WT33NVB/3300 is a 100% cotton men’s vest. Style WT94NVB/9400 is a 100% cotton women’s vest.
The merchandise was manufactured by Multiconfecciones de Jalapa and Industria Maquiladora de los Tuxtlas S.A. de C.V. However, the garments were exported by Industrias Casa Blanca de Tehuacan SA. The NAFTA certificates stated that the exporter is the producer. However, the protest indicates that Multiconfecciones de Jalapa and Industria Maquiladora de los Tuxtlas S.A. de C.V were the producers. Though protestant states Multiconfecciones de Jalapa is related to Industrias Casa Blanca de Tehuacan SA, there is no evidence that Industria Maquiladora de los Tuxtlas S.A. de C.V is related to any company.
ISSUE:
Whether the merchandise qualifies for NAFTA preferential duty treatment.
LAW AND ANALYSIS:
Article 401 of the NAFTA provides, in relevant part, that a good shall originate in the territory of a Party where:
* * * *
(b) each of the non-originating goods used in the production of the good undergoes an applicable change in tariff classification set out in Annex 401 as a result of production occurring entirely in the territory of one or more of the Parties, or the good otherwise satisfies the requirements of that Annex where no change in tariff classification is required... General Note 12, HTSUS, incorporates Article 401 of NAFTA into the HTSUS.
General Note 12(b) provides, in pertinent part:
For the purposes of this note, goods imported into the customs territory of the
United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as “goods originating in the territory of a NAFTA party” only if—
(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that—
(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials.
We note that the goods are classified in Chapter 62, HTSUS. Protestant
claimed NAFTA preferential treatment in its certificate of origin pursuant to Note 12(b)(ii) and Note 12(t). Note 12(t) for chapter 62, HTSUS, requires a change to the relevant subheadings in Chapter 62, HTSUS, from any other chapter, except from headings 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, chapter 54, or headings 5508 through 5516, 5801 through 5802 or 6001 through 6006, provided that the good is both cut and sewn or otherwise assembled in the territory of one or more of the NAFTA parties, and where applicable, the visible lining satisfies the tariff change requirements provided in chapter rule 1 for chapter 62.
Protestant argues that the statutes and regulations do not require cutting and
sewing records as the only documents to support a NAFTA claim and it is the totality of the evidence that must be considered. Although the exporter named in the Certificate of Origin was not the manufacturer of the garments, protestant states that the protestant contracted with the two manufacturers to manufacture the garments and the exporter prepared the Certificate of Origin because the manufacturers did not have export licenses. Protestant further adds that the manufacturers and only in one case the exporter were either partners or related companies. In support of its NAFTA claim, protestant has submitted numerous documents including affidavits, contracts, invoices, purchase orders, bills of lading, employee payment records and certificates of origin. Cutting and sewing records could not be obtained from the manufacturers as they are no longer operating.
The merchandise was not manufactured by the exporter as shown in the submitted Certificate of Origin. As such, the Certificate of Origin is invalid. The submitted evidence does not show that the exporter named in the Certificate of Origin and the manufacturers are related companies or that they had an agreement to manufacture the merchandise. Because the protestant has not submitted a corrected Certificate of Origin as required in the regulations, CBP correctly denied preferential treatment under NAFTA for the protestant’s merchandise. We note that 19 CFR 181.23 provides that if the importer fails to submit a corrected Certificate of Origin, the port director may deny preferential tariff treatment for the imported good.
Moreover, assuming arguendo that the evidence regarding payments to employees indicates that they may have sewn the goods in Mexico, one cannot assume that the employees cut the fabric as well.
Furthermore, pursuant to Section 181.72, CBP is authorized to initiate a verification process to determine whether the imported merchandise qualifies as an originating good under NAFTA as stated in the Certificate of Origin. Under section 181.71, CBP Regulations (19 CFR 181.71), CBP can deny a NAFTA claim only upon a determination following an origin verification, except in certain specified cases. The verification process under NAFTA is directed specifically at the exporter or producer in Canada or Mexico. See 19 CFR 181.72(a). In the verification process, if the exporter or producer that receives a request for information from CBP does not respond within thirty days of the initial request for information, CBP may then consider the goods not to originate in a NAFTA country and may deny preferential treatment for the goods. (19 CFR 181.72(d)). An importer has the right to protest the chargeable rate of duty and thus submit additional documentation in support of the protest. (19 CFR Part 174).
In the instant protest, protestant submitted a blanket Certificate of Origin showing that the exporter and the producer in Mexico were the same party and claiming that the goods were Mexican originating. CBP Forms 28 and 446 were issued to the exporter pursuant to 19 CFR 181.71 requesting evidence that the merchandise had been cut and sewn or otherwise assembled in Mexico as claimed in the Certificate of Origin. A proposed Notice of Action was issued when the exporter failed to respond to the CBP Form 28 and 446. In response to the proposed Notice of Action, protestant submitted various documents including the Certificate of Origin from the Mexican exporter, contracts for production of the merchandise in Mexico, documents certifying the country of origin of the fabric used in the manufacture of the merchandise and transportation documents. However, protestant did not produce the cutting and sewing records from the manufacturer as requested. While the regulations do not mention cutting and sewing records, they likewise do not identify what information should be considered relevant to an origin determination.
Nevertheless, CBP not only requested the cutting and sewing records but also other documentation such as transportation and receiving records, time cards and internal production orders. Only after taking into consideration all of the evidence submitted by the protestant, which did not show that the exporter manufactured the subject merchandise as claimed in the Certificate of Origin, did CBP consider the lack of cutting and sewing records insufficient. The lack of cutting and sewing records in addition to the admission that the two other manufacturers were the actual producers of the merchandise led the Port to reasonably conclude in the Final Notice that the evidence was invalid, insufficient and conflicting. The totality of the evidence indicates that the merchandise was not manufactured by the exporter as indicated in the Certificate of Origin. Inasmuch as the Certificate of Origin did not correctly identify the manufacturer of the merchandise and because the NAFTA claim made for the entries could not be verified as provided for in the regulations, the merchandise is ineligible for NAFTA preferential treatment.
HOLDING:
Pursuant to 19 CFR Part 181, the merchandise is not eligible for NAFTA preferential treatment because the blanket Certificate of Origin accompanying the entries was not correct and the verification conducted by CBP did not show that the merchandise was manufactured by the exporter as claimed in the Certificate of Origin.
The protest should be DENIED. In accordance with the Protest/Petition Processing Handbook, (CIS HB, June 2002, pp 18 and 21), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision
must be accomplished prior to mailing of the decision. No later than sixty days from the date of this letter, 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 by other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division