CLA-2 OT:RR:CTF:VS H145540 KSG
Port Director
U.S. Customs & Border Protection
9 North Grand Avenue
Nogales AZ 85621
Re: Application for Further Review of Protest 2604-10-100028; NAFTA; sufficiency of documents
Dear Port Director:
This is in response to the Application for Further Review of Protest 2604-10-100028 timely filed by counsel on behalf of Sinatex SA de CV, claiming that certain imported 50/50 polyester/cotton yarn was eligible for preferential tariff treatment under the North American Free Trade Agreement (“NAFTA”).
FACTS:
This case involves 16 entries of 50/50 polyester/cotton yarn imported from Mexico from January 5, 2009, through September 8, 2009, classified in subheading 5509.53, of the Harmonized Tariff Schedule of the United States (“HTSUS”). The protestant states that the cotton yarn is produced in the U.S.
In response to a Request for Information (CBP Form 28), the protestant submitted information to CBP regarding the entries. The information submitted included purchase orders that included an invoice from a Chinese company for polyester fibers, a document on Sinatex letterhead (the Mexican exporter) written in Chinese and Spanish (untranslated), and a bale label from DAK Americas, indicating a U.S. address for polyester fiber marked “Made in India.” Production records were not submitted. Based on this response, CBP determined that the protestant had not shown that the polyester fibers used to produce the imported yarn were produced in Mexico. Therefore, your office determined that it was not demonstrated that the polyester/cotton yarn was an originating good under the NAFTA.
In a letter dated August 23, 2010, counsel for the protestant concedes that 23,735 kgs. of polyester fibers were of Chinese-origin and used to produce 47,482 kgs of 50/50 polyester/cotton yarn in Mexico. Counsel contends that 200,100 kgs. of polyester fibers were produced in Mexico and used to produce the 50/50 polyester cotton yarns. (The 50/50 polyester cotton yarns are produced by blending equal amounts of polyester fibers and cotton fibers.) The protestant states that the portion of the polyester yarn that it claims were produced using Mexican-origin polyester fibers and U.S.-origin cotton should be considered originating goods under NAFTA using an Inventory Management method.
The protest contains the following documentation:
a letter dated October 6, 2009, from Juan Ricardo Rodriguez Duran of Akra (a Mexican company) to Sinatex, stating that Akra supplied polyester fibers to Sinatex from the period of January 1, 2008, to August 31, 2009, and listing 8 invoices for 2008 and 6 invoices for 2009. For each invoice, the order number, the date of the invoice, a description of the polyester and the quantity are listed. The Akra letter then states that the polyester fibers were produced at the facilities of Invista at a Mexican address. Eight Akra invoices from 2008 and 2009, which are not translated from Spanish, are also attached.
a certificate of origin dated November 23, 2007, for 23.735 kgs. of polyester fibers that were produced in China;
an invoice dated December 21, 2007, from Xenit S.A. de C.V. in Mexico to Sinatex for polyester fibers
a chart labeled “exhibit C” prepared by counsel listing 16 entries of which 7 entries are identified as of Chinese origin; a second chart prepared by counsel listing entry numbers, date of entry, invoice number, batch number, number of pounds, and a dollar value for 7 entries.
a flow chart prepared by Sinatex titled “production process and procedural information” that provides:
Cotton>Blowing>Carding Unit>Sliver Lap>Ribbon Lap>Combing>
1st Mixing> Drawing>Polyester>Blowing>Carding Unit>Drawing>1st Mixing>Drawing
2nd Mixing>Drawing>3rd Mixing>Drawing>Roving>Spinning>
Winding>Inspecting>Packing>Warehouse
an untranslated document that has the name “Sinatex” at the top of the page and is written in both Chinese and Spanish;
a document described as a bale label with DAK America’s U.S. address and the phrase “Made in India”;
and a blanket NAFTA Certificate of Origin for 2009 prepared by Sinatex, listing Unisun Multinational Inc., as the importer, for cotton/polyester yarn that indicates the country of origin as Mexico. A country declaration is attached, prepared by Sinatex, which indicates that the cotton was grown in the U.S. and the yarn was made and spun in Mexico.
Your office proposed a rate advance in CBP Form 29, dated May 25, 2010, stating that the yarn was not originating under the NAFTA. A Notice of Action dated August 10, 2010, determined that the 16 entries were not originating goods under the NAFTA and that duties were owed on the 16 entries.
ISSUE:
Whether the protestant has demonstrated that the imported 50/50 polyester/cotton yarn is entitled to preferential treatment under the NAFTA.
LAW AND ANALYSIS:
To qualify for entry under the NAFTA, the rule set forth in General Note 12(b)(i), of the Harmonized Tariff Schedule of the United States (“HTSUS”), must be satisfied.
General Note 12(b)(i) provides as follows:
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) …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,
Section 181.71, Customs Regulations (19 CFR 181.71), provides as follows:
…Customs shall deny preferential tariff treatment on an imported good, or shall deny a post-importation claim for a refund filed under subpart D of this part, only after initiation of an origin verification under section 181.72(a) of this part which results in a determination that the imported good does not qualify as an originating good or shall not be accorded such treatment for any other reason as specifically provided for elsewhere in this part.
Section 181.72(a), Customs Regulations (19 CFR 181.72(a)), provides in pertinent part, as follows:
…Customs may initiate a verification in order to determine whether a good imported into the United States qualifies as an originating good for purposes of preferential tariff treatment under the NAFTA as stated on the Certificate of Origin pertaining to the good. Such a verification:
(1) May also involve a verification of the origin of a material that is used in the production of a good that is the subject of a verification under this section;…
Customs determined that the proper classification of the imported yarn was subheading 5509.53, HTSUS, and that the rule set forth in General Note 12(t), was not met because foreign-origin polyester fibers were used to produce the yarn.
Counsel contends that some of the polyester fiber used to produce the yarn was produced in Mexico, and that the polyester fiber is a fungible material. Therefore, counsel claims that some of the entries in question are originating goods. However, the documentation submitted by counsel, which does not include production records, does not demonstrate that any of the polyester fiber used to produce the yarn was originating.
It is acknowledged that at least some of the polyester fibers used to produce the polyester yarn were made in China, but no explanation is provided for the bale label which indicates a country of origin of India for some of the polyester fibers. Counsel submitted a sparse production flow chart, and a letter from Akra, a company in Mexico, with a declaration that alleges Akra supplied Sinatex with Mexican-origin polyester fibers produced by another Mexican company. Therefore, the only documents that address the origin of the polyester yarn are the letter on Akra letterhead and the NAFTA certificate of origin. These documents alone do not demonstrate to Customs satisfaction that any of the polyester fibers were produced in Mexico. We find that CBP properly determined that the polyester/cotton yarn were not originating goods and denied the NAFTA claim for the 16 entries.
We note that certain inventory management methods are allowed for NAFTA originating goods where co-mingled originating and non-originating materials are used and where appropriate recordkeeping supports the inventory management method. In this case, CBP find that the protestant has not demonstrated that any of the polyester fibers used to produce the yarn were originating. Further, assuming that the protestant had shown that some of the polyester fibers were originating, counsel would have to establish that the protestant has adequate recordkeeping in place to support a given inventory management method. Neither criteria are satisfied in this case.
Based on the above, CBP properly disallowed preferential treatment under the NAFTA for the imported yarn. The protest is denied.
HOLDING:
The protest is properly denied. CBP properly disallowed preferential treatment under the NAFTA for the imported yarn.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the Customs 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. 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 & Trade Facilitation Division