OT:RR:CTF:VS H185798 YAG
Port Director – Milwaukee Service Port
4915 S. Howell Avenue, Suite 200 Milwaukee, WI 53207
RE: Application for Further Review (“AFR”) of Protest 3701-11-100006; Women’s Knit Wearing Apparel; Eligibility for Duty Free Treatment under the U.S.-Peru Trade Promotion Agreement (“PTPA”)
Dear Port Director:
This is in response to your correspondence, dated September 6, 2011, forwarding the Application for Further Review (“AFR”) of Protest 3701-11-100006, timely filed by Rode & Qualey, on behalf of the Protestant.
FACTS:
Protestant imports women’s knit wearing apparel, composed of 98% cotton/2% spandex, into the United States from a Peruvian manufacturer. This protest involves two (2) entries liquidated on February 18, 2011, comprised of styles A12252, 02152, and 02151C. The merchandise was entered duty free under subheadings 6102.20.00 and 6110.20.20 of the Harmonized Tariff Schedule of the United States (“HTSUS”), as eligible for the preferential tariff treatment under the U.S.-Peru Trade Promotion Agreement (“PTPA”).
On July 19, 2010, the Port of Milwaukee requested additional documentation from Protestant to confirm that the wearing apparel (styles A12150, A12251, A12250, A12252, A12152, A32252, and 02115) is fully manufactured in Peru. The Port specifically requested samples, invoices for the lycra yarn, identification of the fabric used to make pocketing fabric, and the applicable invoices and affidavits of origin for the subject entries (as well as for the yarn and pocketing fabric used to manufacture the wearing apparel). On August 31, 2010, Counsel for the Protestant provided additional documents. The Port, however, determined that only one invoice for one entry was provided and responded with another request for information, dated November 10, 2010, requesting the invoices for all of the subject entries. Since no response was received, the Port issued a Notice of Action on December 3, 2010, finding that the wearing apparel does not qualify for preferential tariff treatment and rate advancing the entries. In response to this notice, on December 29, 2010, Protestant stated that they reviewed the information on the subject entries and determined that only some styles on these entries are eligible for duty-free treatment under the PTPA. Specifically, Protestant determined that the styles on entries, the subject of this protest (styles A12252, 02152, and 02151C), are eligible for preferential treatment. On January 11, 2011, Protestant was advised that the merchandise on the entries subject to this protest is not eligible for the PTPA, and the entries were liquidated on February 18, 2011, under subheadings 6102.20 and 6110.20, HTSUS, at a duty rate of 16.5%. The Port determined that the documentation provided by Protestant was insufficient to support its claim. This protest followed.
In support of its argument, Protestant submitted the following documentation with respect to styles A12252, 02152, and 02151C: (1) yarn records (purchase orders; affidavits from yarn manufacturers, referencing the appropriate invoices; invoices; evidence of payments); (2) pocketing records (purchase orders; affidavits from manufacturers of pocketing yarn in Peru, referencing the appropriate invoices; invoices; proof of payments); (3) thread used to sew the wearing apparel in Peru (purchase orders; two affidavits from thread manufacturers in Peru, covering these purchase orders as well as the invoices applicable to the purchase orders; invoices; copies of payment for the merchandise for the purchase orders); (4) spandex documents (affidavit from the spandex manufacturer in the United States, referencing the style numbers and Protestant’s purchase order number; Protestant’s purchase orders; affidavit of the U.S. company’s representative in Peru, which sold the spandex yarn to Protestant; invoices; proof of payments); (5) dyeing and knitting records (two lists of employees who knit and dyed the yarn for the manufacturer of garments and the dates it was knit and dyed); (6) cutting and sewing records (planning charts, which illustrate the start and finish dates of production and how many pieces were targeted for completion and eventually completed on each day; the list of employees and the dates they worked on the sewing line making the particular style, the sewing order listing the quantities sewn by color and size; and the cutting order listing the merchandise by color and size; final inspection records).
The wearing apparel for the two (2) entries, subject to this protest, was shipped by the manufacturer from Lima, Peru on September 18, 2010 and on October 4, 2010. The airway bills were included with the documentation, as well as the proof of payments from Protestant to the manufacturer of the imported garments.
On June 21, 2011, the Port identified certain deficiencies in the protest and again requested additional information from the Protestant in order to verify the claim of origin under the PTPA. On June 21, 2011, the Port received a response from the Protestant, with multiple attachments to its submission. The following supplemental information was received:
Style A12252: (1) Bill of Materials, dated July 7, 2011, indicating raw materials used in the production of this style (as well as raw materials used in the production of pocketing fabric); (2) corrected knitting records, referencing 20 denier spandex, dated June 8, 2010 (knitting records previously submitted referenced 70 denier spandex, even though the yarn invoice and affidavit referenced 20 denier spandex); (3) affidavit from Vitotex (manufacturer of fabric), dated July 22, 2011 certifying that this style was knit for the garment manufacturer by Vitotex; (4) shipping records, dated June 14, 2010 and Customs Declaration from the supplier of spandex yarn, indicating that spandex yarn came from the United States; and, (5) knitting record, dated July 1, 2011 and affidavit from the garment manufacturer showing that the pocket fabric was knit in Peru.
Style 02152: (1) Bill of Materials, dated July 27, 2011; (2) Customs Declaration from the supplier of spandex yarn, indicating that spandex yarn came from the United States; and, (3) knitting records, dated December 21, 2010, for pocketing fabric and the affidavit of the garment manufacturer, dated September 10, 2010, certifying that the pocket fabric was knit in Peru. Further, since the yarn for this style arrived before the production dates, the following documents were provided: the purchase order for the 70 denier spandex, dated June 14, 2010; the spandex yarn manufacturer’s invoice to the manufacturer of garments, dated June 16, 2010; the spandex yarn manufacturer’s transport document, dated June 16, 2010; and, the garment manufacturer’s reception ticket, dated June 16, 2010;
Style 02151C: (1) Bill of Materials, dated July 27, 2011; (2) corrected knitting records, referencing 20 denier spandex, dated September 7, 2010 (knitting records previously submitted indicated 70 denier spandex, even though the yarn invoice and affidavit referenced 20 denier spandex); (3) shipping records, dated April 23, 2010 and Customs Declaration from the supplier of spandex yarn, indicating that spandex yarn came from the United States; (4) cutting record, dated September 16, 2010 for the light charcoal fabric; (5) corrected knitting record, dated September 10, 2010 and the affidavit of garment manufacturer, dated September 10, 2010, showing that the pocket fabric was knit in Peru.
Upon its review of the submitted documentation, the Port identified further deficiencies and on September 6, 2011, forwarded this protest to our office. The following deficiencies, as identified by the Port are common to all three styles of the imported garments:
The Bill of Materials provided is dated July 1, 2011; however, production took place in 2010 (the Bill of Materials should indicate the materials used at that time); and
Protestant previously stated that the pocketing material was 100% polyester and did not meet the requirements of the PTPA because it contained yarn from Asia. However, in its correspondence, dated August 31, 2010, Protestant states that it ordered a change to the pocketing material to comply with the PTPA. It is not clear when this change took place and whether the styles subject to this protest were affected.
Additionally with respect to Style A12252 the port notes that: (1) no updated knitting record was provided for number 232628 and the five rolls of fabric included in that document; and (2) an affidavit from Vitotex includes a vague description of the goods (“knitted fabric for different structures for the referring style”) and is dated July 22, 2011. Production took place in 2010. Concerning Style 02152 the port notes that: (1) the invoice for the 70 denier spandex (used in pocketing) is dated September 24, 2010, which is after the production of the goods began; and (2) attachment 6 of the resubmission is supposed to be a correct document indicating a sale of the spandex yarn to the manufacturer of the imported garments. However, the “Observacioines” box does not identify the manufacturer’s production order assigned to the production of this style.
On January 4, 2012, this office held a conference call with the representatives of Protestant and their counsel to address the deficiencies in Protestant’s documentation. On February 1, 2012, this office received a supplemental submission, addressing the issues raised. Our decision follows.
ISSUE:
Does the documentation, submitted by Protestant, support the claim for preferential tariff treatment under the PTPA for the imported garments?
LAW AND ANALYSIS:
The United States-Peru Trade Promotion Agreement was signed on April 12, 2006. The United States-Peru Trade Promotion Agreement Implementation Act (Pub. L. 110-138, 121 Stat. 1455 (19 U.S.C. §3805 note)), as amended by §1634 of the Pension Protection Act of 2006 (Pub. L. 109-280, 120 Stat. 1167), implemented the Agreement in General Note 32, of the HTSUS.
The Customs and Border Protection (“CBP”) Regulations applicable to the PTPA are contained in 19 CFR §10.901 to §10.934. Section 10.926 specifically addresses “Verification and justification of claim for preferential tariff treatment.” With regard to verification of a claim by a port, the regulation references different methods by which verification may be conducted, including written requests for information. In this case, that is what the port did; it issued a CBP Form 28 requesting specific information.
In reviewing documents submitted to support a claim for preferential tariff treatment under a Free Trade Agreement or other tariff preferential program, we consider the guidance issued to CBP field personnel and the importing community by CBP Headquarter offices in the form of memorandum and Textile Book Transmittals (“TBTs”). This guidance includes the February 10, 2009, memorandum entitled “U.S.-Peru Trade Promotion Implementation Instructions,” issued by the Executive Director, Trade Policy and Programs, Office of International Trade; TBT-07-019, “Documents Used to Verify Free Trade Agreement and Legislated Trade Program Claims for Textiles and Wearing Apparel,” issued by the Executive Director, Trade Policy and Programs, Office of International Trade on October 10, 2007; and TBT-11-004, “Additional Documents Used to Verify Free Trade Agreement and Legislated Program Claims for Textiles and Wearing Apparel,” issued by the Executive Director, Trade Policy and Programs, Office of International Trade on March 31, 2011.
With regard to the reasons given for denying the protest and taking into consideration the guidance contained in the February 10, 2009, memorandum and TBTs cited above, we have the following comments.
For all of the styles, subject to this AFR, the bill of materials provided in response to the numerous CF28s is dated July 1, 2011, whereas the goods were produced in 2010. The factory in Peru advised Protestant that the bill of materials shows the dates when the documents were printed in response to the requests from CBP, and not the actual dates these documents were prepared. Protestant provided multiple records, such as purchase orders, invoices, proof of payments, for yarn spandex, pocketing, thread, dyeing and knitting, as well as cutting and sewing records for the finished garments, which all indicate that the materials were sourced and the imported garments produced in 2010. Final inspection records are also dated September 14, 2010 (for style A12252) and September 30, 2010 (for styles 02152 and 02151C). Considering these documents and information, we accept Protestant’s explanation and determine that in this instance the date on the bill of materials submitted by Protestant is not fatal to preferential treatment under the PTPA.
On February 1, 2012, Protestant also provided copies of the company’s email communications, substantiating Protestant’s statement that the pocketing material, used in the production of the imported garments, was changed from 100% polyester to cotton jersey fabric in August 2010. Thus, considering the affidavits obtained from the manufacturers of yarn used for the pocketing and these email communications, Protestant was able to show that all three styles, manufactured in September 2010, contain qualifying pocketing material.
Moreover, with respect to style A12252, we find that the provided documentation substantiates the requirement that the fabric in question was produced and finished in Peru or in the United States. We note that the knit record provided for the pocket fabric is dated July 1, 2011; however, the garments were produced in 2010. In its supplemental submission, dated February 1, 2012, Protestant provided an affidavit from the fabric manufacturer, Vitotex, for the knitting of the fabric, dated May 25, 2010, which was prepared at the time of the knitting of the fabric for Style A12252. Protestant explains that the Vitotex affidavit submitted to the Port previously was dated July 11, 2011 because it was prepared on that date in response to the Port’s request for information. Since Protestant was able to locate the original affidavit, we are satisfied that the fabric for the imported garments was produced and finished in Peru. Furthermore, since the affidavit from the fabric manufacturer specifically refers to the style number in question (and all relevant documentation was provided for style A12252), we find the description of the fabric to be sufficient. On February 1, 2012, Protestant also provided a knitting record number 232628, dated August 6, 2010 to address our concerns.
Finally, concerning style 02152, with respect to the invoice for the 70 denier spandex (used in the pocketing), which is dated after the production of the imported garments began, Protestant states that it is post-dated because the pocketing had to be re-nit. Further, on February 1, 2012, Protestant provided a copy of the purchase order for the 70 denier spandex relating to production order 40654. Protestant stated that during their recent visit to the factory of the garment manufacturer in Peru, the manufacturer of the imported garments was able to confirm that this purchase order covered production order 40654. The “observacioines” box on the purchase order states that it covers certain production orders, as well as “y proyecciones PVP Agosto 2010,” which includes spandex for projections in August 2010 and would cover production order 40654. Once again, taking into account the fact that all other records provided by Protestant point to the fact that the imported garments are cut and sewn in Peru using fabric knit in Peru with Peruvian yarn, we accept Protestant’s explanation. We note that the connection between the purchase order for the 70 denier spandex and the production order could have been better established if there was a specific reference to that purchase order in the production record. Therefore, we urge Protestant to review this decision and its documentation to address these discrepancies in the future. Having reviewed the protest submission, the deficiencies found by the port, and the documentation submitted by Protestant to address the concerns of the port, the protest should be granted.
HOLDING:
Based on the facts presented above, the Protest should be granted.
In accordance with the Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), 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. 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 and Trade Facilitation Division