OT:RR:CTF:ER
H209833 PTM
ENT 1-06
U.S. Customs and Border Protection
Area Port Director
237 West Service Road
Champlain, New York, 12919
Attn: Donald Yando, Assistant Port Director
Re: Request for Internal Advice pursuant to 19 C.F.R. 177.11(b)(2) regarding the steel mill certificate requirement under 19 C.F.R. § 141.89.
Dear Port Director:
This letter is in response to your request for internal advice per 19 C.F.R. § 177.1, dated March 6, 2012, concerning the requirement to provide steel mill certificates for imports of certain merchandise. We regret the delay in our response.
FACTS:
On June 30, 2011, Pratt & Whitney Canada Corporation (“PWC”) made entry of various aircraft parts on entry number UPS 34XXXXX-0. Lines 003, 005 and 006 on the entry summary pertain to steel pipe fittings, including tubes, elbows, and a union joint classified under headings 7304 and 7307 of the Harmonized Tariff Schedule of the United States (“HTSUS”). On October 6, 2011, CBP issued a request for information to PWC, requesting mill test certificates for the pipe fittings within thirty days from the date of the request. The port states that it requested the mill certificates to aid in the determination of the class of fittings and to verify the country of origin of the fittings, as certain fittings from China are subject to antidumping duties. PWC was unable to provide the certificates within thirty days. On November 9, 2011, CBP issued a Notice of Action, stating that the mill test certificate was required to determine whether the merchandise at issue was subject to antidumping duty orders, and as a required document under 19 U.S.C. §1509(a)(1)(A). On December 2, 2011, CBP issued another letter to PWC, informing it that it had been referred to the Enforced Compliance Team for failure to comply with a lawful request for the production of records. The letter stated:
19 C.F.R. § 141.89 outlines additional information requirements for certain classes of merchandise. Iron or steel classifiable in Chapter 72 or headings 7301 to 7307 HTSUS (T.D. 53092, 559977) require a statement of the percentages by weight or carbon and any metallic elements contained in the articles, in the form of a mill analysis or mill test certificate.
PWC met with CBP officials on January 17, 2012. On February 9, 2012, PWC provided a letter to CBP summarizing its position with respect to CBP’s request for mill certificates. See Request for Internal Advice (Feb. 9, 2012). In its letter, PWC states that its main line of business is the production of aircraft engines, and the raw materials and parts it imports into the United States are used in the production of aircraft engines and are termed “product” internally. It states that it also imports items that do not directly relate to the production of aircraft engines, and these items are termed “non-product.” PWC states that the merchandise at issue is “non-product” and consequently does not have a mill certificate. However, it asserts that all of its products must meet a supplier certification process. The supplier certification process requires that each supplier certify that each part conforms to established specifications for that product. The specifications include the tolerable ranges for chemical composition percentages by weight, minimum tensile properties, and hardness as set forth in the Aerospace Material Specifications (“AMS”) standards. PWC provided a sample AMS standard. Additionally, it provided a “Certificate of Conformity” (“COC”) from the supplier that certifies that the part conforms to all applicable specifications, including AMS standards. However, the COC does not show test results for the required specifications.
PWC asserts that the mill certificate requirement in the CBP regulation 19 C.F.R. §141.89 is not binding on it because the regulation did not undergo the complete rulemaking process required by the Administrative Procedure Act (“APA.”). It further asserts that even if the regulation was properly promulgated, that the mill certificate requirement in the regulation is not supported by statutory authority. PWC also argues that a supplier certification accompanying the import is the functional equivalent of a mill certificate, and is therefore, in substantial compliance with the regulation. PWC alternatively requests that CBP agree to an “informed compliance period” of at least one year to allow PWC to bring its import compliance program into conformance with CBP regulations. You request internal advice regarding the legal issues raised in PWC’s letter.
ISSUES:
Whether 19 C.F.R. §141.89 was properly promulgated with requisite statutory authority, and remains enforceable.
Whether the certificate of conformance is a functional equivalent of a mill certificate.
Whether PWC is entitled to a one year “informed compliance” period.
LAW AND ANALYSIS:
The regulation at issue, 19 C.F.R. §141.89(a), requires additional information for imports of certain products. It provides, in relevant part:
§ 141.89 Additional information for certain classes of merchandise. (a) Invoices for the following classes of merchandise, classifiable under the Harmonized Tariff Schedule of the United States (HTSUS), shall set forth the additional information specified: [75-42, 75-239, 78-53, 83-251, 84-149.]…
* * *
Iron or steel classifiable in Chapter 72 or headings 7301 to 7307, HTSUS (T.D. 53092, 55977) -- Statement of the percentages by weight or carbon and any metallic elements contained in the articles, in the form of a mill analysis or mill test certificate.
Thus, the regulation requires additional information to accompany invoices for certain iron or steel products, and that information must be set forth in a mill analysis or mill test certificate, which PWC failed to supply for its entry.
PWC first asserts that 19 C.F.R. § 141.89, and namely the mill certificate requirement applicable to certain iron or steel products, did not undergo the complete rulemaking process, as required by the APA. Specifically, PWC argues that the regulation was only an interim rule and when it ultimately passed as a final rule, the mill certificate requirement was not included. As a result, PWC argues, “it is arguably not a law.” On the contrary, this regulation was properly promulgated and remains in effect. The Administrative Procedure Act at 5 U.S.C. § 553 sets out the procedures required of an agency when making rules. Section 553 requires government agencies to provide public notice of the proposed rule and the opportunity to provide comment on the proposed rule. See 5 U.S.C. § 553(b) & (c). Legacy Customs first gave notice of the regulation and solicited comments when it published T.D. 89-1. See Interim Regulations; Solicitation of Comments, 53 Fed. Reg. 51,244 (T.D. 89-1, Dec. 21, 1988). Further, a Federal Register notice advising that the time for public comments on the interim regulations was extended was subsequently published. See Extension of Time for Comments, 54 Fed. Reg. 9,429 (Mar. 7, 1989). The comment period was further extended to solicit information relating to invoice requirements when a “Notice of Extension of Time for Comments and Notice of Public Meetings” appeared in the Federal Register. See 54 Fed. Reg. 47,348 (Nov. 14, 1989). On October 2, 1990, legacy Customs published the “Notice of Final Rule” (T.D. 90-78) with regard to the Interim Regulations proposed by T.D. 89-1. See 55 Fed. Reg. 40,162 (Oct. 2, 1990). The “Notice of Final Rule” states that “[t]he interim regulations should be adopted as a final rule . . .” 55 Fed. Reg. 40,162. Thus, sufficient notice and opportunity to comment was provided, consistent with the APA.
PWC argues that CBP initially promulgated the regulation as an interim rule, but acknowledged that outstanding “issues” remained regarding invoice requirements when the final rule was adopted, and is therefore not law. See Request for Internal Advice at 5. In the Notice of Final Rule, 55 Fed. Reg. at 40,163, legacy Customs stated that:
[i]n view of the large number of complex issues raised in the numerous comments received on invoice requirements, and in consideration of the significant impact which invoice requirements have on the trade community, Customs has determined that further study is necessary before those invoice issues can be properly resolved…all issues regarding invoice requirements should be dealt with as appropriate in a separate document at a later date.
PWC notes that legacy Customs subsequently issued a notice of proposed rulemaking on invoice requirements that did not include a mill test certificate as a separate document apart from the additional information required on the invoice. See Notice of Proposed Rulemaking, 57 Fed. Reg. at 40,361 (Sep. 3, 1992). However, this proposed rule regarding invoice requirements was later withdrawn, leaving the invoice requirements of 19 C.FR. §141.89(a) intact. See Unified Agenda, 60 FR 23,754, 23,791 (May 8, 1995). Thus, the fact that legacy Customs stated that it would look at this issue further or even proposed a rule has no effect on the validity of a promulgated regulation.
PWC also argues that the regulation was promulgated without the requisite statutory authority. The regulation states that the authority applicable to the entire Part 141 of the CBP regulations is 19 U.S.C. §§66, 1448, 1498 and 1624. Subpart F of 19 C.F.R. Part 141, which includes the regulation at issue, was also issued under the authority of 19 U.S.C. §1481. PWC asserts that 19 U.S.C. §1481 provides no authority for CBP to require additional documentation beyond the invoice itself, and the regulation therefore exceeds the statutory authority of 19 U.S.C. §1481. However, the regulation has statutory authority independent of 19 U.S.C. §1481 by virtue of 19 U.S.C. §§66. Section 66 of Title 19 in the U.S. Code (19 U.S.C. §66), grants the Secretary of Treasury broad authority to issue regulations concerning imports so long as they are “not inconsistent with law.” See 19 U.S.C. §66. See United States v. Federal Insurance Co., 805 F.2d 1012, 1017 (Ct. App. Fed. Cir. 1986) (stating that "Section 66 [of 19 U.S.C.] provides simply that the Secretary shall prescribe rules and regulations with respect to import duties not inconsistent with law."). PWC mentions no law with which the requirement to present a mill test certificate in 19 C.F.R. § 141.89 is inconsistent, nor are we aware of any. Therefore, we find that CBP had the requisite statutory authority to require a mill test certificate as set forth in 19 C.F.R. §141.89(a).
PWC states that, even if CBP finds that 19 C.F.R. §141.89 is valid and a mill certificate is required, that the supplier certification included with the entry is the functional equivalent of a mill certificate. The port requested the mill certificates to aid in the determination of the class of fittings for proper classification, and to verify the country of origin to aid it in making a determination as to whether the fittings were subject to an antidumping order. See Request for Information, supra. Furthermore, the port states that the mill test provides necessary information about the chemical composition of the fittings. See Request for Internal Advice.
The mill test certificate serves several purposes. In Headquarters’ Ruling HQ H068635 (October, 2009), we described a mill test certificate (or mill analysis or mill test report) as:
a certified quality control document from a testing facility that outlines the chemical makeup and physical properties of materials required to meet certain specifications. Generally, these documents are provided by a steel foundry or manufacturer that tests the materials they produce, in which case the mill test certificate also provides the country of origin of the imported merchandise.
We further explained that:
In light of the fact that classification within chapter 72, HTSUS, and in headings 7301 to 7307, HTSUS, depends in large part on the physical and chemical properties of the imported metal, the information contained in a Mill Test Certificate is necessary to ascertain the proper classification of the merchandise. See, e.g., Headquarters Ruling Letter (HQ) 964553, dated May 2, 2001, New York Ruling Letter (NY) G88427, dated April 13, 20001 and NY I89228, dated January 2, 2003. This is the case with respect to used items as well as new. The fact that information must be in the form of a Mill Test Certificate or Mill Analysis reflects the need for CBP to verify the information presented by the importer. By ensuring that the physical and chemical properties of imported iron and steel are tested according to certified methodologies, CBP ensures uniform application of the HTSUS.
Mill Test Certificates are generally prepared by the foundries that manufacture the subject iron and steel. Thus, in addition to ensuring uniform application of the HTSUS, the documents facilitate CBP enforcement of the country of origin marking requirements of 19 U.S.C. § 1304 by verifying the claimed country of origin of the products. The certificates also aid the collection of anti-dumping duties. Id. (citing HQ 546226, Mar. 25, 1996).
Thus, CBP depends upon the mill test certificates to evaluate the physical and chemical properties of imported metal, and determine the country of origin. The information provided by the mill test certificates is used to determine the proper classification of the imported product, and to verify that the information provided by the importer with respect to the metal is correct. Furthermore, the mill test certificate is also useful in determining whether a particular import is within the scope of an antidumping duty order.
PWC provided a “Certificate of Conformance” issued by its supplier wherein the supplier certifies that the product conforms to PWC’s specifications. However, no test results are provided to corroborate the certification. In contrast, a mill test certificate is prepared by the foundry that manufactures the product and contains the actual results of the criteria that the product is tested for, as well as the country of origin. Consequently, the certificate of conformance provides no “[s]tatement of the percentages by weight or carbon and any metallic elements contained in the articles, in the form of a mill analysis or mill test certificate,” as required by 19 C.F.R. §141.89(a). As a result, if the ranges of the specifications fall across HTSUS subheadings or the scope of an antidumping order, it would not be possible to determine which applies without an actual mill test certificate. Therefore, we do not find that the certificate of conformance provided by PWC is the functional equivalent of a milling certificate.
Additionally, the mill test certificate is a required entry document. The CBP recordkeeping statute at 19 U.S.C. §1509(a)(1)(A) requires that importers provide to CBP any record required by law or regulation for the entry of merchandise, within a reasonable time after demand for its production is made. The appendix to the CBP regulations at 19 C.F.R Part 163 provides a list of records required for the entry of merchandise, and is referred to as “the (a)(1)(A) list.” For steel entries it requires “[o]rdering specifications, including but not limited to, all applicable industry standards and mill certificates, including but not limited to, chemical composition.” See 19 C.F.R. Part 163 Appendix. Thus, the mill test certificate is a required document for entries of steel products. Notably, the regulation does not make any allowance for the importer to provide a “certificate of conformance” in lieu of a mill certificate.
Lastly, PWC requests that CBP provide it with a one year “informed compliance” period of at least one year to permit it to bring its importation procedures into conformance with CBP regulations. PWC has asserted no statutory or regulatory basis that would permit it to be entitled to a one-year informed compliance period, nor are we aware of any. Moreover, inasmuch as the mill certificate requirement for the subject merchandise has been in effect since 1990, PWC should not require additional time to bring itself into compliance. Consequently, there is no legal requirement for the port director to provide PWC with a one-year informed compliance period.
HOLDING:
The CBP regulation 19 C.F.R. §141.89 was properly promulgated and remains in effect. Further, the certificate of conformance is not the functional equivalent of a mill certificate and should not be accepted in lieu of a mill certificate for the purposes of 19 C.F.R. §141.89. There is no legal basis that would require CBP provide PWC a one-year informed compliance period.
No later than 60 days from the date of this letter, the Office of Regulations and Rulings 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