OT:RR:CTF:FTM H313149 MJD
Center Director
U.S. Customs and Border Protection
Apparel, Textile and Footwear CEE
555 Battery Street
San Francisco, CA 94111
Attn: Delana F. Kametani-Webber, Import Specialist
RE: Application for Further Review of Protest No. 3001-20-102229; Eligibility of polypropylene bags for preferential tariff treatment under the United States-Panama Trade Promotion Agreement (“PANTPA”)
Dear Center Director:
This is in reference to the Application for Further Review (“AFR”) of
Protest No. 3001-20-102229, timely filed on or before June 10, 2020, by Sandler, Travis and Rosenberg, P.A., on behalf of their client, Ace Packaging, Inc. ( “Protestant”). The AFR concerns the eligibility of polypropylene bags for preferential tariff treatment under the United States-Panama Trade Promotion Agreement (“PANTPA”).
FACTS:
The AFR consists of five styles of polypropylene bags used to transport, carry, and store grass seeds commercially. The styles of the polypropylene bags are the following: 20323, (P) Black Beauty Ultra 25# BA; 27031, (P) Green “new” woven 25#; 22221, (P) Turf Pro S&S 25#; 27030, (P) Green “new” woven 50#; and 22220 (P) Turf Pro S&S 50#. The bags are made of clear woven fabric made from polypropylene strip less than 5mm in width, classified in heading 5407 of the Harmonized Tariff Schedule of the United States (“HTSUS”); translucent sheeting classified in Chapter 39, HTSUS; Biaxially Oriented Polypropylene (“BOPP”) film classified in heading 3920, HTSUS; and sewing thread classified in heading 5509, HTSUS, all from Vietnam. These raw materials are shipped from Vietnam to Panama for cutting and assembly. The final product is shipped directly to the United States from Panama. The manufacturing steps, for the polypropylene bags, are as follows:
Vietnam
Polyester staple fiber thread is formed.
BOPP colored film is formed (outer layer).
Translucent sheet is formed (middle layer).
Polypropylene fabric is formed (bottom layer).
Materials are shipped to Panama.
Panama
Polypropylene fabric is laminated with translucent sheet.
BOPP film is laminated on top of the translucent sheet and polypropylene fabric.
Bag configuration: folding, cutting.
Sewing EZ Open and packaging.
The bag is shipped to the United States
The polypropylene bags were entered as goods eligible for preferential tariff treatment under the PANTPA and classified under heading 6305, HTSUS, and specifically in subheading 6305.33.0040, HTSUSA (“Annotated”), which provides for “[s]acks and bags, of a kind used for the packing of goods: Of man-made textile materials: Other, of polyethylene or polypropylene strip or the like: Other: Weighing less than 1 kg, with an outer laminated ply of plastics sheeting: Printed with three or more colors.” On September 13, 2019, the U.S. Customs and Border Protection (“CBP”) laboratory tested a sample of the 27030, (P) Green “new” woven 50# polypropylene bag and reported via laboratory report no. LA20191046 the following regarding the sample:
The colors of the sample include green, white, black, red, and grey. The sample is a three-layer composite. The front layer is a ply of a clear sheet. The middle layer is a translucent sheet. The back layer is woven. The sample weighs less than 1 kilogram. The strips and the clear ply are composed of polypropylene (man-made textile material). The average width of the polypropylene strips is 2.5 millimeters.
On November 26, 2019, CBP issued a Notice of Action (“CBP Form 29”) stating that the polypropylene bags were classified as entered under subheading 6305.33.0040, HTSUSA, but were not eligible for preferential tariff treatment under the PANTPA. Subsequently, CBP tested a sample of the thread and reported on January 25, 2021, via laboratory report no. NY20201219 the following:
The sample is a 3-ply multiple polyester staple yarn on a cone and weighs 2122.3 grams including the support cone. The sample has a s twist and 224 turns per meter, the linear density of the sample is 2167 decitex. The sample is not impregnated, covered, coated, or laminated with silicones, wax paraffin, or starch.
The CBP laboratory also provided a supplemental laboratory report for the 27030, (P) Green “new” woven 50# sample of the polypropylene bag via laboratory report no. LA20191046S, dated April 1, 2021, which stated the following:
The sample’s colors include green, white, black, red and grey. The sample is a three-layer composite. The front layer is a clear sheet. The middle layer is a translucent sheet. The back layer is woven as it has interlaced strips. All three layers are composed of polypropylene (man-made textile material). The sample weighs less than 1 kilogram (0.13543 kg). The average width of the back layer polypropylene strips is 2.5 millimeters (mm).”
Protestant claims that the subject merchandise is eligible for preferential tariff treatment under the PANTPA.
ISSUE:
Whether the polypropylene bags are eligible for preferential tariff treatment under the PANTPA.
LAW AND ANALYSIS:
Initially, we note that this matter is protestable under19 U.S.C. §1514(a)(2) as a decision on classification and rate amount of duties chargeable. The protest was timely filed within 180 days of liquidation. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)).
On October 21, 2011, the President signed into law the United States- Panama Trade Promotion Agreement Implementation Act (the ‘‘Act’’), Public Law 112–43, 125 Stat. 497 (19 U.S.C. 3805 note), which approved and made statutory changes to implement the PANTPA. The PANTPA is implemented in the tariff schedule in General Note (“GN”) 35, HTSUS. GN 35(a) provides:
Originating goods under the terms of the United States-Panama Trade Promotion Agreement are subject to duty as provided herein. For the purposes of this note, goods of Panama, subject to subdivisions (b) through (o) of this note, that are imported into the customs territory of the United States and entered under a provision for which a rate of duty appears in the “Special” subcolumn of column 1 followed by the symbol “PA” in parentheses are eligible for the tariff treatment, and any applicable quantitative limitations, set forth in the “Special” subcolumn, in accordance with sections 201 and 202 of the United States-Panama Trade Promotion Agreement Implementation Act (Pub.L. 112-43; 125 Stat. 497).
GN 35(b) sets forth the criteria for determining whether a good is an originating good for purposes of the PANTPA. GN 35(b) states:
For the purposes of this note, subject to the provisions of subdivisions (c), (d), (n) and (o) thereof, a good imported into the customs territory of the United States is eligible for treatment as an originating good of Panama or of the United States under the terms of this note if–
the good is wholly obtained or produced entirely in the territory of Panama or of the United States, or both;
the good is produced entirely in the territory of Panama or of the United States, or both, and—
each of the nonoriginating materials used in the production of the good undergoes an applicable change in tariff classification specified in subdivision (o) of this note; or
the good otherwise satisfies any applicable regional value-content or other requirements set forth in such subdivision (o); and satisfies all other applicable requirements of this note and of applicable regulations; or
the good is produced entirely in the territory of Panama or of the United States, or both, exclusively from materials described in subdivisions (i) or (ii), above.
Since the polypropylene bags are made of non-originating materials, they are not considered goods wholly obtained or produced entirely in the territory of Panama or of the United States, or both under GN 35(b)(i), and they do not qualify under GN 35(b)(iii). We must next determine whether the polypropylene bags qualify under GN 35(b)(ii). As previously noted, the polypropylene bags are classified under subheading 6305.33.00, HTSUS. The applicable rule of origin for goods classified under subheading 6305.33.00, HTSUS, is in GN 35(o)/63, HTSUS, which provides the following:
Chapter rule 1: For purposes of determining whether a good of this chapter is originating, the tariff classification rule applicable to that good shall only apply to the component that determines the tariff classification of the good and such component must satisfy the tariff change requirements set out in the rule for that good.
Chapter rule 2: Notwithstanding chapter rule 1 to this chapter, a good of this chapter containing sewing thread of headings 5204, 5401 or 5508 shall be considered originating only if such sewing thread is wholly formed and finished in the territory of Panama or
of the United States, or both.
. . .
4. A change to headings 6304 through 6308 from any other chapter, except from headings 5111 through 5113, 5204 through 5212 or 5310 through 5311, chapter 54 or headings 5508 through 5516, 5801 through 5802 or 6001 through 6006, provided that the good is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of Panama or of the United States, or both.
In the instant case, the polypropylene fabric, classified in heading 5407, HTSUS, BOPP colored film and the translucent sheeting, both classified in Chapter 39, HTSUS, all from Vietnam, are non-originating materials that have to undergo an applicable change in tariff classification. Since, GN 35(o)/63.4 does not allow a change to heading 6305, HTSUS, from Chapter 54, the tariff shift rule is not met. Therefore, the polypropylene bags are not originating goods under the PANTPA. We note that the sewing thread is not subject to Chapter Rule 2 to Chapter 63, GN 35(o) because it is classified in heading 5509, HTSUS. Therefore, the sewing thread does not have to be wholly formed and finished in the territory of Panama or of the United States, or both, in order for the polypropylene bags to be considered originating. That said, as stated above, the bags are not originating goods because the relevant tariff shift in GN 35(o)/63.4 is not met.
Protestant, however, argues that the polypropylene bags are eligible for preferential tariff treatment under the PANTPA. Protestant asserts that when the producer in Panama laminates the polypropylene fabric classified in heading 5407, HTSUS, from Vietnam with the translucent sheeting classified in Chapter 39, HTSUS, also from Vietnam, it creates a self-produced material of heading 5903, HTSUS. According to the Protestant, this self-produced material of heading 5903, HTSUS, is the component that determines the classification of the bags. As a result, since GN 35(o)/63.4 allows for a change to heading 6305, HTSUS, from heading 5903, HTSUS, the polypropylene bags undergo the requisite change in tariff classification and are eligible for preferential tariff treatment under the PANTPA.
We disagree with the Protestant. The PANTPA defines material that is self-produced as “an originating material that is produced by a producer of a good and used in the production of that good.” Based on this definition, in order for the laminated fabric to be considered a material that is self-produced, it must meet the rules of origin for goods of heading 5903, HTSUS. Therefore, each of the non-originating materials, i.e., the translucent sheeting classified in Chapter 39, HTSUS, the BOPP film classified in heading 3920, HTSUS, and the polypropylene fabric classified in heading 5407, HTSUS, must meet the terms of the tariff shift for the laminated fabric classified in heading 5903, HTSUS, to be considered a self-produced material under the PANTPA. The applicable rule for goods classified in heading 5903, HTSUS, is in GN 35(o)/59.3, which provides the following:
A change to headings 5903 through 5908 from any other chapter, except from headings 5111 through 5113, 5208 through 5212, 5310 through 5311, 5407 through 5408 or 5512 through 5516.
Since the polypropylene fabric is classified in heading 5407, HTSUS, the tariff shift rule is not met, and the laminated fabric is not considered a self-produced material under the PANTPA.
Protestant cites to New York Ruling Letter (“NY”) N195248, dated December 14, 2011, to support their argument. In NY N195248, CBP found that cell phone cleaners made from Korean materials that were shipped to Canada for processing operations were originating goods under the North American Free Trade Agreement (“NAFTA”). The cell phone cleaners were classified in subheading 6307.10.20, HTSUS, and were made from woven fabric classified in heading 5407, HTSUS, and plastic classified in Chapter 39. CBP found that the cell phone cleaners originated under NAFTA because when the fabric was laminated in Canada it became a self-produced material of heading 5903, HTSUS, and satisfied the tariff shift requirement for a product of heading 6307, HTSUS.
However, NY N195248 is distinguishable from the case at issue here, as it concerns self-produced materials as defined under the NAFTA Rules of Origin. As mentioned beforehand, the PANTPA defines a self-produced material as “an originating material that is produced by a producer of a good and used in the production of that good.” (emphasis added). Therefore, pursuant to the PANTPA, the laminated fabric is considered self-produced only if enough processing is done by the producer so that the product specific rule for the self-produced material (in this case, the laminated fabric) is satisfied.
Protestant also cites to NY N303580, dated April 10, 2019, (modified by Headquarters Ruling Letter (“HQ”) H304571, dated January 6, 2020) where CBP found that certain mattress covers made from foreign material were eligible for preferential tariff treatment under the Dominican Republic-Central America-United States Free Trade Agreement (“DR-CAFTA”) even though the country of origin of the product was China. Protestant cites to NY N303580 to illustrate that like the mattress covers in NY N303580, the polypropylene bags qualify for preferential tariff treatment under the PANTPA, even though the country of origin of the bags is Vietnam. However, the issue in this case is not that the polypropylene bags are products of Vietnam, the issue is that these bags are not originating pursuant to GN 35(o)/63.4, and the laminated fabric classified in heading 5903, HTSUS, is not considered a self-produced material under the PANTPA. Accordingly, the subject polypropylene bags are not eligible for preferential tariff treatment under the PANTPA.
HOLDING:
The polypropylene bags are not eligible for preferential tariff treatment under the PANTPA.
You are instructed to DENY the protest.
In accordance with sections IV and VI of the CBP Protest/Petition Processing Handbook, 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 re-liquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP Home Page at http://www.cbp.gov by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
For Craig T. Clark, Director
Commercial and Trade Facilitation Division