OT:RR:CTF:FTM H320722 BJK
Mr. Eric Batt
Center Director
Apparel, Footwear, and Textiles
Center of Excellence and Expertise
U.S. Customs and Border Protection
33 New Montgomery Street
San Francisco, California 94105
ATTN: Marchele Wilson, Supervisory Import Specialist
RE: Application for Further Review of Protest No. 0708-20-100609; NAFTA TPL Eligibility
Dear Center Director,
The following is our decision regarding the Application for Further Review ("AFR") of
Protest No. 0708-20-100609, timely filed on December 16, 2020, by Delmar International on behalf of Rayonese Textile, Inc. ("Rayonese" or "Protestant"), concerning the eligibility of certain textile fabrics imported from Canada for duty free treatment under the Trade Preference Level ("TPL") provisions under the North American Free Trade Agreement ("NAFTA").
FACTS:
The textile fabrics at issue were entered as eleven different entries into the United States, between December 11, 2019 and December 23, 2019, within headings 5211, 5407, 5516, and 6006, of the Harmonized Tariff Schedule of the United States (HTSUS).[1] Additionally, the imports included the subheadings 9999.00.54 and 9999.00.55, HTSUS, as "Goods described in additional U.S. Note 4(a) to section XI" and "Goods described in additional U.S. Note 4(c)(i) to section XI," respectively.
At the time of entry, between December 11, 2019 and December 23, 2019, Protestant exhausted its company allowance of the TPL quota for the imported fabrics as provided by the Canadian Government for the 2019 year. While some of the entries possessed Tariff Preference Level Certificates of Eligibility ("TPL Certificates") issued by the Canadian Department of Foreign Affairs, Trade, and Development ("Global Affairs Canada" or "Canadian authorities"), other entries did not. According to Protestant, every year the Canadian government reallocates quota from companies that did not use their full allotment to companies that used all of its quota and had shipments that were not covered by TPL Certificates. Protestant was a recipient of the reallocated unused quotas by the Canadian Government and received TPL Certificates to cover entries that at the time of importation did not contain TPL Certifications. While CBP received TPL Certificates for some entries on December 24, 2019, the reallocated unused quota and subsequent TPL Certificates for the remaining entries were filed with CBP on February 25, 2020. Thus, as of February 25, 2020, CBP was in receipt of TPL Certificates covering all eleven of Protestant's December 2019 entries. Consequently, Protestant contends that there was an overpayment of duties, as the December 2019 entries that were previously outside of the company's quota are now all covered by a TPL Certificate issued by the Canadian Government.
Upon review of Protestant's eleven entries and its supporting documents, CBP contacted Protestant to discuss the TPL Certificates. In correspondence with Protestant, CBP noted that post-summary corrections ("PSC") would require opening the closed 2019 quota and modifying of those records. As such, CBP requested the dates of when the final batch of TPL Certificates was received from Canada. In response, Protestant explained that the TPL certificates for the eleven entries were issued on February 19, 2020 and signed on February 25, 2020. Protestant detailed that in the regular course of its business, it typically utilizes the allotment of their TPL quota by early December. However, after the end of the quota year, the Canadian authorities reallocate TPL quota that companies have not used to companies that exhausted its allotted TPL. Protestant noted that under this "retroactive" TPL quota it can apply for refunds on its full-duty December shipments, which were imported after the exhaustion of initial TPL quota and before the end of the quota year. In support of its claims, Protestant provided CBP with Customs Directives from December 2003 and December 2006 discussing TPL and TPL claims that are allowed and valid under NAFTA.
ISSUE:
Whether the subject entries are eligible for preferential tariff treatment under the NAFTA TPL provisions.
LAW AND ANALYSIS:
Initially, we note that the matter is protestable under 19 U.S.C. 1514(a)(2) as a decision on the rate of duty. The protest was timely filed within 180 days of liquidation of the entry made on November 6 and November 13, 2020. See 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)). Further review of the protest is warranted pursuant to 19 C.F.R. 174.24(a) and 174.25, as the protest is alleged to be inconsistent with a ruling of the Commissioner of Customs or his/her designee, or with a decision made at any port with respect to the same or substantially similar merchandise.
The North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057) was enacted on December 8, 1993. The law implemented the provisions of NAFTA.[2] Within NAFTA were provisions referred to as tariff preference levels or TPLs that allowed the importation of non-originating textile and apparel goods that met specified production requirements within the NAFTA parties. These TPLs were implemented in the additional U.S. Notes to Section XI of the HTSUS and were limited in the amount of goods that may utilize the TPLs. Once a TPL quota applicable to a NAFTA country's exports to another NAFTA country were reached, any further exports of goods of that TPL category to the same NAFTA country during that year were not accorded NAFTA preferential tariff treatment, but rather were subject to duty at the normal trade relation rate. See 19 C.F.R. 102.25 (previously 19 C.F.R. 12.132); see also 60 FR 58518 (Nov. 28, 1995) (U.S. Customs Service final rule implementing the submission of TPL Certificates for textile and apparel goods.).
In order for a garment to be dutiable at the NAFTA tariff rate, based on the TPL, three conditions must be met: first, the good must meet the requirements of the TPL definition in Section XI, Additional U.S. Notes 3 through 6, HTSUS; second, the good must be accompanied by a TPL Certificate in proper form; and, third, the yearly amount under the TPL must not have been filled prior to the presentation of the TPL Certificate. See 19 C.F.R. 102.25. If any of these three conditions are not met, then the good does not qualify under the TPL. Id.
Classification of the textile fabrics is not at issue, as both Protestant and CBP agree on the classification of the subject merchandise under the headings 5211, 5407, 5516, and 6006, HTSUS, including subheadings 9999.00.54 and 9999.00.55, HTSUS. For those entries under subheading 9999.00.54, HTSUS, Section XI, Additional U.S. Note 4(a) provides:
The rate of duty in the "Special" subcolumn of rates of duty column 1 followed by the symbol "CA" in parentheses shall apply to imports from Canada, up to the annual quantities specified in subdivision (c) of this note, of cotton or man-made fiber fabric and cotton or man-made fiber made-up textile goods provided for in chapters 52 through 55 (excluding goods containing 36 percent or more by weight of wool or fine animal hair), 58, 60 and 63, that are woven or knit in the territory of a NAFTA party from yarn produced or obtained outside the territory of one of the NAFTA parties, or knit in the territory of a NAFTA party from yarn spun in the territory of a NAFTA party from fiber produced or obtained outside the territory of one of the NAFTA parties, and to goods of subheading 9404.90 that are finished and cut and sewn or otherwise assembled from fabrics of subheadings 5208.11 through 5208.29, 5209.11 through 5209.29, 5210.11 through 5210.29, 5211.11 through 5211.29, 5212.11, 5212.12, 5212.21, 5212.22, 5407.41, 5407.51, 5407.71, 5407.81, 5407.91, 5408.21, 5408.31, 5512.11, 5512.21, 5512.91, 5513.11 through 5513.19, 5514.11 through 5514.19, 5516.11, 5516.21, 5516.31, 5516.41 or 5516.91 produced or obtained outside the territory of one of the NAFTA parties.
Additionally, for entries with subheading 9999.00.55, HTSUS, Section XI, Additional U.S. Note 4(c) provides, in pertinent part:
The annual quota limits for imports from Canada under subdivision (a) of this note shall be as follows:
. . .
1999 and subsequent years.......71,765,252 SME
Of the annual quantity of imports from Canada listed in this subdivision, no more than the quantity listed below may be in goods of chapters 52 through 55, 58 and 63 (other than subheading 6302.10, 6302.40, 6303.11, 6303.12, 6303.19, 6304.11
or 6304.91); and, of the annual quantity of imports from Canada listed in this subdivision, no more than the quantity listed below may be in goods of chapter 60 and subheading 6302.10, 6302.40, 6303.11, 6303.12, 6303.19, 6304.11 or 6304.91:
. . .
1999 and subsequent years.......38,642,828 SME
For purposes of this subdivision, the number of SME that will be counted against the quota level on imports from Canada shall be:
(i) for textile goods that are not originating because certain non-originating textile materials do not undergo the applicable change in tariff classification set out in subdivision (t) of general note 12 for that good, but where such materials are 50 percent or less by weight of the materials of that good, only 50 percent of the SME for that good; . . . .
There is no dispute that the subject textile fabrics meet the first requirement of TPL, and this merchandise qualifies under the appropriate definitions of Section XI, HTSUS.
Concerning the second requirement, a TPL Certificate must accompany the entries. Regarding TPL Certificates, 19 C.F.R. 102.25 provides that:
[T]he importer must submit to CBP a [TPL] Certificate of Eligibility, or its electronic equivalent, covering the products. The [TPL] Certificate of Eligibility, or its electronic equivalent, must be properly completed and signed by an authorized official of the Canadian or Mexican government and must be presented to CBP at the time the claim for preferential treatment is filed under 181.21 of this chapter.
Protestant entered the subject merchandise into the United States between December 11, 2019 and December 23, 2019, via eleven separate entries. For five of these eleven entries, Protestant attached TPL Certificates, issued to Protestant by Global Affairs Canada throughout December 2019; however, Protestant did not initially claim TPL eligibility with these certificates. Instead, Protestant claimed retrospective TPL eligibility for its eleven entries in February and March 2020, following the issuance of eleven TPL Certificates by Global Affairs Canada on February 25, 2020. While 19 C.F.R. 102.25 requires an importer to submit its TPL Certificate at the time the claim for preferential treatment is filed, in promulgating the final rule implementing the NAFTA TPLs for textiles, CBP explained that importers may submit the TPL Certificate within 180 days after entry is made. See 60 FR 58516 (Nov. 28, 1995). Specifically, CBP notes:
While a failure to supply the required [TPL] Certificate of Eligibility will preclude the filing of a claim for preferential tariff treatment and will result in liquidation of the entry at the non-preferential duty rate, Customs believes that importers in most cases will have adequate opportunity, following the date of entry, to submit the [TPL] Certificate and make the claim when the [TPL] Certificate is not available at the time of entry. Customs notes in this regard that the importer may supply the necessary documentation and make the claim either at any time prior to final liquidation or in connection with the filing of a protest within 90 days following liquidation. Moreover, under existing procedures, liquidation is delayed for a minimum of 90 days following the date of entry. Thus, an importer has at least 180 days from the date of entry in which to file a claim through submission of the required [TPL] Certificate of Eligibility. Id.
Here, Global Affairs Canada issued Protestant eleven TPL Certificates, on February 25, 2020, to cover its December 2019 entries. These certificates were presented to CBP along with revised entry summaries on February 27, 2020 and March 10, 2020. Delmar International, on behalf of Rayonese, submitted to CBP additional TPL Certificates for 2019 on June 9, 2020. As noted, the AFR was timely filed by Delmar International, on behalf of Protestant, on December 16, 2020. All of the TPL Certificates were submitted before the eleven entries were liquidated on November 6, 2020 and November 13, 2020, and the protest itself was filed within 180 days of final liquidation. Therefore, the subject textile fabrics meet the second TPL requirement as the TPL Certificates were submitted and the claims for preferential treatment were made in connection with the filing of a protest within 180 days following liquidation.
Finally, with respect to the third requirement, we must determine the date of presentation for each TPL Certificate and whether the yearly amount allowed under the TPL was filled at that point in time. In HQ 965827, dated November 5, 2002, CBP endeavored to determine the date of presentation when the subject merchandise at issue was released in 1999 while the protest with valid TPL Certificates was retroactively filed in 2001. CBP concluded that the intent of the regulations concerning tariff rate quotas, applied to the TPLs, dictated that the TPL could not be charged to 2001, if it were still open at the time of presentation. Instead, CBP concluded that:
[I]n order for the TPL to be charged to the period in which the merchandise was released, and to establish a date of presentation consistent with the quota period in which merchandise was released, the date of presentation for the subject merchandise should be the last day of the quota period in which the goods were released.
Since the subject textile fabrics at issue here released in 2019, the date of presentation for the TPL Certificates was December 31, 2019. On that date, the TPL for such Canadian goods was not filled. As a result, the subject textile fabrics are eligible for preferential tariff treatment under the TPL for the 2019 quota period.
In addition to its application by CBP in HQ 965827, dated November 5, 2002, CBP has consistently utilized the above three-part requirement and analysis in its determinations involving fabrics dutiable at the NAFTA tariff rate based on the TPLs. For example, in HQ H240508, dated July 16, 2015, CBP found that the fabric at issue should be granted NAFTA preferential duty; specifically incorporating the analysis of HQ 965827 regarding TPL Certificates. Similarly, in NY N304871, dated July 17, 2019, CBP referred to the tripartite analysis of HQ 965827 in its determination and found that the merchandise at issue met the first requirement of the TPL. Specifically, the fabrics met the TPL definition found in Section XI, Additional U.S. Notes 3 through 6, HTSUS, but the importer still needed to present to CBP a properly completed and signed TPL Certificate and show that the yearly amount allowed under the TPL was not filled prior to presentation of the TPL Certificate, which are the second and third requirements, respectively, to be TPL eligible.
Here, the subject textile fabrics meet the three-part requirement of TPL eligibility. As noted above, the entries meet the TPL definition in Section XI, Additional U.S. Notes 3 through 6, HTSUS, as the textile fabrics are classified under subheadings 5211.49.00, 5407.51.00, 5407.52.20, 5407.53.20, 5407.73.20, 5407.81.00, 5407.82.00, 5407.83.00, 5407.91.20, 5407.92.20, 5407.93.20, 5516.11.00, 5516.21.00, 5516.23.00, 6006.31.00, 6006.33.00, HTSUS, including the subheadings 9999.00.54 and 9999.00.55, HTSUS. Second, the goods were accompanied by valid TPL Certificates in proper form within 180 days of entry. Third, the yearly amount allowed under the TPL was not filled prior to the presentation of the TPL Certificates. As such, the eleven subject entries are eligible for preferential tariff treatment under the NAFTA TPL provisions.
HOLDING:
You are instructed to GRANT the Protest in Full. The merchandise is eligible for preferential tariff treatment under the NAFTA TPL provisions.
You are instructed to notify Protestant of this decision no later than 60 days from the date of this decision. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to this notification. 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 Customs Rulings Online Search System ("CROSS") at https://rulings.cbp.gov/ which can be found on the U.S. Customs and Border Protection website at http://www.cbp.gov and other methods of public distribution.
Sincerely,
Yuliya A. Gulis, Director
Commercial and Trade Facilitation Division
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[1] Specifically, the fabrics were entered under subheadings 5211.49.00, 5407.51.00, 5407.52.20, 5407.53.20, 5407.73.20, 5407.81.00, 5407.82.00, 5407.83.00, 5407.91.20, 5407.92.20, 5407.93.20, 5516.11.00, 5516.21.00, 5516.23.00, 6006.31.00, 6006.33.00, HTSUS. Heading 5211, HTSUS, provides for "Woven fabrics of cotton, containing less than 85 percent by weight of cotton, mixed mainly or solely with man-made fibers, weighing more than 200 g/m2:"; heading 5407, HTSUS, provides for "Woven fabrics of synthetic filament yarn, including woven fabrics obtained from materials of heading 5404:"; heading 5516, HTSUS, provides for "Woven fabrics of artificial staple fibers:"; and heading 6006, HTSUS, provides for "Other knitted or crocheted fabrics."
[2] The subject entries were filed in December 2019 during the period in which NAFTA was is in effect. Almost a year later, the United States-Mexico-Canada Agreement ("USMCA") was enacted by Congress on January 29, 2020. (See USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. 4511(a)).
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