OT:RR:CTF:VS H115766 KSG
Field Director
Office of Regulatory Audit
1901 Crossbeam drive
Charlotte NC 28217
Re: GSP; 35% value-content calculation; actual costs
Dear Director:
This is in response to your memorandum dated December 10, 2010, requesting our review of the conclusions of a Focused Assessment (“FA”) audit of imported goods claiming preferential tariff treatment under the Generalized System of Preferences (“GSP”) by The EnCore Group, Inc. At the request of counsel, an initial conference was held on this matter at our office. A submission dated November 11, 2010, was considered in this decision.
FACTS:
The FA examined twelve entries of goods that were entered as eligible for preferential tariff treatment under the GSP as products of Thailand for the period of January 1, 2005, through September 30, 2008. This includes six entries of ceramic mugs; two entries of shot glasses, one entry of pet bowls; one entry of coasters; one entry of switchplates; and one entry of candle votives. Eight products were produced by Chengteh Chinaware (Thailand) Co. Ltd. (“Chengteh”). Four products were sub-contracted out by Chengteh to Maesot Ceramic LP; both factories are located in Thailand.
EnCore states Chengteh produced clay, glaze and molds used to produce the twelve samples in Thailand. The clay contained seven materials produced in Thailand: sodium feldspar, pottery stone, silica sand, kaolin lumpang, sodium tripolyphate, sodium silicate, and MRD 086. Three materials not produced in Thailand were used to produce the clay: ball clay, crude kaolin and scrap.
The glaze contained six materials produced in Thailand: cobalt oxide, zirconium, kaolin, ceracil 325, wallastonite, stronimum. Five materials used to produce the glaze were not produced in Thailand: 28420 black cobalt 99if the mug was a black mug), feldspar kamado, petalite powder, calcined talcum, and FTF 802 feldspar powder.
The clay, glaze, and for some products, decals, were then used by Chengteh to produce mugs, and other ceramic products. Chengteh formed clay, finished clay, formed the mugs using a mold that it produced, fired the mugs, glazed the mugs, coated the mugs, placed a decal on some of the mugs, sprayed pigment on the mugs, and packaged the finished mugs.
For four entries, Chengteh provided clay, glaze, molds and decals to a subcontractor, Maesot Ceramic Limited Partnership, to produce goods. Maesot purchased clay and glaze from Chengteh and the decals were provided as an assist. Maesot produced the finished items. The four entries produced by Maesot included pet bowls, one entry of mugs, switchplates, and candle votives. Counsel indicated that it used the subcontract fee paid by Chengteh to Maesot to arrive at the figure counsel used to represent direct costs of processing in Thailand. For instance, for the pet bowls, counsel states that 76.74 baht or 68% of the regional value content of the products was attributable to the price paid by Chengteh to Maesot.
Counsel states in its submission that CBP failed to advise EnCore of any mathematical errors in the company’s calculation of value content related to samples 1, 2, 3, 4, and 5, inaccuracies between accounting records and invoices for materials, currency conversion rate errors, and incorrect metric measurement conversions. Counsel states that “we recognize the possibility that we may have made mathematical errors in our submission to Customs.” Counsel asked CBP to advise it of mathematical errors.
Chengteh states that it maintains in its ordinary course of business, production data and monthly department expenses but does not normally calculate product specific costs. Instead, it relies on a standard cost system to price its products. Counsel states that to respond to Customs audit requests, Chengteh needed to calculate actual department product specific costs for the imported goods that were the subject of the audit. Counsel submitted to CBP yearly audited financial statements, production records for the month in which each sample was produced, and department specific expense records (e.g., gas, electricity, depreciation, labor) for the month of production for each sample. For the utility costs claimed, counsel submitted summary department specific expense records of Chengteh which tied to the yearly financial statement of Chengteh. Chengteh did not submit billings from the utility company to support its figures for gas and electricity.
Since Chengteh does not maintain records of the actual costs of each product it produces, counsel created a methodology for the purposes of this audit to calculate the costs per good based on the weight of the clay used to produce the good in order to calculate the material costs, labor costs and direct costs of processing per department for a single unit. This methodology was used for the eight samples produced by Chengteh.
For instance, the costs for time and labor spent are tied to the weight of clay used to produce mugs; there is a calculation of production cost per kilogram. Counsel states that actual costs were derived from its records maintained in the ordinary course of business. Chengteh maintains records of actual costs incurred each month for each cost center for all products produced in that period (clay production, glaze production, mold production, forming, finishing, firing, glazing, inspection, coating, decal placement, decal firing, and packaging). CBP was not provided with supporting documentation for labor costs, time, and clay/glaze quantities. Only the records that Chengteh created to allocate a portion of the alleged cost to each product based on units produced and/or weight produced were submitted.
Chengteh provided computer generated documents to CBP for monthly production costs showing various columns and figures and hand-written notations adding up numbers it claims are labor costs for various processes. Counsel stated in a letter dated August 5, 2009, that they provided internal monthly expense reports showing direct labor costs for the particular month of production of the good and the internal monthly production report when the good was produced. There is no indication in the record that these documents were reviewed by an independent auditor.
Sample 1
Sample 1 is a mug bearing a Harley Davidson decal. Counsel claims that 57.35 percent of the dutiable value of the mug satisfies the value content requirement. This includes a claim that 22% of the Thai content is the cost of the decal and 26% of the Thai content is attributed to the direct costs of processing. Thai material costs are 3.6% for the cost of clay and glaze, and 2.5% for packaging. There are invoices from Usun Unique Industrial Co. Ltd and Goldenway Decal (Thailand) Co. Ltd for decals. Most of the invoices are not written in English. To account for costs on a per unit basis, counsel submitted a document with glazing labor costs and glazing expense costs, hand written on a computer generated document with 17 columns that represents the time spent and labor costs for glazing. The costs for time and labor spent are tied to the weight of the clay used to produce the mugs. There are invoices for materials that were used to produce clay and glaze. Your office noted that there were errors in the calculation of the valuation of the materials, and the currency conversion calculation. The clay and glaze were self-produced. Counsel submitted an affidavit from Goldenway Decal, dated June 16, 2009, addressed to CBP that states that the Harley Davidson decals for the 2008 period were domestically produced. There is no information in the file regarding the country of origin of the packaging that was acclaimed as a product of Thailand. Packaging costs provided by EnCore are based on the costs of cartons or trays but are not clearly broken out on a per unit basis.
Sample 2
Sample 2 is a black mug bearing a decal. Counsel claims that 44.1% of the dutiable value of the mug satisfies the value content. This includes a claim that 32% of the Thai content is attributable to the direct costs of processing. The Thai material costs are 4.5% for the cost of clay and glaze, 5% for the decal, and 3% for packaging. There are invoices for materials that were used to produce clay and glaze. The clay and glaze were self-produced. There is no information in the file regarding the country of origin of the decals or packaging. There are invoices that show the purchase of packaging materials and decals but there is no information regarding the origin of the packaging materials or the decals. Further, it is not clear that packaging costs were allocated on a per piece cost.
Sample 3
Sample 3 is a coated white mug. Counsel used a “first sale” price between the middleman and the foreign manufacturer for this good to calculate the dutiable value of the imported mug. There was no information submitted regarding the middleman, its relationship to the other parties, and no paper trail provided to support the first sale claim. There is no indication in the file that the entry was liquidated using the first sale value. The “first sale” price was used by EnCore as the denominator to calculate the 35% value-content for this sample.
Counsel claims that 36% of the dutiable value of the mug satisfies the value content. This includes a claim that 25% of the Thai content is attributable to the direct costs of processing. Thai material costs are claimed to be 6% for the cost of clay and glaze, and 5.5% for packaging. There was no information regarding the origin of the packaging materials.
Sample 4
Sample 4 is a coated mug bearing a decal. Counsel claims that 48.16% of the dutiable value of the mug satisfies the value content requirement. This includes a claim that 36% of the Thai content is attributable to the direct costs of processing. Thai material costs are claimed to be 5% for the cost of clay and glaze, 4% for the decals, and 4% for packaging. There was no information regarding the origin of the decal or packaging materials.
Samples 5 and 6
Sample 5 is a white shot glass. Sample 6 is also a shot glass. Counsel claims that 82.34% of the dutiable value of the shot glass satisfies the value content requirement. This includes a claim that 73% of the Thai content are attributable to the direct costs of processing. Thai material costs are claimed to be 2% for the cost of clay and glaze, and 7% for packaging. There was no information regarding the origin of the packaging materials. Counsel stated that information submitted to support sample 5 should also be used for sample 6, even though sample 5 was a 2008 entry and sample 6 was produced in 2004. Chengteh submitted a letter on its letterhead dated November 24, 2009, stating that it is unable to produce specific monthly costs for 2004 since it no longer has those records. The letter states that the costs for 2004, 2005, 2006, 2007, and 2008 were “very similar.”
Sample 9
Sample 9 is a coaster bearing a decal. Counsel claims that 90.3% of the dutiable value of the mug satisfies the value content requirement. This includes a claim that 37% of the Thai content are the direct costs of processing. Thai material costs are claimed to be 2% for the cost of clay and glaze, 18% for the decal, and 33% for packaging. There was no information regarding the origin of the decal or the packaging materials.
Sample 10
Sample 10 is a mug bearing a decal of a dog. Counsel claims that 60.7% of the dutiable value of the mug satisfies the value content requirement. This includes a claim that 31.5% of the Thai content are attributable to the direct costs of processing. Thai material costs are claimed to be 4% for the cost of clay and glaze, 22% for the decal, and 6.5% for packaging. There was no information regarding the origin of the decal or the packaging materials.
Samples 7, 8, 11 & 12
Samples 7, 8, 11, and 12 were produced by a sub-contractor, Maesot Ceramic Limited Partnership. Counsel submitted the subcontractor’s invoice, which was not translated into English, in support of its claim of Thai direct costs of processing for the four samples. Maesot provided an affidavit stating that it produced the four products in Thailand.
Counsel claims that 76% of the dutiable value of sample 7 satisfies the value content requirement. This includes a claim of 68% regional value content, based on the subcontractor fee paid to Maesot by Chengteh . The costs of clay and glaze were included in the subcontractor fee. Thai material costs were claimed to include 5% for a decal, and 3% for packaging materials. There was no information regarding the origin of the decal or packaging materials.
Counsel claims that 85.6% of the dutiable value of sample 8 satisfies the value content requirement. This includes a clam that 49% is attributable to the subcontractor fee. The material costs of clay and glaze are included in the subcontractor fee. The costs claimed for Thai content are 32% for the decal, and 3% for the packaging materials. There was no information regarding the origin of the decal or the packaging materials.
Counsel claims that 62% of the dutiable value of sample 11 satisfies the value content requirement. This includes a claim that 28% is attributable to the subcontractor fee. The costs of clay and glaze are included in the subcontractor fee. The costs claimed for Thai content are 32% for the decal, and 3% for the packaging materials. There was no information regarding the origin of the decal or the packaging materials.
Counsel claims that 37% of the dutiable value of sample 12, the candle votive, satisfies the value content requirement. This includes a claim that 34% is attributable to the subcontractor fee. Counsel’s submission indicates that the costs of clay and glaze are included in the subcontractor fee. The material costs claimed for Thai content are 2% for the decal, and 1% for the packaging materials. There was no information regarding the origin of the decal or the packaging materials.
ISSUE:
Whether the documents submitted for the twelve samples, as described, are sufficient to demonstrate that the samples are eligible for preferential tariff treatment under the Generalized System of Preferences.
LAW AND ANALYSIS:
Title V of the Trade Act of 1974, as amended (19 U.S.C.A. 2461-65), authorizes the President to establish a Generalized System of Preferences to provide duty-free treatment for eligible articles from beneficiary developing countries (“BDCs”). Articles produced in a BDC may qualify for duty-free treatment under the GSP if the articles are imported directly into the customs territory of the U.S. from the BDC and the cost or value of the materials produced in the BDC plus the direct costs of processing operations performed in the BDC is not less than 35 percent of the appraised value of the article at the time of entry into the U.S. See 19 U.S.C. 2463(a)(2) and (3).
General Note 3(c)(i), HTSUS, provides, in part, that special tariff treatment under the GSP is indicated in the “Special” subcolumn in the tariff by the symbols “A”, “A*,” or “A+”.
Thailand is designated as a beneficiary developing country for GSP purposes under General Note 4(a), HTSUS.
The “product of” requirement means that to receive duty-free treatment, an article either must be made of materials “wholly the growth, product or manufacture of” the BDC, or if made of materials imported into the BDC, those materials must be substantially transformed in the BDC into a new and different article of commerce. See 19 CFR 10.176(a). A substantial transformation occurs “when an article emerges from a manufacturing process with a name, character, or use which differs from those of the original material subjected to the process.” Texas Instruments Inc. v. United States, 681 F.2d 778 (1982).
If an article consists of materials that are imported into a BDC, the cost or value of these materials may be counted toward the 35% value-content requirement only if they undergo a double substantial transformation in the BDC. See 19 CFR 10.177(a)(2). Materials imported into the BDC must first be substantially transformed into a new and different article of commerce which becomes “material produced” and these materials produced in the BDC must then be substantially transformed into a new and different article of commerce (the final article). This intermediate product must be a distinct article of commerce. An article of commerce is commercially recognizable as an article which is readily susceptible of trade and one that persons might well wish to buy and acquire for their own purposes of consumption or production. See Azteca Mill Co. v. U.S., 703 F. Supp. 949 (CIT 1988), and F.F. Zuniga a/c Refractarios Monterrey, S.A. v. United States, 996 F.2d 1203 (Fed. Cir. 1993).
In this case, all of the samples were produced using clay and glaze that contained some non-Thai origin materials so they would not be considered wholly the growth, product or manufacture of the BDC. Chengteh self-produced the clay, and glaze in Thailand, and then used its clay and glaze to produce eight of the samples (mugs, one entry of shot glasses, and one entry of coasters) described in this case. The production of clay and glaze in the BDC, which is then used to produce finished mugs, shot glasses and coasters in the BDC is a double substantial transformation. The production of the clay and glaze would constitute a substantial transformation creating a new product with a new name, character and use. The use of the self-produced clay and glaze to produce mugs or other products would constitute the second substantial transformation. The four samples, which were produced using clay and glaze produced by Chengteh in Thailand and then made into finished products in Thailand by Maesot, would also undergo a double substantial transformation in Thailand.
As noted above, the GSP requires that merchandise must satisfy the 35% value-content requirement for preferential treatment. The language in 19 CFR 10.177(c) requires that the manufacturer’s actual cost for the materials in the BDC be utilized. Pursuant to 19 CFR 10.178(a), the direct costs of processing performed in the beneficiary country is defined as “those costs either directly incurred in, or which can be reasonably allocated to, the growth, production, manufacture, or assembly of the specific merchandise under consideration.” The direct costs of processing include: all actual labor costs; dies, molds, tooling, and depreciation on machinery and equipment which are allocable to the specific merchandise; research, development, design, engineering, and blueprint costs insofar as they are allocable to the specific merchandise; and costs of inspection and testing the specific merchandise.
Items not included in the direct costs of production pursuant to 19 CFR 10.178(b) include profit and general expenses of doing business which are either not allocable to the specific merchandise or are not related to the growth, production, manufacture, or assembly of the merchandise, such as administrative salaries, casualty and liability insurance, advertising and salesmen’s salaries, commissions or expenses.
The issue presented in this case is whether the twelve entries satisfy the 35% value-content requirement. This is a factual determination which must be made on an entry-by-entry basis.
We find that, based upon the particular facts involved, the documentation submitted by the importer does not demonstrate to the satisfaction of CBP that the 35% value-content requirement for the GSP is supported for the twelve entries examined.
I . Sub-contractor fee
Counsel claims the sub-contractor fee that Chengteh paid to Maesot represents the direct costs of processing for Chengteh for four products (samples 7, 8, 11 and 12). In the facts presented, the sub-contractor produced the finished good, not materials, and delivered it to the contractor, Chengteh. Chengteh was not the producer of the pet bowl, shot glass, switchplate and candle votive.
As stated above, pursuant to 19 CFR 10.178(a), the direct costs of processing performed in the beneficiary country is defined as “those costs either directly incurred in, or which can be reasonably allocated to, the growth, production, manufacture, or assembly of the specific merchandise under consideration.” Further, 19 CFR 10.177(c)(i) clearly states that the manufacturer’s actual cost is to be used for the materials. In this case, the direct cost of processing should be based on the sub-contractor’s manufacturing costs, since it is the sub-contractor who is the manufacturer of the finished imported good. The direct costs of processing include: all actual labor costs; and molds, and depreciation on machinery and equipment which are allocable to the specific merchandise. These costs would be from the sub-contractor who manufactured the product.
Items not included in the direct costs of production pursuant to 19 CFR 10.178(b) include profit and general expenses of doing business which are either not allocable to the specific merchandise or are not related to the growth, production, manufacture, or assembly of the merchandise. Therefore, the profit and general expenses of the sub-contractor would have to be subtracted out of the fee that Maesot charged to Chengteh. Further, any costs of Chengteh would not be directly related to the production of the articles and would not be included in the calculation of the 35% value-content. The sub-contractor would have to submit records to support the calculation of the 35% value-content; the invoice showing the price paid by Chengteh to the sub-contractor for the goods would not show the relevant costs. Since no records were submitted by the sub-contractor, the value-content cannot be substantiated for these imported goods.
II. Value-content calculation based on value of another good
For entry 6, counsel submitted a letter stating that the company no longer maintained records related to the costs of this product and instead submitted cost figures based on the production of other shot glasses produced in FY 2008. This entry was produced in November 2004. Pursuant to 19 CFR 10.177 and 10.178, only actual costs of the imported good can be used to calculate the 35% value content for GSP purposes. The importer cannot base its 35% value-content claim for this entry on costs of an entry in a different year (FY 2008).
III. First sale claim
For sample 3, counsel claimed that this entry should have been entered using the first sale between the factory and a middleman as the basis of appraisement. Counsel submitted no documents in support of this claim. This liquidated entry was not entered with a claim of first sale as the basis of appraisement. The statutory language provides that the denominator for the value-content formula is the “the appraised value of such article at the time it is entered.”
In Treasury Decision (“T.D.”) 96-87, 30 Cust. Bull. 52/1 (January 2, 1997), CBP set forth the documentation and information needed to support a ruling request that transaction value should be based on a sale involving a middleman and the manufacturer or other seller rather than on the sale in which the importer was a party. CBP advised that the importer must provide a description of the roles of the parties involved and must supply relevant documentation addressing each transaction that was involved in the exportation of the merchandise to the United States. The documents may include, but are not limited to purchase orders, invoices, proof of payment, contracts, and any additional documents (e.g. correspondence) that establishes how the parties deal with one another. The objective is to provide CBP with “a complete paper trail of the imported merchandise showing the structure of the entire transaction.” If the importer is unable to submit all the required documentation, there is a presumption that the second sale between the middleman and importer should be used as the basis of appraisement.
Since there was no documentation submitted to support the first sale claim, there would be no basis for CBP to conclude that this entry could be appraised based on the first sale. The entry was appraised based on the sale between the middleman and the importer. Counsel claims that using the first sale amount as a denominator, the imported mug meets the 35% value-content requirement (36% value-content was claimed). The value-content for this sample must be recalculated using the value of the sale between the middleman and the importer as the denominator for purposes of calculating the 35% value content.
Direct costs of processing methodology
For the remaining six entries (samples 1, 2, 4, 5, 9, and 10), the goods meet the 35% value-content requirement only if the direct costs of processing asserted by counsel are accepted. The direct costs of processing were calculated by counsel using a methodology described infra which it developed as a response to this audit, which did not use the actual costs of producing the articles based on business records of the factory. The calculation of the direct cost of processing is made up of labor costs, cost of utilities, depreciation of equipment and indirect labor.
Counsel did not submit internal records kept in the ordinary course of business to show the direct labor costs claimed for each item. The methodology devised, which uses internal department monthly production records and labor costs, and a hand-written notation is an averaging system which includes articles not included in this case based on the company’s monthly records. CBP is not able to audit these figures to determine their accuracy.
Counsel states in the August 5, 2009, letter in a footnote that indirect labor includes “salaries for the following personnel: production control staff, raw materials control staff, R & D staff, Q/C staff, warehouse/production logistics of semi-finished product staff, storage area staff, purchasing department staff, and maintenance division staff for machines.” There was no further explanation of the various functions of the personnel listed.
In order to be considered a direct cost of processing, the expense involved must be one which is directly related to, involved in and necessary for the growth, production, manufacture, or assembly of the specific product or article under consideration. Such costs include not only direct labor costs but also dies, tooling, and depreciation on machinery and equipment allocable to the specific merchandise. However, various indirect expenses, such as administrative costs, sales taxes, and casualty and liability insurance, are not direct costs of processing. See 19 CFR 10.178. CBP distinguishes between direct and indirect costs of processing by scrutinizing each particular service or function involved in the growth, production, manufacture, or assembly of the specific product or article, and not by considering the overall function of the manufacturing plant from which the product or article is made. See HRL 557087, dated July 22, 1993.
The costs of supervisory, quality control and similar personnel are specifically enumerated in 19 CFR 10.178(a) as being includable in the direct costs of processing. No explanation was given as to the particular functions of any of the personnel listed above that Chengteh included in the direct costs of processing for labor. It is likely that Q/C staff (we assume that this abbreviation is for quality control), and maintenance division staff for machines would be includable in the direct costs of processing assuming that such costs are allocable to the specific merchandise produced.
CBP would need further information regarding the functions of production control staff, raw materials control staff, R & D staff, warehouse/production logistics of semi-finished product staff, storage area staff, and purchasing department staff, and information on how they are allocated to the specific merchandise in order to determine if such costs are properly included in the direct costs of processing.
Costs for gas and electric utilities were included, but no supporting documents, or bills from utility companies showing monthly utility costs were provided to CBP. The summary worksheets provided are inadequate for CBP to verify the costs claimed for utilities. CBP is unable to determine if the costs claimed by Chengteh in this case were properly allocable to the merchandise produced.
Chengteh included two columns for depreciation costs claimed. This was explained in the August 5, 2009 letter. Chengteh described some depreciaton as direct (used solely by a particular department) and other as depreciation of machinery used by multiple production departments allocated to each department based on direct machinery depreciation. There was no explanation of the calculation of the amount of depreciation claimed and no supporting documentation for CBP to review. CBP is unable to determine the accuracy of this information.
Counsel argues that the costs do not have to be traced on a batch-by-batch basis, but only must be acceptable by generally accepted accounting principles and that the methodology meets those principles.
Headquarters Ruling letter (“HRL”) 563020, dated May 24, 2005, is relevant to this case. In HRL 563020, the importer claimed GSP preferential tariff treatment for imported goods based on a formula based on actual and standard costs where production costs were allocated by department rather than product. CBP stated that there was no information to indicate that the cost accounting methodology used was an accurate calculation of the cost or value of materials according to a specific production period that could be tied to particular lots of merchandise.
In this case, the production records counsel submitted were not kept in the ordinary course of the company’s business and are not the actual costs of labor, materials, utilities, and depreciation for the goods imported. The direct costs of production claimed are not supported by documentation submitted to CBP, contain hand-written notations on a computer generated record and were not independently audited. There was no evidence to show that the methodology created by counsel is in accordance with generally accepted accounting principles. The Customs regulations require that actual costs for materials, actual labor costs, and costs allocable to the specific merchandise be used to calculate the direct costs of processing. See 19 CFR 10.177 and 10.178. The importer has not demonstrated that it’s methodology for computing the costs of materials, labor costs and direct costs of processing satisfies these requirements.
Further, there is no burden on CBP to advise the importer of mathematical errors in records provided by the importer. We note that the auditors found many instances where the material invoices submitted contain mathematical errors. We find that it is reasonable that CBP gave less weight to records which contained mathematical errors.
Inclusion of the value of decals
These samples also include the value of decals as products of Thailand. The only documentation showing that decals were produced in Thailand is an affidavit from Goldenway related to one sample that was prepared in 2009 for the purposes of the audit. The other company that provided decals for sample one (Usun) did not provide any documentation regarding the origin of its decals. The affidavit alone, without any further documentation or information is not of great probative value, but does provide support for the claim that the Goldenway decal, used for the particular item, is of Thai-origin. For all the other decals, no documentation as to origin was provided. With regard to packaging costs, no documentation as to origin was provided, and CBP does not know whether the figures reflect the actual cost of packaging per piece. Therefore, we are unable to rely on these figures and cannot include the value of decals (other than the one sample that Goldenway provided an affidavit for) and packaging into the 35% value-content requirement as products of Thailand.
Lastly, counsel asserted that in the spirit of the GSP program, CBP should apply a lower standard of review to the cost calculations of companies that are located in BDC’s. The purpose of the GSP program is to encourage economic development in the BDC. Utilizing BDC-origin materials and significant, rather than minimal, production in the BDC promotes economic development in the BDC. Accordingly, CBP disagrees with counsel that a lower standard of review with regard to the value-content requirement would be in the spirit of the GSP program.
Based on the factors considered for the twelve samples examined, we find that the importer has failed to demonstrate that any of the samples satisfy the 35% value-content required by the GSP. Therefore, none of the samples are eligible for preferential tariff treatment under the GSP.
HOLDING:
Since the importer has failed to demonstrate that any of the twelve samples satisfy the 35% value-content required by the GSP, none of the samples are eligible for preferential tariff treatment under the GSP.
This decision should be mailed by your office to the party requesting Internal Advice no later than 60 days from the date of this letter. On that date, the Office of Regulations & Rulings will make the decision available to CBP personnel, and to the public on the CBP Home page on the internet at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Monika R. Brenner
Valuation & Special Programs Branch