CLA-2 OT: RR: CTF: TCM H158256 RES
Port Director
U.S. Customs and Border Protection
Service Port-Charlotte
1901 Crossbean Drive
Charlotte, NC 28217
ATTN: Stephanie Allen, Import Specialist
RE: Application for Further Review of Protest No. 1512-10-100149; Tariff classification of cotton rolls.
Dear Port Director:
This letter is in reply to the Application for Further Review (“AFR”) of Protest number 1512-10-100149, filed December 1, 2010, on behalf of American Fiber & Finishing (“American Fiber” or ”Protestant”). The Protest is against U.S. Customs and Border Protection’s (“CBP”) classification of certain cotton rolls under heading 5208, Harmonized Tariff Schedule of the United States (“HTSUS”), as woven fabrics of cotton. In reaching our decision, we examined a submitted sample of the merchandise and we considered the arguments American Fiber made in its memorandum attached to the Protest and in a meeting with members of my staff on July 21, 2011.
FACTS:
The articles at issue are described in the entry documentation as “100% cotton, leno weave gauze rolls” (“cotton rolls” or “the fabric”). Protestant describes the fabric as unbleached and consisting of woven cotton with leno edges. According to the Protestant, the fabric has an average yard number of between 43 and 68, and consists of panels 50 to 61 inches in width.
CBP tested the fabric and concluded in lab report no. SV20101652, dated November 9, 2010, that it did not contain a leno weave but was a plain-woven fabric of bleached cotton with an average yard number of 51 and a weight of 15.3 g/m2.
The articles were entered December 22, 2009, under heading 5208, HTSUS, specifically in subheading 5208.21.60, HTSUS, as “[w]oven fabrics of cotton, containing 85 percent or more by weight of cotton, weighing not more than 200 g/m2: [b]leached: [p]lain weave, weighing not more than 100 g/m2: [of] number 69 or higher number: [c]heesecloth; lawns, voiles or batistes.” Based on the CBP lab report, the cotton rolls were liquidated on October 22, 2010, under the same subheading as entered.
American Fiber filed its Protest and AFR on December 1, 2010. American Fiber asserts that the proper classification of the cotton rolls is under heading 5803, HTSUS, as “[g]auze, other than narrow fabrics of heading 5806.”
American Fiber submitted a commercial invoice and a packing list from Jiangsu Yongtai Datang Medical Material Co to American Fiber. The commercial invoice lists the merchandise, the quantity, the unit price, and the total price. The term of sale is not listed on the invoice. American Fiber also submitted a bill of lading issued by Translink Shipping lines which corresponds to the commercial invoice. The bill of lading indicates that the merchandise shipped “freight collect.” In addition, American Fiber submitted an invoice from Translink Shipping Inc. to Jiangsu Datang which provides a list of charges including ocean freight and insurance. American Fiber claims that the dutiable value of the imported fabric included non-dutiable charges of international freight and insurance.
ISSUES:
Whether the subject cotton rolls are classified under heading 5208, HTSUS, as a woven cotton fabric, or under heading 5803, HTSUS, as gauze?
Whether the claimed international freight and insurance charges may be deducted from the price actually paid or payable for the imported merchandise?
LAW AND ANALYSIS:
Initially, CBP notes that the Protest was timely filed on December 1, 2010, which is within 180 days after the liquidation date of October 22, 2010. See 19 U.S.C. § 1514(c)(3). Additionally, CBP’s classification and appraised value of the merchandise is a protestable matter under 19 U.S.C. § 1514(a)(1)-(2).
Further Review of Protest No. 1512-10-100149 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(b) because the decision against which the Protest was filed is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Court of International Trade. The classification of a woven cotton fabric with a leno selvage is a case of first impression.
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (“GRI”), and, in the absence of special language or context which otherwise requires, by the Additional U.S. Rules of Interpretation (“ARI”). GRI 1 provides that the classification of goods shall be “determined according to the terms of the headings and any relative section or chapter notes.” In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI 2 through 6 may be applied in order.
In understanding the language of the HTSUS, the Explanatory Notes of the Harmonized Commodity Description and Coding System (“ENs”), which constitute the official interpretation of the Harmonized System at the international level, may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).
The 2009 HTSUS headings under consideration in this case are as follows:
5208 Woven fabrics of cotton, containing 85 percent or more by weight of cotton, weighing not more than 200 g/m2:
Unbleached:
5208.11 Plain weave, weighing not more than 100 g/m2:
5208.11.40 Of numbers 43 to 68
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Bleached:
5208.21 Plain weave, weighing not more than 100 g/m2:
5208.21.40 Of numbers 43 to 68
5803 Gauze, other than narrow fabrics of heading 5806:
5803.00.10 Of cotton:
American Fiber contends that the merchandise at issue is “gauze” because it has a leno weave on its selvages (the narrow edge of woven fabric that runs parallel to the warp) and is thusly classified under heading 5803, HTSUS. What constitutes “gauze” for classification purposes is defined in Note 3 to Chapter 58, HTSUS, which states:
For the purposes of heading 5803, “gauze” means a fabric with a warp composed wholly or in part of standing or ground threads and crossing or doup threads which cross the standing or ground threads making a half turn, a complete turn or more to form loops through which weft threads pass.
(emphasis added.) The “weft”, also called the “filling”, is defined as “the yarn running from selvage to selvage (edge to edge) at right angles to the warp”, and “warp” is defined as “the set of yarn in all woven fabrics that runs lengthwise and parallel to the selvage and is interwoven with the filling [weft].” The standing (group) threads and doup threads are the weft threads that create the leno weave. The standing weft thread runs straight underneath the warp threads while the doup weft thread twists around a standing weft thread and the warp threads. See Figure 1 (a basic leno weave). (w=warp thread, s=standing weft thread, and d=doup weft thread).
Figure 1
(w=warp thread, s=standing weft thread, and d=doup weft thread)
In addition, the ENs to Heading 5803, HTSUS, provide in relevant part:
Gauze (sometimes known as leno weave) is defined in Note 3 to this Chapter.
In plain gauze the crossing threads run alternately to the right and left of each standing thread passing over the weft every time but crossing under the standing threads; the standing warp threads are always on one side of the weft, and the standing warp and the weft are not interlaced but are held together by the crossing warp.
* * * * *
This heading includes:
* * *
(2) Fabrics comprising parts of gauze and parts woven by any other weave whatever their relative proportions. These usually have the effect of stripes running warpwise, checks or other varied designs.
* * * * *
The heading does not apply to plain loosely woven fabrics of plain weave, such as those chiefly used for bandages and dressings; these are often called gauze but fall in heading 30.05 (if medicated or put up in forms or packings for retail sale for medical, surgical, dental or veterinary purposes) or Chapters 50 to 55.
* * * * *
(emphasis added.) Thus, in order for a textile fabric to be classified as gauze, its weft threads must have a standing warp thread with a second warp thread that is twisted around the weft and the standing warp threads (i.e., a leno weave).
An examination of the sample provided by American Fiber reveals that the body of the fabric of the cotton rolls has one weft thread that passes successively under and over each warp thread, alternating each row, which, by all definitions, is a plain weave. See Subheading Note (ij) of Section XI, HTSUS, which defines a plain weave as “[a] fabric construction in which each yarn of the weft passes alternately over and under successive yarns of the warp and each yarn of the warp passes alternately over and under successive yarns of the weft.” See also Dictionary of Fiber & Textile Technology at 143. However, in the selvages of the fabric, there appears to be a single column of warp threads that are a leno weave.
American Fiber contends that because the cotton rolls have a leno weave on their selvages, they satisfy the definition of gauze set forth in Note 3 to Chapter 58. American Fiber cites from Note 3 to Chapter 58 the phrase “wholly or in part” and cites from the EN to Heading 5803 the phrase “whatever their relative proportions” as support for its argument that the overall weave of a fabric takes into account the weave that is on a fabric’s selvages.
U.S. courts have consistently held that the selvage is not considered part of the fabric for dutiable purposes. See A. Bonime v. United States, 22 C.C.P.A. 603 (1935). Specifically, the court in Bonime held that “. . . for dutiable purposes, the selvage could not be considered a part of the cloth at all.” Bonime at 607 (citing United States v. Mandel, 1 Ct. Cust. 223 (Ct. Cust. App. 1911)). Rather, the court “defined the term ‘fabric’ as meaning the body of the cloth without the selvage” and hence, classification of a fabric depends upon the construction in its body. Platon Fabrics Corp. v. United States, 56 C.C.P.A. 27, 29 (1968) (citing Bonime). The merchandise at issue in Bonime was fabric that had a twill weave in the body and a taffeta weave on the selvages. Bonime at 605. That case involved tariff provisions for fabrics which based classification upon the number of harnesses (shafts) used to weave the fabric into the finished merchandise. Id. at 608-09. The question before the court was whether to count only the number of harnesses used to make the body of the fabric or to count the number of harnesses used to make both the body and the selvages of the fabric. Id. The Bonime court concluded that the selvage was not a factor to be considered in the classification determination of the whole fabric article if the selvages do not form a material, substantial, or essential part of the fabric in actual consumption. Bonime at 606, 609 (citing Mandel; United States v. Auffmordt & Co., 3 Ct. Cust. 236 (Ct. Cust. App. 1912)).
Likewise, we interpret the “wholly or in part” language in Note 3 to Chapter 58 as referring to the weave in the body of the fabric and not its selvage, as some fabrics can be constructed of a combination of different weaves. Thus, in light of the holding in Bonime, et al, and Note 3 to Chapter 58, the weave of a fabric is determined by the weave that is in the body of a fabric and not by the weave that is only along a fabric’s selvages. Hence, American Fiber’s cotton rolls are classifiable as a plain weave woven fabric of cotton.
Our understanding is in accordance with EN 58.03. The “whatever their relative proportions” language in EN and heading 5803, HTSUS, contemplates a fabric that is made up of a gauze weave and some other weave in the body of the fabric, and not the selvages, as is indicated by the sentence “these [fabrics] usually have the effect of stripes running warpwise, checks, or other varied designs.”
American Fiber also claims that its fabric should be analyzed based on the factors laid out by United States Court of Customs and Patent Appeals in United States v. Carborundum Co., 536 F.2d 373 (C.C.P.A. 1976) to determine whether imported merchandise falls within a particular class or kind. Specifically, American Fiber argues that its fabric falls “under the class or kind of merchandise described in HTSUS heading 5803.” However, the Carborundum factors are applicable only in an analysis involving a “use provision.” Heading 5803 and heading 5208 are not use provisions. Rather, they are eo nomine provisions. Moreover, as explained supra, the classification of articles as “gauze” in heading 5803 is controlled by Note 3 to Chapter 58, HTSUS. Therefore, the Carborundum factors are not applicable to the analysis in this Protest.
The Protestant further asserts that its merchandise meets the definition of gauze as defined in The United States Pharmacopeia—National Formulary (“USP-NF”). CBP only looks at the common meaning of a term if it is not defined by the HTSUS. Because gauze is defined in Note 3 to Chapter 58, HTSUS, the USP-NF is not relevant on the classification of American Fiber’s cotton roll articles at issue here.
In summary, American Fiber’s cotton rolls’ fabric does not meet the definition of gauze as defined in Note 3 to Chapter 58, HTSUS, because it does not have a leno weave in the body of the fabric. Based on the CBP lab report, the fabric is a plain-woven fabric composed of 100 percent bleached cotton with a weight of 15.1 g/m2. Based on these characteristics, the cotton rolls are classifiable under subheading 5208.21.40, HTSUS, as “[w]oven fabrics of cotton, containing 85 percent or more by weight of cotton, weighing not more than 200 g/m2: [b]leached: [p]lain weave, weighing not more than 100 g/m2: [of] numbers 43 to 68.”
Alternative classification claim
American Fiber argues in the alternative the cotton rolls should be classified under subheading 5208.11.40, HTSUS, because the merchandise is unbleached and has an average yarn number of 43 to 68. However, the CBP lab report determined that the fabric is bleached. Absent a conclusive showing that the testing method used by the CBP laboratory is in error, or that the CBP's laboratory results are erroneous, there is a presumption that the results are correct. See Exxon Corp. v. United States, 462 F. Supp. 378, 81 Cust. Ct. 87 (1978). Protestant has not submitted any evidence to contradict the CBP lab report.
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Valuation Claim
On a separate issue, American Fiber claims that the dutiable value of the cotton roll merchandise at issue here was overstated because it included non-dutiable charges.
The preferred method of appraising merchandise imported into the United States is transaction value pursuant to section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (“TAA”), codified at 19 U.S.C. 1401a. 19 U.S.C. § 1401a(b)(1) provides, in pertinent part, that the transaction value of imported merchandise is the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus certain additions. The term “price actually paid or payable” is defined in 19 U.S.C. § 1401a(b)(4)(A) as:
[T]he total payment (whether direct or indirect, and exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller.
See also, 19 CFR 152.102(f).
In Treasury Decision (“T.D.”) 00-20, CBP reiterated its longstanding position that with regard to freight, insurance and other costs incident to international shipment, including foreign inland freight, the importer of record must deduct the actual costs for these charges from the price actually paid or payable in determining transaction value, if these costs are included in the price actually paid or payable. The notice advised that CBP considers actual costs to constitute those amounts ultimately paid to the international carrier, freight forwarder, insurance company or other appropriate provider of such services. Commercial documents to and from the service provider such as an invoice or written contract separately listing freight/insurance costs, a freight/insurance bill, a through bill of lading or proof of payment of the freight/insurance charges (i.e., letters of credit, checks, bank statements) are examples of some documents which typically serve as proof of such actual costs. Other types of evidence may be acceptable.
As previously noted, the invoice from Jiangsu Yongtai Datang Medical Material Co. to American Fiber does not indicate the term of sale of the transactions. No other evidence was submitted to establish that the international freight and insurance costs were included in the price for the goods. The bill of lading indicates “freight collect” which typically means that the receiver of the goods pays the transportation costs. Since American Fiber has not provided sufficient evidence to substantiate its claim that the international freight and insurance costs were included in the price paid to the seller of the merchandise, no deduction may be made for these charges.
HOLDING:
Pursuant to GRI 1, the 100% cotton leno weave gauze rolls are classified under subheading 5208.21.4090, HTSUSA, as “[w]oven fabrics of cotton, containing 85 percent or more by weight of cotton, weighing not more than 200 g/m2: [b]leached: [p]lain weave, weighing not more than 100 g/m2: [of] numbers 43 to 68: [c]heesecloth; lawns, voiles or batistes.” The general, column one, rate of duty is 10.2 percent, ad valorem, and the visa category is 226.
The claimed international freight and insurance charges are not deductible from the price actually paid for the imported cotton rolls. The dutiable value used in the duty calculation for the cotton rolls in the October 22, 2010, liquidation is correct.
The Protest should be DENIED in full. A copy of this ruling should be attached to the CBP Form 19 and provided to the protestant as part of the notice of action on the protest.
Sixty days from the date of the decision the Office of International Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
The designated textile and apparel category may be subdivided into parts. If so, the visa and quota requirements applicable to the subject merchandise may be affected. Since part categories are the result of international bilateral agreements which are subject to frequent renegotiations and changes, we suggest your client check the Textile Status Report for Absolute Quotas at www.cbp.gov close to the time of shipment to obtain the most current information available.
Sincerely
Myles B. Harmon, Director
Commercial and Trade Facilitation Division