OT:RR:CTF:VS H192336 CMR

Port Director
U.S. Customs and Border Protection
6601 NW 25th Street
Room 272
Miami, FL 33122

RE: Protests and Applications for Further Review, Nos. 5201-11-100203 and 5201-11- 100204

Dear Mr. Suliveras:

On October 7, 2011, this office set aside the denials of further review issued by your port for Protest Nos. 5201-11-100203 and 5201-11-100204 and voided the denials of the protests. The protests were filed by Sandler, Travis & Rosenberg, P.A., on behalf of their client, Washington International Insurance Company. We set aside the denials of further review because in the application for further review (AFR) set forth in the protests, counsel argued that denial of the protest due to insufficiency of documents without notifying the surety of the alleged insufficiency and opportunity to correct it is inconsistent with the Court of International Trade’s decision in Estee Lauder v. United States, Slip Op. 11-23 (decided March 1, 2011). Customs and Border Protection (CBP) has not ruled upon the applicability of this court decision in situations involving the sufficiency of documentation in protests.

FACTS:

Each protest involves one entry of merchandise consisting of various apparel articles for which preferential tariff treatment was claimed under the Dominican Republic – Central America – United States Free Trade Agreement (DR-CAFTA).

With regard to the merchandise which is the subject of Protest No. 5201-11-100204, the port initially sought information from the importer to substantiate the preference claim by issuing a Customs and Border Protection (CBP) Form 28, Request for Information on March 17, 2010. Specifically, the port requested affidavits of origin from the producers of the fabric, yarn and thread used in manufacturing the entered garments. The request also included the same information for the elastic and trims. The CBP Form 28 indicated that the affidavits should “provide a complete description of

the item produced (including fiber content); producer; purchaser; date of sale; location of manufacturing plant; name, title, telephone number of person executing affidavit.” The information was requested for the entry at issue in the protest along with three other entries. We note the CBP Form 28 indicates by handwritten notation that no response was received as of April 28, 2010.

A proposed Notice of Action, CBP Form 29, was issued to the importer on April 28, 2010, indicating that due to the importer’s failure to respond to the request for information, the DR-CAFTA claims for the entry at issue and the additional three for which information had been requested would be denied. The notice noted that to avoid the denial of the preference claim, the requested information should be submitted within 20 days of the date of the notice. A handwritten notation notes a response was received by CBP on May 20, 2010.

On June 22, 2010, CBP issued a Notice of Action notifying the importer that the DR-CAFTA claim was denied because the submitted documentation failed to substantiate that the imported garments were originating and entitled to preferential treatment under the DR-CAFTA. The determination applied to all garments, except the women’s cotton knitted jackets on ten entries identified in the notice. The port listed 29 deficiencies with the documents and noted the list was not a finite list.

The entry at issue in Protest No. 5201-11-100203 was one of the entries listed on the CBP Forms 28 and 29 issued for the entry at issue in Protest No. 5201-11-100204. The surety was billed due to the failure of the importer to pay the assessed duties. The bill was mailed to the surety on October 26, 2010 and included the entries at issue in Protest Nos. 5201-11-100203 and 5201-11-100204. The protests were timely filed on April 18, 2011 and April 25, 2011, respectively.

In the submitted protests, counsel identifies each of the parties involved in the transactions and their roles. Counsel also identifies the documentation submitted to substantiate the DR-CAFTA claim for the individual styles in the entries.

The port listed reasons for denying each protest. These reasons are set forth below:

Protest 5201-11-100203 and Protest 5201-11-100204

Certificate of origin from yarn producer [X] was not acceptable. The certificate of origin was not an affidavit of origin and the document related to 50%

cotton/50% polyester yarn and 100% cotton yarn consigned to a company not named in the import transaction.

Affidavits were not provided from the producers of the rib knit fabric for the cuffs nor waistbands.

Protest 5201-11-100203

Bill of lading reflects exportation of cotton yarn, not polyester yarn.

Purchase order from importer does not reference the fiber content of the goods.

Protest 5201-11-100204

Invoice reflects yarn sold to a party not named in the import transaction.

Affidavit from 100% cotton yarn producer reflects yarn sold to a party not named in the import transaction.

Affidavit of fabric producer not acceptable. Various yarn producers were identified and the yarn producers were not reflected on the DR-CAFTA certifications. The affidavit did not provide a complete description of the fabric produced by the company. And, invoices and purchase orders referenced on the affidavit were not provided.

As noted above, the denial of AFR was set aside by this office on October 7, 2011. As such, we have reviewed the documentation submitted in support of the claim to the port, including the information submitted as part of the protest packet, and information submitted with the request to set aside the denial of the AFR which we view as supplemental documentation to the protest now before us. Due to the thorough review by the Port of Miami, we focused on the documentation the port found to be deficient in our review of this matter. We reviewed the deficiencies listed above, in addition to others noted by the port. Our decision is set forth below.

ISSUE:

Does the documentation submitted by the importer support the claim for preferential tariff treatment under the DR-CAFTA for the merchandise imported in the entry in question?

LAW AND ANALYSIS:

Before we address the substance of these protests, we address the applicability of the Estee Lauder case to these protests and other protests involving the sufficiency of documentation submitted to substantiate a preferential tariff rate under a preference program, including Free Trade Agreements. It is our view that the Estee Lauder case does not apply. The decision of the Court of International Trade therein goes to the sufficiency of a protest for purposes of determining whether it is valid. It does not address the sufficiency of documents which an importer submits to support its claim under a preference program. Similarly, the reference to Customs Directive 3550-065 (August 4, 1993) in the court decision pertains to information in a section addressing “Incomplete Protests” which clearly references 19 CFR 174.13 of the Customs and Border Protection Regulations. Section 174.13 (19 CFR 174.13) is entitled “Contents of protest.” Therefore, reliance on the Estee Lauder case is clearly misplaced.

The DR-CAFTA is implemented in the HTSUS in General Note (GN) 29. At issue in this case is whether the information submitted substantiated the claim that the merchandise met the terms of GN 29 and that certain materials used in the manufacture of the merchandise originated within the territory of one or more of the DR-CAFTA parties.

The Customs and Border Protection (CBP) Regulations applicable to the DR-CAFTA are contained in 19 CFR § 10.581 to § 10.625. Section 10.616 specifically addresses “Verification and justification of claim for preferential tariff treatment.” With regard to verification of a claim by a port, the regulation references different methods by which verification may be conducted, including written requests for information. In this case, that is what the port did; it issued a CBP Form 28 requesting specific information. The DR-CAFTA claim was denied because the importer failed to respond to the port’s request.

However, when the importer filed a protest against the port’s action of liquidating the entry without benefit of the DR-CAFTA claim, the importer submitted additional information to support the claim for preferential tariff treatment. The port reviewed the submitted documentation and concluded that the documents were deficient.

In reviewing documents submitted to support a claim for preferential tariff treatment under a Free Trade Agreement or other tariff preferential program, we consider the guidance issued to CBP field personnel and the importing community by CBP Headquarter offices in the form of memorandum and Textile Book Transmittals (TBTs). This guidance includes the April 26, 2006, memorandum regarding “Amendments to the U.S. – Dominican Republic – Central America Free Trade Agreement Implementation Instructions,” issued by the Executive Director, Trade Enforcement and Facilitation, Office of Field Operations; TBT-07-019, “Documents Used to Verify Free Trade Agreement and Legislated Trade Program Claims for Textiles and Wearing Apparel,” issued by the Executive Director, Trade Policy and Programs, Office of International Trade on October 10, 2007; and TBT-11-004, “Additional Documents Used to Verify Free Trade Agreement and Legislated Program Claims for Textiles and Wearing Apparel,” issued by the Executive Director, Trade Policy and Programs, Office of International Trade on March 31, 2011.

With regard to the reasons given for denying the protest and the specific documents cited by the port, and taking into consideration the guidance contained in the April 26, 2006, memorandum and TBTs cited above, we have the following comments.

Protest 5201-11-100203 and Protest 5201-11-100204

1. Certificate of origin from yarn producer [X] was not acceptable. The certificate of origin was not an affidavit of origin and the document related to 50% cotton/50% polyester yarn and 100% cotton yarn consigned to a company not named in the import transaction.

An affidavit of origin is not an absolute requirement. TBT-07-019 and TBT-11-004 are clear that documentation, other than affidavits, is acceptable provided it contains the elements described in TBT-07-019. Specifically, TBT-07-019 refers to affidavits or declarations. TBT-11-004 broadens the scope by not characterizing the documentation by name, but simply requires it contain the elements necessary to substantiate a claim for preferential treatment referenced in TBT-07-019. Therefore, rejecting the claim because the yarn producer submitted a certificate of origin as opposed to an affidavit of origin was an error on the part of the port.

The port also rejected this document because the yarn was consigned to a company not named in the import transaction. The record contains explanations from the importer as to the role of the company in question. The company is related to the fabric producer. On its website, the company states that the fabric producer in question is owned and operated by the company. The company’s letter, submitted as Exhibit F to the protest, explains that the company “buys, owns and provides the yarn” to the fabric manufacturer. We accept the explanation and see no reason to reject the Certificate of Origin submitted by the yarn producer.

2. Affidavits were not provided from the producers of the rib knit fabric for the cuffs nor waistbands.

The record shows one fabric manufacturer submitted an affidavit reflecting that it produced 80% cotton/20% polyester fleece fabric, 95% cotton/5% spandex rib knit fabric, 100% cotton jersey fabric, and 100% cotton rib knit fabric. The affidavit was signed by the plant manager in Honduras where the fabrics were produced. Three U.S. yarn manufacturers, a Guatemalan yarn manufacturer and an El Salvadoran yarn manufacturer were identified as supplying yarn for the production of these fabrics. The affidavit further identifies the yarn suppliers for each fabric identified on the affidavit.

Protest 5201-11-100203

3. Bill of lading reflects exportation of cotton yarn, not polyester yarn.

The port is correct that the referenced bill of lading refers only to cotton yarn. However, another bill in the file shows another yarn manufacturer as the exporter, the company at issue in 1 above as the consignee and the final destination as the fabric producer. This bill of lading indicates the shipper, bill of lading number, and that the commodity is 50/50 cotton yarn. Based on the yarn manufacturer’s affidavit, it produced 50/50 poly/cotton yarn. In drafting the bill of lading, the 50/50 was captured in the description of the yarn, but the cotton was the only fiber named and the polyester was apparently forgotten.

Purchase order from importer does not reference the fiber content of the goods.

We are unable to find a purchase order from the importer for the imported goods in the file. The only purchase order in the file was one for fabrics that the importer purchased and shipped to the garment manufacturer. That purchase order does not reference the fiber contents of the fabrics listed, but does specifically provide a product number and the style numbers for the garments to be made from such fabric. We cannot sustain denying preferential treatment based upon a document not available for our review and one which the port cannot locate at this time.

Protest 5201-11-100204

3. Invoice reflects yarn sold to a party not named in the import transaction.

The invoice does indicate sale to a third party but with the initials of a party related to the fabric producer following the third party name. Further, the invoice clearly indicates that the yarn is destined for the fabric producer. The affidavit from the yarn manufacturer indicates the yarn is sold to the fabric producer and fails to mention the third party intermediary. However, by letter dated October 15, 2010, the yarn manufacturer explained that the third party intermediary purchases the yarn from it and resells the yarn to the fabric producer’s related party. While the transaction appears somewhat convoluted, we have no basis upon which to reject the explanation.

4. Affidavit from 100% cotton yarn producer reflects yarn sold to a party not named in the import transaction. Also, affidavit from 50% cotton/50% polyester yarn producer sold to the same party as the 100% cotton yarn.

The party referenced as not part of the import transaction is the same party discussed in our response to 1 for protests 5201-11-100203 and 5201-11-100204 above. We are satisfied with the explanation of the role of the party and see no reason to reject the affidavit.

5. Affidavit of fabric producer not acceptable. Various yarn producers were identified and the yarn producers were not reflected on the DR-CAFTA certifications. The affidavit did not provide a complete description of the fabric produced by the company. And, invoices and purchase orders referenced on the affidavit were not provided.

The port did not request the invoices and purchase orders referenced on the affidavit, so we will not deny the claim for that reason. As for the affidavit of the fabric producer, we note three U.S. yarn producers are identified and one Guatemalan yarn producer is identified. The affidavit further identifies the yarn suppliers for each fabric identified on the affidavit. Further, the fabrics’ fiber composition is specified, as is their construction. For example, the producer of the yarns used for the 80% cotton/20% polyester fleece fabric is identified. In addition, the specific yarns used in the construction of that fabric are described as 20/1 100% cotton carded ring spun and 14/1 50% cotton – 50% polyester carded open end. We find the descriptions of the yarns and fabrics produced from such yarns to be complete and are uncertain as to what the port believed was lacking in the affidavit. We also note that three affidavits were presented from the fabric producer. Each affidavit varies somewhat as to the yarn suppliers used for the production of the fabrics.

As to the fabric and yarn producers identified on the certificates of origin, we note that for one certificate of origin for a garment consisting of 80% cotton/20% polyester knit fabric, two yarn producers are identified. The yarn producers are the producers identified on the affidavit for fleece knit fabric of the same fiber composition. The technical sketch with garment specifications for the subject garment describes the garment in part as “straight leg fleece pant.”

Another certificate of origin for a garment of 80% cotton/20% knit indicates the same fabric producer as the previously mentioned certificate, but different yarn suppliers. However, an affidavit was submitted from the fabric producer identifying the yarn suppliers as suppliers for 80% cotton/20% polyester fleece knit fabric produced by the company. The technical sketch with garment specifications for the subject garment describes Fabric A, the fabric for the body of the garment, as “FLEECE Laundered (Ctn/Poly 80/20%) 305 gms.”

Based on our review, we find the affidavits of the fabric producer to be sufficient to support the claims.

HOLDING:

We note that the decision herein is based upon the specific facts of this case and the documents submitted to and reviewed by this office. Based upon our review of the documents submitted in support of the claim for DR-CAFTA preferential tariff treatment, we disagree with conclusion of the port. We find that the documentation is sufficient to support the claim. The protest should be allowed.

In accordance with the Protest/Petition Processing Handbook (CIS HB 3500-08A, December 2007, pp. 24 and 26), 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 reliquidation of the entry in accordance with this decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision Regulations and Rulings of the Office of International Trade 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