CLA-2: RR:CTF:TCM H047557 KSH
Port Director
U.S. Customs and Border Protection
9777 Via De La Amistad San Diego, CA 92154
RE: Application for Further Review of Protest 2506-08-100047; screen printed
girls’ cotton knit pullover
Dear Port Director:
This is in reply to your correspondence forwarding Application for Further Review of Protest (AFR) 2506-08-100047, filed by William Gould, on behalf of his client, California Concepts, Inc.
FACTS:
The merchandise at issue is identified as Style 258X548M. It is a girls’ 100% cotton knit pullover which features screen-printing of a butterfly on the front body. The fabric used to produce the pullover was produced outside the territory of a NAFTA party. It was imported into the United States where protestant states it was cut into components and exported to Mexico. In Mexico, protestant states the components were sewn and assembled, screen-printed and packaged. The finished pullovers were exported to the United States.
The protest is against Customs and Border Protection’s (CBP)
denial of duty free treatment under the North American Free Trade Agreement (NAFTA).
On January 13, 2007, protestant entered the merchandise subject to this protest duty-free in subheading 9999.00.60, of the Harmonized Tariff Schedule of the United States (HTSUS), as goods described in Additional U.S. Note 3(b) to Section XI, HTSUS.
On June 21, 2007, a CBP Form 28, Request for Information was issued seeking information to verify the applicability of the Tariff Preference Level (TPL) under Section XI, Additional U.S. Note 3(b). No response was received. A second CBP Form 28 was issued on October 7, 2007, requesting sewing and cutting tickets. On November 7, 2007, a final Notice of Action was issued denying the claim for TPL. On January 25, 2008, the merchandise was
liquidated in subheading 6110.20.2079, HTSUS, which provides for girls’ knit pullovers.
On July 23, 2008, protestant filed a protest and application for further review against the denial of the claim for TPL. Protestant’s AFR request was approved.
ISSUE:
Whether the pullovers are eligible for the NAFTA TPL under Additional U.S. Note 3(b) to Section XI.
Whether the pullovers are eligible for a duty allowance under subheading 9802.00.80, HTSUS, when returned to the U.S.
LAW AND ANALYSIS:
Initially, we note that the matter is protestable under 19 U.S.C. §1514(a)(2) as a decision on the duty rate. The protest was timely filed within 180 days of liquidation of the entry made on January 13, 2007. (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 CFR §§174.24(b) and 174.25 as the protest is alleged to be inconsistent with a ruling of the Commissioner of Customs or his designee, or with a decision made at any port with respect to the same or substantially similar merchandise. Specifically, protestant cites to Headquarters Ruling Letter (HQ) 967594, dated June 24, 2005.
The North American Free Trade Agreement Implementation Act (Public Law 103-182, 107 Stat. 2057) was enacted on December 8, 1993. The law implemented the provisions of the NAFTA. Within the NAFTA were provisions referred to as "tariff preference levels" that allow the importation of non-originating textile and apparel goods that meet specified production requirements within the NAFTA parties. These TPLs are implemented in the additional U.S. notes to Section XI of the HTSUS and are limited in the amount of goods that may utilize the TPLs.
Subheading 9999.00.60, HTSUS, is listed under Special Statistical
Reporting Numbers as follows:
TEXTILE AND APPAREL GOODS FROM CANADA OR MEXICO
The following provisions must be utilized in reporting textile and apparel goods imported from Canada or from Mexico under the terms of additional U.S. notes 3, 4 and 5 to section XI of the tariff schedule; and the goods described in these provisions must be reported in terms of their square meter equivalent, determined in accordance with such additional U.S. notes:
* * *
Imports of textile and apparel goods from Mexico under additional U.S. notes 3 (other than subdivision (c)), 4 and 5 to section XI:
Goods described in additional U.S. note 3(b) to section XI, except as provided in subdivisions (d) and (e) of such note:
9999.00.60 Cotton or man-made fiber apparel.
Additional U.S. Note 3(b) to Section XI, HTSUS, provides as follows:
The rate of duty in the "Special" subcolumn of rates of duty column 1 followed by the symbol "MX" in parentheses shall apply to imports from Mexico, up to the annual quantities specified in subdivisions (g)(i) of this note, of apparel goods provided for in chapters 61 and 62 that are both cut (or knit to shape) and sewn or otherwise assembled in the territory of a NAFTA party from fabric or yarn produced or obtained outside the territory of one of the NAFTA parties.
In the instant matter a Request for Information was issued on June 21,
2007 and on October 7, 2007 to verify the applicability of the claim for TPL. The claim for TPL was denied based on protestant’s failure to respond.
Protestant states it did not respond to the notices because it was in the process of closing its operations. Specifically protestant states that all of its employees handling imports were terminated in April 2007. Its last order was shipped in July 2007, it vacated its premises in August 2007, and states that it did not receive mail for a period of six months after vacating the premises.
The procedure for initiating a NAFTA origin verification is set forth in 19 C.F.R. §181.72. It provides that CBP may deny preferential treatment where a producer of a material fails to respond to an initial and follow up questionnaire.
The failure of the producer to provide the information requested by CBP after the verification is a proper basis for CBP to take action on the information available to it.
Moreover, the evidence submitted in conjunction with the instant protest and AFR merely contains cutting summaries which do not provide enough information to ensure that the garments were cut in a NAFTA country. Further, the Import Pedimento indicates that the merchandise was entered as a pullover in heading 6110, HTSUS, rather than as parts of garments in heading 6117, HTSUS. Based on the totality of the evidence, the claims for NAFTA TPL were properly denied.
The ruling Protestant cites, HQ 967594, is inapplicable to the facts presented herein insofar as it concerned the proper interpretation of the phrase "both cut (or knit to shape) and sewn or otherwise assembled in the territory of a NAFTA party" for purposes of Additional U.S. Note 3(b) to Section XI, HTSUS. The sole issue presented here, however, is the sufficiency of the evidence presented.
Alternatively, protestant requests that the entry be liquidated in subheading 9802.00.80, HTSUS, as U.S. made components assembled abroad.
Subheading 9802.00.80, HTSUS, provides a partial duty exemption for: [a]rticles, except goods of heading 9802.00.90 and goods imported under provisions of subchapter XIX of this chapter and goods imported under provisions of subchapter XX, assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process such as cleaning, lubricating and painting.
All three requirements of subheading 9802.00.80, HTSUS, must be
satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, CBP Regulations (19 CFR 10.24).
Section 10.14(a), CBP Regulations (19 CFR 10.14(a)), states in part that: [t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not lose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components. Section 10.16(a), CBP Regulations (19 CFR 10.16(a)), provides that the
assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, lamination, sewing, or the use of fasteners.
Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. See 19 CFR 10.16(a). However, any significant process, operation or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component. See 19 CFR 10.16(c). Screen-printing after assembly is considered to be an operation that advances the value, and therefore, the garments would not qualify for a reduced rate under HTS 9802.00.80. See HQ 559691, dated August 30, 1996. The pullovers would be dutiable upon the full appraised value of the garments.
HOLDING:
The pullovers are not eligible for the NAFTA TPL under Additional U.S. Note 3(b) to Section XI.
The pullovers are not eligible for a duty allowance under subheading 9802.00.80, HTSUS, when returned to the U.S.
Since the rate of duty under the classification indicated above is the same as the liquidated rate, you are instructed to deny the protest in full.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (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 the decision must be accomplished prior to mailing 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