OT: RR: CTF: VS H271198 CMR
U.S. Customs and Border Protection
City View Plaza-Suite 3000
#48 Rd. 165 Km. 1.2
Guaynabo, PR 00968-8000
RE: Internal Advice; NAFTA preferential treatment of certain plastic wrap
Dear Port Director:
We are providing internal advice with regard to Protest #4909-15-100036, and the Application for Further Review, filed by counsel on behalf of Walton & Post against your proposed denial of preferential tariff treatment to certain plastic wrap imported from Mexico. We note that two entries are at issue in the protest – one liquidated on March 13, 2015 and the other entry liquidated on May 15, 2015.
An importer has 180 days after the date of liquidation in which to file a protest against an action taken by Customs and Border Protection (CBP). We note that this office received an amended protest which was received by CBP on September 14, 2015, which is 185 days after the date of liquidation for the first entry. However, a review of CBP records indicates the protest was originally created on September 2, 2015 which means the protest was timely filed with respect to both entries at issue.
FACTS:
The entries at issue involve the importation of certain plastic wrap manufactured in Mexico. The plastic wrap is used in packaging food products and is known as “Meat Film Paper LCE.” It is manufactured in Mexico according to specifications to meet Walton and Post’s requirements. Your office did not question the classification of the merchandise in subheading 3920.43.10, Harmonized Tariff Schedule of the United States (HTSUS), which provides for: “Other plates, sheets, film, foil and strip, of plastics, noncellular and not reinforced, laminated, supported or similarly combined with other materials: of polymers of vinyl chloride: containing by weight not less than 6 percent of plasticizers: Made in imitation of patent leather.” The merchandise is described as comprised of 70 percent by weight of polyvinyl chloride resin and 25 percent by weight of plasticizers.
The merchandise was entered claiming preferential tariff treatment under the North American Free Trade Agreement (NAFTA). On August 7, 2014, your office issued a CBP Form 28 related to the March 2015 liquidated entry requesting information stating an origin verification was being conducted in accordance with 19 USC §§ 3301-3373. Your office requested:
Schematics/pictures/drawings; description of the good; manufacturing process flow chart, narrative, description, etc.; bill of materials indicating the HTSUS numbers and the originating status of each material.
On September 23, 2014, your office issued a CBP Form 29, Notice of Proposed Action, proposing to deny preferential duty treatment under NAFTA because there had been no response to the CBP Form 28 request for information. On February 23, 2015, your office issued a CBP Form 29, Notice of Final Action, denying preferential tariff treatment under NAFTA because no evidentiary documentation was received. The final notice identified the May 2015 liquidated entry as also being denied NAFTA treatment. However, a CBP Form 29 was issued specifically identifying the May 2015 liquidated entry and indicating preferential tariff treatment under NAFTA had been denied due to failure to provide affidavits from the manufacturers of the materials. Your office rejected the NAFTA claims and liquidated the merchandise as dutiable at 3.1 percent ad valorem for both entries.
As indicated above, the protest was timely file, and we note with regard to the application for further review (AFR), counsel merely checked “NO” in response to the three questions in box 15 of the CBP Form 19 and stated:
The denial of NAFTA preferences for this merchandise involves questions of law or fact which have not been ruled upon by CBP or the courts.
No other information or argument was submitted with regard to why AFR should be allowed with regard to this protest. However, your office approved the request for AFR. With regard to the NAFTA claim, additional information and arguments to support the claim were submitted with the protest, including: a bill of materials, a manufacturer’s affidavit from the Mexican manufacturer of the plastic wrap, affidavits from suppliers showing cost, purchase and manufacturing details for the raw materials used by the Mexican manufacturer in the production of the plastic wrap, and the NAFTA Certificate of Origin completed by the Mexican manufacturer.
The manufacturer’s affidavit indicates that only 5 percent of the materials used in producing the plastic wrap are sourced from outside the United States and Mexico. We note that the plastic wrap consists of five raw materials, of which two are sourced from outside the U.S. or Mexico. The affidavit also states that the regional value content of the plastic wrap is greater than 50 percent when the net cost method is used. Counsel notes that the polyvinyl chloride resin used in producing the plastic wrap is classifiable in heading 3904, HTSUS, which provides for “polymers of vinyl chloride or of other halogenated olefins, in primary forms.” The other ingredients, counsel states, are classified outside of Chapter 39.
ISSUE:
Whether AFR should be allowed in this case.
Whether the importer has submitted sufficient information to substantiate the NAFTA claim.
Whether the merchandise was properly classified.
LAW AND ANALYSIS:
The criteria required for the granting of a request for further review are set forth in 19 CFR § 174.24 of the Customs and Border Protection (CBP) Regulations. This section states, in pertinent part, further review will be accorded to:
. . . a party filing an application for further review which meets the requirements
of § 174.25 when the decision against which the protest was filed:
(a) 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;
(b) 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 Customs
courts;
(c) Involves matters previously ruled upon by the Commissioner of Customs or his designee or by the Customs courts but facts are alleged or legal
arguments presented which were not considered at the time of the original ruling;
or
(d) Is alleged to involve questions which the Headquarters Office, United
States Customs Service, refused to consider in the form of a request for internal
advice pursuant to § 177.11(b)(5) of this chapter.
In addition to the requirements regarding an application for further review set forth at 19 CFR § 174.24, 19 CFR § 174.25 provides:
(b) Contents. An application for further review shall contain the following information:
* * *
(3) A statement of any facts or additional legal arguments, not part of the record, upon which the protesting party relies, including the criterion set forth in § 174.24 which justifies further review. A showing of facts that support the allegation of a criterion set forth in § 174.24(c) will constitute a ground for the granting of further review in circumstances where the applicant’s inability to affirmatively make the allegations described in paragraph (b)(2) of this section would otherwise result in its denial.
In this case, the justification given for further review in box 16 of the CBP Form 19 was stated as follows:
The denial of NAFTA preferences for this merchandise involves questions of law or fact which have not been ruled upon by CBP or the courts.
A review of the file reveals no further information provided as to why further review of this protest should be allowed. We have stated previously that when a claim for further review is made, the protestant must explain how the regulatory provisions apply to the case at issue. Failure to seek a ruling on a transaction does not entitle a party to automatically receive AFR if there is a dispute with a port. There are no arguments set forth in the protest submission by counsel to explain how this situation falls within the regulatory requirements for further review. As the requirements of 19 CFR 174.24 and 174.25 have not been met, the AFR should not have been approved. We are returning the protest to your office for appropriate action. However, we are providing the following comments for consideration in reaching your decision.
The NAFTA is implemented in General Note (GN) 12 of the HTSUS. GN 12(a)(ii) states that goods are eligible for the NAFTA rate of duty if they originate in the territory of a NAFTA party and qualify to be marked as goods of Mexico. GN 12(b) sets forth the various methods for determining whether a good originates in the territory of a NAFTA party. Specifically, these provisions provide, in relevant part, as follows:
(a) Goods originating in the territory of a party to the North American Free Trade Agreement (NAFTA) are subject to duty as provided herein. For the purposes of this note—
(ii) Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note and that qualify to be marked as goods of Mexico under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether the goods are marked), and goods enumerated in subdivision (u) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn followed by the symbol “MX” in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.
(b) For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as “goods originating in the territory of a NAFTA party” only if—
they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that—
(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivision (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivision (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials; ….
There is agreement that the merchandise at issue is classified in heading 3920, HTSUS. As such, the appropriate tariff shift rule to apply under GN 12(t) is:
A change to headings 3901 through 3920 from any other heading, including another heading within that group, provided there is a regional value content of not less than:
60 percent where the transaction value method is used, or
50 percent where the net cost method is used.
Based on the information provided regarding the materials used to manufacture the plastic wrap, all of the raw materials make the requisite tariff shift.
GN 12(c) provides, in relevant part, with regard to regional value content:
Except as provided in subdivision (c)(iv) of this note, the regional value content of a good shall be calculated, at the choice of the exporter or producer of such good, on the basis of either the transaction value method . . . of the net cost method set out in subdivision (c)(ii).
* * *
Net cost method. The regional value content of a good may be calculated on the basis of the following net cost method:
NC – VNM
RVC = NC X 100
Where RVC is the regional value content, expressed as a percentage; NC is the net cost of the good; and VNM is the value of non-originating materials used by the producer in the production of the good.
Except as provided in subdivisions (d)(i) and (d)(ji)(A)(2) of this note, the value of non-originating materials used by the producer in the production of a good shall not, for purposes of calculating the regional value content of the good under subdivision (c)(i) or (c)(ii) of this note, include the value of non-originating materials used to produce originating materials that are subsequently used in the production of such good.
With regard to the three materials sourced from the U.S. and Mexico, counsel has submitted affidavits from the suppliers which show that the materials were produced in the U.S. or Mexico and sold to the manufacturer of the plastic wrap in Mexico. However, simply sourcing a material from a NAFTA party does not confer originating status on the material. No information was submitted to support the originating status of the three materials. It is unknown as to whether they were produced in the U.S. or Mexico of imported materials or materials wholly obtained in the NAFTA parties. Nor is there information as to whether their production, if of imported materials, results in a tariff shift of any non-originating inputs such that the materials become originating. In the case of the polyvinyl chloride resin used in producing the plastic wrap, classifiable in heading 3904, HTSUS, it is subject to the same tariff shift rule as the plastic wrap at issue, and thus, it is subject to a regional value content rule if any non-originating materials are used in its production. The only information we have with regard to the polyvinyl chloride resin is that it is produced in the United States. CBP cannot assume that materials produced in the NAFTA parties are originating simply by virtue of production in a party. Therefore, we agree with your office that insufficient information was submitted to substantiate the NAFTA claim with regard to these two entries.
Further, with regard to the classification of the plastic wrap, it was entered classified in subheading 3920.43.1000, HTSUS, which provides for: “Other plates, sheets, film, foil and strip, of plastics, noncellular and not reinforced, laminated, supported or similarly combined with other materials: of polymers of vinyl chloride: containing by weight not less than 6 percent of plasticizers: Made in imitation of patent leather.” Counsel supplied this office with a picture of the product in question and this office conferred with the National Import Specialist responsible for classification of goods in heading 3920, HTSUS. We believe the plastic wrap at issue is properly classified in subheading 3920.43.5000, HTSUS, which provides for: “Other plates, sheets, film, foil and strip, of plastics, noncellular and not reinforced, laminated, supported or similarly combined with other materials: of polymers of vinyl chloride: containing by weight not less than 6 percent of plasticizers: Other.”
HOLDING:
Protest #4909-15-100036 is referred back to your office for appropriate action. Application for Further Review of Protest #4909-15-100036 should not have been approved as the AFR request did not meet the requirements of 19 CFR §§ 174.24 and 174.25. We agree that insufficient information was provided to support the claim for preferential treatment under the NAFTA. The classification of the product at the time of importation was incorrect as it is not a good that is “made in imitation of patent leather.” The plastic wrap is properly classified in subheading 3920.43.5000, HTSUS. Goods entered under that subheading in the year 2014 were subject to duty at 4.2 percent ad valorem.
Sixty days from the date of this letter, Regulations and Rulings of the Office of International Trade will take steps to make this decision available to Customs and
Border Protection ("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,
Monika R. Brenner, Chief
Valuation & Special Programs Branch