OT:RR:CTF:VS H128019 BGK
Mr. Munford Page Hall, II
Adduci Mastriani & Schaumberg LLP
1200 17th Street, N.W.
Washington, D.C. 20036
Re: Certificate of Origin under the North American Free Trade Agreement
Dear Mr. Hall:
This is in response to your letter, dated October 18, 2010, requesting a binding ruling on behalf of your client, pursuant to 19 C.F.R. Part 177, concerning their ability to issue a Certificate of Origin under the North American Free Trade Agreement (NAFTA).
Your client located in the U.S. procures cheese in 40-pound blocks, stated to be classifiable in subheading 0406.10 or 0406.90, Harmonized Tariff Schedule of the United States (HTSUS), from U.S. producers and either cuts the cheese into smaller pieces or shreds or grates it in their U.S. facility. The cheese, stated to be classifiable in subheading 0406.10 or 0406.90 (sliced) or 0406.20 (grated or shredded), HTSUS, is then packaged in retail or restaurant packaging for sale to U.S. customers who in turn export it to Canada and Mexico. Your client adds potato starch (powdered cellulose, stated to be classifiable in Chapter 11, HTSUS) to the shredded cheese, but other than that, does not add any ingredients to the cheese. Additionally, cheese from different producers is not commingled and is tracked by lot number. Your client obtains, and keeps on file, NAFTA Certificates of Origin from all of its U.S. cheese producers.
Your client wishes to issue a NAFTA Certificate of Origin, as a producer, to its U.S. customers who export the cheese to Canada and Mexico. Your client has also requested that, should they be allowed to issue such a Certificate of Origin, they will not be liable if the Certificate of Origin is found to be invalid because the Certificate of Origin from the U.S. producer, upon which your client relied, was found to be invalid.
Whether your client may issue NAFTA Certificates of Origin as a producer.
LAW AND ANALYSIS:
Under NAFTA, goods produced in Canada, Mexico, or the U.S. are eligible for preferential tariff treatment upon importation into one of the three countries if they satisfy certain rules. The rules are laid out in the various articles of the North American Free Trade Agreement. The corresponding regulations are set out in Part 181 of the Customs Regulations (19 C.F.R. Part 181). For purposes of this ruling, we are assuming that the cheese exported from the U.S. is originating under NAFTA.
Pursuant to Subpart C of Part 181 and NAFTA Article 501, an importer who claims NAFTA preference must make a declaration of that claim, and the declaration must be based on a complete and properly executed original Certificate of Origin, or copy thereof which covers the goods being imported. See 19 C.F.R. 181.21(a). It is further provided in 19 C.F.R. 181.22(b) that the Certificate of Origin shall be on U.S. Customs and Border Protection (CBP) Form 434 (or a form issued by the customs authority for Canada or Mexico or other approved format), signed by the exporter or authorized agent having knowledge of the relevant facts.
In Field 8 of CBP Form 434, the certifier is required to indicate whether or not they are the producer. If not the producer, the exporter is required to indicate in Field 8, by the numbers (1), (2), or (3), the basis for signing the Certificate of Origin. As noted in the instructions for CBP Form 434, the indicators refer to the following basis:
(1) your knowledge of whether the good qualifies as an originating good;
(2) your reliance on the producer's written representation (other than a Certificate of Origin) that the good qualifies as an originating good; or
(3) a completed and signed Certificate for the good, voluntarily provided to the exporter by the producer.
See also 19 C.F.R. 181.11(b).
The certification requirement is central to the implementation of NAFTA preference and gives effect to the understanding by all three Parties to NAFTA that a claim for tariff preference must be based on knowledge that a good originates. This knowledge must be actual knowledge of factual information that, under the post-entry verification procedures of NAFTA, is sufficient to demonstrate that the specific rule of origin is satisfied, e.g., that the change in tariff classification and the regional value content requirements are in fact satisfied.
In 19 C.F.R. 181.1(t), producer means a producer as defined in the appendix to [Part 181]. NAFTA Article 415 and the appendix to Part 181, Customs Regulations, define producer as a person who grows, mines, harvests, fishes, traps, hunts, manufactures, processes or assembles a good[.] In this case, the cheese comes to your client already in 40-pound blocks, and your client processes it by cutting it into smaller pieces or shredding or grating it, and then packing it for retail or restaurant sale. Therefore, processing occurs at two points in the U.S. before exportation.
In Headquarters Ruling Letter (HRL) 563274, dated August 3, 2005, CBP held that a truck part company, Mascot Truck Parts Ltd. (Mascot), may rely on another company's certificate of origin for a truck part and execute Certificates of Origin for refurbished transmissions as a producer. The transmission cases were originally manufactured in Mexico by a separate company, Transmission Technologies Corporation (TTC). TTC provided Mascot with Certificates of Origin for the cases. Mascot rebuilt the used transmission cases in their refurbished transmissions, and then issued Certificates of Origin for the refurbished transmissions as a producer. HRL 563274 found that Mascot was a producer with direct knowledge of the originating status of the materials it uses to produce the goods.
Your client processes the cheese when it cuts, shreds, or grates it and packages it for retail or restaurant sale. As such, we find that your client may issue a NAFTA Certificate of Origin as a producer. Under 19 C.F.R. 181.12, an exporter or producer who signs a Certificate of Origin is required to maintain records relating to the origin of the goods for five years. See 19 C.F.R. 181.12(a). This would include the Certificates of Origin received from the original producers and any other records within the scope of the regulations. These must be made available to CBP if requested of either your client or its clients. See 19 C.F.R. 181.12(b).
Your client also asked about its liability if a Certificate of Origin that it receives from the producer of the 40 pound block of cheese is found to be invalid.
The civil penalty for a false certification in a NAFTA Certificate of Origin is found in 19 U.S.C. 1592, in relevant part:
(f) False certifications regarding exports to NAFTA countries
(1) In general
Subject to paragraph (3) [exception for changed information promptly reported], it is unlawful for any person to certify falsely, by fraud, gross negligence, or negligence, in a NAFTA Certificate of Origin (as defined in section 1508(b)(1) of this title) that a good to be exported to a NAFTA country (as defined in section 3301(4) of this title) qualifies under the rules of origin set out in section 3332 of this title.
19 U.S.C. 1592(f).
The certifier on the NAFTA Certificate of Origin makes the following certifications:
The information on this document is true and accurate and I assume the responsibility for proving such representations. I understand that I am liable for any false statements or material omissions made on or in connection with this document;
I agree to maintain and present upon request, documentation necessary to support this certificate, and to inform, in writing, all persons to whom the certificate was given of any changes that could affect the accuracy or validity of this certificate;
The goods originated in the territory of one or more of the parties, and comply with the origin requirements specified for those goods in the North American Free Trade Agreement and unless specifically exempted in Article 411 or Annex 401, there has been no further production or any other operation outside the territories of the parties; . . .
CBP Form 434 (04/97) (emphasis added).
Penalties are evaluated based on the facts as they were when the violation occurred and the presence, or lack thereof, of any applicable mens rea. Should a false certification occur, the decision of whether or not to penalize your client would be based on the circumstances of the violation. The decision to issue a Certificate of Origin is a voluntary one made by the company. An exporter/producer assumes the responsibilities that accompany the certifications when they sign the Certificate of Origin.
As a producer, your client is considered to have direct knowledge of the originating status of the materials it uses to produce the goods. See HRL 563274. In HRL 563274, CBP held that Mascot could use the Certificates of Origin provided by TTC as a reasonable basis for its own NAFTA Certificate of Origin because the Certificates of Origin and records provided by TTC constitute direct knowledge for Mascot. However, CBP did not go so far as to say that this would relieve Mascot from liability should TTC's Certificate of Origin contain a false certification. While your client may issue Certificates of Origin as a producer, based on the Certificates of Origin received from the cheese producers, CBP will not preemptively waive any liability that may arise from such reliance.
Your client may issue NAFTA Certificates of Origin for the packaged cheese as a producer because by cutting, grading, or shredding the cheese and packaging it, your client processes the cheese purchased from U.S. cheese producers. However, CBP will not preemptively waive liability for any false certifications that occur because the Certificates of Origin are based on certificates received from the U.S. cheese producers.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs official handling the transaction.
Monika R. Brenner
Chief, Valuation & Special Programs Branch