OT:RR:CTF:VS H244700 MLR
U.S. Customs and Border Protection
240 N. Freeport Drive
Nogales, AZ 85621
RE: Application for Further Review of Protest No. 2604-13-100006: Country of Origin Certificate; North American Free Trade Agreement
Dear Port Director:
The following is our decision regarding the Application for Further Review (“AFR”) of Protest No. 2604-13-100006 (the “Protest”) filed by counsel on behalf of Continental Automotive Systems, Inc. (“Continental” or “protestant”), regarding the denial of preferential tariff treatment under the North American Free Trade Agreement (“NAFTA”) on automotive materials entered at the Port of Nogales.
Continental imports various automotive control modules and car radios produced in Mexico by its related company, Continental Automotive Nogales S.A. de C.V. (manufacturer). On July 13, 2012, Customs and Border Protection (“CBP”) issued a CBP Form 28 Request for Information concerning the control modules and TMU Audio Devices imported by Continental between January 1, 2011 and December 31, 2011. The scope covered all entries of goods classified under subheadings 9032.89.6075 and 8517.12.0020, Harmonized Tariff Schedule of the United States (“HTSUS”). CBP also requested the total volume and the total entered value for the goods. On August 7, 2012, CBP granted Continental’s broker’s request for a two week extension to respond.
According to your office, on August 28, 2012, Continental provided a partial response, submitting bills of materials for the top ten finished goods by value and volume imported under the above-listed tariff numbers and which identified the country of origin, tariff numbers and unit prices of the materials, as well as flow charts describing the assembly and manufacturing process of the finished goods. Continental did not provide the NAFTA Certificates of Origin of the finished goods, and did not provide any documentation related to the total volume of goods imported or the total value entered.
Your office indicated it had concerns with regard to the NAFTA eligibility of the finished goods. On September 7, 2012, CBP issued a CBP Form 29 Notice of Action indicating that it had previously requested from Continental a detailed written narrative depicting the assembly process, and that Continental instead provided flow charts that were not legible or comprehensible. The Notice also indicated that CBP had previously issued a letter to Continental about the inadequacy of their invoice descriptions, which were only product codes, and therefore CBP was unable to properly identify the goods to substantiate the entered classifications. CBP also noted that the component/material descriptions on the bills of materials that Continental provided were insufficient for CBP to determine the nature and functionality of the individual components and materials to ensure accurate classification and appropriate tariff shift. Furthermore, the Notice stated that the documentation submitted in response to CBP’s concerns that certain products were incorrectly classified, failed to adequately describe the functionality of the finished articles subject to preferential tariff treatment. Your office notes that in previous correspondence and meetings with the protestant, CBP and the importer had determined that the HTSUS classifications for many of the imported goods were incorrect. Finally, CBP noted Continental had failed to supply any NAFTA Certificates of Origin with its response, which “leads [CBP] to believe that you did not have a properly executed Certificate of Origin upon claiming preferential treatment.” Protestant was granted an additional 30 days to provide additional documentation in support of the NAFTA claims.
On October 9, 2012, CBP received a response on behalf of protestant from Barthco International, Inc. dba OHL-International (“Barthco”). The response included a cover letter dated October 8, 2012, bills of materials, assembly narratives for the goods, NAFTA Certificates of Origin, descriptive product literature, a listing of the top five imported parts by value and volume, and values for the parts. Three Certificates of Origin were submitted:
For the part numbers 28-4D57-008-300 and 28-4D57-0108-300, classified under 9032.89, HTSUS, a NAFTA Certificate of Origin was submitted for the blanket period of January 1, 2011 through December 31, 2011, signed and effectuated on May 15, 2011.
For the part numbers A2-C602-6103-800, AF-SC10-E070-600, AG-C0AG-4AGC-A00, AL-C82D-C090-800, AL-C82M-B090-800, and AT-15MU-4040-400, classified under 9032.89, HTSUS, a NAFTA Certificate of Origin was submitted for the blanket period from January 1, 2011 through December 31, 2011, signed and effectuated on February 3, 2012.
For the part numbers AF-TC10-E070-600 and AI-TB10-F070-600, classified under 9032.89, HTSUS, a NAFTA Certificate of Origin was submitted for the blanket period from January 1, 2012 through December 31, 2012, signed and effectuated on February 6, 2012. The time period subject to this verification was 2011, therefore no NAFTA Certificate of Origin was provided for these part numbers covering the year being verified.
No Certificates of Origin were provided for goods classified under subheading 8517.12.0020, HTSUS. The cover letter also advised that three of the part numbers at issue under heading 8517 did not have valid NAFTA Certificates of Origin at the time of the claims, and states “[a]t the time of entry, Continental’s Nogales broker  was receiving and using an EDI feed from Continental in Mexico to create the commercial invoice … [f]or these three parts, they appear not to have had a valid NAFTA Certificate in place.”
As requested by your office, focusing on the higher volume and value parts, a flow chart and description of part number 28-4D57-008-300, listed on the first Certificate of Origin, above, has been provided. It sets forth a description of the part and links the steps to the flow chart.
On October 17, 2012, CBP issued a CBP Form 29 Notice of Action advising Continental that the NAFTA preferential duty claims for goods classified under subheading 8517.12.0020, HTSUS, were denied because the Certificates of Origin for those goods were not provided. Further, the Notice of Action stated that the preferential claims for goods classified under subheading 9032.89.6075, HTSUS, were denied for those goods imported prior to the signature dates of the 2011 blanket period Certificates of Origin, and for those goods for which the Certificate covered the wrong blanket period (2012). CBP requested that Continental identify all entries involving the commodities determined to be ineligible, and no response was received. The Notice of Action also states that CBP questions the accuracy and legitimacy of all of Continental’s NAFTA claims filed at the Port of Nogales, and that the NAFTA claims for goods classified under subheadings 8517.12.0020, HTSUS, and 9032.89.6075, HTSUS, have been denied. CBP states that Continental had the right to appeal the liquidation of the entries involving these commodities pursuant to 19 U.S.C. § 1514.
Whether the goods imported by Continental between January and December of 2011 were eligible for preferential tariff treatment under NAFTA.
LAW & 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, and the corresponding regulations are set out in Part 181 of the Customs Regulations (19 C.F.R. Part 181).
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). The Certificate of Origin shall be on 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. See 19 C.F.R. § 181.22(b). An importer may use single Certificates for single importations. The single Certificate should be related to the shipment by indicating the invoice number or other unique reference. Blanket Certificates may be used for repetitive shipments of goods, and the goods must be imported on or between the specified “From” and “To” dates. This period may not exceed 12 months. See 19 C.F.R. § 181.22(b)(5)(i)-(ii).
Pursuant to 19 CFR § 181.22(b), an importer claiming preferential treatment shall provide, at the request of the port director, a copy of each Certificate of Origin pertaining to the goods in question. Thus, an importer is required to submit a Certificate of Origin which was in its possession at the time of importation to CBP upon request, in order to receive preferential tariff treatment. In HRL 228506, CBP stated that “[t]he failure to supply promptly, within the 30-day period set in CF 28, a Certificate of Origin creates a rebuttable presumption that the importer did not have such a Certificate of Origin in its possession at the time of importation.” However, this presumption can be rebutted if the importer provides credible and sufficient evidence that the party had a valid Certificate of Origin in its possession at the time of the claim. See, e.g., HRL 561991, dated March 29, 2001.
The requirements of 19 CFR Part 181 are further clarified in Customs Directive 3810-014A, dated July 2008, which provides guidelines to CBP officers regarding the NAFTA Certificate of Origin. The directive states, in pertinent part, that:
5.1.3 In situations where the Certificate was not signed, not dated, or was dated after the date of the claim, the importer must provide proof that a signed and correctly dated Certificate was in the importer’s possession on the date the claim was made. Failure to provide Import Specialists with such proof will result in the denial of the claim.
In this case, CBP initiated a NAFTA origin verification pursuant to 19 C.F.R. 181.72 on July 13, 2012. In response, the Protestant provided three Certificates of Origin that did not fully cover the merchandise at issue in the origin verification. Per 19 CFR § 181.21(a), the Certificate of Origin “must cover the good being imported.” The first submitted Certificate of Origin which lists part numbers 28-4D57-088-300 and 28-4D57-0108-300, covered the correct blanket period at issue in the verification, but was signed almost halfway through the blanket period (May 15, 2011), and therefore does not cover any claims made prior to the date of the Certificate. The second submitted Certificate of Origin for the parts noted above in the Facts section of this decision, was signed two months after the end of the blanket period, and is therefore invalid for any importations occurring during that blanket period. The third submitted Certificate of Origin, as noted above, covered a completely different blanket period than the one at issue in the origin verification, and is therefore invalid for any importations during the blanket period at issue in the origin verification.
Since the Protestant was unable to provide sufficient evidence that it possessed either a valid Certificate of Origin for any items entered prior to the date of the first submitted Certificate of Origin or valid Certificates of Origin for those items entered under the second and third Certificates of Origin, NAFTA preferential tariff treatment should be denied for those items. Furthermore, Protestant has stated that it did not have Certificates of Origin for three of the parts at issue in the origin verification, and therefore NAFTA preferential tariff treatment should be denied for those items. Counsel for Protestant argues that the goods in question do in fact qualify for NAFTA eligibility even though a NAFTA Certificate of Origin did not exist at the time of the claims, and that CBP had been provided with adequate supporting documentation to substantiate the NAFTA claims. Counsel argues that CBP could allow a waiver for the presentation of a valid NAFTA Certificate of Origin. CBP Regulations allow an individual port to waive the Certificate of Origin requirement when the port director has in writing waived the requirement because they are “otherwise satisfied that the good qualifies for preferential tariff treatment under the NAFTA.” 19 C.F.R. § 181.22(d)(1)(i). However, an importer should obtain a written waiver agreement from the port prior to entry. In the instant case, there is no evidence that the importer tried to secure a waiver of the Certificate of Origin requirement prior to entry.
The only entries for which a proper NAFTA claim possibly was made are for those parts listed on the first Certificate of Origin and that were entered after May 15, 2011. As mentioned above, the port focused on two part numbers on the first Certificate of Origin based on volume and value (part numbers 28-4D57-0008-300 and 28-4D57-0108-300). A flow chart and description of a door control module, part number 28-4D57-0008-300, was provided on February 21, 2013. Counsel states that the description provided is representative of the documentation for some of the other parts at issue (we presume counsel means other part numbers listed on the first Certificate of Origin). Your office indicates that the documentation and flow charts provided for the finished goods did not sufficiently establish that the finished goods were actually eligible for preferential treatment under NAFTA. It is not clear if further information was presented on February 21, 2013 or if this was the documentation your office reviewed. However, the description now provides a bill of materials for the door control module and the description is linked to the flow chart to describe how the printed circuit board (PCB) was laser marked, components were mounted on the PCB, software was stored on the microcontroller, and other steps were conducted. We are satisfied with the description which shows what steps were performed in Mexico. Accordingly, for those parts listed on the first Certificate of Origin that were entered after May 15, 2011, NAFTA preference may be granted provided the port has sufficient information to identify those entries and parts. As noted in the October 17, 2012 Notice of Action, the port requested Protestant to identify all entries and commodities that are ineligible. No such information was presented. Further, counsel acknowledges the port’s letter of February 1, 2013, which again requested the Protestant to identify all entries involving the parts covered by the technically deficient certificates. In order to identify those parts for which NAFTA preference may be granted, the Protestant will need to identify, within 30 days from the date this decision is provided to the Protestant by the port, to the port’s satisfaction the invoices setting forth the parts on the first Certificate of Origin that correlate to those entries that occurred after May 15, 2011.
The protest should be denied and may be granted, in part provided the requisite information is provided by the Protestant. The Protestant has not established that it had NAFTA Certificates of Origin in its possession when NAFTA duty treatment was claimed for goods classified under heading 8517, HTSUS, and for goods classified under heading 9032 and set forth in the second and third Certificates of Origin. NAFTA preference may be granted for those goods classified under heading 9032 as set forth in the first Certificate of Origin and entered after May 15, 2011, provided Protestant can identify those goods to the port’s satisfaction.
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 Customs 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 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.
Myles B. Harmon, Director
Commercial and Trade Facilitation Division