OT:RR:CTF:VS H280239 AJR
U.S. Customs and Border Protection
11099 S. La Cienaga Blvd.
Los Angeles, CA 90045
RE: Application for Further Review of Protest No. 2704-16-100199; Eligibility of Certain Gold Jewelry under the United States – Bahrain Free Trade Agreement
Dear Port Director:
This is in response to an Application for Further Review (“AFR”) of Protest No. 2704-16-100199, timely filed by counsel on February 17, 2016, on behalf of the importer, Kishek International, Inc. (hereinafter, the “protestant”), concerning the eligibility of certain gold jewelry for duty-free treatment under the United States – Bahrain Free Trade Agreement (“UBFTA”).
The protestant has requested that certain information be treated as confidential. The protestant’s request for confidentiality is approved. The information contained within brackets and all attachments to this protest decision, forwarded to our office, will not be released to the public and will be withheld from published versions of this ruling.
The merchandise subject to the protest was entered on December 19, 2014, by the protestant under subheadings 7113.19.5085 and 7113.19.2980, Harmonized Tariff Schedule of the United States (“HTSUS”), as eligible for preferential tariff treatment under the UBFTA. The corresponding entry summary, dated January 1, 2015, states that the protestant imported approximately [XXXX] grams (“g”) of the subject gold jewelry, valued at $[XXXX], from Bahrain with reference to invoice 01321 and airway bill 176-74892451. Invoice 01321, dated December 17, 2014, was issued by Manish Jewellery Trading W.L.L. (“Manish”) in Bahrain to the protestant in the United States for the sale of 1,029 pieces of assorted jewelry (i.e., chains, locks, necklaces, and bangles), weighing [XXXX] g, and valued at $[XXXX]. Air waybill bill 176-74892451, dated December 17, 2014, shows that approximately [XXXX] g of gold jewelry were shipped from Dubai, United Arab Emirates to the protestant in Los Angeles, California by Ramdas Trading Co. LLC (“Ramdas”).
On March 17, 2015, the U.S. Customs and Border Protection (“CBP”) issued a CBP Form 28 (Request for Information) to the protestant requesting documentation to substantiate the claim for preferential treatment including a certification of origin, bill of materials, cost data, production and manufacturing records, and records showing the transportation of the goods from Bahrain to Dubai. In response, the protestant provided the documentation discussed below.
The protestant provided a Certificate of Origin, dated December 18, 2014, issued by the Bahrain Chamber of Commerce & Industry stating that 21 karat gold jewelry, weighing [XXXX] g, was produced in Bahrain. The Certificate references invoice 01321, and lists that the date of departure was December 17, 2014. The Certificate states that it authenticates the validity of the chamber member’s signature as per the chamber’s records, without bearing any liability.
The protestant submitted two vouchers. One voucher, dated November 27, 2014, shows that Manish issued [XXXX] g of 24 karat gold to Nabeel Malik Workshop (“Nabeel”). The other voucher, dated November 28, 2014, shows that Manish issued [XXXX] g of 24 karat gold to Wesal Goldsmith Workshop (“Wesal”).
The protestant submitted a letter, dated April 14, 2015, from Manish explaining the manufacturing process involved in producing the subject gold jewelry at its two factories in Bahrain, Nabeel and Wesal. The letter states that the raw or pure gold that is involved in the manufacturing process is either purchased or obtained from Manish’s existing stock of gold. The letter explains that the gold is mixed with alloys like silver and copper to transform the gold into 21 karat purity. The letter states that operations involved in the manufacturing include melting, shaping, casting, cutting, buffing, polishing, washing, drying, and packaging the gold for shipment from Bahrain or from Dubai. The letter explains that all the flight connections to the United States are through the airport in Dubai. Sometimes the goods are hand carried to that airport in Dubai from Bahrain because such transportation is very fast. However, flight connections from Bahrain to Dubai are also frequent. The letter also states that the jewelry manufactured in Bahrain is mostly done by hand because it has “the best craftsmen in this trade,” and, as a result, less machinery is involved during this process.
Additionally, the protestant submitted customs records and shipping records. The customs records show that the owner of Manish, Mr. Manish, entered Dubai on December 10, 2014, by flight from Bahrain, with [XXXX] g of gold jewelry. The protestant also provided a valuable handling receipt showing that Ramdas insured two pouches of gold jewelry valued at $[XXXX] with Transguard on December 12, 2014. The receipt indicates that the jewelry was set for delivery to the Los Angeles International Airport, with reference to air waybill 176-74892451.
On July 9, 2015, and August 25, 2015, CBP issued a CBP Form 29 (Notice of Action) advising the protestant that since sufficient information had not been provided to CBP, the UBFTA claim would be denied. Specifically, CBP explained that the inconsistencies and lack of detail in the submitted documents did not make a conclusive case that the gold jewelry originated in Bahrain. On February 17, 2016, counsel for the protestant timely filed a protest, claiming that the imported merchandise qualifies for duty-free treatment under the UBFTA. In addition to the documentation that was submitted upon entry and in response to CBP Form 28, counsel submitted the documentation discussed below.
In the memorandum in support of the protest and AFR at issue, counsel explained that the protestant works with Manish and Ramdas to arrange the manufacture and export of the protestant’s jewelry orders. The documentation indicates that Manish handles the jewelry manufacturing process, while Ramdas handles the logistics, including placing jewelry orders on behalf of the protestant and arranging for transportation of the jewelry into the United States. Counsel submitted a purchase order showing that on November 15, 2014, Ramdas requested for Manish to manufacture [XXXX] g of chains, [XXXX] g of locks, [XXXX] g of necklaces, and [XXXX] g of bangles, which amounted to [XXXX] g of jewelry. Counsel also provided various business records showing that Manish is registered in Bahrain as an importer, exporter, and seller of gold, silver, and jewelry; and that Nabeel and Wesal are registered in Bahrain as goldsmith workshops. These business records also show Manish’s ownership details, its legal partnership with Wesal, and its working arrangements with Nabeel and Wesal via letters from Manish, dated January 10, 2015. These letters indicate that Manish requested a minimum of [XXXX] g of jewelry per month from Nabeel, and [XXXX] g a month from Wesal, during 2014.
Counsel also submitted additional details with regard to the manufacturing process, such as production records for three of the four types of subject gold jewelry. The production records include a letter from Nabeel, dated December 9, 2014, showing the gold used for the production of the 21 karat locks; and two letters from Wesal, dated December 9, 2014, showing the gold used for the production of the 21 karat necklaces and 21 karat bangles. For instance, Wesal started with [XXXX] g of gold, which underwent a process of melting, casting, soldaring, filing, drum polishing, cutting, buff polishing, acid cleaning, and drying, in order to yield [XXXX] g of 21 karat necklaces for the subject jewelry order. For each individual process (e.g., melting, casting, etc.), the letters detail the amount of gold that was either lost or became scrap during that particular process. For example, after Wesal melted the [XXXX] g of gold for the necklace order, [XXXX] g of gold were lost and [XXXX] g became scrap during the melting process, yielding [XXXX] g of gold for the start of the casting process.
The production records also include a metal sale voucher showing that Arihant Jewellers (“Arihant “) in Bahrain sold [XXXX] g of gold to Manish for $[XXXX] on November 26, 2014. The voucher indicates that the gold sold by Arihant had a purity of .995, which counsel explains is pure gold of 24 karats. Counsel indicates that Manish issued portions of this 24 karat gold to Nabeel and Wesal per the vouchers discussed above, and that the factories mixed this pure gold with alloys like silver and copper in order to convert it to 21 karat gold for the production of the subject gold jewelry. Counsel submitted three invoices showing that Gem Stones & Jewellers Centre (“Gem Stones”) in Bahrain sold silver, copper, and other materials to Nabeel and Wesal. The invoice, dated November 28, 2014, shows that Nabeel purchased various items for [XXXX] Bihrain Dinars (“BHD”). The handwritten descriptions of the items on this invoice are illegible, but according to counsel, these items were metal alloys used to make the locks in the subject gold jewelry order. The invoice, dated November 30, 2014, shows that Wesal purchased silver, copper, zinc, and another item for [XXXX] BHD. The handwritten description of the other item on this invoice is illegible, but according to counsel, it was an alloy metal used to make the bangles and necklaces in the subject gold jewelry order. The invoice, dated December 1, 2014, shows that Nabeel purchased silver, copper, and two other items for [XXXX] BHD. The handwritten description of the two other items on this invoice is illegible as well. Counsel also submitted two purchase vouchers issued by Manish to Nabeel and Wesal, respectively, on December 10, 2014. The Nabeel purchase voucher was for its production of 21 karat gold chains and locks in accordance with invoice 01321. The Wesal purchase voucher was for its production of 21 karat gold bangles and necklaces in accordance with invoice 01321. According to counsel, these payment vouchers show that Manish paid Nabeel and Wesal for their production of this gold jewelry.
Counsel for the protestant also submitted attachments entitled “cost data,” which include: Manish’s cost breakdown for employee wages, gold loss, rent, utilities, and profit; machinery receipts issued to Manish and Wesal; a letter from Manish, dated July 15, 2015, listing the employees at Nabeel and Wesal; payroll records for the employees during November and December of 2014, and January of 2015; passport and residence documents of the employees showing their presence in Bahrain; and, various photographs and videos showing the employees manufacturing gold jewelry, the equipment used to produce the gold jewelry, a “Nabeel Malik Goldsmith Workshop” sign posted outside of a building, and a “Wesal Goldsmith” sign posted outside of a building.
Counsel states that the value of the gold used to manufacture the jewelry satisfies over 90 percent of the value content requirement. Counsel explains that the value of each piece of jewelry is roughly $[XXXX]/g of jewelry, and the cost of the 21 karat gold used to produce the subject jewelry is roughly $[XXXX]/g of 21 karat gold. Counsel further explains that the value of 24 karat gold is roughly $[XXXX]/g of 24 karat gold, and this value is reduced to $[XXXX]/g when converted to 21 karat gold. Our decision follows.
Whether the subject gold jewelry is eligible for duty-free treatment under the UBFTA?
LAW AND ANALYSIS:
The UBFTA was signed by the United States and the Kingdom of Bahrain on September 14, 2004. The UBFTA was approved by the U.S. Congress with the enactment on January 11, 2006, of the United States – Bahrain Free Trade Agreement Implementation Act, Pub. L. 109-169, 119 Stat. 3581 (19 U.S.C. § 3805 note). General Note (“GN”) 30, HTSUS, implements the UBFTA. GN 30(b) sets forth the criteria for determining whether a good is an originating good for purposes of the UBFTA as follows:
For the purposes of this note, subject to the provisions of subdivisions (c), (d), (e), (g) and (h) thereof, a good imported into the United States is eligible for treatment as an originating good of a UBFTA country under the terms of this note only if --
the good is a good wholly the growth, product or manufacture of Bahrain or of the United States, or both;
for goods not covered by subdivision (b)(iii) below, the good is a new or different article of commerce that has been grown, produced or manufactured in the territory of Bahrain or of the United States, or both, and the sum of --
the value of each material produced in the territory of Bahrain or of the United States, or both, and
the direct costs of processing operations performed in the territory of Bahrain or of the United States, or both,
is not less than 35 percent of the appraised value of the good at the time the good is entered into the territory of the United States; or
the good falls in a heading or subheading covered by a provision set forth subdivision (h) of this note and --
each of the nonoriginating materials used in the production of the good undergoes an applicable change in tariff classification specified in such subdivision (h) as a result of production occurring entirely in the territory of Bahrain or of the United States, or both; or
the good otherwise satisfies the requirements specified in such subdivision (h); and
and is imported directly into the territory of the united States from the territory of Bahrain and meets all other applicable requirements of this note. For purposes of this note, the term “good” means any merchandise, product, article or material.
In the instant case, it is not disputed that when 24 karat gold and alloys are manufactured into gold jewelry, the gold and the alloy are substantially transformed. Further, it is also not disputed that the gold ingots and the alloy would undergo a double substantial transformation when processed initially into long bars or wires, which would then be substantially transformed into chains, locks, necklaces, and bangles. See Headquarters Ruling Letter (“HRL”) 562725, dated May 28, 2003, wherein CBP determined that imported gold and silver ingots underwent a double substantial transformation in the GSP country when made into wire, and the wire was made into continuous lengths of chain links and necklaces. See also HRL H234186, dated July 24, 2014; and HRL 555210, dated April 26, 1989.
At issue, in this case, is the verification of whether the subject gold jewelry was manufactured in Bahrain. The Port found that the inconsistencies and lack of detail in the submitted documents did not make a conclusive case that the gold jewelry originated in Bahrain. The Port noted that there was no clear link between the payment vouchers, purchase orders, and commercial invoice, and that the documentation did not provide descriptions of the jewelry aside from listing the types of jewelry. Additionally, the Port stated that it was questionable whether the number of employees working at Nabeel and Wesall during November and December of 2014 would be capable of producing the quantity of jewelry pieces in the stated timeframe. The Port also noted that the Certificate of Origin was dated on December 18, 2014, which is after the date of exportation from Bahrain, and only one day prior to entry into the United States. We also note that the submitted documentation reported four different weights for the subject gold jewelry: approximately [XXXX] g on the entry summary and the airway bill; [XXXX] g on invoice 01321, the Certificate of Origin, and the Nabeel and Wesal purchase vouchers; [XXXX] g on the Dubai customs records; and, [XXXX] g on the purchase order from Ramdas to Manish.
CBP Regulations applicable to the UBFTA are contained in 19 C.F.R. § 10.801 to § 10.827. The issue of verification is addressed in 19 C.F.R. § 10.824 which provides in paragraph (a) that:
A claim for preferential treatment made under § 10.803 of this subpart, including any declaration or other information submitted to CBP in support of the claim, will be subject to such verification as the port director deems necessary. In the event that the port director is provided with insufficient information to verify or substantiate the claim, the port director may deny the claim for preferential treatment.
As clearly set forth above, the port director may deny the UBFTA claim if insufficient information was provided to substantiate the claim that the gold jewelry was manufactured in Bahrain. Based on our review, the protestant has not submitted sufficient documentation to establish that the gold jewelry was produced in Bahrain.
As previously noted, the protestant submitted certain commercial documents related to the purchase and sale of the materials and the gold jewelry. These include a purchase order from Ramdas to Manish, without indicating that Ramdas was placing the order on behalf of the protestant. The purchase order merely lists the type of merchandise (chains, locks, necklaces, and bangles) and the approximate weight of the merchandise, [XXXX] g. The purchase order does not provide the unit of purity for the gold, nor does it describe in detail each type of jewelry or a style number. Similarly, the commercial invoice from Manish to the protestant (invoice 01321), and the purchase vouchers from Nabeel and Wesal to Manish, do not describe in any detail each type of jewelry or provide a style number, nor do these documents reference the purchase order or that Ramdas had placed the purchase order on behalf of the protestant. Invoice 01321 and the purchase vouchers also list a different weight for the merchandise, [XXXX] g, than the purchase order, and only the purchase vouchers indicate that the purity of the gold jewelry is 21 karats. The Certificate of Origin references invoice 01321, the 21 karat purity identified in the purchase vouchers, and the weight listed on both the invoice and the purchase vouchers. However, the Certificate is dated December 18, 2014, and states that the merchandise was exported from Bahrain on December 17, 2014. This information conflicts with the Dubai customs records, which state that the merchandise was exported from Bahrain to Dubai on December 10, 2014, weighing [XXXX] g. The date of the Certificate is also only one day prior to the merchandise entering the United States on December 19, 2014, per the entry summary. However, the weight of the subject jewelry on the entry summary, as well as on the air waybill from Dubai to Los Angeles, is listed as approximately [XXXX] g. The lack of description, conflicting dates, and significant difference in weight of the jewelry upon export from Bahrain and entry into the United States makes it difficult to connect these documents to the same transaction.
The protestant also submitted invoices from Gem Stones to Nabeel and Wesal for certain materials, including alloys, to produce the gold jewelry, and an invoice from Arihant to Manish for 24 karat gold. The invoices from Gemstone indicate that a total of at least [XXXX] g of silver or copper were purchased by Wesal and Nabeel on November 30, 2014, and December 1, 2014, respectively. The invoice from Arihant states that 24 karat gold was purchased by Manish on November 26, 2014, and that a total of approximately [XXXX] g of this gold were issued by Manish to Nabeel and Wesal on November 27, 2014, and November 28, 2014, respectively. While the production process is described using these materials, it is unclear whether the amounts listed on these invoices correspond to the figures listed in the production calculations. In conclusion, these documents do not sufficiently correspond with each other. Even if we were to find that these documents were consistent with the facts stated, they are merely indicative of the purchase and sale of the materials and the gold jewelry; thus, they do not demonstrate that the gold jewelry was actually manufactured in Bahrain. Furthermore, the dates on these invoices leave only between 10 and 14 days to complete the production of the subject jewelry by the date such were exported from Bahrain per the Dubai customs records on December 10, 2014. It is unclear how 1,029 pieces of jewelry were manufactured by approximately 12 to 14 employees in such a brief time period.
As noted in the facts section of the AFR, the protestant also submitted a summary of the cost data; machinery receipts issued to Manish and Wesal; employee and payroll records during November and December of 2014, and January of 2015; and various photographs and videos showing gold jewelry production. The information provided in these documents is not sufficiently specific. The summary of cost data lists lump sum amounts for employee wages, gold loss, rent, utilities, and profit. The employee and payroll records do not indicate the responsibilities of the employees as they relate to the manufacturing of the merchandise, but rather only the amount of hours worked by the employees on certain days. While the photographs and videos show employees producing gold jewelry, and Nabeel and Wesal signs are posted outside of buildings, these records do not demonstrate that such production actually occurred in Bahrain during the time period at issue.
In HRL H234186, CBP held that an importer did not provide sufficient documentation to demonstrate that gold jewelry it had imported under the United States – Oman Free Trade Agreement was manufactured in Oman. To support the production in Oman, the importer submitted various documents, including: a Certificate of Origin for the jewelry; invoices, purchase orders, and purchase vouchers showing the sale and purchase transactions of the jewelry and material required to make the jewelry (e.g., 24 karat gold and alloys); shipping and customs records; a summary of the cost data and general expenses; production calculations; summary of total hours employees worked; vouchers issued to each employee for that time period; photographs of the production facility; and a tenancy agreement for the manufacturer’s facility in Oman. In reaching its conclusion, CBP noted that the documents did not describe the jewelry in detail (aside from purity, type, and weight); that the amount of materials listed on the invoices did not correspond to the production calculations; and that it was unclear how 18 employees produced thousands of jewelry pieces in a period of 20 days from the date of the purchase order to the date of importation into the United States.
Similarly, in this case, we find that the protestant did not provide sufficient documentation to demonstrate that the subject gold jewelry imported under the UBFTA was manufactured in Bahrain because there is a lack of detail concerning the merchandise, significant inconsistencies with regard to the weight and date of exportation, a the brief production period for a large quantity of jewelry by few employees, and a general inability to connect the documentation to the same transaction at issue. No explanation for these discrepancies and inconsistencies was provided for in the submitted documentation or in in the memorandum in support of protest and AFR. Furthermore, considering the large quantity of jewelry pieces and the value of $[XXXX], we would expect to see documentation that is more sufficiently detailed to demonstrate that the processing of the gold jewelry actually occurred in Bahrain. As such, the Port found and we agree that there is inadequate supporting documentation to demonstrate that the gold jewelry was manufactured in Bahrain. Accordingly, we find that the gold jewelry is not eligible for duty-free treatment under the UBFTA.
Based on the information provided, the protestant has not demonstrated that the imported gold jewelry was manufactured in Bahrain. Therefore, the gold jewelry is not eligible for duty-free treatment under the UBFTA.
In conformity with the foregoing, the protest should be DENIED.
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 sixty days from the date of this letter. Sixty days from the date of the decision Regulations and Rulings of the Office of 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