CLA-2 CO:R:C:S 556341 WAW
District Director
U.S. Customs Service
La Puntilla #1
Old San Juan, PR 00903
RE: Protest No. 490991100009 concerning the eligibility of
artificial flowers from Macau for duty-free treatment under
the GSP
Dear Sir:
This is a decision on an Application for Further Review of
the above-referenced protest filed by George R. Tuttle, A.P.C.,
on behalf of First American Flowers against the assessment of
duties on artificial flowers imported into the U.S. from Macau.
We have considered the protest and our decision follows.
FACTS:
The protestant claims that the subject artificial flowers
should be entitled to duty-free treatment under the Generalized
System of Preferences (GSP) (19 U.S.C. 2461-2466) since they are
manufactured by two companies Fabrica De Flores Artificials Tai
Keong aka Great Strong Artificial Flower Factory and Fabrica De
Flores Artificials "Hip Wai" both located in Macau and are
classifiable under a GSP eligible provision. In the protestant's
declaration of the manufacturing and/or processing operations of
the artificial flowers, the protestant states that Macau is the
country where these operations took place. The two entries the
subject of this protest were entered on July 9, 1990 and April
24, 1990, and liquidated duty-free on October 19, 1990 under the
GSP as a product of Macau. The protestant further claims that
other ports have allowed products from these suppliers in Macau
to be entered and liquidated free of duty under subheading
6702.90.40, HTSUSA. Your office, however, subsequently amended
the entry summary to reflect a change in the country of origin of
the artificial flowers and consequently reliquidated the entries
dutiable at 9 percent ad valorem.
ISSUE:
Whether the artificial flowers from Macau are entitled to
duty-free treatment under the GSP?
LAW AND ANALYSIS:
Under the GSP, eligible products the growth, product of
manufacture of a designated beneficiary developing country (BDC)
which are imported directly into the U.S. qualify for duty-free
treatment if the sum of (1) the cost or value of the material
produced in a BDC, plus (2) the direct costs involved in
processing the eligible article in the BDC, is not less than 35%
of the appraised value of the article at the time it is entered
into the U.S. See section 10.176(a), Customs Regulations (19 CFR
10.176(a)).
As stated in General Note 3(c)(ii)(A), Harmonized Tariff
Schedule of the United States Annotated (HTSUSA), Macau is a
designated BDC for the purposes of the Generalized System of
Preferences (GSP). In addition, it appears from your description
of the merchandise that at the time of importation, the products
at issue were classified under subheading 6702.90.40, HTSUSA,
which provides for artificial flowers of man-made fibers.
Articles classified under this subheading are eligible for duty-
free treatment under the GSP provided they satisfy all of the
requirements.
The test for determining whether a substantial
transformation has occurred is whether an article emerges from a
process with a new name, character or use, different from that
possessed by the article prior to processing. See Texas
Instruments Inc. v. United States, 69 CCPA 152, 156, 681 F.2d
778, 782 (1982).
Pursuant to INV 8-02 CO:TO:C RG, dated January 22, 1991, the
Assistant Commissioner of Commercial Operations instructed the
Regional Commissioners that all entries of artificial flowers
claimed to be manufactured in Macau by any of the 15 factories
which are listed in the memorandum should be denied GSP treatment
and, rather, should be rate advanced via the issuance of a
Proposed Notice of Action (CF 29). Tai Keong and Hip Wai are two
of the factories which have been precluded from receiving duty-
free treatment under the GSP pursuant to this memorandum. In
addition, the memorandum states that the SCR/Hong Kong has also
issued reports of investigation concerning the alleged
transshipment of PRC-origin artificial flowers via Macau, which
indicate that the named factories were either "not manufacturing
artificial flowers in Macau, or were incapable of manufacturing
them in the quantities exported to the U.S." Therefore, the
Assistant Commissioner instructed all Regional Commissioners that
in the absence of "compelling evidence" to the contrary, protests
filed on the liquidation of entries from any of the factories
enumerated in the memorandum should be denied. The Assistant
Commissioner also recommended that any evidence submitted on
behalf of an importer of artificial flowers from Macau must be forwarded to the Commercial Compliance Branch for
their analysis and review before any action is taken.
With regard to the instant case, the protestant has not
submitted any independent evidence to the District Director in
your office to substantiate his claim for duty-free treatment
pursuant to the GSP. Accordingly, without sufficient information
to confirm that the artificial flowers are manufactured in Macau
(i.e., cutting, dying, texturizing, and injection molding
machinery, personnel, electric bills, etc.), we cannot agree with
the protestant's claim that the artificial flowers were
manufactured in Macau. Therefore, absent compelling evidence to
the contrary, the artificial flowers in this case will not be
eligible for duty-free treatment under the GSP.
HOLDING:
Therefore, based on the foregoing discussion, this protest
should be denied in full. A copy of this decision should be
attached to Form 19 to be returned to the protestant.
Sincerely,
John Durant, Director
Commercial Rulings Division