CLA-2 CO:R:C:S 556779 WAW
District Director
U.S. Customs Service
423 Canal Street
New Orleans, LA 70310
Attn: Room 200 - Protest Office
RE: Protest No. 2002-21-000292 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 Chas L. Green, on behalf of
Green Importers, 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 were
manufactured by the "Fabrica de Flores Artificials Dak Fong"
(hereinafter Dak Fong), "Fabrica de Flores Artificiais Florist"
(hereinafter Florist) and "Luen Fat" factories 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
merchandise which is the subject of this protest was entered on
August 9, 1990, September 18, 1989, October 9, 1989 and December
27, 1989. Your office, however, subsequently denied the entries
duty-free treatment under the GSP and liquidated them dutiable at
the rate of 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 or
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)).
In a memorandum to the field dated October 31, 1991 (INV 8-
02 CO:TO:C JRD), the Assistant Commissioner for Commercial
Operations instructed the Regional Commissioners that all entries
of artificial flowers claimed to be manufactured in Macau by any
of the named factories listed in the memorandum should be denied
GSP treatment and, instead, should be rate advanced via the
issuance of a Proposed Notice of Action (CF 29). All three of the
factories involved in this protest are named as being precluded
from receiving duty-free treatment under the GSP pursuant to the
above-referenced memorandum. In addition, the memorandum states
that the Senior Customs Representative (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 Office of Commercial Compliance for their analysis and
review before any action is taken.
In response to our request for verification of the production
cost data for the factories at issue in this protest, protestant
provided affidavits from the suppliers of the artificial flowers,
protestant's agent and Certificates of Origin Form A's that were
signed by the designated governmental authority in Macau.
Protestant claims that these affidavits are sufficient proof that
the artificial flowers were produced in Macau and that the entries
satisfy the GSP 35% value-content requirement. In regard to the
Certificate of Origin Form A's which were signed by the designated
foreign official in Macau, in T.D. 86-107, 20 Cust. Bull 287
(1986), Customs established a final rule with respect to the
documentation requirements and eliminated mandatory foreign
government certification of the GSP Certificate of Origin Form A's,
except for those beneficiary countries with which the U.S. Customs
Service has a bilateral enforcement agreement. Customs announced
in T.D. 86-107 that certification by a foreign government has no
binding legal effect on the duty-free eligibility of imported
merchandise since it is Customs, and not the BDC government, which
is charged with the responsibility under U.S. law to determine the
proper tariff status of imported merchandise. Thus, certification
by a foreign government alone, without supporting documentation to
demonstrate compliance with the country of origin requirements is
not sufficient to grant duty-free treatment under the GSP.
Likewise, sworn affidavits from protestant's agent and suppliers
of the artificial flowers that the flowers were produced in Macau
and satisfy the GSP 35% value-content requirement alone, without
more specific information regarding the direct costs of processing
operations and origin of the materials used in the production of
the flowers, is not sufficient evidence to grant the protest.
With regard to the instant case, the protestant has not
submitted sufficient independent evidence to your office to
substantiate its claim for duty-free treatment pursuant to the GSP.
Protestant simply asserts that the importer relied on the
supplier's representations, sales confirmations, declarations from
sales agents, and the Certificate of Origin Form A's, as evidence
that the merchandise was manufactured in Macau by the named
factories. Moreover, based on the evidence that we have from the
SCR/HK investigation into the artificial flower industry in Macau,
we know that the majority of flowers during the period of the
protest were assembled in China. However, the entry documentation
submitted for the current protested entries is misleading because
the "Textile Declaration," which describes the manufacturing
operations and country of manufacture of the flowers, indicates
that for the subject entries the printing, cutting, molding,
dyeing, packing, and assembling all took place in Macau.
Furthermore, based on an investigation beginning in June 1989,
conducted by the SCR/HK, Customs concluded that the Florist factory
was not capable of manufacturing artificial flowers at its facility
due to its very limited production capacity. Customs Service
informants in Macau revealed that the Florist factory had not
produced artificial flower components or artificial flowers in
Macau for several years. In addition, confidential source
information, comments by other artificial flower manufacturers in
Macau, and an investigation conducted by both the Macau authority
and the SCR/HK indicated that Florist subcontracted all production
to the PRC and its factory in Macau functioned only as a location
for the export packing and preparation of commercial documents.
With regard to the Luen Fat factory, we note that during
Customs' investigation into the manufacturing processes, the
evidence indicated that artificial flowers were neither produced
by Luen Fat in their Macau factory, nor assembled in the PRC from
components produced in Macau. Based upon information obtained
during the SCR/HK's investigation, it appeared that some of the
machines in Luen Fat had been set up for a very short period of
time and were either non-operational or showed little or no sign
of recent use. Additionally, the SCR/HK received information from
employees of flower factories in Macau stating that shipments of
finished artificial flowers were delivered to the Macau factories
from the PRC for repackaging before they were shipped to the U.S.
The evidence made it clear that the only manufacturing process
being performed in Macau was the cutting of the imported fabric
into shapes, and the remainder of the manufacturing operations,
such as texturizing, coloring, plastic extrusion, formation of
stems, and the final assembly of the flowers, were performed in the
PRC.
Finally, based on information developed during the
investigation into the manufacturing processes of the Dak Fung
factory, it was found that this factory had not been capable of
producing artificial flower components or artificial flowers in
Macau for a significant period of time. The investigation by the
SCR/HK revealed that Dak Fung did not possess the essential
equipment in an operational condition to produce artificial flower
components since late 1989. The entry under this protest
identifying Dak Fung as the factory of manufacture is the August
9, 1990, entry which was exported from Macau on July 9, 1990.
Therefore, based on this information, it was reported that
the vast majority, if not all, of the flowers shipped from the
Florist, Luen Fat and Dak Fung factories and labeled "made in
Macau" were actually produced in China. Protestant has not
provided "compelling evidence" for any of the entries to rebut the
findings of the SCR/HK.
The Customs Regulations require that a protest set forth the
nature of, and justification for the objection distinctly and
specifically with respect to each claim. Section 174.13(a)(6),
Customs Regulations (19 CFR 174.13(a)(6)). The Customs Service
has and will continue to fully consider any relevant allegation in
a protest supported by competent evidence. However, in acting on
a protest, Customs cannot and will not assume facts that are not
presented (e.g., an unsubstantiated claim that the direct costs of
processing operations incurred in producing the artificial flowers
was equivalent to at least 35% of the appraised value of the
merchandise). Accordingly, without sufficient information to
confirm that the artificial flowers in the instant case were
manufactured in Macau by the Florist, Luen Fat and Dak Fong
factories (i.e., evidence of manufacturing operations performed in
Macau such as cutting, dying, texturizing, and injection molding),
we cannot determine whether any materials imported in Macau and
used in the production of the artificial flowers have undergone a
double substantial transformation, so that the cost or value of
these materials may be included in the GSP 35% value-content
requirement. Therefore, the value of any imported materials in
this case may not be included towards satisfying the GSP 35% value-
content requirement. As we have no evidence that the direct costs
of processing operations alone satisfy the GSP 35% requirement, the
protest should be denied.
HOLDING:
Upon review of all of the documentary evidence submitted in
connection with this protest, which contests the assessment of
duties on entries of artificial flowers from the Luen Fat, Dak Fung
and Florist factories in Macau, it is our determination that
protestant has not provided sufficient independent evidence to
support a claim that the artificial flowers from these factories
are entitled to duty-free treatment under the GSP upon entry into
the U.S.
Based upon the foregoing discussion, this protest should be
denied in full. A copy of this decision should be attached to the
Customs Form 19 to be returned to the protestant as part of the
notice of action on the protest.
Sincerely,
John Durant, Director
Commercial Rulings Division