OT:RR:CTF:VS H167136 CMR
U.S. Customs and Border Protection
Port of Detroit
477 Michigan Ave Room 210 Detroit, MI 48226
RE: Protest 3801-11-100118; Applicability of Merchandise Processing Fee to Canadian goods entered in over-quota tariff provisions; NAFTA
Dear Port Director:
This is in response to Protest No. 3801-11-100118 with Application for Further Review (AFR), forwarded by you to this office for response. The protest was timely filed by FedEx Trade Networks on behalf of their client, Dure Foods Limited. We note that the AFR was properly approved pursuant to 19 CFR 174.24(a).
FACTS:
The merchandise at issue was entered under subheadings 1806.90.5900, Harmonized Tariff Schedule of the United States (HTSUS) and 2101.12.5800, HTSUS. Subheading 1806.90.5900, HTSUS, provides for:
Chocolate and other food preparations containing cocoa: Other: . . .: Articles containing over 10 percent by dry weight of sugar described in additional U.S. note 3 to chapter 17: Other [other than goods described in additional U.S. note 8 the chapter 17 and entered pursuant to its provisions].
Subheading 2101.12.5800, HTSUS, provides for:
Extracts, essences and concentrates, of coffee, tea or mate and preparations with a basis of these products or with a basis of coffee, tea or mate; roasted chicory and other roasted coffee substitutes, and extracts, essences and concentrates thereof: Extracts, essences and concentrates of coffee, and preparations with a basis of these extracts, essences or concentrates or with a basis of coffee: Preparations with a basis of extracts, essences or concentrates or with a basis of coffee: Other: Articles containing over 10 percent by dry weight of sugar described in additional U.S. note 3 to chapter 17: Other [other than goods described in additional U.S. note 8 to chapter 17 and entered pursuant to its provisions]
As described in the tariff provision for each, both of these provisions are for merchandise that is over-quota, i.e., beyond the amount allowed in the applicable quota provisions in Chapter 17, HTSUS.
The protestant asserts that the goods at issue qualify as “originating goods” under the NAFTA. The goods are dutiable as they fall within over-quota provisions of the tariff. However, the protestant claims that the goods are not subject to the merchandise processing fee (MPF) as they are originating goods. Your port is of the view that the goods are not originating goods because the special program indicator “CA” is absent from the provisions in which the goods are classified, namely subheadings 1806.90.59, HTSUS, and 2101.12.58, HTSUS. Specifically, your office is of the view that a good that falls within a dutiable tariff provision without the applicable special program indicator in the “Special” column for the duty rate cannot be an “originating good” within the meaning of General Note (GN) 12(a)(i) of the HTSUS.
ISSUE:
Is the presence of the special program indicator “CA” in the applicable tariff provision for a good of Canada a requirement for such good to be an “originating good” under the NAFTA, provided all other requirements of GN 12, HTSUS, have been met?
Are NAFTA originating goods that are subject to tariff rate quotas subject to the MPF when the quota is filled and the goods fall into the over quota tariff provision which lacks a special program indicator for the NAFTA party at issue?
LAW AND ANALYSIS:
The NAFTA is implemented in GN 12 of the HTSUS. GN 12(a)(i) states that goods are eligible for the NAFTA rate of duty if they originate in the territory of a NAFTA party and qualify to be marked as goods of Canada. GN 12(b) sets forth the various methods for determining whether a good originates in the territory of a NAFTA party. Specifically, these provisions provide, in relevant part, as follows:
(a) Goods originating in the territory of a party to the North American Free Trade Agreement (NAFTA) are subject to duty as provided herein. For the purposes of this note—
(i) Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note and that qualify to be marked as goods of Canada under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether the goods are marked), and goods enumerated in subdivision (u) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the "Special" subcolumn followed by the symbol "CA" in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.
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(b) For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as "goods originating in the territory of a NAFTA party" only if—
they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that—
(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials; or
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Emphasis added.
Based on the language of GN 12, GN 12(a) describes the duty-treatment afforded originating goods, but refers to GN 12(b) for purposes of determining whether a good is an “originating good” under the NAFTA. As such, the presence of the special program indicator “CA” in the special duty column is for the purpose of indicating the proper duty-rate. It is not a requirement for determining a good is an originating good under the NAFTA. We look to GN 12(b) to make that determination.
In this case, the protestant claims the merchandise at issue qualifies as “originating goods” under GN 12, HTSUS and qualifies to be marked as a “good of Canada.” If the applicable tariff rate quota had not been filled at the time of entry, the merchandise would have been entered under subheadings 1806.90.5500, HTSUS, and 2101.12.5400, HTSUS, respectively. These provisions contain the same language at the four and six digit level of the tariff as subheadings 1806.90.5900, and 2101.12.5800, HTSUS, but are the quota provisions which are available until filled and indicate a duty rate of Free for goods of Canada under the NAFTA. For purposes of this decision, we assume the merchandise would be considered originating by your office if the quota had not been filled and the goods had been entered under 1806.90.55, HTSUS, and 2101.12.54, HTSUS.
However, entering the United States after the quota has filled, as in this case, does not change the originating status of a good; it merely affects the duty rate applicable to the good at the time of entry. The goods at issue remain originating goods provided they meet the terms of GN 12(b).
While not dispositive in this case, but noteworthy, for purposes of other free trade agreements subsequent to the NAFTA, such as those with Singapore, Chile and Bahrain, the tariff provides provisions in Chapter 99, HTSUS, for within quota entries and over-quota entries. The provisions in Chapter 99 set forth reduced rates for the over-quota quantities for the provisions at issue here in Chapters 18 and 21, but also contain the special program indicators. The special program indicator for Canada is lacking in the two provisions at issue, but the goods are, nonetheless, stated to be originating goods under the NAFTA.
Furthermore, we note that GN 3 provides that the special subcolumn identifies the rate of duty if the legal requirements under the specific tariff program are met. For example, GN 4 implements the Generalized System of Preferences and requires the Special Program Indicator (“SPI”) to be present for a good to be eligible under that program. By contrast, under GN 12 the SPI in the special duty column reflects the rate of duty, but it is not a requirement of determining the originating status of a good.
The protestant cites to 19 CFR 24.23(c)(3) which provides, in pertinent part:
The ad valorem, surcharge, and specific fees provided for under paragraphs (b)(1) and (b)(2) of this section shall not apply to goods originating in Canada or Mexico within the meaning of General Note 12, HTSUS . . . , where such goods qualify to be marked, respectively, as goods of Canada or Mexico
pursuant to Annex 311 of the North American Free Trade Agreement and without regard to whether the goods are marked. . . .
Further, we note that 19 CFR 24.23(c)(5) exempts products of Israel from the ad valorem, surcharge, and specific fees provided for under paragraphs (b)(1) and (b)(2) of this section. On the other hand, goods of Morocco and Jordan under their Free Trade Agreements with the United States are subject to these fees. The presence or absence of a “SPI” in the special duty column is not indicative of whether these fees are due. It is the statutory language implementing the Free Trade Agreement or other program at issue that is determinative.
19 U.S.C. § 58c(b)(10)(B) provides, in relevant part:
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For goods qualifying under the rules of origin set out in section 3332 of this title, the fee under subsection (a)(9) or (10) of this section –
(i) may not be charged with respect to goods that qualify to be marked as goods of Canada pursuant to Annex 311 of the North American Free Trade
Agreement, for such time as Canada is a NAFTA country, as defined in section 3301(4) of this title[.]
19 U.S.C. § 3332 implements the provisions of the NAFTA. 19 U.S.C. § 3332(a)(1), which defines “originating goods” for purposes of the statute, is the source for GN 12(b).
The absence of a special program indicator in the special duty column for subheadings 1806.90.5900, HTSUS and 2101.12.5800, HTSUS, is not relevant to determining the applicability of the MPF.
HOLDING:
NAFTA originating goods which are subject to tariff rate quotas and fall into over quota provisions are nevertheless exempt from payment of the MPF as they are NAFTA originating goods which qualify to be marked as goods of a NAFTA party. Provided that these goods qualify as originating goods under General Note 12(b) of the HTSUS and they qualify to be marked as goods of Canada under the NAFTA marking rules set forth in 19 CFR Part 102, these goods are exempt from payment of the MPF.
The protest is to be allowed. 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 60 days from the date of this letter. Any reliquidation of the entry in accordance with this 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.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division