OT:RR:CTF:VS H193956
Assistant Port Director, Trade Operations
U.S. Customs and Border Protection
6601 NW 25th Street
Miami, Florida 33122
Re: Protest No. 5201-11-100376; Jewelry; Subheadings 9801.00.20 and 9801.00.25, HTSUS; Consignment; Specifications; Treatment
Dear Assistant Port Director:
This is in response to the Application for Further Review of Protest No. 5201-11-100376, which pertains to the eligibility of jewelry importations for duty free treatment under subheadings 9801.00.20 and 9801.00.25, Harmonized Tariff Schedule of the United States (HTSUS). In addition, it is claimed that the goods are entitled to treatment under subheading 9801.00.25, HTSUS, pursuant to 19 C.F.R. § 177.12(c).
A ruling request, dated July 29, 2011, was submitted by Sandler, Travis & Rosenberg, on behalf of Orogemma Jewelers, Inc. (Orogemma), regarding the eligibility of prospective transactions for duty-free treatment under subheading 9801.00.25, HTSUS. At the time of the request, all previous entries, now subject to this protest, were liquidated without treatment, and any duty owed was paid. Our office had a conference call with the importer’s counsel on September 27, 2011, regarding the importer’s eligibility for subheading 9801.00.25, HTSUS, and the ruling request was subsequently withdrawn on November 3, 2011. The protest was timely filed on October 19, 2011. Our office met with counsel and the importer in a meeting on November 15, 2012, and received supplemental information the week of January 2013 and February 2014.
FACTS:
Orogemma imported jewelry into the United States from abroad. The jewelry was subsequently exported and offered for sale abroad. Potential customers contacted the company to describe the type of jewelry he/she was interested in purchasing and Orogemma’s President or sales agent exported jewelry to present to the potential customer. It is stated that the president had been exporting jewelry for Orogemma for the past eight (8) years. Multiple pieces that may meet the customer’s description were chosen and exported. The jewelry may then have been purchased, and any jewelry that was not purchased was returned to the U.S. and offered for sale to another customer.
According to the protest, between June 2008 and July 2011, Orogemma reimported unsold jewelry under subheading 9801.00.25, HTSUS, 30 times. We note that the last ten (10) of these entries are subject to this protest, eight (8) of which are claimed to be eligible for subheading 9801.00.25, HTSUS treatment, and two (2) of which are also claimed to be eligible for subheading 9801.00.20, HTSUS treatment.
Documentation was provided for original entries into the U.S. For example, for an entry of February 11, 2010, an invoice dated March 1, 2010 is presented, indicating that 42 gold pendants were imported from Hong Kong. Line one of the invoice lists an item number and states: “PENDANT Round Diamond 18 KW 1.92 GM 28D0.36 87D1.05,” followed by “6 pcs.,” unit price of “$121.00,” for a total of & 726.00. Thirteen other lines follow on this invoice, for a total of 42 pieces. Other invoices from different entries list other types of jewelry, such as earrings, bangles, etc., and some provide better descriptions, such as “18K RWG pink Sap. Amethrsy Double Layers Earrings 18 K White Gold 14.93gm 277 pink sapphire 5.62CT 110 Amethrsy 1.48CT (along with a picture), while other list the jewelry generically, such as “14K Gold Ring w/Dia QTY 372.”
Upon return, declarations by both the Orogemma President and the potential purchasers were provided regarding the reasons for “return” for the unsold jewelry. The declarations by Orogemma reference the original entry date and number and contain merchandise descriptions. For example, for a return entered on March 9, 2010 (entry NLxxxxxx353), the declaration from Orogemma lists 7 descriptions, such as “Assorted earring + Dia 14 kt + 18 kt gold = 324 pcs,” and “Assorted Ring Diamond 14kt and 18 kt gold = 9 pcs”, for a total of 619 pieces, and the declaration references the initial entry date of February 11, 2010 and its entry number. The declarations by the potential customers list merchandise descriptions similar to those of the declarations by Orogemma and “reason[s] for return” such as “designs not appealing to store clientele” and “low diamond quality and designs.” For example, for the March 9, 2010, return entry, the “Rejection of Merchandise” is signed by the owner of a store in Multiplaza Pacific Mall in Panama. In addition, for the return entry of March 9, 2010, for example, a 21 page “Memo” on Orogemma letterhead was submitted, listing 619 pieces of various types of jewelry, billed and shipped to Orogemma’s president. The “Memo” lists 499 lines, and, for example, line one lists the item number “WB003526”, style code “E2319”, item description “18 KW Dia Wedding Band”, Disc “90.00”, Sales Price “34,362.00”, and Extended Price “3,436.20.” AES Direct Shipment Records are also submitted. For example, for a departure date of March 2, 1010, the document shows that 629 articles of jewelry with a value of $487,653 were shipped from Miami International on American Airlines with a destination to Multiplaza Pacific Mall in Panama. No specific descriptions of the jewelry are provided on this document. We note that in some instances for those declarations with all the referenced entries provided, not all the goods listed on the declarations as being returned were listed on the invoices accompanying the referenced original entries. On February 6, 2014, we received a supplemental submission whereby counsel attempted to match the original entries, to the customer rejections and re-importations.
Entries and invoices that are claimed to be the original entries for the following dates have been submitted: February 11, 2010 (42 pieces imported); April 27, 2010 (198 pieces); June 3, 2010 (1150 pieces); June 29, 2010 (50 pieces); July 16, 2010 (20 pieces); August 1, 2010 (255 pieces); September 7, 2010 (44 pieces); September 28, 2010 (4 pieces); and September 30, 2010 (34 pieces). For the first return entry at issue in this protest dated March 9, 2010 (NLxxxxxx353), the date of exportation was March 2, 2010 and the quantity exported is stated to be 629, and 619 pieces with 619 referenced in the declaration were returned on March 9, 2010. The other returns are as follows: NLxxxxxx096 dated May 4, 2010 (exported 842, rejected 787, and returned 810); NLxxxxxx351 dated May 25, 2010 (845 exported, 812 rejected, and 812 returned); NLxxxxxx716 dated June 25, 2010 (426 exported, 337 rejected, and 321 returned); NLxxxxxx268 August 14, 2010 (865 exported, 716 rejected, and 716 returned); NL xxxxxx615 September 21, 2010 (350 exported, 299 rejected and 303 returned); NLxxxxxx191 November 10, 2010 (1201 exported, 1076 rejected, and 1076 returned); and NLxxxxxx264 dated February 2, 2011 (736 exported, 649 rejected, and 652 returned). As noted, some return entries contained more jewelry pieces than were declared as rejected.
To show how the protestant has regularly reimported jewelry in the past, a spreadsheet was provided for each of the entries claimed to be eligible as reimported jewelry, listing the importer ID, entry number, line number, tariff classification, date of import, date of entry, special program indicator, country of origin, country of export, port of entry, entry type, method of transportation, line value, total user fees, and estimated duty amount. Although the goods are stated to be previously imported, and entry documents have been provided for jewelry from abroad, the country of origin of all the jewelry is listed as U.S. upon “reimportation.” The company’s broker evidently advised Orogemma to do this when claiming Chapter 98, HTSUS, and this was explained to be a mistake.
Counsel states that each time the jewelry was imported, it was inspected at the airport and a U.S. Customs and Border Protection (CBP) Form 3461 was filed with CBP. It is also stated that CBP reviewed the entry documentation and signed the CBP Form 3461. The protest contains the CBP Form 3461 for five (5) entries from 2008 and 2009.
The goods in these eight entries are also claimed to be exported under a “memo” consignment. This has been explained to be a common practice in the jewelry industry, whereby one party consigns the goods to another by way of a memo listing all the consigned pieces. In these eight entries, it is stated that the goods are consigned from Orogemma to its president for sale abroad. It is stated that in the two remaining entries the subject jewelry was consigned to a “sales agent” to be exported, and the agent received a commission on any jewelry sold. A Consignment Agreement between Orogemma and the claimed agent, dated October 7, 2011, was submitted with the protest. The agreement states that the title to the jewelry remains with Orogemma. The agreement states that this arrangement has been in place between the parties for ten (10) years. Although the agreement is stated to be between Orogemma and the agent, the “name of consigner” is Orogemma’s President. There is no reference to a commission. Additionally, in subsequent submissions, it has been clarified that the goods were actually sold by Orogemma to the “sales agent” before she traveled abroad. She then issued a memo consignment to her prospective customers abroad. Orogemma retained the right to buy back any returned pieces which the “agent” did not wish to keep. Orogemma acted as importer of record in these transactions.
ISSUE:
I. Whether the unsold jewelry returned to the U.S. was entitled to duty free treatment under either subheading 9801.00.25, or subheading 9801.00.20, HTSUS.
II. Whether CBP has granted treatment, as defined in 19 C.F.R. § 177.12, with respect to subheading 9801.00.25, HTSUS, such that CBP must publish notice of the intent to revoke such treatment in the Customs Bulletin.
LAW AND ANALYSIS:
Chapter 98, U.S. Note 2 provides that “[i]n the absence of a specific provision to the contrary, the tariff status of an article is not affected by the fact that it was previously imported into the customs territory of the United States and cleared through customs whether or not duty was paid upon such previous importation.” Two such provisions allowing for exemptions from duty upon subsequent importation are subheadings 9801.00.20 and 9801.00.25, HTSUS.
Subheading 9801.00.25, HTSUS, provides duty-free treatment for:
Articles, previously imported, with respect to which the duty was paid upon such previous importation if (1) exported within three years after the date of such previous importation, (2) reimported without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, (3) reimported for the reason that such articles do not conform to sample or specifications, and (4) reimported by or for the account of the person who imported them into, and exported them from, the United States.
The primary issue in this case regarding subheading 9801.00.25, HTSUS, was whether adequate proof was submitted to show that the same goods were imported with duty paid, exported within three years, and re-imported. The original protest submission contains entry documents and invoices from foreign sellers claimed to be the original importations upon which duty was paid, and
documentation relating to shipments to overseas potential purchasers, which appear to be printouts from the company’s computer system, as well as entry documents for the reimportation with accompanying “memos” that contain the same information that would be expected on an invoice. Counsel provided supplemental information attempting to connect this information, and it was acknowledged that for the first several return entries, original entries prior to February 2010 would have to be submitted, but no such information was provided. Therefore, for the return entries of March 9, May 4, and May 25, 2010, it is clear that the quantities imported from the original entries prior to May 25 would not cover the amount that were exported. The reason given why a lesser amount of original importations is set forth for some of the re-imported entries, is because it is claimed that some of the jewelry was exported and re-imported multiple times, and that they were imported prior to February 2010. While the AES documentation does note that 629 pieces were exported, we have no other information on these 629 pieces other than the quantity. The pieces were obviously imported at some point, but there is no documentation presented to show when duty was paid or that the pieces were exported within three years.
For the other entries beginning with June 25, 2010, we note that by this point in time, adequate quantities were shown to have been imported when compared to the original entries; however, the descriptions are not the same. For example, many of the items returned on June 25 were wedding bands and earrings, and the original June 3, 2010 entry lists many rings and earrings. The same comparisons can be made for the return entries of August 14, and November 10, 2010. However, for the entries of September 21, 2010, and February 2, 2011, more pieces were imported than were rejected. We note that item numbers appear on the original entries and list the same number for multiple pieces, which we assume are for the same type of jewelry item, and that the return “Memo” also lists some item numbers; but, as acknowledged by the protestant, in order to match each exported piece to a returned piece would be a monumental task. Nonetheless, from our examination of the documents presented, we have not been able to match any item numbers and this is a task that would need to be done by the protestant. Therefore, as the protestant has failed to match the pieces, it is not reasonable to assume CBP would undertake as failed this task. Accordingly, we find that the jewelry did not qualify for entry under subheading 9801.00.25, HTSUS.
For two entries, NLxxxxxx597 dated December 10, 2010, and NLxxxxxx286 dated May 21, 2010, it is claimed that the articles qualify for subheading 9801.00.20, HTSUS, treatment.
Subheading 9801.00.20, HTSUS, provides duty-free treatment for:
Articles, previously imported, with respect to which the duty was paid upon such previous importation or which were previously free of duty pursuant to the Caribbean Basin Economic Recovery Act or Title V of the Trade Act of 1974, if (1) reimported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, after having been exported under lease or similar use agreements, and (2) reimported by or for the account of the person who imported it into, and exported it from the United States.
As in the situation with the May entry above concerning subheading 9801.00.25, HTSUS, no proof was submitted to show that 812 pieces of jewelry that were returned, were previously imported with duty paid. Furthermore, it was acknowledged that some of the pieces were sold. As such, they would not have been exported under lease or a similar use agreement. Therefore, we find that the jewelry did not qualify for entry under subheading 9801.00.20, HTSUS.
II. Treatment
Counsel argues that should the goods be ineligible for duty free treatment under subheading 9801.00.25, HTSUS, CBP is required to publish notice of such a decision in the Customs Bulletin, pursuant to 19 U.S.C. § 1625(c) and 19 C.F.R. § 177.12, before denying preferential treatment to the jewelry. Section 1625(c) provides that “A proposed interpretive ruling or decision which would— . . . (2) have the effect of modifying the treatment previously accorded by the Customs Service to substantially identical transactions; shall be published in the Customs Bulletin.”
CBP has promulgated regulations, contained in 19 C.F.R. § 177.12(c), to determine if a treatment existed such that compliance with 19 U.S.C. § 1625(c) is required. The Court of Appeals for the Federal Circuit has determined that “19 C.F.R. § 177.12(c)(1)(i), which like (c)(1)(ii) defines ‘treatment’ in § 1625(c)(2), is ‘a reasonable and permissible construction of the statute,’ [Motorola, Inc. v. United States, 436 F.3d 1357, 1366], and thus entitled to deference under Chevron.” Motorola, Inc. v. United States, 509 F.3d 1368, 1371 (Fed. Cir. 2007). Section 177.12(c) delineates the rules that will be used to determine if treatment was accorded by CBP.
The following rules will apply for purposes of determining under this section whether a treatment was previously accorded by Customs to substantially identical transactions of a person:
(i) There must be evidence to establish that:
(A) There was an actual determination by a Customs officer regarding the facts and issues involved in the claimed treatment;
(B) The Customs officer making the actual determination was responsible for the subject matter on which the determination was made; and
(C) Over a 2-year period immediately preceding the claim of treatment, Customs consistently applied that determination on a national basis as reflected in liquidations of entries or reconciliations or other Customs actions with respect to all or substantially all of that person’s Customs transactions involving materially identical facts and issues[.]
19 C.F.R. § 177.12(c). The determination of whether treatment existed will be made on a case-by-case basis. See 19 C.F.R. § 177.12(c)(ii). The evidentiary burden for claiming treatment rests on the party claiming treatment.
The evidentiary burden as regards the existence of the previous treatment is on the person claiming that treatment. The evidence of previous treatment by Customs must include a list of all materially identical transactions by entry number (or other Customs assigned number), the quantity and value of merchandise covered by each transaction (where applicable), the ports of entry, the dates of final action by Customs, and, if known, the name and location of the Customs officer who made the determination on which the claimed treatment is based. In addition, in cases in which an entry is liquidated without any Customs review (for example, the entry is liquidated automatically as entered), the person claiming a previous treatment must be prepared to submit to Customs written or other appropriate evidence of the earlier actual determination of a Customs officer that the person relied on in preparing the entry and that is consistent with the liquidation of the entry.
19 C.F.R. § 177.12(c)(iv).
In this case, the importer has submitted a spreadsheet identifying some, but not all, of the information required by § 177.12(c)(iv). The importer has presented Customs with 30 entries for which subheading 9801.00.25, HTSUS, was claimed, including the 10 protested entries for which subheading 9801.00.25, HTSUS, treatment was denied. The spreadsheet lists the importer ID, entry number, line number, tariff classification, date of import, date of entry, special program, country of origin, country of export, port of entry, entry type, method of transportation, line value, total user fees, and estimated duty amount. Missing from the spreadsheet are the dates of final action by CBP and names of officers who made the claimed determination. The importer’s submission of entries pursuant to 19 C.F.R. § 177.12(c)(iv) is incomplete. The importer did provide five CBP Form 3461s for entries liquidated under subheading 9801.00.25, HTSUS. Although an affidavit from Orogemma’s customs broker was provided regarding the process she follows for in-person jewelry importations, the affidavit does not claim that the CBP Officer (CBPO) reviews or discusses the proper classification:
5. I meet [Orogemma President] at the airport, at the international arrival area in Concourse E. Upon his arrival, CBP takes [Orogemma President] to an office and physically inspects the jewelry. At this time, the CBP inspector that is on duty reviews the Customs Form 3461 reflecting classification under subheading 9801.00.25, HTSUS and supporting documentation. In some cases, the CBP officer will ask questions about the accompanying invoices.
6. After inspecting the goods and approving the documentation including the classification of the merchandise, the CBP officer signs the 3461.
Protest, Exhibit 6. Although the affidavit states that the documentation that includes the classification of the merchandise is signed, it does not state that the classification is reviewed, approved, or discussed.
A member of my staff spoke with the CBPO who signed one of the submitted CBP Form 3461s regarding her duty requirements for a jewelry importation at the airport. Consistent with the affidavit of the broker, the CBPO is responsible for reviewing the CBP Form 3461 and accompanying invoices and jewelry to ensure all pieces are accounted for and authentic. Generally, if all pieces are accounted for and authentic, the CBPO will accept the CF 3461. Classification is the responsibility of the Import Specialist, if the entry is reviewed by one.
In this case, a claim for treatment cannot be granted on the basis of the evidence provided. The importer has failed to provide evidence regarding a review of the classification as required by § 177.12(c)(i)(A). Although the documentation contained the classification, this issue was not subject to the CBPO’s review, as corroborated by the affidavit and the CBPO. In Kyocera Industrial Ceramics Corp. v. United States, 30 Ct. Int’l Trade 2011, 2018 (2006), the importer informed the customs officers that it was relying on a particular ruling for its classification both orally and by attaching the ruling to its entry documentation. The court held that “[t]he requirement is actual determination, however, not attempted notice by the importer.” The court further stated that “[w]hile there may have been no objection on the part of Customs, that was not the equivalent of a positive determination that would satisfy the standard of subsection 177.12(c)(1)(i)(A).” Kyocera, 30 Ct. Int’l Trade at 2018. The situation at issue is similar, as declared in the affidavit, the classification was contained on the reviewed CF 3461s; however, the importer has failed to prove that the CBPO made an actual determination on the classification or that the classification was even reviewed by the CBPO. As the Court of Appeals for the Federal Circuit held in Motorola:
it is reasonable for Customs to require that before it required to acquiesce to a claim of treatment, there have been ‘an actual determination’ based on an examination that particular items belonged under a particular classification, by an officer with responsibility for the subject matter under consideration, and that the same determination have been made consistently over the preceding two years with respect to the importer’s materially identical parts.
Motorola, 509 F.3d at 1371-72. We find that the importer has failed to prove that treatment existed such that CBP is required to publish a decision to revoke such treatment in the Customs Bulletin.
Additionally, as discussed earlier, the documentation provided is not sufficient to support the claimed subheading. As such, even were treatment to have existed, these entries would not have been eligible.
HOLDING:
The protest should be denied as the documentation fails to match the original importations to the re-imported jewelry pieces.
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