VAL OT:RR:CTF:VS H297329 EE
Port Director
U.S. Customs and Border Protection
555 Battery Street
San Francisco, CA 94111
RE: Application for Further Review of Protest No. 2801-17-100120; Eligibility of Certain Gold Jewelry under the United States – Oman Free Trade Agreement
Dear Port Director:
This is in response to an Application for Further Review (“AFR”) of Protest No. 2801-17-100120, timely filed by counsel on October 2, 2017, on behalf of the importer, Surya International Inc. (hereinafter, the “protestant”), concerning the eligibility of certain gold jewelry for duty-free treatment under the United States – Oman Free Trade Agreement (“OFTA”).
FACTS:
The merchandise subject to the protest at issue, 655 pieces of 22 karat assorted gold jewelry, valued at $396,356, was entered on November 10, 2015 by the protestant duty-free under subheadings 7113.19.29 and 7113.19.50, Harmonized Tariff Schedule of the United States (“HTSUS”), as eligible for preferential tariff treatment under the OFTA. On June 29, 2016, the Port issued a Request for Information (CBP Form 28) to the protestant requesting supporting documentation to substantiate the claim for preferential treatment including proof of payment, sales contract, purchase order, cost analysis breakdown of materials and labor, photos of each item, and a certificate of origin. On January 5, 2017, CBP issued a proposed Notice of Action (CBP Form 29) requesting time cards and proofs of payment for all employees identified for June 1, 2015 through November 30, 2015; lease/rental agreement for New Salalah Trading LLC (“New Salalah”), the manufacturer and seller of the jewelry at issue at the physical address for a minimum of the last two years; utility bills (gas/electric/water/phone) for New Salalah at the physical address from October 1, 2015 through July 31, 2016; additional information including affidavits for all the materials used to make the products; and factory production records for the completed articles along with photos (date/time stamped). The port indicated that if this information was not provided after 20 days, preferential treatment under OFTA would be denied. On March 2, 2017, CBP issued a CBP Form 29 advising the protestant that an action had been taken to deny the claim for preferential tariff treatment under the OFTA to the entry which was the subject of the verification. Specifically, the port indicated that the protestant had not demonstrated that the gold jewelry was actually manufactured in Oman since sufficient information, such as production and manufacturing records for the jewelry at issue was not provided. Subsequently, CBP liquidated the entries on April 7, 2017, denying OFTA treatment. Counsel for the protestant timely filed a protest on October 2, 2017, claiming that the imported merchandise qualifies for duty-free treatment under the OFTA.
The protestant states that in Oman, businesses receive their mail at post office boxes rather than at their physical location. New Salalah uses P.O. Box 651, Muttrah - 114, Oman. The protestant states that New Salalah’s address of its physical location is Building 1497, Block 114, Way 1427, Muttrah, Oman. New Salalah used the services of a selling agent, Shantilal Jewellers LLC (“Shantilal”), located at P.O. Box 3244, Deira, Dubai, UAE. The protestant states that Shantilal’s physical location is Suite 74, 3rd Floor, Zone 5, the Gold Center, Gold Souk, Deira, Dubai, UAE. Shantilal facilitated the transaction by taking the order, acquiring materials for New Salalah, and assisting in the exportation to the United States once the goods were sent from Oman to Dubai. The protestant then paid Shantilal for jewelry purchased from New Salalah who deducted its material expenses and remitted the balance to its principal. Shantilal was paid a commission by New Salalah.
The protestant provided the following documents in support of his claim that the jewelry at issue is eligible for duty-free treatment under the OFTA.
-Invoice number 00604, dated November 8, 2015, from New Salalah to the protestant for the merchandise at issue weighing a total of 11,485.410 grams in the amount of $396,356.
-A packing list which corresponds to the invoice and lists 655 pieces of jewelry.
-A sales contract between New Salalah and the protestant, dated June 7, 2015, for 22 karat, 21 karat, and 18 karat gold jewelry. The term of sale listed is CIF, Port of destination is San Francisco, CA, terms of payment is 15 days, and all payments to be remitted to “Shantilal” unless stated otherwise.
-A debit statement from Bank of America, dated November 12, 2015, for payment from the protestant to Shantilal for the amount of $310,556.78.
-Gold payment voucher number 22084 from Shantilal to New Salalah, dated October 11, 2015. The payment voucher is for pure gold bars weighing 11,100 grams.
-Invoice number 3092 from Gem Gold Ind. LLC (“Gem Gold”) to Shantilal, dated October 11, 2015, for pure gold bar weighing 12,000 grams.
-The ledger of Shantilal from October 1, 2015 to October 31, 2015 issued by Gem Gold which lists invoice number 3092, dated October 11, 2015.
-A receipt for gold issued by Shantilal to New Salalah, dated November 11, 2015, for $1000. The receipt indicates that this amount is the commission for invoice number 00604, which is the commercial invoice issued by New Salalah to the protestant for the merchandise at issue.
-A Certificate of Origin, dated November 9, 2015, issued by the Oman Chamber of Commerce & Industry stating that the goods are made in the Sultanate of Oman. The Certificate of Origin states that the signature and stamp (of New Salalah) have been attested without the chamber bearing any responsibility on the contents of the Certificate.
-An air waybill, dated November 8, 2015, listing the shipper as New Salalah c/o Shantilal and the consignee as the protestant. The gross weight listed is 21.40 kilograms. The airport of departure is Dubai International and the airport of destination is San Francisco International.
-A declaration from Khamis Nasser Aziz Al Balushi stating that he transported the jewelry at issue to Dubai airport to be shipped to the protestant. The statement is not dated. The protestant also included a copy of Khamis Nasser Aziz Al Balushi’s identity card.
-The gold manufacturing process and salary chart issued by New Salalah. The chart lists manufacturing processes including melting, rolling wire, casting, stamping, polishing, sand blasting, milling, and cleaning. The chart also includes amount of gold that was used during each manufacturing process, date, and the salary paid for each manufacturing process.
-A document from New Salalah listing its employees and their positions.
-A statement by New Salalah indicating that its employees are paid on a per job basis.
-Gold payment vouchers issued by New Salalah to the 20 workers which the protestant claims manufactured the jewelry at issue. The vouchers are dated November 6, 2015 and are issued for 24 karat pure gold. Eighteen workers were paid 12.5 grams of 24 karat gold and two workers were paid 25 grams of pure gold. According to New Salalah, the two latter workers were senior employees.
-Photos of individuals working on the jewelry, the building, and some of the equipment.
-The Commercial Registration Certificate for New Salalah with the commercial registration number 1259750 signed on October 21, 2015. The address listed is P.O. Box 651, postal code: 114. The establishment and registration dates are listed as February 16, 1987 and the expiration date is February 15, 2017. There are a number of branch locations throughout the years. Commercial activity is listed as retail of jewelry.
-The translation of the local license from the Directorate General of Muttrah for New Salalah which indicates license number BM/11749/2013, registry number 1259750, branch code 29509782, and the following address: Unit no. 5, building no. 1497, road no. 1427, complex no. 114, Muttrah. The activity is listed as jewelry and trading (sale gold jewels and jewelry). The issuance date is May 1, 2016 and the expiration date is April 30, 2017.
-An Oman Chamber of Commerce & Industry membership card issued to commercial registration number 1259750 with an expiration date of October 20, 2017.
-A translated version of tenancy agreement number 1889028. The landlord listed on the tenancy agreement is Heirs/Abdul Hussain Bin Abdullah Bin Abdul Aziz Al Lawati. The tenant is New Salalah with a commercial registry number of 1259750. The address for New Salalah is listed as P.O. Box 651, postal code 114. Property details list building no. 1497, block number 114, way 1427. Both parties’ phone numbers are listed on the agreement. Land use is listed as residential/commercial and the type of activity is jewelry and jewels trading. The agreement is valid for one year commencing from April 1, 2016 to March 31, 2017. Monthly rental fees are listed on the agreement.
-Electricity bills from the Muscat Electricity Distribution Co. issued to the landlord from October 1, 2015 to July 1, 2016.
ISSUE:
Whether the gold jewelry imported from Oman is eligible for duty-free treatment under the OFTA.
LAW AND ANALYSIS:
The United States-Oman Free Trade Agreement (OFTA) was signed by the Governments of Oman and the United States on January 19, 2006. The OFTA was approved by the U.S. Congress with the enactment on September 26, 2006, of the OFTA Implementation Act (the Act), Pub. L. 109-283, 120 Stat. 1191 (19 USC 3805). GN 31 of the HTSUS implements the OFTA. GN 31(b) sets forth the criteria for determining whether a good is an originating good for purposes of the OFTA. GN 31(b) states:
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 UOFTA country under the terms of this note only if --
the good is a good wholly the growth, product or manufacture of Oman or of the United States, or both;
for goods not covered by subdivision (iii) below, the good is a new or different article of commerce that has been grown, produced or manufactured in the territory of Oman or of the United States, or both, and the sum of --
A. the value of each material produced in the territory of Oman or of the United States, or both, and
B. the direct costs of processing operations performed in the territory of Oman 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—
A. 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 Oman or of the United States, or both; or
B. the good otherwise satisfies the requirements specified in such subdivision (h);
…
In the instant case, it is not disputed that when 24 karat gold and alloy is manufactured into gold jewelry, the gold and the alloy are substantially transformed. Further, it is also not disputed that the gold alloy would undergo a double substantial transformation when processed initially into gold wire, castings, and stampings, which would then be substantially transformed into gold necklaces, chains, bangles, earrings, rings, and bracelets. See Headquarters Ruling Letter (“HQ”) 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 HQ 555210, dated April 26, 1989.
At issue is the verification whether the gold jewelry was manufactured in Oman. The port stated that the protestant did not provide sufficient information, such as production and manufacturing records for the gold jewelry at issue to substantiate the claim that the gold jewelry was actually manufactured in Oman.
CBP Regulations applicable to the OFTA are contained in 19 C.F.R. § 10.861 to § 10.890. The issue of verification is addressed in 19 C.F.R. § 10.887 which provides in paragraph (a) that:
A claim for preferential treatment made under § 10.863 or § 10.870 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 OFTA claim if insufficient information was provided to substantiate the claim that the gold jewelry was manufactured in Oman. Based on our review, the protestant has not submitted sufficient documentation to establish that the gold jewelry was produced in Oman.
As previously noted, the protestant submitted certain commercial documents related to the purchase and sale of the materials and the gold jewelry. These include an invoice from New Salalah to the protestant for certain 22 karat gold jewelry weighing 11,485.410 grams for a total amount of $396,356 and a packing list which corresponds to the commercial invoice listing 655 pieces of 22 karat gold jewelry. The sales contract issued by New Salalah does not specify the merchandise. The Bank of America debit statement, dated November 12, 2015, indicates a payment from the protestant to Shantilal for the amount of $310,556.78, which does not correspond to the amount for the merchandise on the commercial invoice from New Salalah to the protestant. The Counsel for the protestant states that the payment to Shantilal was less than the invoice value because New Salalah made an adjustment due to quality issues on a prior shipment but the protestant did not offset this on the entry to calculate the entered value and reported the higher value for shipment. However, the protestant did not provide us with any documentation evidencing this claim.
The protestant also submitted gold payment voucher number 22084, dated October 11, 2015, from Shantilal to New Salalah for pure gold bars weighing 11,100 grams. This amount does not correspond to the amount of gold indicated on invoice number 3092 from Gem Gold Ind. LLC (“Gem Gold”) to Shantilal Jewellers, dated October 11, 2015, which was for pure gold bars weighing 12,000 grams. The protestant claims that Gem Gold and Shantilal do not pay each other by bank transfers. Rather, they make debit and credit entries in their books for the purchases and sales. The balance in their books get settled by debit and credit entries. However, the protestant did not submit any documents to evidence the missing gold.
The air waybill issued by Cargo Partners lists the airport of departure as Dubai and the airport of arrival as San Francisco. Counsel for the protestant claims that exporters of jewelry from Oman must export their jewelry trough Dubai for security purposes since carriers will not pick up in Oman or issue an airway bill of lading for high value cargo originating from Oman. Therefore, it is the shipper’s responsibility to “privately” transport the jewelry to the carrier’s cargo agent at the Dubai International Airport. Counsel states that typically a jewelry manufacturer will use a trusted employee or a reliable courier will drive the merchandise from its place of manufacture in Oman to Dubai International Airport. Goods transiting between members of the Gulf Cooperation Council are subject to minimum customs control and there are no documents stamped at the frontier as evidence of transit. The protestant provided an undated statement from Khamis Nasser Aziz Al Balushi indicating he received the shipment in Oman, maintained exclusive control over it during its transit from Oman to Dubai, and personally delivered it to Cargo Partners. An undated statement from Mr. Al Balushi is not sufficient documentation to prove that the merchandise was transported from Oman to the UAE. Further, this documentation is not sufficient to meet the imported directly requirement under the Oman FTA. See 19 C.F.R. § 10.1880. Additionally, the gross weight of the merchandise listed on the air waybill is 21.4 kg which is much higher than the weight of the merchandise at issue, and this was not explained by the protestant.
The information we received concerning the factory includes a tenancy agreement, a business license, a local license issued by the Directorate General of Muttrah, and utility bills. The tenancy agreement is valid for one year, from April 1, 2016 to March 31, 2017. This period of time is after the entry date and therefore the tenancy agreement submitted is not relevant. The protestant submitted the Commercial Registration Certificate for New Salalah with the commercial registration number 1259750 signed on October 21, 2015. The address listed is P.O. Box 651, Postal code: 114. The establishment and registration dates are listed as February 16, 1987 and the expiration date is February 15, 2017. This document merely references the P.O. Box for New Salalah and not the physical address of the factory. The protestant submitted the translation of the local license from the Directorate General of Muttrah for New Salalah which does list the physical address of the factory; however, the issuance date of the local license is May 1, 2016 which is after the entry date of the merchandise and therefore the local license is not relevant. The protestant submitted electricity bills from the Muscat Electricity Distribution Co. issued to the landlord, Abdualhassin Abdualla Abduallaziz Alwati, from October 1, 2015 to July 1, 2016. The bills state that the tariff type is commercial; however, there is nothing that ties the bills to New Salalah other than the way number (1427). The protestant states that in Oman, because of the unique infrastructure, commercial property is not necessarily separately metered and is not billed in the name of the owner, nor the tenant and may not be unique to a particular piece of property. Further, the protestant states that the electricity bill issued to the owner of the property indicates the address which is “very close to the physical location for New Salalah.” The relevance of proximity of the address listed on the electricity bill is unclear. The protestant submitted photos of individuals working on the jewelry, the building and some of the equipment. Counsel for the protestant states that the photos do not represent the manufacturing of the jewelry at issue, rather of production of other jewelry at New Salalah. These photos are not relevant since they do not represent the time period at issue.
Based on the documents provided, we agree with the port that there is inadequate supporting documentation that the gold jewelry was manufactured in Oman. Mainly, we have not received sufficient documentation evidencing transport of the jewelry from Oman to the UAE; the tenancy agreement and local license are not relevant for the time period at issue; the Commercial Registration Certificate does not list the physical address of the factory; and the photos provided are not linked to the merchandise at issue. Accordingly, we find that the gold jewelry is not eligible for duty-free treatment under the OFTA.
HOLDING:
Based on the information provided, the protestant has not demonstrated that the imported gold jewelry was manufactured in Oman. Therefore, the gold jewelry is not eligible for duty-free treatment under the OFTA.
In conformity with the foregoing, the protest should be DENIED.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (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 or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (CROSS) at https://rulings.cbp.gov/ which can be found on the U.S. Customs and Border Protection website at http://www.cbp.gov and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division