VAL OT:RR:CTF:VS H307425 EE
Port Director
U.S. Customs and Border Protection
John F. Kennedy International Airport
Building 77, 2nd Floor, Executive Office
Jamaica, NY 11430
RE: Application for Further Review of Protest No. 4701-18-100197; 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. 4701-18-100197, timely filed by counsel on May 16, 2018, on behalf of Shanti Gold LLC (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, 1,119 pieces of 22 karat assorted gold jewelry, valued at $918,819 was entered on October 7, 2016 by the protestant duty-free under subheading 7113.19.50, Harmonized Tariff Schedule of the United States (“HTSUS”), as entitled to preferential tariff treatment under the OFTA. On July 18, 2017, the Port issued a Request for Information (CBP Form 28) to the protestant requesting supporting documentation to substantiate the claim for preferential treatment including a certificate of origin, invoices, bill of materials with manufacturer names, manufacturer affidavits, cost data, production and manufacturing records, transportation documentation and payment records for the raw materials received at the factory, factory production records for the completed article, as well as final cost payment. The port also requested that all documents must be translated to English. On August 18, 2017, CBP issued a proposed Notice of Action (CBP Form 29) stating that no bill of materials with manufacturer names, manufacturer affidavits, cost data, or production and manufacturing records were provided. The information requested included transportation documentation and payment records for the raw materials received at the factory as well as factory production records for the completed article. The port also requested final cost payment and proofs of payment. The port indicated that if this information was not provided after 20 days, preferential treatment under OFTA would be denied. On September 21, 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 bank records, wire transfers, and cancelled checks for payment of goods and raw materials was not provided. Subsequently, CBP liquidated the entries on November 17, 2017, denying OFTA treatment. Counsel for the protestant timely filed a protest on May 16, 2018, claiming that the imported merchandise qualifies for duty-free treatment under the OFTA.
The protestant provided the following documents in support of the claim that the jewelry at issue is entitled to duty-free treatment under the OFTA:
-Invoice number 01220, dated October 6, 2016, from New Salalah Trading LLC to the protestant for “Assorted Gold Jewellery” weighing a total of 23,457.220 grams in the amount of $918,819.30.
-A packing list, dated October 6, 2016, which corresponds to the invoice and lists 1,119 pieces of jewelry weighing 23,457.220 grams.
-A Certificate of Origin, dated October 6, 2016, issued by the Oman Chamber of Commerce & Industry stating that 22K “Assorted Gold Jewellery” are made in the Sultanate of Oman. The Certificate of Origin states that the signature and stamp (of New Salalah Trading) have been attested without the chamber bearing any responsibility on the contents of the Certificate.
-Description of the manufacturing processes of the jewelry at issue.
-Jewelry manufacturing process chart.
-Affidavit from Abdul Rehman, the owner of New Salalah Trading, dated July 25, 2017, stating that the jewelry at issue was manufactured by New Salalah Trading in its factory in Oman. The affidavit also describes the manufacturing process for the jewelry at issue.
-Breakdown of value and origin of the gold and copper as well as manufacturing costs issued by New Salalah Trading.
-Gold manufacturing process log issued by New Salalah Trading listing the dates of processing operations such as melting, rolling wire, casting, stamping etc. which tracks the amount of gold used during the processing operations.
-A cash memo from Al-Buraq Al-Akhdhar Trad. & Cont. to New Salalah Trading, dated August 20, 2016, for 20 kg of copper for 330.00 Omani Rial.
-A gold payment voucher from Shantilal to New Salalah Trading, dated September 12, 2016, for 24 karat gold bars weighing 22,600 for 782,582 Omani Rial.
-A letter from New Salalah Trading, dated January 1, 2016, and another letter, dated January 1, 2017, stating that all future payments should be made to Shantilal Jewellers, Dubai, and providing account details.
-A letter from New Salalah Trading to the protestant, dated May 14, 2018, explaining that the reason why it requested that all payments be sent to Shantilal Jewellers is because it buys gold bullion bars from Shantilal Jewellers and needs to make payment to them, so transferring funds directly to them saves New Salalah Trading time and costs of wiring funds to them. New Salalah Trading also states that it is not related to Shantilal Jewellers and that the latter is only supplying New Salalah Trading gold bullion bars.
-Wire transfers to Shantilal Jewellers. The wire transfers total $398,484. It is unclear who was the sender of the wire transfers.
-A wire transfer from the protestant to Shantilal Jewellers on October 17, 2016 in the amount of $49,560.
-Statement of account of the protestant issued by Shantilal Jewellers LLC listing the payments it received from the protestant for New Salalah Trading LLC for invoice no. 01220. The statement of account lists a debit, dated October 6, 2016, for the amount of $918,819.30 for invoice no. 01220.
-A table which lists the breakdown of payments from New Salalah Trading for invoice number 01220. The payments total $919,731.66.
-A table which lists two airway bills, listing customer as the protestant and consignee as Shantilal Jewellers, insured value and invoice numbers.
-A declaration from Khamis Nasser Aziz Al Balushi, an employee of New Salalah Trading, stating that he transported the jewelry at issue on behalf of New Salalah Trading to Dubai International Airport to deliver it to Mr. Gurmeet Guleria, manager of the protestant, who would hand carry it to New York to the protestant. The statement is not dated. The protestant also included a copy of Khamis Nasser Aziz Al Balushi’s identity card. The identity card expired on August 15, 2016.
-Mr. Gurmeet Guleria’s roundtrip itinerary from New York, NY to Mumbai, IN, through Dubai, UAE, leaving on September 27, 2016 and arriving on September 28, 2016 and returning from Mumbai, India, to New York, NY, through Dubai, UAE, leaving on October 1, 2016 and arriving on October 7, 2016.
-A translated version of the business license issued by the Muscat Municipality DG of Muttrah in the Sultanate of Oman to New Salalah Trading. The business license was issued on May 1, 2016 and expired on April 30, 2017. It lists license number, registration number as 1259750, and branch code. The address is listed as unit no.5, bldg no.1497, st. no.1427, community no.114, area: Al Muttrah. Trade activity is listed as trading of jewellery and ornaments (selling gold & jewellery).
-A translated version of tenancy agreement number 1889028. The landlord listed on the tenancy agreement is Heirs / Abdulhussain Abdullah Bin Abdul Aziz Al Loothi. The tenant is New Salalah Trading with a commercial registry number of 1259750. The address for New Salalah Trading is listed as P.O. Box 651, postal code 114. Property details list building no. 1497, block number 114. Both parties’ phone numbers are listed on the agreement. Land use is listed as commercial residence and the type of activity is jewelry trading. The agreement commences on April 1, 2016 to March 31, 2017.
-Photographs of individuals working on jewelry.
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, 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 bank records, wire transfers, and cancelled checks for payment of goods and raw materials 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. In the instant case, the protestant submitted certain commercial documents including a commercial invoice and a packing list for the gold jewelry at issue, a cash memo and a gold payment voucher for the raw materials, and Wells Fargo withdrawals/debits statements indicating payments to Shantilal Jewellers. However, none of the amounts on the payment statements correspond to the amount on the commercial invoice from New Salalah to the protestant for the gold jewelry at issue. In addition to the discrepancy in the payment documents, the protestant has not submitted sufficient documentation to establish that the gold jewelry was actually manufactured in Oman.
The protestant submitted an undated declaration from Khamis Nasser Aziz Al Balushi, an employee of New Salalah Trading, stating that he transported the jewelry at issue on behalf of New Salalah Trading to Dubai International Airport to deliver it to Mr. Gurmeet Guleria, manager of the protestant, who would hand carry it to New York to the protestant. Mr. Al Balushi states that he maintained exclusive control over the jewelry at issue during its transit from Oman to Dubai; that the jewelry was neither exhibited nor offered for sale in the UAE; and that he did not transit any countries other than Oman and the UAE. Mr. Al Balushi also states that there is an open border between Oman and the UAE such that citizens of one country may freely travel to the other with a minimum of customs or immigration control and there are no documents stamped while transiting between two countries. Accordingly, when Mr. Al Balushi crossed the border from Oman to the UAE, he was not subject to customs control. The protestant also submitted Mr. Gurmeet Guleria’s roundtrip itinerary from New York, NY to Mumbai, IN, through Dubai, UAE, leaving on September 27, 2016 and arriving on September 28, 2016 and returning from Mumbai, India, to New York, NY, through Dubai, UAE, leaving on October 1, 2016 and arriving on October 7, 2016. An undated statement from Mr. Al Balushi is not sufficient documentation to prove that the merchandise was transported from Oman to the UAE. This documentation is not sufficient to meet the imported directly requirement under the Oman FTA. See 19 C.F.R. § 10.1880.
Further, the protestant did not submit any information about the employees who produced the jewelry. In a letter addressed to the protestant, dated May 14, 2018, the owner of New Salalah Trading stated that they do not have any payroll records as they pay workers on job work basis. Workers do not get paid in currency, rather they get paid in gold according to the quantity of jewelry production they carry out. He stated that for example, if the employee produces 10,000 grams of jewelry, they get 150 grams of gold as their compensation. New Salalah Trading states that this is a normal practice in that part of the world as it encourages workers to produce more jewelry hence increase their compensation. Without any documentation concerning the employees, the protestant has not demonstrated that the production of the imported jewelry actually occurred in Oman by the alleged manufacturer’s employees.
Moreover, the protestant has not provided sufficient information documenting that the factory where the imported jewelry was produced is actually located in Oman. The information provided concerning the factory includes a tenancy agreement and a business license. The protestant did not submit any utility bills related to the operation of the factory. The protestant submitted photos of individuals working on jewelry and some of the equipment. However, these photos are not date stamped and it is unclear whether they represent the manufacturing of the jewelry at issue. Further, the protestant did not submit purchase receipts for the machinery or any information concerning maintenance records.
Based on the documents provided, we agree with the port that there is inadequate supporting documentation that the gold jewelry was actually produced in Oman. Mainly, we have not received sufficient documentation evidencing transport of the jewelry from Oman to the UAE. We have not been provided any information concerning the employees who allegedly produced the jewelry at issue or detailed breakdowns for the cost of labor. Further, we have not received sufficient documentation related to the operation of the factory such as utility bills or purchase receipts for the machinery or any information concerning maintenance records. We also did not receive any rental bills or proof of payment for rent. Lastly, photos provided are not linked to the merchandise at issue. Considering the large quantity of jewelry pieces and the value of $918,819, we would expect to see documentation that is more sufficiently detailed to demonstrate that the processing of the gold actually occurred in Oman. Accordingly, we find that the gold jewelry is not eligible for duty-free treatment under the OFTA.
The protestant inquired about the liability of the customs broker as the importer of record. The importer of record, which is the broker in the instant case, is ultimately responsible for the correctness of the entry documentation presented to CBP and all applicable duties, taxes and fees.
HOLDING:
Based on the information provided, the protestant has not demonstrated that the imported gold jewelry was actually 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,
for Craig T. Clark, Director
Commercial and Trade Facilitation Division