Protest 2002-97-101860; Country of Origin; Work Gloves; Marking Duties; 19 U.S.C. §1304(h)

HQ 961514 November 23, 1998 CLA-2 RR:CR:TE 961514 RH CATEGORY: Classification Port Director U.S. Customs Service 423 Canal Street New Orleans, LA 70130 ATTN: Protest Office, Room 200 RE: Protest 2002-97-101860; Country of Origin; Work Gloves; Marking Duties; 19 U.S.C. §1304(h) Dear Sir: This is in reply to your letter dated March 10, 1998, regarding the Application for Further Review of Protest (AFR) 2002-97-101860. The law firm of Thompkins & Davidson filed the AFR on behalf of International Sourcing Co., Inc., against the assessment of marking duties for failure to properly mark the gloves at issue with the correct country of origin. The AFR covers three entries. The protestant claims that the assessment of marking duties is inconsistent with Customs policies set forth in Headquarters Ruling Letter (HQ) 734151, dated April 6, 1992, and HQ 559620, dated May 17, 1996. Initially, we note that in HQ 560854, dated February 24, 1998, our office determined that review of the AFR was warranted under 19 CFR §§ 174.24(a) and (b). FACTS: On January 22, 1996, and February 23, 1996, the protestant filed three entries at the Port of New Orleans, covering 54,000 dozen pairs of men’s 100 percent cotton, knitted, work gloves - styles 14001G and 14001P. The entries identified Macau as the country of origin, and the “Fabrica de Luvas Kuong Chau” as the manufacturer of the gloves. - 2 - On March 6 and 7, 1996, officials from U.S. Customs, Hong Kong and Macau Economic Services visited the Fabrica de Luvas Kuong Chau factory. The team concluded that the Fabrica de Luvas Kuong Chau factory was incapable of producing the quantity of gloves allegedly manufactured by it. Thereafter, Customs issued a Notice to Redeliver on Customs Form (CF) 4647 to the protestant on April 5, 1996, stating that the merchandise was in violation of quota/visa restraints and that the gloves had been transshipped through Macau. The redelivery notice was extended a short time to allow the protestant to obtain evidence that the Fabrica de Luvas Kuong Chau factory actually manufactured the gloves. On May 13, 1996, the protestant’s Customs broker submitted the following documentation on its behalf: 1) Two letters signed by the Manager of Fabrica de Luvas Kuong Chau; 2) Daily production records in cutting, sewing, etc.; 3) Manufacturing records for each worker; 4) Order for packing cases; 5) Copy of the inspection report issued by the Economic Services Department of Inspection of Economic Activities, Government of Macau; 6) Copies of documents pertaining to the entry of Chinese-origin fabric into Macau; 7) Purchase invoice covering the knit, “wrist” and jersey fabrics; 8) Payment records for manufacturing; 9) Certificates of Origin and export licenses issued by the Macau Economic Services for each of the three entries. The protestant failed to redeliver the merchandise, and Customs issued a Notice of Action (CF 19) on June 2, 1997, informing the protestant that marking duties of 10 percent were assessed against the three entries in question for inability to redeliver the merchandise which was not legally marked upon entering the commerce of the United States. Customs liquidated all three entries on June 27, 1997. The protestant timely filed the AFR on September 24, 1997. ISSUES: The primary issue in this case is a question of fact - Has the protestant submitted sufficient evidence to prove that the work gloves were manufactured at the Fabrica de Luvas Kuong Chau factory in Macau? Secondly, was the assessment of marking duties under 19 U.S.C. §1304(h) proper? - 3 - LAW AND ANALYSIS: Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. §1304), provides that, unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. Section 1304(h) provides that 10 percent marking duties shall be levied, collected and paid if an imported article is not properly marked with the country of origin at the time of importation and such article is not exported, destroyed or properly marked under Customs supervision prior to liquidation. Under this provision, such duties shall not be remitted wholly or in part nor shall payment thereof be avoidable for any cause. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. §1304. Section 134.51, Customs Regulations (19 CFR §134.51), provides that when articles or containers are found upon examination not to be legally marked, the port director shall notify the importer on CF 4647 to arrange with the port director's office to properly mark the article or container or to return all released articles to Customs custody for marking, exportation or destruction. Section 134.52, Customs Regulations (19 CFR §134.52), allows a port director to accept a certification of marking supported by samples from the importer or actual owner in lieu of marking under Customs supervision if specified conditions are satisfied. As noted by the United States Customs Court in A.N. Deringer, Inc. v. United States, 51 Cust. Ct. 21, C.D. 2408 (1963): Those who import goods into the United States accept certain responsibilities that have been laid on them by Congress. One such responsibility, and an important one, is to see that imported merchandise of foreign origin is properly marked to show the country of origin, before it enters into the commerce of the United States. Moreover, in HQ Memorandum 731775, dated November 3, 1988, Customs ruled that two prerequisites must be present in order for marking duties to be properly assessed under 19 U.S.C. §1304(h) [previously 19 U.S.C. §1304(f)]. These two prerequisites are: 1. the merchandise was not legally marked at the time of importation, and 2. the merchandise was not subsequently exported, destroyed or marked under Customs supervision prior to liquidation. - 4 - In this case, counsel argues that the evidence submitted with the protest demonstrates that the work gloves were cut, sewn and fully produced in the Fabrica de Luvas Kuong Chau factory in Macau, and that the gloves were not transhipped. He claims, for instance, that the daily production records are consistent with the records of shipment. Fabrica de Luvas also provided copies of documents covering the purchase of fabric for the gloves, including copies of the Macau Customs entries. In further support of Macau origin, he states that the Certificate of Origin and export license issued by the Macau Economic Services Ministry confirms that the work gloves were produced in Macau. Finally, he states that the president of the protestant company traveled to Macau on March 24, 1996, and witnessed the factory fully engaged in the manufacture of the work gloves and saw no evidence of transshipment. As stated in the factual portion of this ruling, Customs officials visited the Fabrica de Luvas Kuong Chau factory and determined that it did not have the capacity to produce the volume of gloves imported in the limited amount of time available after the fabric was cut into components. There were only six to nine workers in the factory and nine sewing machines. The cutting equipment had not been used. The number of packed boxes of gloves far exceeded the production capacity of the factory. Based on domestic (U.S.) industry standards, Customs officials concluded that the Fabrica de Luvas Kuong Chau factory had the capacity to produce less than 10 percent of its exports given the length of time and number of workers claimed to be producing the gloves. Additionally, one of the Customs officials who visited the factory in March of 1996, reviewed the documentation submitted with the protest and confirmed Customs previous conclusion. In his opinion, the documentation submitted did not substantiate counsel’s claims. Finally, the two rulings cited in your protest are irrelevant. In 734151, Customs found that the assessment of marking duties was in error because the merchandise was properly marked under Customs supervision prior to liquidation of the entry. In HQ 559620, Customs determined that the merchandise at issue was legally marked at the time of importation and, thus, the assessment of marking duties was inappropriate. On the contrary, in this case the protestant has not proved that the gloves were produced in Macau. Therefore, we find that the gloves were not properly marked at the time of importation. Furthermore, the protestant failed to destroy or mark the gloves under Customs supervision. Accordingly, the assessment of marking duties under 19 U.S.C. §1304(h) was proper, and the protest should be denied. HOLDING: The protestant failed to prove that the foreign manufacturer had the capacity to produce the cotton knitted work gloves under protest and the assessment of marking duties under 19 U.S.C. §1304(h) was proper. Accordingly, the protest should be denied. - 5 - In accordance with Section 3A(11)(b) of Customs Directive 099 3550065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs 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 the mailing of this decision. Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, John Durant, Director Commercial Rulings Division