Protest No. 2506-10-100088; NAFTA; sufficiency of documentation; trousers

HQ H148195 August 4, 2011 OT:RR:CTR:VS H148195 KSG Port Director U.S. Customs and Border Protection 9777 Via De La Amistad San Diego, California 92154 RE: Protest No. 2506-10-100088; NAFTA; sufficiency of documentation; trousers Dear Director: This is in response to an application for Further Review of Protest No. 2506-10-100088 filed by the broker on behalf of Hera Apparel S.A. de C.V. (Hera) which concerns the denial of a North American Free Trade Agreement (NAFTA) claim for imported men’s cotton denim trousers. FACTS: The imported jeans were entered on April 8, 2010, claiming NAFTA preference. The jeans were classified in subheading 6203.42.4011 of the Harmonized Tariff Schedule of the United States (“HTSUS”). Hera Apparel S.A. de C.V. is the exporter. Lya Group Inc. is the importer. The protestant filed a blanket NAFTA claim for the goods for the period of January 1, 2010, through December 31, 2010. On June 10, 2010, CBP issued a Request for Information (CBP Form 28) indicating that the entry had been selected for verification. The Request for Information asked the exporter to provide: a costed bill of materials including the country of origin of all components; invoices for fibers, yarns and fabric as well as affidavits from the mills where the fibers, yarns and fabrics were manufactured; cutting tickets including the name and location of the facility, the style and number being cut as well as the type of fabric used; export documents such as a bill of lading, or a document showing transport of goods into Mexico and an invoice for those goods; sewing records; and transportation documents from the fabric vendor/mill to the cutting facility and from the cutting facility to the assembler. Hera Apparel responded on July 7, 2010, and submitted the following information: a payment voucher for denim fabric dated March 17, 2010; an invoice for the fabric in Spanish (not translated) dated March 17, 2010; NAFTA certificate of origin for the fabric; a blanket affidavit for the fabric on the letterhead of GlobalDenim dated March 1, 2010 through December 2010; a purchase order for jeans on the letterhead of Lucky Brand Dungarees dated December 23, 2009; a record for the denim jeans dated February 26, 2010, showing cut number LBD0168, style number 7MD1229 for 2,102 pairs of jeans, and a sketch of the jeans; a document titled “Sewing Records” dated Feburary 27, 2010, matching the cut number LBD0168 and style number 7MD1229; a document from GlobalDenim that is in Spanish (not translated); and a packing list dated March 17, 2010, with a date stamp of March 18, 2010. On August 20, 2010, CBP issued a Notice of Action proposing a rate advance after finding the documentation submitted to be inconclusive. CBP stated that the certificate of origin was illegible and asked for the following documents: a legible copy of the certificate of origin; sewing records; cutting records; affidavits and mill certificates for the yarn used; a company profile for Hera Apparel, including information such as the number of employees, inventory of machines, and daily production yields; a description of the relationships between Hera and LYA Group; a description of the relationship between LYA and LB distribution Center; an explanation of invoice No. A38895 to explain why such a large amount of fabric was purchased; and a manufacturer’s affidavit or certificate of origin from the mill where the fabric was produced. In response to the Notice of Action, Hera submitted additional information on September 17, 2010, including: a letter on Hera Apparel letterhead explaining why more fabric was purchased than used for the particular style of jeans; a letter on Lucky Brand dungarees letterhead dated April 9, 2010, authorizing the importation of the jeans; a factory evaluation for Hera Apparel; a letter on Hera apparel letterhead stating how many employees were employed at the plant; and computer-generated production records for jeans dated from March 23-30, 2010. CBP responded on October 12, 2010, with a Notice of Action indicating a rate advance. CBP stated that the reasons for the denial of the claim was that the cutting record submitted was dated prior to the date of the purchase of the fabric (cut date was February 27, 2010, and the fabric was purchased March 17, 2010), and the cut numbers listed on the letter of explanation for fabric invoice A38895 did not match the cutting records submitted. The sewing records submitted also did not include the information requested regarding the style number, pieces sewn, quantity, and time allotted by the machine operator to manufacture the jeans. Hera submitted attachments to the protest which showed a document titled “Cutting Record” (written out) showing a cut date of March 19, 2010, for the appropriate style (7MD1229) and a sewing record dated March 20, 2010, that bears the matching cut number, style number and total units produced for this entry. The sewing record does not show which operator sewed the jeans or the time allotted to sew the jeans. ISSUE: Whether the protestant has submitted sufficient documentation to support the NAFTA claim for the imported jeans. LAW AND ANALYSIS: To qualify for entry under the NAFTA, the goods must qualify to be treated as “originating goods” pursuant to General Note 12(b)(i),or (ii) of the Harmonized Tariff Schedule of the United States (“HTSUS”). General Note 12(b) provides, in pertinent part, as follows: 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— (i) 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) …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, Section 181.71, Customs Regulations (19 CFR 181.71), provides, in pertinent part, as follows: …Customs shall deny preferential tariff treatment on an imported good, or shall deny a post-importation claim for a refund filed under subpart D of this part, only after initiation of an origin verification under section 181.72(a) of this part which results in a determination that the imported good does not qualify as an originating good or shall not be accorded such treatment for any other reason as specifically provided for elsewhere in this part. Section 181.72(a), Customs Regulations (19 CFR 181.72(a)), provides, in pertinent part, as follows: …Customs may initiate a verification in order to determine whether a good imported into the United States qualifies as an originating good for purposes of preferential tariff treatment under the NAFTA as stated on the Certificate of Origin pertaining to the good. Such a verification: (1) May also involve a verification of the origin of a this part, only after initiation of an origin verification under section 181 material that is used in the production of a good that is the subject of a verification under this section;… The NAFTA blanket certificate of origin indicates that the basis of the preference claim is criterion B. Criterion B indicates that the tariff shift rules set forth in GN 12(t), HTSUS, have been satisfied. The rule set forth at GN 12(t) for goods of subheading 6203.42, HTSUS, is as follows: A change to subheadings 6203.41 through 6203.49 from any other chapter, except from headings 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, chapter 54, or headings 5508 through 5516, 5801 through 5802 or 6001 through 6006, provided that the good is both cut and sewn or otherwise assembled in the territory of one or more of the NAFTA parties. The protestant states that it has provided a corrected cutting record to show that the fabric was cut on March 19, 2010, and that even though some dates were not correct and there were some omissions in their initial response to CBP, there was not sufficient reason to deny NAFTA preference. Given the rule set forth above, it is critical for CBP to verify that the imported garments are both cut and sewn in the territory of one or more of the NAFTA parties. The protestant has not adequately explained why there was an inconsistency between the initial cutting record (which is computer generated and shows the date, style number, total quantity and the cut number), the initial sewing record (which matches the cut number and style number in the initial cutting record) and the date the denim fabric was purchased. The documents submitted as attachments to the Protest show that the jeans were cut on March 19, 2010, and sewn on March 20, 2010, but fail to explain why the initial documents submitted showed cutting and sewing in February 2010. Further, the “corrected documents” are inconsistent with the packing list provided in the initial submission which was dated March 17, 2010. Also, the sewing record does not indicate who the operator was or how long it took to produce the jeans. The protestant has failed to demonstrate to CBP’s satisfaction that the imported goods were eligible for preferential treatment under the NAFTA. Since CBP is not satisfied that the rule set forth in GN 12(t), HTSUS, has been satisfied in this case, CBP properly denied NAFTA preference to the imported men’s jeans. The protest is denied. HOLDING: The protest in this case is denied. CBP properly denied NAFTA preference to the imported men’s jeans in this case. 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 Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the 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 & Trade Facilitation Division