Application for Further Review of Protest No. 2507-11-100004; NAFTA; sufficiency of documentation

HQ H194999 June 24, 2014 OT:RR:CTF:VS H194999 CMR CATEGORY: Classification Customs and Border Protection Commercial Operations Building C P.O. Box 632 Calexico, CA 92231 Attn: Entry Section, Ms. Sonia Hodgers RE: Application for Further Review of Protest No. 2507-11-100004; NAFTA; sufficiency of documentation Dear Port Director: This is in response to Application for Further Review of Protest No. 2507-11-100004 which was forwarded to this office for review. The protest was filed by Zisser Customs Law Group, on behalf of Pro 5 Apparel, against your decision to liquidate 33 entries of cotton knit T-shirts without benefit of preferential tariff treatment under the North American Free Trade Agreement (NAFTA). The protest was timely and Further Review was approved by the port. FACTS: The entries at issue consist of 100% cotton knit T-shirts. The goods were entered under subheading 6109.10.00, Harmonized Tariff Schedule of the United States, claiming preferential tariff treatment under the NAFTA. On March 5, 2010, your port issued a Customs and Border Protection (CBP) Form 28 to the importer requesting documentation to support the claim for preferential tariff treatment. The request asked for all NAFTA certificates of origin for one entry, i.e., the entry made on January 29, 2010, consisting of 2191 dozen T-shirts [the importer indicates there were 26,288 100% cotton T-shirts in the entry]. In addition, the port requested a copy of the contract (or purchase order and seller’s confirmation thereto) covering the transaction, including any revisions thereto, and samples or descriptions of the merchandise at issue. The port also requested that the importer submit a reconstructed entry summary package within two days of the date of the notice. Your port issued a follow-up CBP Form 28 requesting, among other things, the basis for claiming preference in the certificate of origin signed on January 1, 2010; a description of the production process from start to finish; information regarding the cutting facility and the assembly facility; packing slips for fabric and finished goods; purchase orders and invoices for fibers, yarns and fabrics; manufacturer affidavits for fibers, yarns and fabrics; purchase orders or invoices for dyeing process, if fabric dyed; invoices for everyone involved in the production chain – fiber producer, fiber vendor, yarn producer, yarn vendor, fabric producer, fabric vendor, fabric buyer; copies of actual cutting tickets; copies of actual sewing tickets; the shipper’s export declaration, bill of lading, pedimento, and invoice; and transportation records between the various facilities involved in the production of the good. On August 6, 2010, your port issued a proposed Notice of Action, CBP Form 29 informing the importer that documents were missing, invalid or incomplete, including the following: Description/flow chart of production process from start to finished product; Information regarding the assembly facility including monthly production capacity and number of employees per shift, number of work days per week and number of fabric cutters); Packing list for finished goods did not identify information for assembly facility; Additional packing lists entitled “Reporte de pzas. Para embarque packing list” were incomplete (missing dates and company addresses); Purchase orders; Packing list covering yarn invoice 1041; Packing lists for fabrics; Various invoices; Manufacturer affidavits for yarns were not signed; Manufacturer affidavits for fibers and fabrics were not provided; Cutting records were incomplete; Copies of actual sewing tickets; and, Export documents from the U.S. into Mexico. On January 24, 2011, your port issued a CBP Form 29 informing the importer that an Action had been taken to deny the claim for preferential tariff treatment under the NAFTA to the entry which was the subject of the verification. In the CBP Form 29, the port listed 14 items as the reason the documentation presented to CBP was insufficient to support the claim. The entry was liquidated on March 4, 2011 without benefit of the NAFTA preferential tariff treatment. The documentation submitted with the protest filed on August 31, 2011, addressed many of the deficiencies cited in the CBP Form 29. However, your port has noted the following information as missing: No invoices or country of origin affidavit were supplied by one of the yarn suppliers. Some cutting records were missing or did not support the quantity of garments imported. For example, for one lot of fabric, no cutting record was provided and for another lot, the cutting record was short by 30 garments. Sewing records do not include quantity sewn per day. Although the quantity sewn support the number of garments imported, in some cases more garments were sewn than pieces cut. Some dyeing records were missing. Some fabric invoices did not match the dyeing records, i.e., the fabric invoice stated one company dyed the fabric, whereby the dyeing records indicated a different company dyed the fabric. ISSUE: Does the documentation, submitted by the Protestant, support the claim for preferential tariff treatment under the NAFTA for the imported garments? LAW AND ANALYSIS: The NAFTA is implemented in General Note (GN) 12 of the Harmonized Tariff Schedule of the United States (HTSUS). GN 12(a)(ii) states that goods are eligible for the NAFTA rate of duty if they originate in the territory of a NAFTA party and qualify to be marked as goods of Mexico. GN 12(b) sets forth the various methods for determining whether a good originates in the territory of a NAFTA party. Specifically, these provisions provide, in relevant part, as follows: Goods originating in the territory of a party to the North American Free Trade Agreement (NAFTA) are subject to duty as provided herein. For the purposes of this note— (ii) Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note and that qualify to be marked as goods of Mexico under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether the goods are marked), and goods enumerated in subdivision (u) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the "Special" subcolumn followed by the symbol "MX" in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act. (b) For the purposes of this note, 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— they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or they have been transformed in the territory of Canada, Mexico and/or the United States so that--A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivision (r), (s) and (t) of this note or the rules set forth therein, or (B) the goods otherwise satisfy the applicable requirements of subdivision (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials; …. There is no dispute as to the classification of the merchandise in subheading 6109.10.00, HTSUS. As the port correctly requested, in order to be considered originating, information on the yarn needed to be provided. The protestant has now submitted the missing manufacturer’s affidavit for the yarn, indicating that the yarn was produced of U.S. originating fibers, and invoices to this office that the port requested, but did not receive. Based on this information, we find that NAFTA preferential treatment may be granted. Regarding the cutting and sewing, the protestant has submitted a large volume of records to substantiate the origin of the yarn, the fabric, and the cutting and sewing of the knit T-shirts. Counsel for the protestant indicates it has now submitted all requested cutting records except those pertaining to lot #111852, because the cutter is no longer in business. For another lot, pertaining to 690 T-shirts, the port indicated the quantity is short 30 garments. Considering the volume, we are satisfied that the protestant’s records are sufficient in this case to conclude that the knit T-shirts at issue qualify for preferential treatment under the NAFTA. While records are required to be kept for five years pursuant to 19 CFR 181.12, in this case the crucial fact is that the fabric and yarns were originating materials. HOLDING: The protest should be allowed. 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