Protest and Application for Further Review Nos. 5201-11-100266 and 5201-11- 100309; Knit and woven garments; DR-CAFTA

HQ H196456 May 16, 2012 OT:RR:CTF:VS H196456 CMR CATEGORY: Classification Port Director U.S. Customs and Border Protection 6601 NW 25th Street Room 272 Miami, FL 33122 RE: Protest and Application for Further Review Nos. 5201-11-100266 and 5201-11- 100309; Knit and woven garments; DR-CAFTA Dear Mr. Suliveras: On November 8, 2011, this office set aside the denials of further review issued by your port for Protest Nos. 5201-11-100266 and 5201-11-100309 and voided the denials of the protests. The protests were filed by Alston & Bird, LLP, on behalf of their client, School Apparel, Inc. We set aside the denials of further review because counsel raised arguments that the evaluation of affidavits of origin according to TBT-11-004 “Additional Documents Used to Verify Free Trade Agreement and Legislated Program Claims for Textiles and Wearing Apparel” presented questions of law not yet considered by CBP Headquarters. Specifically, in Protest No. 5201-11-100266, counsel argued that the port’s reasons for denying the preference claims presented new questions of law, including, whether an affidavit of origin must be on letterhead; whether an affidavit of origin may cover two or more separately identified and clearly described fabrics or yarns, whether CBP should deny preference claims when affidavits contain obvious typographical errors, and whether a date of sale is required on every affidavit of origin. We have reviewed the protests and the port’s comments. Our decision on both protests is set forth below. FACTS: Each protest deals with one entry of goods by School Apparel Inc. (SAI). The entries contained various knit and woven garments produced in a party to the Dominican Republic – Central America – United States Free Trade Agreement Implementation Act (DR-CAFTA) from U.S. origin fabric of U.S. origin yarn, or of fabric that had been designated as not available in commercial quantities, i.e., short supply fabric. SAI procures the fabric and supplies it to the garment producer. The entries at issue were entered April 9, 2010 and August 5, 2010 claiming preferential tariff treatment under the DR-CAFTA. In both cases, the port issued a Customs and Border Protection (CBP) Form 28 requesting information. In the case of the earlier entry, the port requested valid DR-CAFTA certificates of origin; affidavits of origin from the thread, yarn and fabric producers; and proof of payment to the seller of the imported merchandise. With regard to the affidavits of origin, the port instructed that . . . Affidavits must provide a complete description of the item produced (including fiber content), name of purchaser, date of sale, etc. Affidavits must include the name and physical address of the manufacturing facility as well as the telephone number for the person executing the affidavit for verification purposes. For the latter entry, the CBP Form 28 requested the same information as requested in the earlier entry, but also requested cutting and sewing records for specific styles and samples of specific styles. As to the claim for garments produced using short supply fabric, the port requested “fabric specification sheets and mill certifications from the producers of the fabric which provide a description of the fabric that agrees with the descriptions reflected in the Annex 3.25 “short supply” listing. With regard to the earlier entry, the port issued a proposed CBP Form 29 Notice of Action notifying SAI it intended to deny the DR-CAFTA claim due to insufficiency of documentation to support the claims. The company submitted additional information, but the port still found the documentation to be deficient and rate advanced the entry, liquidating it on January 3, 2011. By letter dated February 20, 2011, SAI protested the liquidation without benefit of the DR-CAFTA preferential rate. On July 5, 2011, counsel for the protestant filed a CBP Form 19, Protest Form, as a supplemental to the February 29, 2011 protest. Counsel claims the port did not treat the February 20, 2011 letter as a protest of its actions; however, this office views the letter to be such a protest and treats the CBP Form 19 and accompanying materials as supplemental to that protest. As to the later entry, the port issued the CBP Form 28 on December 1, 2010. Although the company contacted the port in writing requesting additional time to respond due to holiday travel and factory closures, the port issued a proposed CBP Form 29, Notice of Action, on January 4, 2011, denying the DR-CAFTA claim for failure to respond. A CBP Form 29, Notice of Action, denying the DR-CAFTA claim for the same reason cited in the proposed action, i.e., failure to respond, was issued on January 26, 2011. The entry was liquidated on February 18, 2011 and the protest was filed on August 16, 2011. We note that revised documents were submitted with the protests to address the objections raised by the port with regard to certain documents previously submitted to support the claim for preferential tariff treatment. The revised documents include such revisions as including a date of sale on a blanket affidavit and submitting the document on letterhead paper. As noted above, the port denied further review and issued denials of the protests. This office set aside the denials of the further review and voided the denials of the protests. We have considered the arguments of the port and counsel for the protestant. Among counsel’s arguments is that the port erred in not following the TBTs issued by CBP Headquarters providing instructions on the information to be contained in an affidavit or other declaration submitted to support a claim for preferential tariff treatment under a Free Trade Agreement (FTA). Our decision on both protests is set forth below. ISSUES: Was the documentation submitted to the port sufficient to support the claim for preferential tariff treatment under the DR-CAFTA? LAW AND ANALYSIS: The DR-CAFTA is implemented in the HTSUS in General Note (GN) 29. However, at issue in this case is not the question of whether the merchandise met the terms of the GN 29 per se, but whether the information submitted to substantiate the claim that the merchandise met the terms of GN 29 and that certain materials used in the manufacturer of the merchandise originated within the territory of one or more of the DR-CAFTA parties was sufficient to validate the claim. The Customs and Border Protection (CBP) Regulations applicable to the DR-CAFTA are contained in 19 CFR § 10.581 to § 10.625. Section 10.616 specifically addresses “Verification and justification of claim for preferential tariff treatment.” With regard to verification of a claim by a port, the regulation references different methods by which verification may be conducted, including written requests for information. In the case of both entries at issue, that is what the port did; it issued CBP Form 28s requesting specific information. The DR-CAFTA claims were denied because the port felt the documentation submitted in response was deficient to support the claims. When the importer filed protests against the port’s liquidation of the entries without benefit of the DR-CAFTA claims, the importer submitted additional information to support the claims for preferential tariff treatment. The port reviewed the submitted documentation and concluded that the responses to questions and the documentation provided were insufficient to support the claims. In reviewing documents submitted to support a claim for preferential tariff treatment under a Free Trade Agreement or other tariff preferential program, we consider the guidance issued to CBP field personnel and the importing community by CBP Headquarter offices in the form of memorandum and Textile Book Transmittals (TBTs). This guidance includes the April 26, 2006, memorandum regarding “Amendments to the U.S. – Dominican Republic – Central America Free Trade Agreement Implementation Instructions,” issued by the Executive Director, Trade Enforcement and Facilitation, Office of Field Operations; TBT-07-019, “Documents Used to Verify Free Trade Agreement and Legislated Trade Program Claims for Textiles and Wearing Apparel,” issued by the Executive Director, Trade Policy and Programs, Office of International Trade on October 10, 2007; and TBT-11-004, “Additional Documents Used to Verify Free Trade Agreement and Legislated Program Claims for Textiles and Wearing Apparel,” issued by the Executive Director, Trade Policy and Programs, Office of International Trade on March 31, 2011. This guidance addresses, among other things, the information needed to establish a claim. With regard to the reasons given for denying the protests and the specific documents cited by the port as deficient, our comments are set forth below. Protest 5201-11-100266 The port objected to the affidavit from a yarn supplier as containing ambiguous language, i.e., “which were or will be sold.” The description on the affidavit made reference to both “greige thread yarn” and to “greige (unfinished) yarn.” TBT-07-019, “Documents Used to Verify Free Trade Agreement and Legislated Trade Program Claims for Textiles and Wearing Apparel,” clearly indicates that blanket certificates of origin are acceptable. Furthermore, in the April 26, 2006, memorandum regarding “Amendments to the U.S. – Dominican Republic – Central America Free Trade Agreement Implementation Instructions,” the Executive Director, Trade Policy and Programs, Office of International Trade addressed “Certification or Other Information Requirements.” The information therein addresses certification of an imported good. Your office has questioned a material used to produce the imported good. We believe the guidance provided applies both to materials and goods. The memorandum states: If the certification serves as the basis for the claim, it does not need to be in a prescribed format, may be submitted electronically and may cover a single shipment or multiple shipments of identical goods not to exceed the time period of 12 months. The certification must not only include the reason the good qualifies as originating, but must contain the required data elements pertaining to the importation of the good, as outlined in Attachment A. . . . * * * If the basis for the claim is not a certification but rather is supported by other information, that information must also include the required data elements outlined in Attachment A, but does not need to include the certifying statement or the blanket period. However, the information must sufficiently support the claim for preference.  Attachment A to the memorandum lists the required data elements. These elements are: the names and addresses of the importer; exporter and producer (including telephone and email); a description of the good; the Harmonized Tariff Schedule of the United States (HTSUS) classification number (to six or more digits); the applicable preference criterion; the commercial invoice number if the transaction involves a single shipment; the blanket period if multiple shipments of identical goods are involved; and a signature by someone authorized to legally bind the company and with access to the underlying records. The signature block should include not only the signature, but the company name, individual’s title, telephone, fax and email. The submitted affidavit contains the name and address of the producer of the yarn in the United States (U.S.) and the name of the finisher in the DR-CAFTA party who will dye and finish the yarn effectuating the classification change from yarn to sewing thread. The document also contains a description of the goods sold to the finisher along with the HTSUS classification numbers, and an explanation that the yarn was wholly formed in the United States. The document covers a blanket period of one year and is signed by the Director of Logistics of the company. The address, phone, fax and email are provided on the document. The document meets all of the required elements of Attachment A. Another affidavit completed by the finisher in the DR-CAFTA party was submitted and contains the name and address of the producers i.e., it contains the name of the yarn producer in the U.S. and the finisher in the DR-CAFTA party who dyes and finishes the yarn into sewing thread. The document also contains a description of the good with its HTSUS classification number, and an explanation that the “sewing thread” was produced in the U.S. and finished in the DR-CAFTA party. The document covers a blanket period of one year and is signed by the Country Manager of the DR-CAFTA party plant. The address, phone, fax and email are provided at the bottom of the document. The document meets the requirements of Attachment A when considered in the context of material inputs. As to the description on the yarn producer’s affidavit referencing both “greige thread yarn” and to “greige (unfinished) yarn,” we see no cause for concern or confusion. The producer produced yarn that would become sewing thread, but the sewing thread cannot be considered as such until it is finished. As the yarn had not been dyed and finished, it was considered to be in a greige state. The yarn producer’s affidavit and the DR-CAFTA party finisher’s affidavit were sufficient in conveying the necessary information as to the processing of the sewing thread without confusion. As to the “were or will be sold” language of the affidavit, the port is correct that it is ambiguous. However, no request was made for purchase orders or invoices, only for affidavits. While the CBP Form 28 and 29s issued to the protestant indicated that a date of sale should be on the affidavit, the blanket affidavits provide the time frame during which the sale occurred and CBP has accepted blanket certificates as evidenced by the instructions in TBT-07-019 and the CBP Regulations for various trade programs. In the future, we suggest that purchase orders and invoices be requested to support that an actual sale occurred relevant to the entry at issue. The port believes the affidavit from the DR-CAFTA party yarn finisher is invalid. The port stated”[t]he ambiguous verbiage on the affidavit does not reflect that a sale actually occurred.” The ambiguous verbiage the port objects to is the blanket period specified in the affidavit. Our response to this issue above applies equally here. The port raised the same objection to several of the submitted affidavits. The importer should be provided the opportunity to submit purchase orders and invoices to substantiate the sale relevant to the entry at issue if the port believes such documentation is necessary to support the claim. TBT-07-019, dated October 10, 2007, does indicate with regard to affidavits that: If the importer purchased the yarn or fabric, he should provide a commercial invoice for the material. If the fabric is a U.S. product, the importer should provide the bill of lading showing its movement from the United States to the beneficiary country. If neither of the two instances mentioned in the cited TBT arise, and the port only requests affidavits, the importer will not necessarily recognize the need for submitting purchase orders and invoices unless the port so requests. With regard to an affidavit from another yarn producer, the affidavit was rejected because it refers to yarn and not thread. Similar to the situation previously discussed - the yarn is described as 100% polyester textured yarn and its HTSUS number is provided; the plant where it was produced and its address are identified; the affidavit was signed by the Customs Compliance Specialist with the company; it was dated; and telephone and fax numbers were provided. The document also indicates that the yarn was wholly formed in the United States of U.S. originating fibers and/or other materials. Another affidavit from the DR-CAFTA party yarn finisher describes 100 percent polyester textured filament yarn produced at the factory identified in the yarn producer’s affidavit. Reviewing the two affidavits together, we disagree with the port’s objection to the use of the terms “yarn” and “thread.” As for the difference in the signature on the affidavit from that on file with the port, we recognize that individuals may vary their signature somewhat depending on a number of factors. Further, the port has informed this office that the yarn producer has submitted sample signatures, handwritten and electronic, for the person authorized to sign their affidavits. The differences noted by the port are apparently the differences seen between the electronic signature and the handwritten signature. As the differences have been explained, the port has withdrawn the objection based on the signature. The port’s objection to affidavits submitted for styles 8776, 8770, and 8758, by a yarn producer for failure to provide a date of sale was an error by the port. Revised affidavits reflecting the dates of sale were submitted with the protest. The port also cited failure to provide copies of the referenced invoices and bill of lading, but these documents were not requested. The port only requested affidavits; therefore, protestant’s failure to supply referenced invoices and bills of lading should not result in denial of the preference claim. The port raised objections to the affidavits submitted for styles 8078, 8077, 8061 and 8060, by the fabric manufacturer. The objections included how the fiber content was conveyed and that the producer did not explain “that ‘various’ yarns were combined to produce 60% cotton/40% polyester fabric.” The port also cited that the affidavits did not provide the name of the purchasers or the dates of sale. As to the fiber content of the fabric, the manufacturer identified with specificity the type of yarns in the warp and filling and the fiber content of each yarn. If the port questioned how the yarns, with their particular fiber content and construction, yielded a 60% cotton/40% polyester fabric, it should have sought advice from either the National Import Specialist for woven fabrics, the Office of Laboratory Services, or simply asked the importer. We find no deficiency in the manner in which the fabric and its construction were set forth on the certificate of origin submitted by the manufacturer. In addition, we find no issue with the yarn manufacturers’ affidavits. As to the port’s issue regarding the failure to name the purchasers or have dates of sale, our review shows that the fabric manufacturer’s certificates of origin do contain a block wherein a buyer’s name and address is displayed. Additionally, the manufacturer’s affidavit for yarn produced by the fabric manufacturer clearly indicates the yarn is to be used by the manufacturer in creating a fabric. The other yarn manufacturer’s affidavit clearly indicates the party to whom the yarn was sold. The certificate and affidavits are blanket documents specifying various periods of time during which sales of the manufactured goods occurred. As you are aware, the purpose of the various TBTs on documents used to verify preference claims is to provide guidance to both the ports and the importing community as to what information is required on affidavits or other documentation submitted to support a preference claim. The date of sale is not an element required by the April 26, 2006, memorandum regarding “Amendments to the U.S. – Dominican Republic – Central America Free Trade Agreement Implementation Instructions,” TBT-07-019, “Documents Used to Verify Free Trade Agreement and Legislated Trade Program Claims for Textiles and Wearing Apparel,” or TBT-11-004 “Additional Documents Used to Verify Free Trade Agreement and Legislated Program Claims for Textiles and Wearing Apparel.” A port may always request invoice