Lead Protest 2604-02-150001; seat belt assemblies

HQ W966139 December 22, 2008 CLA-2 OT:RR:CTF:TCM W966139 AML/RFA CATEGORY: Classification TARIFF Nos.: 8708.21.0000; 8708.29.5000 Port Director U.S. Customs and Border Protection 200 North Mariposa Road Nogales, AZ 85621 Attn.: Patricia Christiansen RE: Lead Protest 2604-02-150001; seat belt assemblies Dear Port Director: The following is our decision regarding lead protest 2604-02-150001, dated May 8, 2002, which was filed by counsel on behalf of Takata Seat Belts, Inc. ("Takata"), against your reclassification of various seat belt assemblies as a result of a North American Free Trade Agreement ("NAFTA") verification audit, under the Harmonized Tariff Schedule of the United States Annotated ("HTSUSA"). Copies of supporting materials considered in the NAFTA Verification Audit Report, and copies of Customs and Border Protection Form ("CF") 29s proposing the denial (dated December 13, 2000) and effecting denial (dated May 16, 2002) of NAFTA preferential treatment were provided for our consideration. We also considered arguments made by counsel for the protestant during a teleconference on April 23, 2003 and a supplemental submission made May 23, 2003. FACTS: The protests at issue stem from a NAFTA Verification Audit conducted by your staff during July 1999 that is summarized in a report dated October 30, 2000. The conclusions reached in the report, i.e., 1) that the components used to manufacture the various assemblies ("which are not parts of general use nor more specifically provided for elsewhere, nor excluded by Section or Chapter Notes") are classified under subheading 8708.29.50, HTSUS; 2) that the foregoing classification of the component parts precludes, in the entries in which complete assemblies were classified under subheading 8708.21.00, HTSUS, the tariff shift necessary to qualify for NAFTA preference, and 3) that the articles were classified under subheading 8708.29.50 rather than 8708.21.00, HTSUS (set forth below), resulted in the reclassification of 13 of 17 the subject assemblies and denial of preferential treatment for several of the articles. The chronology of events and procedural history are as follows: a. The articles at issue were entered in 495 entries during 1998. b. Via letter dated July 21, 1999, U.S. Customs and Border Protection ("CBP") informed Takata of its intention to conduct the verification visit concerning entries made during 1998 under a blanket certificate of origin for the year 1998. c. The verification visit was conducted between August 24 and September 2, 1999. d. A CBP Form ("CF") 29, dated December 13, 2000, was issued to Takata's Mexican subsidiary, Equipo Automotriz Americana, SA de CV, proposing to change the classification of 13 of 17 seat belt assemblies as a result of the audit. e. Via CF-29 dated May 16, 2002, CBP denied NAFTA preferential treatment. Takata, through counsel, provided descriptions of the various articles and met with staff from your port in response to the CF-29. Takata provided both a list of the various constituent parts that comprise the assemblies manufactured in Mexico as well as a list of the various assemblies that are imported into the United States. The articles at issue (see the CF 6445A and the technical/engineering drawings) can be described as follows: 1. RR CTR Belt ASM S84, part number 82455S84A000MA, engineering drawing number 15580. This is a rear center seat belt assembly. From the schematic drawings provided, it appears to be comprised of a metal anchor, two lengths of webbing, a buckle and a springed retractor assembly. 2. RR 4DR RETR SID ASM (97) Charcoal, part number SO1824A1XNH178, engineering drawing number 15719. This is a retractor side assembly. From the schematic drawings provided, it appears to be comprised of a metal anchor, a length of webbing, a metal "tongue" and a springed retractor assembly. The drawing also depicts a buckle connected to a length of webbing and a metal anchor. 3. FRT LH S84 S/B (Accord), part number 8185OS84A000MA, engineering drawing number 15577. This is a belt assembly. From the schematic drawings provided, it appears to be comprised of a metal anchor, a length of webbing, a buckle and a springed retractor assembly. 4. RR RH RETR SID ASM (WGN) SIA, part number 64671AC520MU, engineering drawing number 16465. This is a rear right hand retractable side assembly. From the schematic drawings provided, it appears to be comprised of a metal anchor, a length of webbing, a "sash anchor," a buckle and a springed retractor assembly. 5. FRT LH BELT ASM CIV (CAN) CHAR, part number SO1818XNH178, engineering drawing number 15034. This is a front left-hand belt assembly. From the schematic drawings provided, it appears to be comprised of a metal anchor, a length of webbing, a metal "tongue" and a springed retractor assembly. In the narrative portion of the 6445A, you describe CBP's position, in pertinent part, to be that: All of the parts classified in MX8708.99.8080 and incorporated into the 17 seat belt assemblies were reclassified to MX 8708.29.50. As a result of this reclassification, four of the complete seat belt assemblies in tariff item MX 8708.21.00 failed to meet the NAFTA rule of origin for the preferential duty rate of free. Counsel protests the classification of the articles as well as what it alleges to be procedural defects concerning the denial of preferential treatment and imposition of duties that resulted from the audit. In asserting that the articles are alternatively classifiable under subheadings 8708.21.00 and 8708.99.00, HTSUS (set forth below), counsel also describes the seat belt parts and assemblies at issue in terms of their respective functions and ultimate location, i.e., what portion of the vehicle to which they are attached, in the vehicles. We paraphrase those contentions as follows: Counsel contends that, because seat belts are provided for eo nomine under subheading 8708.21, HTSUS, and that the subheading does not contain a parts provision, that the seat belt parts were erroneously classified under subheading 8708.29, HTSUS and should instead be classified under subheading 8708.99 (set forth below), HTSUS, which provides for other parts of motor vehicles. Both CBP and counsel rely on the determination made in Headquarters Ruling Letter ("HQ") 960308, dated October 7, 1997, regarding the classification of the articles. Although counsel contends that the ruling is distinguishable on its facts, i.e., that the articles imported by Takata are neither anchored to the floor of nor considered to be full or partial seat belt assemblies in and of themselves. Counsel contends that the articles are instead components of seat belt assemblies. Counsel further contends that the reclassification of the articles and negative origin determination which resulted from the audit should not be effected retroactively. That is, citing 19 CFR §181.76(b)(i)(ii) and Customs Directive 3810-010A, counsel contends that the effective date of the denial of preferential treatment is 30 days from the date on which the written determination is sent to the importer by CBP. Finally, counsel contends that its clients have entered the subject goods under subheading 8708.21, HTSUS, since the inception of NAFTA. Counsel argues that the pattern of entries for such an extended period constitutes an established practice as contemplated by 19 CFR §177.10(e), triggering the notice and comment period set forth therein, and extending the effective date of the negative origin determination, in counsel's view, to ninety days. Electronic research conducted on Customs Rulings Online Search System ("CROSS") revealed New York Ruling Letter ("NY") C84516, dated February 27, 1998, which was issued to a customs broker on behalf of Takata and classified seat belt assemblies substantially similar to those at issue under subheading 8708.29.50, HTSUS. The protests were filed on May 8, 2002. ISSUES: Whether the various seat belt parts and assemblies are classifiable as parts of automobile bodies under subheading 8708.29.50, HTSUS, or whether the articles should be separately classified by description and function? What is the effective date of the negative origin determination? Whether there was treatment or an established practice that required notice and comment as set forth in 19 CFR §177.9? LAW and ANALYSIS: Initially, we note that the matter protested is protestable under 19 U.S.C. §1514(a)(2) as a decision on classification. The protest was timely filed, within 90 days of liquidation of the first entry for entries made before December 18, 2004, and within 180 days of liquidation of the first entry for entries made on or after December 18, 2004. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)). Classification As is set forth above, Takata provided a list of the component parts that are used to create the imported seat belt assemblies during the course of the NAFTA Verification. Ten pages were provided that list approximately 300 separate articles (from weights, washers and screws to spring assemblies) used to manufacture the seat belt assemblies. Takata provided tariff codes for each of the listed items, and upon examination those codes appear to be prima facie correct. For example, the fasteners all bear a heading from Chapter 73, textiles in Chapter 56, etc. To be eligible for tariff preferences under the NAFTA, goods must be "originating goods" within the rules of origin in General Note 12(b), HTSUS. General Note 12(b)(ii)(A), HTSUS, states, in relevant part, that 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 have been transformed in the territory of Canada, Mexico and/or the United States so that-- 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 subdivisions (r), (s) and (t) of this note or the rules set forth therein." One such authorized change is to subheading 8708.21 from any other heading or a change to subheading 8708.21 from subheading 8708.99 whether or not there is also a change from any other heading, provided there is a regional value content of not less than 50 percent under the net cost method. See General Note 12(t) 87/18(A) and (B). Classification under the HTSUS is made in accordance with the General Rules of Interpretation ("GRIs"). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs may then be applied. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and mutatis mutandis, to the GRIs. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law. The HTSUS provisions under consideration are as follows: 8708 Parts and accessories of the motor vehicles of headings 8701 to 8705: Other parts and accessories of bodies (including cabs): 8708.21.00 Safety seat belts 8708.29 Other: 8708.29.50 Other. . . Other parts and accessories: 8708.99 Other: Other: Other: 8708.99.80 Other. . . . In HQ 960308, dated October 7, 1997, we classified what we described as a buckle assembly, constituting only half of a seat belt under subheading 8708.29.50, HTSUS, the basket provision for other parts and accessories of bodies (including cabs). In making that conclusion, we reasoned that "the buckle assembly's primary purpose, when anchored to the interior of an automobile body, is to form half of an automobile safety system." "When the buckle of this item is clasped to an automotive seat belt insert, the whole provides a safety restraint for seated passengers." HQ 960308 at page 2. As a complete seat belt assembly is considered to be a part of the body, CBP concluded that half of a seat belt assembly is classified as other parts of bodies as they did not meet the terms of safety seat belts. The Harmonized Commodity Description and Coding System Explanatory Notes ("ENs") constitute the official interpretation of the Harmonized System. While not legally binding on the contracting parties, and therefore not dispositive, the ENs provide a commentary on the scope of each heading of the Harmonized System and are thus useful in ascertaining the classification of merchandise. CBP believes the ENs should always be consulted. See T.D. 89-80, 54 FR 35127, 35128 (August 23, 1989). The ENs to heading 8708, HTSUS, provide, in pertinent part, that: Parts and accessories of this heading include: * * * (B) Parts of bodies and associated accessories, for example . . . safety seat belts designed to be permanently fixed into motor vehicles for the protection of persons . . . etc [emphasis added]. The classification of parts of seat belts comports with established classification principles concerning the classification of parts of articles in instances in which a parts provision does not exist. The Court of International Trade observed in Riekes Crisa Corp. v. United States, 10 CIT 235, 245 (1990), that "under well established principles of customs law, 'a tariff provision which does not specifically provide for parts does not include them'" (citing Glass Products. v. United States, 10 CIT 253, 255, 641 F. Supp. 813, 814 (1986)). As half a seat belt assembly cannot be classified in subheading 8708.21.00, HTSUS, the subject articles fall to be classified under 8708.29.50, HTSUS. This conclusion comports with several prior rulings that follow the rationale set forth above: given that subheading 8708.21 does not contain a parts provision, the articles in question fall to be classified under subheading 8708.29.50, HTSUS. See HQ 962708, dated June 9, 1999 and HQ 960308, dated October 7, 1997. This determination is consistent with NY C84516, dated February 27, 1998, which was issued to a customs broker on behalf of Takata and classified seat belt assemblies under subheading 8708.29.50, HTSUS. Therefore, we find that the subject articles are properly classified under subheading 8708.29.50, HTSUS. The effective date of the negative origin determination Takata, through counsel, citing 19 CFR §181.76(b)(i)(ii) and Customs Directive 3810-011, contends that the negative origin determination should have been effective 30 days after CBP sent notice of the determination. We noted in HQ 227853, dated January 11, 2000, with regard to the cited Customs Directive that: First we note that the procedures governing NAFTA origin verification investigations are set forth in the Customs Regulations. Customs internal operations directive 099-3810-011 does not have the full force and effect of law, as would a regulation promulgated in compliance with the Administrative Procedures Act (5 U.S.C. 551 et seq.). At a minimum, such a directive would have had to have been issued subject to the notice and comment provisions of the APA. See Brow v. Secretary of Health & Human Services, 627 F.Supp. 1467 (USDCDVT 1986). Clearly, in this case, the Customs Regulations and not the Customs directive sets the standards of conduct to which the importer shall be held. 19 CFR §181.76 provides, in pertinent part, that: (a) General. Except as otherwise provided in this section, an origin determination may be applied upon issuance of the determination under Sec. 181.75 of this part. (b) Negative origin determinations. In the case of a negative origin determination issued under Sec. 181.75(b) of this part: (1) The date on which preferential tariff treatment may be denied shall be no earlier than 30 calendar days from the date on which: (i) Receipt of the written determination by the exporter or producer is confirmed, if a request under Sec. 181.75(b)(1) of this part has been made; or (ii) The written determination is sent by CBP, if no request under Sec. 181.75(b)(1) of this part has been made; and (2) Before denying preferential tariff treatment, CBP shall take into account any comments or additional information provided by the exporter or producer during the period established in accordance with paragraph (b)(1) of this section. * * * (d) Differing determinations. Where CBP determines, either as a result of an origin verification initiated under Sec. 181.72(a) of this part or under any other circumstance, that a certain good imported into the United States does not qualify as an originating good based on a tariff classification or a value applied in the United States to one or more materials used in the production of the good, including a material used in the production of another material that is used in the production of the good, which differs from the tariff classification or value applied to the materials by the country from which the good was exported, the CBP determination shall not become effective until CBP provides written notification thereof both to the U.S. importer of the good and to the person who completed and signed the Certificate of Origin upon which the claim for preferential tariff treatment for the good was based. (e) Applicability of a determination to prior importations. CBP shall not apply a determination made under paragraph (d) of this section to an importation made before the effective date of the determination if, prior to notification of the determination, the customs administration of the country from which the good was exported either issued an advance ruling under Article 509 of the NAFTA or any other ruling on the tariff classification or on the value of such materials, or gave consistent treatment to the entry of the materials under the tariff classification or value at issue, on which a person is entitled to rely and on which that person did in fact rely. For purposes of this paragraph, the person who received notification of the determination shall demonstrate to the satisfaction of CBP, in writing within 30 calendar days of receipt of the notification, that the conditions set forth herein have been met. For purposes of this paragraph: (1) A "ruling'' on which a person is entitled to rely in the case of Canada must be issued pursuant to section 43.1(1) of the Customs Act (Advance Rulings) or in accordance with Departmental Memorandum 11-11-1 (National Customs Rulings) and in the case of Mexico must be issued pursuant to Article 34 of the Codigo Fiscal de la Federacion and pursuant to Article 30 of the Ley Aduanera or the applicable provision of Mexican law related to advance rulings under Article 509 of the NAFTA; and (2) "Consistent treatment'' means the established application by the Canadian or Mexican customs administration that can be substantiated by the continued acceptance by the customs administration of the tariff classification or value of identical materials on importations of the materials into Canada or Mexico by the same importer over a period of not less than two years immediately prior to the date of signature of the Certificate of Origin for the good that is the subject of the determination referred to in paragraph (d) of this section, provided that with regard to those importations: (i) The tariff classification or value of the materials was not the subject of a verification, review or appeal by that customs administration on the date of the determination under paragraph (d) of this section; and (ii) The materials had not been accorded a different tariff classification or value by one or more district, regional or local offices of that customs administration on the date of the determination under paragraph (d) of this section. (f) Detrimental reliance. If Customs proposes to deny preferential tariff treatment to a good pursuant to a determination made under paragraph (d) of this section, Customs shall postpone the application of the determination for a period not exceeding 90 calendar days from the date of issuance of the determination where the U.S. importer of the good, or the person who completed and signed the Certificate of Origin upon which the claim for preferential tariff treatment for the good was based, demonstrates to the satisfaction of Customs that it has relied in good faith to its detriment on the tariff classification or value applied to such materials by the customs administration of the country from which the good was exported. [T.D 95-68, 60 FR 46364, Sept. 6, 1995; T.D. 95-68, 61 FR 1829, Jan. 24, 1996] Takata presents no positive proof that it has received a ruling from Mexican Customs as contemplated by 19 CFR §§181.76(e) and (f) above. We note here as we did in the "Facts" section above, that NY C84516, dated February 27, 1998, was issued to a customs broker on behalf of Takata and classified seat belt assemblies under subheading 8708.29.50, HTSUS. As the subject entries of the verification were in 1998, any claim of detrimental reliance by Takata regarding classification of the articles is obviated by this information as of February 27, 1998. Based on the CF-29s cited above, CBP notified Takata of the intention to deny preferential treatment based upon the verification. Counsel for Takata was afforded an opportunity to and did in fact provide comment in response to the notice. Counsel's comments notwithstanding, we denied preferential treatment in accordance with the determinations made in the NAFTA verification. Contrary to claims made by counsel that the regulations require the effective date of verification to apply only to prospective entries, we find that the verification applies to all entries subject of the verification. The 30-day period in the regulations cited by counsel is to allow for any comment or additional information to be provided that would substantiate the claim of NAFTA eligibility. Counsel was afforded this opportunity and provided additional arguments to support their claim. A finding that a NAFTA verification can only be prospective would render the verification process meaningless. Such a finding would prevent CBP from reliquidating entries that were the subject of the verification. Our interpretation is supported by 19 CFR § 181.75(b)(2). Was there treatment or an established practice that required notice and comment as set forth in 19 CFR §177.9? Counsel for Takata alleges that Takata is entitled to treatment under 19 CFR §177.9 of its claimed classification of the seat belt assemblies because Takata has so classified, and Customs has so liquidated the articles, since the inception of NAFTA. Counsel alleges that CBP's reclassification of the articles constitutes a change of practice giving rise to notice and comment procedures and an effective date of 90 days from the date of CBP's decision as delineated in 19 CFR §§177.10 (c) and (e) [1998]. In order for these provisions to apply, there must be a finding that there is a treatment or practice. Traditionally, a uniform practice is established by a finding that such a practice exists. In Heraeus-Amersil, Inc. v. United States, 600 F. Supp. 221 (Ct. of Intl. Trade 1984), the Court of International Trade stated that an established and uniform practice could be shown by actual uniform liquidations, even though the Secretary of the Treasury had made no "finding" that such a practice existed. Id. at 226. The essence of such a de facto established uniform practice is a determination by the court that CBP consistently classified a specific type of merchandise under a particular category of the tariff schedules prior to some distinct point in time. See Atari Caribe, Inc. v. United States, 799 F. Supp. 99, 106-07 (1992). In Heraeus- Amersil, the court stated that the factors to be considered in determining an established and uniform practice are: the number of entries resulting in the alleged uniform classifications, the number of ports at which the merchandise was entered, the period of time over which the alleged uniform classifications took place, and whether there had been any uncertainty regarding the classification over its history. In essence, the question is whether a uniform and established practice existed that would lead an importer, in the absence of notice that a change in classification will occur, reasonably to expect adherence to the established classification practice when making an importation. See also HQ W968457, dated April 11, 2007. While the regulations in effect at that time [1998] discuss uniform and established practice, that was not the legal standard to apply. Rather, the legal provisions of 19 U.S.C. §1625(c)(2), as amended as part of the North American Free Trade Agreement Implementation Act ("NAFTA"), Pub. L. 103-182, §623 (1993) is the standard where no ruling is present. Counsel's argument for treatment fails for several reasons. In American Bayridge, Corp. v. United States, 35 F. Supp. 2d 922, 936 (Ct. of Int'l. Trade 1998), vacated in part on other grounds, 217 F.3d 857 (Fed. Cir. 1999), the Court did "not agree that Customs can continue to use its old regulations to implement the new statute." Rather, 19 U.S.C. §1625(c) is new statutory language that prevails over the existing regulations. Further, counsel has provided absolutely no evidence to support its claim. Accordingly, protestant has failed to perfect a claim of consistent treatment. Moreover, a claim of a practice or treatment for the subject merchandise is unsubstantiated as CBP published notice of its reconsideration of NY 807765, dated March 22, 1995, in the Customs Bulletin, Volume 31, Number 36, on September 3, 1997. In NY 807765, CBP classified a buckle assembly of an automotive seat belt system under subheading 8708.99.8080, HTSUS, as other parts and accessories of motor vehicles. After the notice and comment period, pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. 1625(c)(1)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993), CBP published HQ 960308, dated October 7, 1997 which revoked NY 807765, and classified an automotive buckle assembly under subheading 8708.29.50, as other parts of motor vehicle bodies. In HQ 960308, CBP found that the buckle assembly's primary purpose, when anchored to the interior of a vehicle body, is to form half of an automotive seat belt safety system. When the buckle of this item is clasped to an automotive seat belt insert, the whole provides a safety restraint for seated passengers. CBP concluded that the applicable subheading for the buckle assembly is 8708.29.50, HTSUS, the subheading applicable to parts of seat belts, and not subheading 8708.99.80, HTSUS. During the notice and comment period in 1997, CBP informed the public that any claims of treatment for substantially identical transactions should be brought to the attention of CBP during the comment period. Takata, nor its agents, submitted any such information during the notice and comment period On January 1, 1998, Takata filed blanket certificates of origin for 1998, claiming classification under subheading 8708.99. Once Takata, through its agent, received the binding ruling NY C84516, dated February 27, 1998, which classified seat belt assemblies under subheading 8708.29.50, HTSUS, the classification of seat belt assemblies should have conformed to the decision made in that ruling. Given all the facts as outlined above, we conclude that no claim of treatment under 19 U.S.C. §1625(c) can be sustained. HOLDINGS: Classification: The seat belt assemblies not comprising a complete seat belt are classified under subheading 8708.29.5060, HTSUSA, which provides for: "Parts and accessories of the motor vehicles of headings 8701 to 8705: Other parts and accessories of motor vehicle bodies (including cabs): Other: Other. . . ." Effective date of denial of preferential NAFTA treatment: Pursuant to 19 CFR §181.76, the denial of preferential treatment is effective for the entries made as of January 5, 1998, that were the subject of the NAFTA verification. Treatment or established practice claim: We find that the protestant has failed to perfect a claim of consistent treatment as it has provided absolutely no evidence to support its claim. Moreover, a claim of a practice or treatment for the subject merchandise is unsubstantiated as CBP published notice of its reconsideration of NY 807765, dated March 22, 1995, in the Customs Bulletin, Volume 31, Number 36, on September 3, 1997, which resulted in the publication of HQ 960308, dated October 7, 1997. This notice and comment period effectively ended any claims of treatment of seat belt assemblies that may have existed as of that date. Therefore, the protest should be DENIED in full. 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 in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of 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 16 11