United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 2002 HQ Rulings > HQ 561827 - HQ 562175 > HQ 562045

Previous Ruling Next Ruling
HQ 562045





December 4, 2001

CLA-2 RR:CR:SM 562045 TJM

CATEGORY: CLASSIFICATION

Area Port Director
US Customs Service
6601 NW 25th Street
Miami FL 33102

RE: Application for Further Review of Protest No. 5201-00-100631; NAFTA Certificate of Origin; NAFTA verification; Importer’s Protest Rights; women’s underwear garments; Ardyss International; 19 CFR 174.11(b); 19 CFR 181.71; 19 CFR 181.72; 19 CFR 171.11(b); 19 CFR 171.28

Dear Port Director:

The above referenced protest was forwarded to this office for further review. We have considered the evidence provided, and the points raised by your office and the protestant. Our decision follows.

FACTS:

This protest concerns the denial of NAFTA preferential duty rate for the importation of women’s underwear garments from Mexico. The Mexican exporter of the goods, Ardyssa S.A. De. C.V. (“Ardyssa”) of Mexico, completed the Certificates of Origin for the products. The importer of record is Ardyss International, Inc. (“Ardyss”), of Miami Florida. Your office stated that Ardyss and Ardyssa are related companies.

The first entry at issue was made on March 2, 2000. The Certificate of Origin (“C.O.”) for the products entered on March 2, 2000, was completed by Ardyssa and was dated February 29, 2000. Additional entries were made on March 17, 2000 (C.O. signed on March 16, 2000); May 22, 2000 (C.O. signed on May 17, 2000); May 24, 2000 (C.O. signed on May 20, 2000); and May 25, 2000 (C.O. signed on May 24, 2000). Protestant also included in the current protest an entry made on August 9, 2000. The various Certificates of Origin were submitted to Customs along with other entry documents. On June 9, 2000, the U.S. Customs Service (“Customs”) officials from your office held an informed compliance session with Ardyss of Miami. Customs officials informed Ardyss staff of proper classification, reasonable care on entry documentation, consequences to not exercising reasonable care on entry requirements, and other matters. Customs officials specifically addressed issues from Ardyss’ entry of March 2, 2000.

On June 14, 2000, Customs issued a CF 28, Request for Information, to Ardyssa of Mexico to verify NAFTA origin of the goods entered during March 2, 2000 through May 25, 2000. The CF 28 was mailed on June 16, 2000, and received by Ardyssa in Mexico on June 30, 2000. Customs port provided this office a copy of the registered mail receipt for the CF 28. The registered mail receipt was addressed to Ardyssa S.A.de C.V. in Mexico and was postmarked by the U.S. Postal Service on June 16, 2000. The registered mail number is R580490554. The return receipt was also postmarked June 30, 2000, by the Mexican Postal Administration and signed by an agent of the addressee whose first name appears as “Katia.”

On August 25, 2000, Customs issued a follow-up letter on a CF 29, Notice of Action, notifying Ardyssa that if the requested information is not provided to Customs to verify NAFTA origin of the goods, Customs will determine that the entries covered by the Certificates of Origin do not originate in a NAFTA country. The CF 29 was mailed on August 28, 2000, and received by Ardyssa in Mexico on September XX, 2000 (exact date is undecipherable from the available copy). Customs port provided this office a copy of the registered mail receipt which was addressed to Ardyssa in Mexico and was postmarked by the U.S. Postal Service on August 28, 2000. The registered mail number is RR027804681US. The return receipt is signed by an agent of the addressee whose first name appears as “Katia” and was postmarked by the Mexican Postal Administration on “Sept. XX 2000.”

On September 19, 2000, Customs issued a CF 29, Notice of Action, notifying Ardyssa that due to Ardyssa’s failure to provide requested information, Customs has determined the goods as not originating in a NAFTA country. The CF 29 was mailed on September 25, 2000. Customs port provided this office a copy of a registered mail receipt (RR027804837US) addressed to Ardyssa of Mexico. The receipt was postmarked by the U.S. Postal Service on September 25, 2000. The return receipt also was stamped with a serial number 145257 and signed by an agent of the addressee whose name appears as “Katia.” Customs port states that a copy of the September 19, 2000, Notice of Action was mailed to Ardyss International Inc. of Miami, Florida (the importer of record). Subsequently, Customs liquidated the goods on November 3, 2000, with a rate advance.

On December 21, 2000, the importer of record, Ardyss International Inc. of Miami, Florida, filed a timely protest and an application for further review with Customs Miami port. The protestant, who is the importer of record, protests on the basis of the amount of duties chargeable (19 CFR § 174.11(b)). Ardyss claims that the denial of the NAFTA preferential duty rate was not justified because Customs did not inform Ardyss of the NAFTA verification. Ardyss claims that had they been notified, they would have been able to supply the necessary documents.

The Miami port approved the application for further review and we received the protest in this office on February 20, 2001.

ISSUE:

Whether the denial of the NAFTA preferential duty rate claim in this case described above is consistent with Customs laws and regulations.

LAW AND ANALYSIS:

Section 181.21(a), Customs Regulations (19 CFR 181.21(a)) states, in pertinent part, that:

[I]n connection with a claim for preferential tariff treatment for a good under NAFTA, the U.S. importer shall make a written declaration that the good qualifies for such treatment. . . .[t]he declaration shall be based on a complete and properly executed original Certificate of Origin, or copy thereof, which is in the possession of the importer and which covers the good being imported. (Emphasis added)

To verify or substantiate the NAFTA claim, Customs has the right to seek further information by initiating a NAFTA verification. Under Section 181.71, Customs Regulations (19 CFR § 181.71), except in such cases as when a Certificate of Origin is not provided, Customs can deny a NAFTA claim only upon a determination following an origin verification. In the instant case, the importer submitted various Certificates of Origin along with other entry documents. Therefore, a negative origin determination can result only from an origin verification process.

NAFTA Verification with the Exporter

NAFTA verification procedures are set forth in section 181.72, Customs Regulations (19 CFR § 181.72). In particular, 19 CFR § 181.72(a), states:

Subject to paragraph (e) of this section, 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.

Also, 19 C.F.R. § 181.72(a)(3) states, in pertinent part, that an origin verification shall be conducted by means including:

(3) A verification letter which requests information from a Canadian or Mexican exporter or producer, including a Canadian or Mexican producer of a material, and which identifies the good or material that is the subject of the verification. The verification letter may be on Customs Form 28 or other appropriate format and may be sent: (A) By certified or registered mail, or by any other method that produces a confirmation of receipt by the exporter or producer. . . .

The NAFTA verification process is directed specifically at the exporter or producer in Canada or in Mexico. Inquiries may be made to the U.S. importer. However, the failure of the U.S. importer to respond to Customs requests does not prejudice the exporter or producer. In other words, the importer’s noncompliance with a Customs request is not imputed to the Mexican or Canadian producer or exporter. Section 181.72(c), Customs Regulations (19 CFR 181.72(c)), states in pertinent part that:

[n]othing in paragraph (a) of this section shall preclude Customs from directing inquiries or request to a U.S. importer for documents or other information regarding the imported good. If such an inquiry or request involves requesting the importer to obtain and provide written information from the exporter or producer of the good. . . . such information shall be requested by the importer and provided to the importer by the exporter or producer only on a voluntary basis, and a failure or refusal on the part of the importer to obtain and provide such information shall not be considered a failure of the exporter or producer to provide the information and shall not constitute a ground for denying preferential tariff treatment on the good. (Emphasis added)

In the NAFTA verification process, if the exporter or producer that receives a request for information from Customs does not respond within 30 days of the initial request for information, Customs shall send a follow-up verification letter. See 19 C.F.R. 181.72(d). The follow-up letter also should be sent by certified, registered, or other method of mail that can prove delivery, which Customs complied with in this case. If the exporter or producer does not respond within 30 days of receiving the follow-up request, Customs may then consider the goods to not originate in a NAFTA country and may then deny preferential tariff treatment on the goods. Section 181.72(d)(2)(ii), Customs Regulations (19 CFR 181.72(d)(2)(ii)), states in pertinent part:

If the exporter or producer of a good fails to respond to a follow-up verification letter. . .Customs may consider the good to be non-originating and consequently may deny preferential tariff treatment on the good as follows: (A) if the follow-up letter or questionnaire included a written determination as provided for in paragraph (d)(1)(i) of this section and the exporter or producer fails to respond to the follow-up letter or questionnaire within 30 calendar days or such longer period as specified therein: (1) from the date on which the follow-up letter or questionnaire and written determination were received by the exporter or producer, if sent pursuant to the paragraph (d)(1)(ii)(A) of this section. . . . (Emphasis added)

In the instant case, the Mexican exporter did not respond to Custom’s requests at any time during the verification process. There is also sufficient evidence, as required by Customs Regulations, that the exporter received these Customs’ requests for information and the latter’s notification of a proposed negative determination of NAFTA origin.

Importer’s Rights under NAFTA Verification

The protestant contends that it was not notified of Customs’ initiation of the NAFTA origin verification as described above and had it been notified, it could have provided the necessary information. However, as noted above in Customs Regulations, the NAFTA origin verification is directed at the party that executed the Certificate of Origin, which is the exporter or producer in the exporting NAFTA country. See 19 C.F.R. 181.72(a)(3). See also NAFTA Article 506(1)(a). Therefore, the omission by your office of notifying the importer of a NAFTA origin verification is not determinative nor detrimental to the origin determination. Your office provided a copy of the September 19, 2000, CF 29 (Notice of Action), which stated Customs’ determination that due to the lack of evidence, the goods do not qualify as originating in a NAFTA country.

However, despite the emphasis in the NAFTA origin verification process on the exporter or producer, an importer’s interest (the protestant in this case) is preserved by its right to protest the chargeable rate of duty. The amount of duties chargeable on liquidation is protestable under 19 U.S.C. § 1514(a)(2); 19 C.F.R. § 174.11(b). Also, under 19 U.S.C. § 1514 (c)(2)(A) and 19 C.F.R. § 174.12(a)(1), an importer shown on the entry papers has the right to protest. In the instant case, the importer’s protest was timely filed as it was within the 90-day period permitted by 19 U.S.C. § 1514(c)(3), 19 C.F.R. § 174.12(e).

The importer contends that it has the necessary documents to prove the validity of the NAFTA claim. Upon further review in a protest, 19 C.F.R. § 174.28 allows the submission of additional arguments/grounds and alternative claims until the final disposition of the protest. It has been the practice of this office to allow protestants to submit additional evidence in a protest. See for example, HRL 112667, dated May 25, 1993; HRL 224397, dated March 8, 1994; and HRL 224118, dated July 26, 1993.

Because the port is best suited in the instant case to determine whether the documents that the importer asserts to have currently in its possession to substantiate the NAFTA claim do in fact substantiate the NAFTA claim, we remand this protest to your office. The importer should be afforded a reasonable period of time to submit the documents it claims to have in possession to substantiate the NAFTA claim. Upon analysis of those documents, the port should decide whether the goods do in fact qualify for the NAFTA preference.

HOLDING:

Under the NAFTA, origin verification is directed at the producer or exporter of the goods - the party that executed the Certificate of Origin. The importer may provide such verification information. However, pursuant to the NAFTA and the Customs Regulations, in a NAFTA verification, the burden to substantiate the Certificate of Origin is on the exporter or the producer who executed the Certificate.

An importer’s interest is preserved by its right to protest the chargeable rate of duty levied by Customs. In the instant case, the importer has protested the rate advance. It also claims to possess the necessary documents to substantiate the validity of the NAFTA claim. Because a protestant has the right to submit additional evidence and arguments until the final disposition of a protest, we remand this protest to the port. The port should allow the importer a reasonable period of time to submit the evidence it asserts to currently possess to substantiate the NAFTA claim. Thereafter, upon analysis of the evidence presented, the port should decide whether the goods do in fact qualify for the NAFTA preference.

This decision should be mailed by your office to the protestant no later than sixty days from the date of this letter. On that date, the Office of Regulations & Rulings will take steps to make the decision available to Customs Personnel and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act and other means of public distribution.

Sincerely,

John Durant
Director

Previous Ruling Next Ruling