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HQ 965040




August 20, 2002

CLA-2 RR:CR:TE 965040 mbg

CATEGORY: CLASSIFICATION

Port Director
U.S. Customs Service
100 Los Indios Blvd, Box 800
Los Indios, TX 78567

RE: Decision on Application for Further Review of Protest No. 2304-99-100270; Tariff Preference Level Certificates of Eligibility and Applicable Duty Rate under the NAFTA

Dear Sir:

This is a decision on an application for further review of a protest timely filed by Daniel B. Hastings, Inc. on behalf of Early Warning Designs, against your decision regarding the proper format for reporting a mistake in classification on a Tariff Preference Level (“TPL”) Certificate of Eligibility and thus, the applicable rate of duty for a garment under the North American Free Trade Agreement (“NAFTA”). The one entry which was the subject of this protest was liquidated on June 11, 1999.

FACTS:

On July 15, 1998, Early Warning Designs filed the entry which is the subject of this protest at the port point of entry of Los Indios, Texas. This entry covered 1,121 dozen women’s suit-type jackets constructed from 97 percent polyester and 3 percent spandex woven fabric. This entry covered women’s jackets which were cut and sewn in Mexico and thus eligible for the NAFTA rate of duty under the TPL program. The Protestant filed a type 02 entry containing TPL quota merchandise without visa requirements at the time of entry.

On September 11, 1998, the TPL quota category for the subject women’s jackets closed. On March 31, 1999, the entry was reviewed by the port, and a classification error was discovered. The entry stated that the proper classification under the Harmonized Tariff Schedule of the United States Annotated (“HTSUSA”) was subheading 6204.31.2010 which provides for women’s jackets of wool. The proper classification of the women’s jackets should have been entered as 6204.33.5010, HTSUSA, which provides for women’s jackets of man-made fibers. The import specialist issued a Customs Form 29 indicating the classification error, which in their opinion rendered the TPL certificate invalid and thus a resulting increase of duty to be paid. On June 11, 1999 the entry was liquidated at non-TPL duty rates.

When the TPL certificates of eligibility covering the entry was corrected, the importer sent those certificates to his broker. The broker, in turn, relied upon a local port publication and did NOT file a Supplemental Information Letter or a corrected Certificate of Eligibility with Customs.

It is the Port’s opinion, that a TPL Certificate of Eligibility is similar to a Visa and thus must be complete and accurate in order to qualify for the preferential NAFTA duty rate. In this respect the port concludes that the TPL certificate of eligibility requires the correct HTSUSA classification subheading. In the case of the subject entry as the HTSUSA classification was not entered correctly, the port concluded that TPL eligibility was appropriately denied for the subject entry.

On August 20, 1999, a protest was timely filed by Daniel B. Hastings, Inc. on behalf of Early Warning Designs. The Protestant claims that the error in the classification of the women’s jackets was a typographical error on the part of the Mexican government in preparing the original TPL Certificate of Eligibility. Protestant obtained a corrected Certificate of Eligibility from the Mexican government but due to confusion on the appropriate port policy, this corrected Certificate of Eligibility was not timely submitted to Customs. As such, the Protestant claims that Customs was not justified in denying TPL eligibility to this entry.

ISSUE:

Whether denial of TPL eligibility for this entry was appropriate and what is the applicable rate of duty?

LAW AND ANALYSIS:

In order for a garment to be dutiable at the NAFTA tariff rate, based on the Tariff Preference Level, three conditions must be met in which the good must first meet the requirements of the TPL definition found in Section XI, Additional U.S. Notes 3- 6, HTSUSA; second, the good must be accompanied by a Certificate of Eligibility in proper form; and third, the yearly amount allowed under the TPL must not have been filled prior to the presentation of the Certificate of Eligibility. If any of these three conditions are not met then the good does not qualify under the TPL.

Classification of the subject women’s jackets is not at issue and Protestant agrees with Customs that classification of the subject women’s jackets is proper in subheading 6204.33.5010, HTSUSA, which provides for “Women’s or girls’ suits, ensembles, suit-type jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear): Suit-type jackets and blazers: Of synthetic fibers: Other: Women’s.” Furthermore, the subject women’s jackets appear to meet the requirements of Section XI, Additional U.S. Note 3(b) which provides:

The rate of duty in the “Special” subcolumn of rates of duty column 1 followed by the symbol “MX” in parentheses shall apply to imports from Mexico, up to the annual quantities specified in subdivision (g)(i) of this note, of apparel goods provided for in chapters 61 and 62 that are both cut (or knit to shape) and sewn or otherwise assembled in the territory of a NAFTA party from fabric or yarn produced or obtained outside the territory of one of the NAFTA parties.

In addition, the women’s jackets are not excluded by any of the factors provided in Section XI, Additional U.S. Notes 3(d) and 3(e). Therefore, the subject women’s jackets meet the first requirement of TPL in that they qualify under the appropriate definitions of Section XI, HTSUSA.

Concerning the second requirement, the Customs Regulations, Section 12.132(3)(b), concerning the Certificate for Eligibility state:

In connection with a claim for NAFTA preferential tariff treatment involving non-originating textile and apparel goods subject to the tariff preference level provisions of appendix 6.B. to Annex 300-B of the NAFTA and Additional U.S. Notes 3 through 6 to Section XI, Harmonized Tariff Schedule of the United States, the importer shall submit to Customs a Certificate of Eligibility covering the goods. The Certificate of Eligibility shall be properly completed and signed by an authorized official of the Canadian or Mexican government and shall be presented to Customs at the time the claim for preferential tariff treatment is filed under §181.21 of this chapter.

Protestant had submitted a copy of the Certificate of Eligibility which covered the entry however, the original Certificate of Eligibility contained an error in the HTSUSA classification number. A corrected certificate for the appropriate style, quantity and category number was submitted with this Protest and appear to be in proper form. The Protestant claims that no supplemental letter of information regarding the correct classification of the women’s jackets was given to the port because the port refused to accept any such supplemental information until the liquidation of the subject jackets. The port was relying in good faith upon internal procedures for accepting such information and provides that the Protestant’s broker did not attempt to clarify the HTSUSA classification number. The Protestant claims that his broker relied upon a published memorandum in the Laredo Service Port Trade Bulletin 97-34 for the submission of supplemental information letters. This publication provides that supplemental letters can only be submitted when an entry has been scheduled for liquidation and thus the broker did not submit the corrected TPL Eligibility Certificate. Reliance by the Protestant’s broker on this publication for TPL Eligibility Certificates was incorrect.

The Protestant’s broker had almost instantaneous knowledge of the correctable classification error due to such information being provided by the Protestant. However, the broker made no attempt to contact the import specialist team at the port to clarify the port policy on the submission of supplemental information regarding the corrected Certificates for Eligibility for TPLs and clearly should have done so. The Customs publication that the Protestant’s broker relied upon was not applicable to TPL certificates or for that matter, to other entry summary documentation. However, we cannot find any language in the Customs Regulations or any other source relevant to TPL’s which “require” that the form must contain the HTSUSA classification number.

19 CFR §12.132(b) provides that a certificate of eligibility must be presented to Customs at the time a claim for a TPL is made. However, due to confusion based upon a Customs publication, the corrected TPL was never submitted to the port but rather as part of the application for further review. Customs notes that the corrected TPL was acquired and is dated August 24, 1998, which is prior to the closing of the TPL quota for the subject merchandise. Since the quota did not fill for the subject merchandise until after the date of the corrected Certificate of Eligibility in 1999 and thus would have been open but for the confusion on the appropriate filing of supplemental information, the subject entry is eligible for TPL treatment at the 1999 rates.

However, during the course of any transaction, it is the responsibility of the importer to provide the Customs Service with all information necessary to make a proper decision. If there was ANY question about whether the Laredo port’s publication on the filing of supplemental information was applicable to the paperwork for the subject entry, Protestant’s broker should have contacted the port immediately for clarification.

The North American Free Trade Agreement Implementation Act of 1993 included major provisions in Title VI of that Act relating to Customs Modernization which have come to be known as the “Mod Act.” The Mod Act has transformed the way the Customs Service and importers do business. Primary among these changes is a new responsibility called informed compliance that is shared between the trade community and the U.S. Customs Service. Informed compliance permeates virtually all import transactions and determines how government and the trade community will interact. Informed compliance has inspired new protocols and stratagems under which the importing community and government have new rights and responsibilities toward each other.

At the heart of informed compliance is a strategy called reasonable care, in which the trade community demonstrates its exercise of due diligence by following the suggestions and protocols promulgated by the Customs Service in its publications, which include not only the various informed compliance publications available on Customs Website (www.customs.gov), but also include Customs rulings and Customs Regulations.

Informed compliance is a shared responsibility between Customs and the importing community by which Customs communicates its requirements to the trade, and the people and businesses subject to those requirements conduct their regulated activities in accordance with U.S. laws and regulations. A key component of informed compliance is the expectation that the importer will exercise reasonable care in his or her importing operations.

Informed compliance benefits both parties. When voluntary compliance is achieved, Customs resources need not be inefficiently expended. From the trade perspective, when voluntary compliance is attained, compliant parties are less likely to have their shipments examined or their entries reviewed and more likely to receive their merchandise quickly.

Reasonable care is an explicit responsibility on the part of the importer. Despite its seemingly simple connotation, the term reasonable care defies easy explanation because the facts and circumstances surrounding every transaction differ, from the experience of the importer to the nature of the imported articles. In the spirit of mutual responsibility and informed compliance, Customs will grant this protest and apply the NAFTA TPL rate applicable for 1999 to the subject entry. However, we urge the importer to promptly direct any questions in the future to the appropriate port to avoid a similar situation for NAFTA eligible goods.

HOLDING:

The protest should be GRANTED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, 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 or entries in accordance with the decision must be accomplished prior to mailing the decision.

Sixty days from the date of the decision, the Office of Regulations and Rulings will 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 methods of public distribution.

Sincerely,

Myles B. Harmon, Acting Director

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