HQ 0222654 - Request for further review of protest #3801-9-002515 concerning exemption from duty under the Automotive Products Trade Act as applied to automobile parts from Canada - United States International Trade Commision Rulings

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HQ 222654

March 22, 1991

ENT-1-09 CO:R:C:E 222654 TLS

CATEGORY: ENTRY

District Director
U.S. Customs Service
477 Michigan Avenue Suite 200
Detroit, Michigan 48266

RE: Request for further review of protest #3801-9-002515 concerning exemption from duty under the Automotive Products Trade Act as applied to automobile parts from Canada

Dear Sir:

We have received your memorandum of February 14, 1990, which was forwarded to us from the Customs Information Exchange in New York. Upon review of information and documents sent to us, we submit the following ruling.

FACTS:

The protestant, Hamilton-Pax, Inc., wishes to import automobile components from Canada under the Automotive Products Trade Act (APTA). The components are to be installed into vehicles manufactured in the United States. Upon entry into the Customs territory, the protestant requested duty-free treatment for the parts under APTA by submitting with the entry documents a "declaration of the importer". No purchase order was submitted (nor required at the time) with the declaration. The subject entry [xxxxxxxxxxxxx] was made on January 16, 1989, and was liquidated on July 28, 1989.

You notified the importer that you required a purchase order verifying the claim for duty-free treatment. In particular, you state that your office notified the protestant's agent in writing and by telephone, both directly and through the importer's broker. The protestant argues that it did not receive a Notice of Proposed Action making such a request. In fact, the protestant claims to have only received a notice of a rate advance taken by your office, dated June 21, 1989. Charles Laue, Ltd., Canada, the parent company of the protestant, contends that the Notice of Proposed Action, dated August 26, 1988, was sent to the wrong address (Laue states in a letter to Customs Atlanta office dated August 14, 1989, that John V. Carr & Sons, Inc. ceased to represent Hamilton-Pax as a broker as of November 26, 1988). You argue that the original request for APTA duty-free treatment of the entry was incomplete and unclear; you therefore considered the purchase order an essential document to the request. Your office sought to verify whether or not the subject parts were destined for a bona fide motor-vehicle manufacturer in the United States as defined under General Note 3(c)(iii)(4) of the Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

Hamilton-Pax did not provide the purchase order to you within the time allotted, which led to the rate advance decision. The protestant claims that the purchase order is a strictly confidential document that is not subject to release. The claim for duty-free treatment was subsequently denied and this protest was soon after filed.

ISSUE:

Whether or not the district director has the authority to disallow duty-free treatment of merchandise entered under an exemption claim provided for by the Automotive Products Trade Act.

LAW AND ANALYSIS:

At the center of the dispute is the interpretation of 19 CFR 10.84 (1988) and how much authority it gives district directors in making decisions on claims for duty-free treatment under APTA. Section 10.84 of the Customs Regulations provides the following:

(a) When total exemption from duty on automotive products is claimed on the ground that an importation consists of "Canadian articles" as defined in General Headnote 3(d), Tariff Schedules of the United States, this fact must be established to the satisfaction of the chief Customs officer at the port of entry. Such Customs officer may accept as satisfactory evidence that an article is a "Canadian article" a certificate executed by the exporter in the approximate form specified in paragraph (b) of this section, subject to any verification he may deem necessary, or he may satisfy himself of such fact by other means if, taking into consideration the kind and value of the goods and the circumstances of importation, he deems a certificate unnecessary. (emphasis added.)

In the present case, the district director is the chief Customs officer in charge of making the initial determination. The director first received a declaration of importer from the protestant without asking for or receiving copies of the purchase orders for the merchandise. The declaration received by the director comports with the requirements for such under section 10.84 and its contents and effect are not in dispute.

The director's requirement for copies of the purchase orders in this case is not consistent with normal procedures for APTA claims, however. You acknowledge such in your submission to us, stating, "[i]n most cases, we do not require the production of the actual purchase order. In this instance, we considered it to be an essential document [in] order to verify Hamilton-Pax's APTA claims." In particular, you found the importer's declarations to be insufficient because lack of clarity and incompleteness. You contend that from the information submitted by the importer it cannot be determined that the merchandise is destined for use by a bona fide automotive manufacturer. Section 10.84(c) gives the director the authority to require a copy of "the written order, contract, or letter of intent" either with the declaration or within three (3) years from the entry date or withdrawal from a warehouse. Thus, while the request for production of the purchase orders here might be considered extraordinary, the director was well within legal bounds to make such a request.

The Automotive Products Trade Act provides for duty-free treatment upon entry of automotive parts from Canada that meet the following criteria:

1) the article must be a Canadian product;

2) it must be obtained from a Canadian supplier;

3) it must be acquired through a purchase order agreement;

4) the buyer must be a bona fide motor vehicle manufacturer in the United States;

5) the article must be a fabricated component;
and (6) it must be intended for use as original equipment in the manufacture in the United States of a motor vehicle.

There is no question that the subject merchandise was imported from Canada; we can infer from the facts that these parts were also produced in that country. Charles Laue, Ltd. is a Canadian corporation that is in the business of supplying auto parts to American-based companies. The buyer in this case is Bendix Corporation, an American company in the business of manufacturing and supplying auto parts to automobile manufacturers. Bendix does not manufacture complete automobiles itself. The product in this case is a piston to be used as part of a master cylinder. Criteria 1, 2, 5, and 6 can be verified from the declaration and other information submitted. Whether these parts are destined for use by a bona fide automobile manufacturer in the United States cannot be verified from the information submitted, however. We also cannot verify the existence of the purchase order without an actual copy, although the declaration does include a purchase order number and original date.

Because the absence of the purchase order is not unusual, other extraordinary circumstances must have presented themselves in this case to require the production of the order. The documents presented only show that Bendix is to receive the subject parts from the importer; no other American manufacturing company is mentioned within the information submitted. General Note 3(c)(iii)(4) of HTSUSA defines "bona fide motor-vehicle manufacturer" as follows:

(4) ...a person who, upon application to the Secretary of Commerce, is determined by the Secretary to have produced no fewer than 15 complete motor vehicles in the United States during the previous 12 months, and to have installed capacity in the United States to produce 10 or more complete motor vehicles per 40-hour week.

The Note also provides that the Secretary of Commerce shall maintain a list of names and addresses of bona fide motor-vehicle manufacturers which will be published in the Federal Register "from time to time."

Bendix is not listed among those manufacturers published in the Federal Register as a bona fide motor-vehicle manufacturer. The protestant claims that the parts are shipped to Bendix to be processed for ultimate use by General Motors Corporation, an automotive manufacturer that is listed in the Register. To the extent that the ultimate user would be a bona fide manufacturer, an APTA claim could be found in this case. None of the official documents reflect such, however. Customs has taken the extraordinary step of requesting the purchase order to verify Hamilton-Pax's claim. The protestant either could not or would not honor Customs request, stating that confidentiality precluded it from doing so. Whatever information Hamilton-Pax sought to protect is not confidential to Customs, however. The legal right of Customs to request such information is not qualified in any respect to privacy concerns. Such information in the possession of the U.S. Customs Service is protected from public display and its contents cannot be divulged in any case. Furthermore, Customs has received similar documents from other organizations and has allowed them to edit out any information they wished to keep secret while submitting only the information sought by Customs. The importer has failed to compromise on this matter even to that extent. Therefore, we find the protestant's concerns about confidentiality to be baseless in light of the various protections afforded to it by Customs.

The protestant has also claimed that it did not receive a Notice of Proposed Action to inform it of Customs preliminary finding that the APTA claim should be disallowed. A copy of this Notice has been submitted and it shows that it was addressed to Hamilton-Pax, Inc., c/o John V. Carr & Son, Inc. (Carr) in Chicago, Illinois, dated August 26, 1988. Twelve (12) days beforehand, the parent company of the protestant sent a letter to Customs Atlanta office which stated that Carr no longer represented Hamilton-Pax as a broker as of November 27, 1988. The November date is two months after the Notice was sent to Carr by Customs Detroit office. To the extent that the office handling this particular matter, the Detroit Customs office, was not notified of Hamilton-Pax's terminations of its relationship with Carr, it had no reason to believe it should not be doing business with the protestant through Carr. Furthermore, even if Detroit had been properly notified of this fact, the fact that its effective date comes two months after the Notice was sent to Carr suggests that Carr continued to represent Hamilton-Pax at that time. Given these facts, we cannot help but find Laue's notification to Atlanta Customs to have no bearing on Detroit Customs Notice of Proposed Action to the protestant through its broker.

In summation, we find the Detroit Customs district director to have legitimately exercised his right to request copies of purchase orders concerning the subject merchandise as provided for under 19 CFR 10.84. We also find the Notice of Proposed Action to be valid in this case because it was sent to the importer's agent who was authorized at the time to receive the notice on behalf of the importer.

HOLDING:

The director of the Customs district office in Detroit legitimately and properly exercised his right to request copies of purchase orders from the protestant pursuant to 19 CFR 10.84. The protestant was properly notified through a Notice of Proposed Action that it should comply with the request. Notification was properly sent to the protestant's agent who was authorized at the time to receive such communications on behalf of the protestant. This protest should be denied.

Sincerely,

John Durant, Director

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