HQ 0556648 - Protest No. 3901-91-101040 concerning the eligibility of artificial flowers from Macau for duty-free treatment under the GSP - United States International Trade Commision Rulings

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HQ 556648

July 24, 1992

CLA-2 CO:R:C:S 556648 WAW

CATEGORY: CLASSIFICATION

District Director
U.S. Customs Service
610 South Canal Street
Chicago, IL 60607

RE: Protest No. 3901-91-101040 concerning the eligibility of artificial flowers from Macau for duty-free treatment under the GSP

Dear Sir:

This is a decision on an Application for Further Review of the above-referenced protest filed by All World Imports, Inc., against the assessment of duties on artificial flowers imported into the U.S. from Macau. We have considered the protest and our decision follows.

FACTS:

The protestant claims that the subject artificial flowers should be entitled to duty-free treatment under the Generalized System of Preferences (GSP) (19 U.S.C. 2461-2466) since they are manufactured by the "Fabrica de Flores Artificials Man Fong" (hereinafter Man Fong) factory located in Macau and are classifiable under a GSP eligible provision. In the protestant's declaration of the manufacturing and/or processing operations of the artificial flowers, the protestant states that Macau is the country where these operations took place. The merchandise which is the subject of this protest was entered on September 4, 1990. Your office, however, subsequently liquidated the entry dutiable at the rate of 9 percent ad valorem on June 28, 1991.

ISSUE:

Whether the artificial flowers from Macau are entitled to duty-free treatment under the GSP?
LAW AND ANALYSIS:

Under the GSP, eligible products the growth, product of manufacture of a designated beneficiary developing country (BDC) which are imported directly into the U.S. qualify for duty-free treatment if the sum of (1) the cost or value of the material produced in a BDC, plus (2) the direct costs involved in processing the eligible article in the BDC, is not less than 35% of the appraised value of the article at the time it is entered into the U.S. See section 10.176(a), Customs Regulations (19 CFR 10.176(a)).

Protestant's request for further review may be summarily disposed of. The scope of review in this protest is on the administrative record, and protestant has not presented any evidence in support of its assertions. The Customs Service will not grant further review of a blanket protest. Protestant must comply with the statutory and regulatory requirements. Under 19 U.S.C. section 1514(c)(1) a protest of a decision must set forth distinctly and specifically each decision as to which protest is made. See generally, United States v. Parksmith Corp., 514 F.2d 1052, 62 C.C.P.A. 76 (1975); American Commerce Co. v. United States, 173 F. Supp. 812 (Cust. Ct. 1959); United States v. E.H. Bailey & Co., 32 C.C.P.A. 89 (1945).

Pursuant to INV 8-02 CO:TO:C JRD, dated October 31, 1991, the Assistant Commissioner of Commercial Operations instructed the Regional Commissioners that all entries of artificial flowers claimed to be manufactured in Macau by any of the named factories listed in the memorandum should be denied GSP treatment and instead, should be rate advanced via the issuance of a Proposed Notice of Action (CF 29). The Man Fong factory is one of the factories which has been precluded from receiving duty-free treatment under the GSP pursuant to this memorandum. In addition, the memorandum states that the Senior Customs Representative (SCR/Hong Kong) has also issued reports of investigation concerning the alleged transshipment of PRC-origin artificial flowers via Macau, which indicate that the named factories were either "not manufacturing artificial flowers in Macau, or were incapable of manufacturing them in the quantities exported to the U.S." Therefore, the Assistant Commissioner instructed all Regional Commissioners that in the absence of "compelling evidence" to the contrary, protests filed on the liquidation of entries from any of the factories enumerated in the memorandum should be denied. The Assistant Commissioner also recommended that any evidence submitted on behalf of an importer of artificial flowers from Macau must be forwarded to the Commercial Compliance Branch for their analysis and review before any action is taken.

With regard to the instant case, the protestant has not submitted any independent evidence to the District Director in your office to substantiate its claim for duty-free treatment pursuant to the GSP. Protestant simply asserts that the importer relied on the supplier's representations, sales confirmations, letters of credit and the GSP Form A, as evidence that the merchandise was manufactured in Macau by the Man Fong factory.

Based on an investigation beginning in June 1989, conducted by the Senior Customs Representative, Hong Kong (SCR/HK), Customs concluded that the Man Fong factory was not capable of manufacturing artificial flowers at its facility due to its very limited production capacity. Customs informants in Macau revealed that the Man Fung factory had been producing artificial flowers in China for many years and simply performed packaging operations at its facility in Macau. Therefore, based on this information, the SCR/HK concluded that the vast majority, if not all, of the flowers shipped from the Man Fong factory and labeled "made in Macau" were actually produced in China. Protestant has not provided "compelling evidence" to rebut the evidence reported by the SCR/HK.

Moreover, without sufficient information to confirm that the artificial flowers in the instant case were manufactured in Macau by the Man Fong factory (i.e., evidence of manufacturing performed in Macau such as cutting, dying, texturizing, and injection molding), we cannot determine whether the materials imported into Macau and used in the production of the artificial flowers have undergone a double substantial transformation, so that the cost or value of these materials may be included in the GSP 35% value-content requirement. Therefore, the artificial flowers in this case will not be eligible for duty-free treatment under the GSP.

HOLDING:

Based on the foregoing discussion, this protest should be denied in full. A copy of this decision should be attached to the Customs Form 19 to be returned to the protestant as part of the notice of action on the protest.

Sincerely,

John Durant, Director

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