HQ 0556768 - Protest No. 1303-92-100086 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 556768

July 24, 1992

CLA-2 CO:R:C:S 556768 WAW

CATEGORY: CLASSIFICATION

District Director
U.S. Customs Service
40 South Gay Street
Baltimore, MD 21202

RE: Protest No. 1303-92-100086 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 Linda Wilder on behalf of GB Stores 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 Golden Dragon 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 August 20, 1990, as duty-free under the GSP. On December 27, 1991, your office, however, liquidated the entry as dutiable at 9 percent ad valorem.

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 RG, dated January 22, 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 15 factories which are listed in the memorandum should be denied GSP treatment and, rather, should be rate advanced via the issuance of a Proposed Notice of Action (CF 29). The Golden Dragon 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 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 his claim for duty-free treatment pursuant to the GSP. Protestant simply asserts that the importer relied on the supplier's representations that the merchandise was manufactured in Macau by the Golden Dragon factory. Based on an investigation conducted by the Senior Customs Representative, Hong Kong (SCR/HK), Customs concluded that the Golden Dragon factory was falsifying their production documents in an effort to obtain duty-free treatment under the GSP. Although there was evidence that the Golden Dragon factory had some production capabilities, Customs determined that this firm chose, for financial reasons, to produce a portion or all of its components in China.

Without sufficient information to confirm that the artificial flowers in the instant case are manufactured in Macau by the Golden Dragon factory (i.e., evidence of processes performed in Macau such as cutting, dying, texturizing, and injection molding), we cannot determine whether or not they are "products of" Macau, or whether the materials imported into Macau and used in the production of the artificial flowers underwent a double substantial transformation, so that the cost or value of these materials may be included in the GSP 35% value-content requirement. Therefore, absent compelling evidence to the contrary, the artificial flowers in this case will not be eligible for duty-free treatment under the GSP.

HOLDING:

Therefore, 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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