HQ 0557775 - Application for Further Review of Protest No. 2904-93-100233; Denial of duty-free treatment of toys from Thailand under the Generalized System of Preferences (GSP); direct costs of processing - United States International Trade Commision Rulings

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 > 1994 HQ Rulings > HQ 0557668 - HQ 0731996 > HQ 0557775

HQ 557775

May 25, 1994

CLA-2 CO:R:C:S 557775 MLR

CATEGORY: CLASSIFICATION

District Director
U.S. Customs Service
Federal Building, Room 198
511 N.W. Broadway
Portland, OR 97209

RE: Application for Further Review of Protest No. 2904-93-100233; Denial of duty-free treatment of toys from Thailand under the Generalized System of Preferences (GSP); direct costs of processing

Dear Sir:

This is in reference to a protest and application for further review filed by Kmart Corporation ("Kmart"), contesting the denial of duty-free treatment of toys from Thailand under the Generalized System of Preferences (GSP).

FACTS:

Kmart originally entered certain toys under subheading 9503.41.10, Harmonized Tariff Schedule of the United States (HTSUS), which is a GSP-eligible provision. Your office, upon liquidation, advanced the rate as dutiable at 6.8 percent because the Thailand manufacturer's invoice was not submitted.

The record includes invoice number 030518PMW dated August 1, 1993, with the heading "Pacific Impex, (Taiwan) Ltd., Anco Merchandise Co., Ltd, Taiwan, R.O.C." and stamped with "Anco merchandise Co., Ltd." This invoice indicates that the toys were made by Thai K.C. Toy Co., Ltd. ("Thai"), Bangkok, Thailand, and that their country of origin is Thailand. A bill of lading dated July 30, 1993, is also enclosed showing the exporter as Thai and the consignee as Kmart, and that the toys were loaded in Bangkok, transshipped to Kaohsiung, and discharged in Portland, Oregon.

In a Notice of Action dated September 9, 1993, your office informed Kmart that the Thailand manufacturer's invoice and Certificate of Origin Form A was required. The record now includes the Form A dated July 30, 1993, which makes reference to an invoice with the number "KC-0076/93" dated July 26, 1993, and indicates that the toys were consigned from Thai in Thailand, to Kmart, in the U.S., and that the toys were produced in Thailand. Another invoice number 030518PMW dated August 1, 1993, is also submitted, which is identical to the Pacific Impex invoice except Kmart claims it is the Thailand manufacturer's invoice. Consequently, Kmart requests that duty in the amount of $695.03 be refunded.

ISSUE:

Whether the toys from Thailand satisfy the 35 percent value- content requirement under the GSP.

LAW AND ANALYSIS:

Under the GSP, eligible articles the growth, product or manufacture of a designated beneficiary developing country (BDC) which are imported directly into the customs territory of the U.S. from a BDC may receive duty-free treatment if the sum of (1) the cost or value of materials produced in the BDC, plus (2) the direct costs of the processing operations performed in the BDC, is equivalent to at least 35 percent of the appraised value of the article at the time of entry into the U.S. See 19 U.S.C. 2463(b). As provided in General Note 3(c)(ii)(A), Harmonized Tariff Schedule of the United States (HTSUS), Thailand is a designated BDC for purposes of the GSP, and the toys are classified in subheading 9503.41.10, HTSUS, which is a GSP-eligible provision.

The Form A reflects that the sum of the direct costs of processing and the cost of any materials produced in Thailand represents 60 percent of the toys estimated appraised value. However, this "appraised value" apparently was based upon the Thailand invoice price. Customs appraised the merchandise based upon the Taiwan invoice price. Therefore, to determine if the toys would meet the minimum 35 percent value-content requirement, the Thailand manufacturer's invoice was requested to verify the actual costs of processing operations in Thailand. However, the invoice submitted has the same information as the invoice submitted from Taiwan and it is not the one referred to on the Form A.

Customs announced in T.D. 86-107 that certification by a foreign government has no binding legal effect on the duty-free eligibility of imported merchandise since it is Customs, and not the BDC government, which is charged with the responsibility under U.S. law to determine the proper tariff status of imported merchandise. Thus, certification by a foreign government alone, without supporting documentation to demonstrate compliance with the country of origin requirements is not sufficient to grant duty- free treatment under the GSP. In acting on a protest, Customs cannot and will not assume facts that are not presented (e.g., an unsubstantiated claim that the direct costs of processing operations incurred in producing the toys was equivalent to at least 35 percent of the appraised value of the merchandise). Accordingly, without sufficient information regarding the costs of producing the toys in Thailand, we cannot determine whether the GSP 35 percent value-content minimum would be satisfied in this case.

HOLDING:

Based on the documentary information submitted in connection with this protest, we find that the protestant has not provided sufficient proof to show that the 35 percent value-content requirement under the GSP has been satisfied. Accordingly, this protest should be denied.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065 dated August 4, 1993, Subject: Revised Protest Directive, this decision should be attached to Customs Form 19, Notice of Action, and be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director

Previous Ruling Next Ruling