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HQ 954145


December 23, 1993

CLA-2 CO:R:C:M 954145 RFA

CATEGORY: CLASSIFICATION

TARIFF NO.: 6913.90.50

District Director of Customs
312 Fore Street
P.O. Box 4688
Portland, Maine 04112-4688

RE: Protest Nos. 0101-93-100038 and 0101-93-100026; ceramic flower pots with saucers; Canadian Free Trade Agreement (CFTA); General Note 3(c)(vii)(B)(2); "originating goods"; NY 860020; detrimental reliance; 19 CFR 177.9(d); North American Free Trade Agreement (NAFTA)

Dear District Director:

The following is our decision regarding the request for further review of Protest Nos. 0101-93-100038 and 0101-93-100026, which concerns the rate of duty of various ceramic flower pots with saucers under the Harmonized Tariff Schedule of the United States (HTSUS). The entries subject to Protest No. 0101-93- 100038 were liquidated on January 29, 1993, March 5, 1993, and April 8, 1993. The protest was timely filed on April 27, 1993. The entries subject to Protest No. 0101-93-100026 were liquidated on January 15, 1993, and February 5, 19, 26 and 28, 1993. The protest was timely filed on March 22, 1993.

FACTS:

Plain, unglazed red clay flower pots and saucers were imported into Canada from Italy. In Canada, the pots and saucers were decorated, glazed and fired in a kiln. After this process, they were exported to the United States.

The merchandise was entered under subheading 6913.90.50, HTSUS, as other ornamental ceramic articles, eligible for CFTA (Canadian Free Trade Agreement) duty treatment according to NY 860020, dated February 27, 1993. The CFTA rate of duty is 3.5 percent ad valorem. The entries were liquidated under subheading 6913.90.50, HTSUS. However, the goods were determined to be ineligible for duty reduction benefits under the CFTA. The general, column one rate of duty of 7.0 percent ad valorem was assessed.
ISSUE:

Whether the ceramic flower pots and saucers are eligible for duty reduction benefits as "originating goods" under the CFTA?

LAW AND ANALYSIS:

The CFTA was approved and enacted into United States law, by the Implementation Act of 1988, Pub. L. 190-449, 101 Stat. 1851, September 28, 1988 (the Act). Chapter 3 of the CFTA sets forth the rules of origin for determining whether goods qualify for the tariff preferences under the CFTA. Section 202 of the Act refers to Chapter 3 of the CFTA, and paragraph (d) of Section 202 refers specifically to the Annex Rules (Annex 301.2 of the CFTA) and authorizes the President to proclaim the rules. The rules of origin, including the specific rules of the Annex, were implemented by Presidential Proclamation 5923, December 14, 1988, as General Note 3(c)(vii), HTSUS.

To be eligible for tariff preferences under the CFTA, goods must be "originating goods" within the rule of origin in General Note 3(c)(vii)(B), HTSUS. There are two primary means in General Note 3(c)(vii)(B), HTSUS, by which articles imported into the United States may be "goods originating in the territory of Canada." The first method is if the goods are "wholly obtained or produced in the territory of Canada and/or the United States." General Note 3(c)(vii)(B)(1), HTSUS. The second method is if the goods are transformed in the territory of Canada and/or the United States. General Note 3(c)(vii)(B)(2), HTSUS.

The subject merchandise was made from undecorated Italian clay pots, and, therefore does not meet the criterion of General Note 3(c)(vii)(B)(1) because it was not wholly obtained or produced in Canada and/or the United States. The protestant states that the Italian clay pots underwent a transformation, as described in General Note 3(c)(vii)(B)(2), HTSUS, because they were glazed, colored by hand, and fired in a kiln in Canada. To be transformed, the merchandise must be subject to a change in tariff classification as described in the rules of General Note 3(c)(vii)(R), HTSUS. General Note 3(c)(vii)(R)(aa), HTSUS, provides that for articles classified under Chapters 68 through 70, a transformation into "originating goods" occurs if the operations performed in Canada result in a classification change of the merchandise from one chapter to another.

The undecorated pots and saucers were classified under Chapter 69 (subheading 6912.00, HTS) when entered into Canada. Upon importation to the United States, the same pots and saucers, which were decorated, remain classified under Chapter 69 (subheading 6913.90, HTS). Because there is no classification change from one chapter to another, the ceramic flower pots with saucers were not transformed in Canada. Therefore, the subject merchandise cannot be considered to be "originating goods" from Canada for CFTA purposes.

In NY 860020, Customs held that the ceramic pots and saucers were eligible for CFTA treatment as "originating goods". Based upon the above analysis, we find that the holding in NY 860020 as to CFTA treatment is incorrect and should be modified. However, as a result of the North American Free Trade Agreement Implementation Act [December 8, 1993], the CFTA terminates as of December 31, 1993. Therefore, as of December 31, 1993, rulings such as NY 860020 dealing with CFTA treatment, shall cease to be valid by operation of law. This will have no effect on the marking or classification decisions in NY 860020.

The protestant contends that they detrimentally relied on NY 860020. Citing section 177.9(d) of the Customs Regulations [19 CFR 177.9(d)], the protestant states that a revocation of NY 860020 shall not be applied retroactively to them. Further, if and when the ruling is properly modified or cancelled, the effective date can be no earlier than the date of the notice from Headquarters or, upon written request, up to 90 days after the notice in those cases where the claimant can prove that they relied upon the ruling and that they will be injured by the change.

Normally, under the provisions of 19 CFR 177.9(d), the protestant may obtain a delay from the effect of a revocation or modification up to 90 days, if they can establish by documentary evidence, that they reasonably relied on NY 860020 to their detriment. In view of the unique circumstances of this particular case and the recent changes in the law, Headquarters finds that such action need not be taken by the protestant. Detrimental reliance of NY 860020 cannot be claimed for any entry of the subject merchandise after December 31, 1993. Therefore, only the protestant's entries, liquidated and unliquidated, up to December 31, 1993, will receive the benefit of CFTA treatment.

HOLDING:

For the foregoing reasons, we find that the ceramic flower pots with saucers are classifiable under subheading 6913.90.50, HTSUS, as other ornamental ceramic articles. The general, column 1 rate of duty is 7.0 percent ad valorem. However, all of the protestant's entries, liquidated and unliquidated, that are imported on or before December 31, 1993, will be eligible for CFTA treatment upon compliance with all applicable regulations. Effective January 1, 1994, preferential treatment for goods under the CFTA will be discontinued and entries of these goods will be subject to the requirements of the North American Free Trade Agreement Implementation Act.

Because reclassification of the merchandise as indicated above will result in the same rate of duty as claimed, you should allow the protest in full. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision, together with the Customs Form 19, should 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
Commercial Rulings Division

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