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 > 2003 HQ Rulings > HQ 965538 - HQ 965865 > HQ 965827

Previous Ruling Next Ruling
HQ 965827




November 5, 2002

CLA-2 RR:CR:TE 965827 mbg

CATEGORY: CLASSIFICATION

TARIFF NO.: 6202.12.2050

Port Director
U.S. Customs Service
6747 Engle Road
Middleburg Heights, OH 44130

RE: Decision on Application for Further Review of Protest No. 4192-01-100006; Tariff Preference Level Certificates of Eligibility and Applicable Duty Rate under the NAFTA

Dear Sir:

This is a decision on an application for further review of a protest timely filed by Meeks & Sheppard on behalf of Algo Industries Ltd., against your decision regarding the proper processing of a Tariff Preference Level (“TPL”) Certificate of Eligibility and thus, the applicable rate of duty for a garment under the North American Free Trade Agreement (“NAFTA”). The one entry that was the subject of this protest was liquidated on February 16, 2001.

FACTS:

The Protestant claims that during the course of business, it regularly exports NAFTA originating products to the U.S. and also products that although non-originating for preferential duty purposes qualify for preferential duty treatment under the TPL provisions of NAFTA.

Protestant claims that at the time of exportation of the subject apparel from Canada, and also at the time of entry in the U.S., Protestant believed that the fabric met the NAFTA origin requirements. The subject fabric had been obtained from NAFTA suppliers and used by Algo to produce the garments and consequently, Protestant believed that the apparel manufactured from the fabric met the NAFTA preference requirements.

However, Protestant later learned that the fabric used to produce the subject garments contained non-NAFTA yarn in excess of 7 percent by weight. Upon further investigation subsequent to this “discovery”, the Protestant learned that the subject garments met the requirements of the TPL and then obtained the requisite “Certificate of Eligibility” from the Canadian government.

Customs notes the following timeline regarding the subject entry:

-October 27, 1999. Algo filed the entry that is the subject of this protest at the port point of entry of Cleveland, Ohio. This entry covered 55 cartons of women’s jackets. This entry covered women’s jackets which were cut and sewn in Canada and thus eligible for the NAFTA rate of duty. The merchandise was also released on this date.

-March 30, 2000. Customs filed an extension on the liquidation of the subject entry.

-February 16, 2001. The subject entry liquidated at the non-NAFTA duty rate with the classification in subheading 6202.12.2050, HTSUSA, which provides for women’s cotton woven coats, and a duty rate of 9.2 percent ad valorem.

-May 15, 2001. The Canadian government issued a TPL certificate of eligibility to Algo for the merchandise covered by the subject entry.

-May 17, 2001. The Protestant files the subject Protest at the port of Cleveland and requests Further Review. It is the Port’s opinion, that a TPL Certificate of Eligibility must be submitted to U.S. Customs prior to the liquidation of the entry for which the importer is claiming TPL eligibility. It is Protestant’s opinion that Customs was not justified in denying TPL eligibility to this entry.

ISSUE:

Whether the subject entry is eligible for preferential tariff treatment under the NAFTA TPL program?

LAW AND ANALYSIS:

I. Eligibility for NAFTA Tariff Preference Level

Goods entered into the commerce of the United States from Mexico and Canada which are considered “originating” goods from those countries are granted preferential tariff treatment under NAFTA. In addition specified textile and apparel goods imported into the U.S. from Canada or Mexico which are not “originating” goods may nevertheless be granted preferential tariff treatment like originating goods up to specific annual quantitative TPLs. Once a TPL applicable to a NAFTA country’s exports to another NAFTA country has been reached, any further exports of goods of that TPL category to the same NAFTA country during that year may not be accorded NAFTA preferential tariff treatment, but rather will be subject to duty at the normal trade relation rate. See T.D. 95-98, the final rule implementing the submission of certificates of eligibility in 19 CFR § 12.132(b). Consequently, a TPL is a type of tariff-rate quota.

In order for a garment to be dutiable at the NAFTA tariff rate, based on the Tariff Preference Level, three conditions must be met in which the good must first meet the requirements of the TPL definition found in Section XI, Additional U.S. Notes 3- 6, HTSUSA; second, the good must be accompanied by a Certificate of Eligibility in proper form; and third, the yearly amount allowed under the TPL must not have been filled prior to the presentation of the Certificate of Eligibility. If any of these three conditions are not met then the good does not qualify under the TPL.

Classification of the subject women’s jackets is not at issue and Protestant agrees with Customs that classification of the subject women’s jackets is proper in subheading 6202.12.2050, HTSUSA, which provides for “Women’s or girls’ overcoats, carcoats, capes, cloaks, anoraks (including ski-jackets), windbreakers and similar articles (including padded, sleeveless jackets), other than those of heading 6204: Overcoats, carcoats, capes, cloaks and similar coats: Of cotton: Other: Other: Other: Women’s.” Furthermore, the subject women’s coat appears to meet the requirements of Section XI, Additional U.S. Note 3(a) which provides:

The rate of duty in the “Special” subcolumn of rates of duty column 1 followed by the symbol “CA” in parentheses shall apply to imports from Canada, up to the annual quantities specified in subdivision (f) of this note, of apparel goods provided for in chapters 61 and 62 that are both cut (or knit to shape) and sewn or otherwise assembled in the territory of a NAFTA party from fabric or yarn produced or obtained outside the territory of one of the NAFTA parties.

Therefore, the subject women’s jacket meets the first requirement of TPL in that it qualifies under the appropriate definitions of Section XI, HTSUSA.

Concerning the second requirement, the Customs Regulations, Section 12.132(3)(b), concerning the Certificate of Eligibility state:

In connection with a claim for NAFTA preferential tariff treatment involving non-originating textile and apparel goods subject to the tariff preference level provisions of appendix 6.B. to Annex 300-B of the NAFTA and Additional U.S. Notes 3 through 6 to Section XI, Harmonized Tariff Schedule of the United States, the importer shall submit to Customs a Certificate of Eligibility covering the goods. The Certificate of Eligibility shall be properly completed and signed by an authorized official of the Canadian or Mexican government and shall be presented to Customs at the time the claim for preferential tariff treatment is filed under §181.21 of this chapter.

Protestant had submitted a copy of the Certificate of Eligibility that was intended to cover the entry yet, this Certificate of Eligibility was not acquired from the Canadian government until after the entry had liquidated. In fact, the Protestant did not initially claim TPL eligibility for the merchandise but only in retrospect made the TPL claim. 19 CFR 12.132(3)(b) provides that the Certificate of Eligibility must be presented to Customs at the time the claim for preferential treatment is filed. However, T.D. 95-98 provides for the filing of a TPL claim after the entry is filed. T.D. 95-98 states, in a discussion of public comments on this issue, the following:

While a failure to supply the required Certificate of Eligibility will preclude the filing of a claim for preferential tariff treatment and will result in liquidation of the entry at the non-preferential duty rate, Customs believes that importers in most cases will have adequate opportunity, following the date of entry, to submit the Certificate and make the claim when the Certificate is not available at the time of entry. Customs notes in this regard that the importer may supply the necessary documentation and make the claim either at any time prior to final liquidation or in connection with the filing of a protest within 90 days following final liquidation.

(emphasis added.)

Therefore, the subject women’s jacket meets the second requirement of the TPL in that the certificate of eligibility was submitted and the claim for preferential treatment was made in connection with the filing of a protest within 90 days following final liquidation. Concerning the third requirement, we must determine when the certificate of eligibility was presented and whether or not the yearly amount allowed under the TPL was filled.

We first note that the applicable laws and regulations do not specifically provide for TPLs in the quota regulations, part 132. Therefore, there are certain issues that are not specifically provided for by the regulations, e.g., what is the time of presentation for a TPL. Consequently, when this is the case, we will look to the intent of the regulations concerning tariff rate quotas, and apply those principles to TPLs.

Since the date of presentation determines the quota priority and status and determines when the quota is charged for tariff rate quotas (See 19 CFR §132.1(d), 132.11a, and 141.68(d)), we must first determine what is the date of presentation for the scenario described. The time of presentation for other tariff rate quotas is the time entry summary is delivered in proper form with estimated duties attached (unless ABI procedures are used). For a TPL, however, the date of presentation may not be when the entry summary is filed since 19 CFR 12.132(b) provides that entry may be made without making a claim for treatment as a TPL and submitting the certificate of eligibility. T.D. 95-98, which includes comments on the implementation of section 12.132(b), states that the submission of the certificate of eligibility and thus the claim for preferential treatment as a TPL may be made prior to liquidation or after liquidation with a timely filed protest. Consequently, the date of presentation for merchandise eligible for a TPL, which is entered without the submission of the certificate of eligibility, should be the time the valid certificate of eligibility is submitted, with a supplemental information letter prior to liquidation or a valid protest within 90 days of liquidation.

On May 17, 2001, Protestant timely filed a protest with the certificate of eligibility for the subject entry. Therefore, that is the date that a valid claim for TPL treatment was made and could set the date of presentation. Thus, in this case the subject merchandise was released in 1999 and the protest with valid certificates of eligibility was filed in 2001. The question which arises is whether the merchandise can take a presentation date in 2001, and the TPL would be charged to 2001, if it were still open at the time of presentation.

19 CFR § 142.23 and 19 CFR § 142.21(e) provide that for merchandise subject to quota, the entry summary must be filed and the estimated duties must be deposited within 10 days or before the end of the quota period, whichever expires first. Based on these regulations, in Headquarters Ruling (HQ) 114071, dated January 15, 1998, in which we note that the tariff-rate quota involved in that ruling was a TPL, we stated the following:

Clearly the regulations provide that for merchandise subject to a tariff-rate quota and released by immediate delivery near the end of a quota period, entry summary must be filed by the end of that quota period if it occurs prior to 10 working days of the date of release. In such a scenario, if the regulations are followed, entry summary would be filed and presentation would occur before the end of the quota period in which release occurred. Consequently, the purpose of the applicable regulations, 19 CFR § 142.23 and 19 CFR § 142.21(e), is clear: to ensure that importers may not gain release of merchandise subject to a tariff-rate quota at the end of a quota period and file entry summary after the close of that period in order to circumvent the tariff-rate quota in effect at the time of release.

If the date of presentation is considered to be in 2001 and quota for that period is applicable to the subject merchandise, then the tariff-rate quota at the time of release would be circumvented. Such an outcome is inconsistent with 19 CFR § 142.23, 19 CFR § 142.21(e), and HQ 114071. Consequently, in order for the TPL to be charged to the period in which the merchandise was released, and to establish a date of presentation consistent with the quota period in which merchandise was released, the date of presentation for the subject merchandise should be the last day of the quota period in which the goods were released. Since the goods were released in 1999, the date of presentation should be December 31, 1999. On that date the 1999 TPL had not filled. Consequently, the subject merchandise is eligible for preferential tariff treatment under the TPL for the 1999 quota period.

For the subject merchandise, a valid certificate of eligibility was submitted on May 17, 2001. This date was within the timeframe for the filing of a valid protest on the subject entry. At the time of release, the quantitative restraints for the subject TPL had not been filled. Consequently, the subject entry was eligible for preferential tariff treatment under the TPL.

HOLDING:

The protest should be GRANTED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.

Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at , by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Myles B. Harmon, Acting Director

Previous Ruling Next Ruling

See also: