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HQ 967712




August 30, 2005

CLA-2: RR:CTF:TCM 967712 KSH

CATEGORY: CLASSIFICATION

TARIFF NO.: 6208.91.1010, 6108.91.0030

Port Director
P.O. Box 619050
Customs and Border Protection
Dallas Fort Worth Airport, TX 75261-9050

RE: Application for Further Review of Protest 5501-05-100023

Dear Port Director:

This is in reply to your correspondence forwarding Application for Further Review (AFR) of protest no. 5501-05-100023, filed by Sandler, Travis, & Rosenberg, P.A., on behalf of Charles Komar & Sons, Inc.

FACTS:

The protest is against Customs and Border Protection’s (CBP) Notices to Redeliver two entries of ladies 100% cotton woven robes and ladies 60% cotton/ 40% polyester knitted nightshirt separates classified under subheadings 6208.91.1010 and 6108.91.0030 of the Harmonized Tariff Schedule of the United States Annotated (HTSUSA), respectively. Protestant entered the merchandise subject to this protest on May 20, 2004 and July 15, 2004. On November 5, 2004, CBP issued notices to redeliver the merchandise in accordance with 19 C.F.R. 141.113(b). The notice advised protestant that the country of origin was incorrectly claimed to be Hong Kong rather than China. The notice further advised protestant that the merchandise was subject to quota safeguards which had closed.

Protestant filed the protest with an AFR on January 28, 2005, challenging the demand for redelivery. The importer’s request for AFR was approved. The protest was timely filed pursuant to 19 U.S.C. 1514(c)(3) and 19 C.F.R. 174.12(e)(1).

Protestant has alleged the decision against which the protest is filed involves questions of fact that have not been ruled upon by the Commissioner of Customs or his designee or by the Customs Courts. No rulings addressing whether a redelivery notice issued pursuant to 19 C.F.R. 141.113(b) applies to textile products subject to China safeguards under 19 C.F.R. 12.130 have been located, thus, further review is warranted pursuant to 19 C.F.R. §§174.24(a) and 174.25.

ISSUE:

Whether a notice of redelivery issued pursuant to 19 C.F.R. 141.113(b) applies to merchandise subject to China safeguard quotas.

LAW AND ANALYSIS:

The Customs and Border Protection (CBP) Regulations governing the recall of textiles and textile products released from CBP custody are found in 19 C.F.R. § 141.113. Paragraph (b) of section 141.113 provides as follows:

For purposes of determining whether the country of origin of textiles and textile products subject to the provisions of §12.130 of this chapter has been accurately represented to Customs, the release from Customs custody of any such textile or textile product shall be deemed conditional during the 180-day period following the date of release. If the port director finds during the conditional release period that a textile or textile product is not entitled to admission into the commerce of the United States because the country of origin of the textile or textile product was not accurately represented to Customs, he shall promptly demand its return to Customs custody. Notwithstanding the provisions of paragraph (h) of this section and §113.62(l)(1) of this chapter, a failure to comply with a demand for return to Customs custody made under this paragraph shall result in the assessment of liquidated damages equal to the value of the merchandise involved.

The background information on section 141.113(b), published in T.D. 94-95, Customs Bulletin, Vol. 28, No. 50, December 14, 1994, makes clear that the regulation was adopted because of a significant enforcement problem regarding textiles and textile products that are imported into the United States in violation of quota restrictions or without the appropriate visa from the country of origin. Prior to the enactment of section 141.113, CBP was required to issue a Notice of Redelivery within 30 days of the release of the merchandise from CBP’s custody. See Headquarters Ruling Letter (HQ) 226089, dated February 9, 1996. However, most violations were not discovered until after the close of the time period for issuance of a Notice of Redelivery. See HQ 226089 and T.D. 94-95 (cited above). Accordingly, the 180-day conditional release period was specifically implemented to provide CBP with an opportunity to verify that country of origin claims are "accurately" represented to CBP.

The redelivery notices were issued because the imported merchandise from China, corresponding to textile category code 350, was subject to safeguards that had closed. Protestant notes that the issue of whether China safeguard quotas established pursuant to regulations issued by the Committee for the Implementation of Textile Agreements (CITA) under the terms of China’s Accession to the WTO are textile quotas established pursuant to section 204 of the Agricultural Act of 1956 and subject to CITA’s authority is pending before the U.S. Court of International Trade in U.S. Association of Importers of Textiles and Apparel v. United States, 350 F. Supp.2d 1342 (December 30, 2004).

Paragraph 242 of the Report of the Working Party on the Accession of China to the World Trade Organization (WTO) allows WTO Members that believe imports of Chinese origin textile and apparel products are, due to market disruption, threatening to impede the orderly development of trade in these products to request consultations with the People’s Republic of China with a view to easing or avoiding such market disruption.

On December 24, 2003, as provided for under paragraph 242 of the Report of the Working Party on the Accession of China to the World Trade Organization (Accession Agreement), pursuant to the authority of Section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854), and Executive Order 11651 of March 3, 1972, as amended, and in accordance with the procedures set forth by CITA on May 21, 2003 (68 FR 27787), as clarified on August 18, 2003 (68 FR 49440), CITA established a twelve-month limit on cotton and man-made fiber dressing gowns in Category 350/650 from China, beginning on December 24, 2003, and extending through December 23, 2004 at a level of 4,094,382 dozen. (68 FR 74947). The quota restraints were issued as a result of a determination by CITA that imports of Chinese origin cotton and man-made fiber dressing gowns and robes were, due to market disruption and the threat of market disruption, threatening to impede the orderly development of trade in cotton and man-made fiber dressing gowns and robes, and that imports of cotton and man-made fiber dressing gowns and robes from China played a significant role in the existence and threat of market disruption.

Paragraph 2.B. of the U.S.-China Textile Visa Arrangement provides that if additional categories become subject to import quotas, those categories shall be automatically included in the coverage of the Visa Arrangement. This Visa Arrangement was notified to the World Trade Organization Textiles Monitoring Body as an agreed administrative arrangement on May 21, 2002. Shipments exported from China on or after January 23, 2004 must be accompanied by an export visa and Electronic Visa Information System (ELVIS) transmission issued by the Government of the People’s Republic of China, and shipments without an export visa and ELVIS transmission will be denied entry. Consequently, shipments of Chinese origin cotton and man-made fiber dressing gowns and robes in Category 350/650 were required to be accompanied by an export visa and Electronic Visa Information System (ELVIS) transmission issued by the Government of the People's Republic of China. The entries at issue were entered on May 20 and July 15, 2004. Per the instructions issued by CITA to CBP, without the Chinese visa, the goods had no right to enter.

Protestant argues that the redelivery notices are invalid if 19 C.F.R. 141.113(b) does not apply to goods subject to China safeguard quotas. The FR notice issued by CITA establishing the 12 month limit on imports of Chinese origin cotton and man-made fiber dressing gowns and robes in Category 350/650 cites Section 204 of the Agricultural Act of 1956 as the authority for its action. We also note that in CITA’s letter to CBP, Section 204 of the Agricultural Act and Executive Order 11651 were cited. Accordingly, we have no evidence to suggest that the WTO Accession Agreement is not a textile agreement for purposes of Section 204 of the Agricultural Act of 1956. U.S. Association of Importers of Textiles and Apparel v. United States concerns, in part, the prospective ability of CITA to administer the WTO Accession Agreement. Assuming arguendo that the CIT were to determine that the WTO Accession Agreement is not a textile agreement for purposes of Section 204 of the Agricultural Act of 1956, it is unlikely that its determination would affect the safeguards issued for Chinese origin cotton and man-made fiber dressing gowns and robes in Category 350/650 on December 24, 2003 and expiring on December 23, 2004, shortly after the litigation commenced. Moreover, the Court of Appeals for the Federal Circuit recently held that:

[T]he Association does not support its assertion that neither the paragraph 242 safeguard nor the China Accession Agreement qualifies as a textile trade agreement with any reasoning, evidence, or precedent. In any event, the argument utterly fails to persuade if indeed it is not also frivolous. U.S. Association of Importers of Textiles and Apparel v. United States, Slip Op. 05-1209 (June 28, 2005).

The court further stated:

We also note that the preliminary injunction was not based on the fourth claim [that CITA lacks the authority to aid in the administration by the President of the paragraph 242 safeguard] because the preliminary injunction enjoined only threat-based considerations. If the trial court had relied on the fourth claim, it would have enjoined CITA from considering petitions without distinguishing current from threatened market disruption. Indeed, the trial court recognized as much in its analysis of the balance of hardships factor, concluding that granting relief on the Association’s fourth claim would require invalidating the procedures altogether, not merely interpreting them not to include consideration of threat-based petitions. USA-ITA, 350 F. Supp.2d at 1350 (“Whether a WTO accession agreement is a ‘textile agreement’ is a question of first impression. If plaintiff is fully successful on the merits of the case, CITA’s China Textile Safeguard Regulations will be invalidated in toto.”).

Accordingly, the Association failed to establish even a “fair chance” of succeeding on its fourth claim and, in any event, the fourth claim does not appear to have been the basis for the preliminary injunction. Id.

Substantively protestant argues that CBP did not follow its own procedures for entry review thereby causing a delay in review of the entry until after the quota had closed. Protestant cites to Customs Directive 099-3550-067, which precludes entry summaries from being rejected after 10 working days following the presentation date and only if objective, substantive errors have been found. Protestant correctly notes that the entries were not rejected within 10 working days after the presentation date. However, protestant has failed to read the cited directive in conjunction with 19 C.F.R. 141.113(b) which allows the entries to be conditionally released during the 180 days following release. The merchandise was conditionally “accepted” after release until November 5, 2004, well within the 180 day conditional release period, at which time Redelivery Notices were issued.

Protestant also argues that CBP may not create a condition of inadmissibility where none existed at the time of entry. Protestant argues that unlike the usual transshipment case, there was no impediment to admissibility of the subject merchandise from the time of entry until November 1, 2004, when the safeguards had closed. Protestant assumes that no new information was presented to CBP between the time of entry until the date of the redelivery notices. Protestant postures that CBP merely waited until the safeguard had filled to request redelivery in spite of the obvious inconsistencies between the invoice and country of origin declaration. Protestant incorrectly states that 19 C.F.R. 141.113(b) was not intended to apply to situations similar to those at bar and that no visa was required at the time of entry.

As previously stated, pursuant to Paragraph 2.B. of the U.S.-China Textile Visa Arrangement, shipments of Chinese origin cotton and man-made fiber dressing gowns and robes in Category 350/650 were required to be accompanied by an export visa and Electronic Visa Information System (ELVIS) transmission issued by the Government of the People's Republic of China. Further, 19 C.F.R. 141.113(b) was adopted because of a significant enforcement problem regarding textiles and textile products that are imported into the United States in violation of quota restrictions or without the appropriate visa from the country of origin.

On October 15, 2004, TBT-04-030 was issued to importers and brokers to review their entries for categories in which safeguards were in effect for China to ensure the proper country of origin was declared. The TBT was issued as a result of newly discovered information regarding errors by importers and brokers not declaring the correct country of origin. Under the Customs Modernization Act, the protestant has a duty to exercise reasonable care to ensure that the textile or apparel articles are accompanied by documentation accurate to its origin. See HQ 964923, dated March 30, 2001. After reviewing the documentation submitted with the entries in question, CBP issued a Request for Information to explain the noted discrepancies. CBP acted with reasonable diligence when information was presented to it regarding the potential inaccuracies and timely issued the Notices to Redeliver.

HOLDING:

The Notice to Redeliver was properly issued in accordance with 19 C.F.R. 141.113(b).

The protest should be DENIED. In accordance with the Protest/Petition Processing Handbook, (CIS HB, June 2002, pp 18 and 21), you are to mail this decision, together with the CBP Form 19, 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. No later than sixty days from the date of this letter, the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World WideWeb at www.cbp.gov, by means of the Freedom of Information Act, and by other methods of public distribution.

Sincerely,

Myles B. Harmon, Director

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