CBP Says No 'Uniform Practice' Involved When Single Port and Importer Involved
Despite a previous port classification decision and 81 subsequent liquidated entries claiming preferential treatment under that classification, the entries of a single importer through a single port is not enough to create an "established and uniform practice," CBP said in ruling HQ H15556. The ruling, dated Feb. 3, addressed an internal advice request on whether embroidered fabric produced in Honduras using originating embroidery yarns and batiste fabric from China origin qualify for preferential tariff treatment as an originating good under the Dominican Republic -- Central America -- U.S. Free Trade Agreement (DR-CAFTA). The agency also considered whether a uniform practice had been established.
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The importer, Fashion Textile Trading (FTT), imports embroidered fabrics manufactured in Honduras using U.S. produced embroidery yarns. The Port of Newark in 2008 begin a verification of DR-CAFTA preferential treatment claims for the embroidered fabrics, which FTT imported under the DR-CAFTA short supply provision in HTS heading 9822.05.01, said CBP. Although CBP initially proposed to reject the claim, FTT's customs broker subsequently submitted additional information at CBP's request and the agency issued a CBP Form 29 that said it would allow the fabric to get duty-free treatment under the provision.
The same port began a new verification in 2011 of the embroidered fabrics entered by FTT under the short-supply provision. The Port of Newark in this case disagreed with the classification and issued a negative determination for DR-CAFTA eligibility. FTT's lawyer subsequently argued "that an established and uniform practice exists to treat FTT’s embroidered fabrics" and that Customs Bulletin publication of CBP's plans to change the practice is required before a decision is made.
The lawyer provided documentation of the liquidated entries. Following a CBP review, it appeared that FTT was the only importer of embroidered fabric entered claiming DR-CAFTA preferential tariff treatment under heading 9822.05.01, the agency said. The only entry that did not come through the Port of Newark, instead coming through the Port of JFK, "was not actively considered by a CBP officer," said CBP.
The Court of Appeals for the Federal Circuit in1982 found in Siemens America v. U.S. that more than a 100 entries through a single port did not create a "de facto established and uniform practice" for classification. Unlike the Siemens case "over a two-year and two month period, we have merely 81 liquidated entries at a single port; and one entry, which was a by-pass entry, at a second port" and "when the second port through which the merchandise was imported examined a 2010 entry of the embroidered fabrics, it determined the goods did not qualify," said CBP. Notably, it also appears that the importer is the sole importer of the merchandise at issue, it said. Consistent with the Siemens case, the entries in question do not create a established practice, the agency found.
The importer's classification is also faulty, said CBP. "The embroidered fabric produced in Honduras using originating embroidery yarns and batiste fabric of Chinese origin does not qualify as an originating good entitled to preferential tariff treatment under the DR-CAFTA because the non-originating fabric is not allowed under the terms of GN 29(m)(viii)(A), which limits the use of short supply materials allowed in goods of chapters 50 through 60 to non-originating fibers or yarns designated in U.S. Note 20 to be in short supply," the agency said.
While FTT's lawyer also "argued that the port erred in advancing the value of the merchandise in the entry to reflect the cost of the fabric which the importer maintains is reflected in the value declared to CBP and which the port believes was not included in the declared dutiable value," the port agreed to review the value decision if FTT can provide more proof. "In addition, counsel has indicated a protest would be filed against the liquidation of this entry in which this issue will be addressed," said CBP. "Therefore, we will not address the value of the fabric in this internal advice decision."