Corrpro Companies, Inc. v. United States , 28 Ct. Int'l Trade 1523 ( 2004 )

Slip Op. 04-116
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: HON. RICHARD W. GOLDBERG, SENIOR JUDGE
CORRPRO COMPANIES, INC.,
Plaintiff,
Court No. 01-00745
v.
UNITED STATES,
Defendant.
[Judgment for plaintiff.]
Dated: September 10, 2004
Simons & Wiskin (Jerry P. Wiskin and Philip Yale Simons) for
plaintiff.
Peter D. Keisler, Assistant Attorney General, United States
Department of Justice; Barbara S. Williams, Attorney in Charge,
International Trade Field Office, Commercial Litigation Branch,
Civil Division, United States Department of Justice (Aimee Lee);
Beth C. Brotman, Office of Assistant Chief Counsel, International
Trade Litigation, United States Bureau of Customs and Border
Protection, of counsel, for defendant.
OPINION
GOLDBERG, Senior Judge: In this action, plaintiff Corrpro
Companies, Inc. (“Corrpro”) seeks preferential duty treatment for
its imported sacrificial magnesium anodes (“the subject
merchandise”) under the North American Free Trade Agreement
(“NAFTA”). Corrpro argues that the subject merchandise is
classifiable under subheading MX 8543.30.00 of the Harmonized
Tariff Schedule of the United States (“HTSUS”) free of duty. The
Court No. 01-00745 Page 2
Bureau of Customs and Border Protection (“Customs”), as defendant
in this action, concedes that the subject merchandise is
classifiable under the same subheading without NAFTA treatment
with a duty rate of 2.6 percent ad valorem, as claimed in the
second cause of action in Corrpro’s complaint. Hence, the sole
issue before the Court is whether the subject merchandise is
entitled to NAFTA treatment.
The Court’s prior decision in this action in Slip Op. 03-59
(June 4, 2003) was vacated by order on November 18, 2003. In the
instant action again before the Court, Corrpro moves for summary
judgment pursuant to USCIT R. 56. Customs moves to dismiss for
lack of jurisdiction or, in the alternative, cross-moves for
summary judgment.
For the reasons that follow, the Court finds the subject
merchandise classifiable under HTSUS MX 8543.30.00 and grants
Corrpro’s motion for summary judgment on the first cause of
action in its complaint.
I. BACKGROUND
Corrpro is an importer of the subject merchandise. Customs
Headquarters Ruling Letter (“HQ”) 557046, dated May 17, 1993,
classified the subject merchandise under subheading 8104.19.00,
HTSUS. Under this subheading, the subject merchandise was
ineligible for NAFTA treatment. On August 16, 1999, Corrpro
began importing the subject merchandise into the United States
Court No. 01-00745 Page 3
under HTSUS 8104.19.00, as “[m]agnesium and articles thereof,
including waste and scrap: Unwrought magnesium: Other” at the
rate of 6.5 percent ad valorem. Corrpro did not make a claim for
NAFTA treatment at the time of entry as provided by 19 C.F.R. §
181.21(a), nor did it file a post-importation NAFTA claim within
one year of the date of importation under 19 U.S.C. § 1520(d).
On June 30, 2000, Customs liquidated the subject merchandise. On
September 12, 2000, Corrpro timely filed protests under 19 U.S.C.
§ 1514(a)(2), asserting that the proper classification of the
subject merchandise was under subheading HTSUS MX 8543.30.00. In
the memorandum of fact and law that accompanied the protests,
Corrpro claimed that its protests of classification and duty
rates constituted a proper claim for NAFTA treatment. On August
13, 2001, Customs denied the § 1514 protests in full.
Corrpro filed a complaint with the Court of International
Trade on September 6, 2001. Corrpro asserted that the Court had
jurisdiction under 28 U.S.C. § 1581(a) because of its timely
protests of classification and rate and amount of duties
chargeable pursuant to 19 U.S.C. § 1514(a)(2).
On October 10, 2001, Customs retracted HQ 557046 and
reclassified the subject merchandise under HTSUS 8543.30.00.
Customs issued a final notice of revocation of the classification
under HTSUS 8104.19.00 on December 5, 2001. In its answer to
Corrpro’s complaint, dated June 24, 2002, Customs agreed to
Court No. 01-00745 Page 4
stipulate to Corrpro’s second cause of action, classifying the
subject merchandise under HTSUS 8543.30.00 – without NAFTA
treatment.
On June 4, 2003, the Court dismissed this action in Slip Op.
03-59. Corrpro moved for relief from judgment, claiming that the
failure of Customs to disclose HQ 561933 constituted
“misrepresentation . . . of an adverse party” under USCIT R.
60(b)(3). On November 18, 2003, the Court granted Corrpro’s
motion to vacate the decision and judgment in Slip Op. 03-59 and
restored this action to the Court’s calendar for further
proceedings.
II. STANDARD OF REVIEW
Corrpro, as plaintiff, has the burden of establishing the
basis upon which subject matter jurisdiction under 28 U.S.C. §
1581(a) lies in this matter. See Juice Farms, Inc. v. United
States, 68 F.3d 1344, 1345 (Fed. Cir. 1995). In considering
Customs’ USCIT R. 12(b)(1) motion to dismiss, the Court assumes
all well-pled factual allegations are true and construes all
reasonable inferences in favor of the non-movant, Corrpro. See
United States v. Islip, 22 CIT 852, 854, 18 F. Supp. 2d 1047,
1051 (1998) (quoting Gould, Inc. v. United States, 935 F.2d 1271,
1274 (Fed. Cir. 1991)).
Upon establishing jurisdiction under § 1581(a), the Court
will grant summary judgment “if the pleadings show that there is
Court No. 01-00745 Page 5
no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.” USCIT R.
56(c). However, “if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party,” summary judgment
will not be granted. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986).
III. DISCUSSION
A. The Court Has Subject Matter Jurisdiction Over This Matter
Pursuant to 28 U.S.C. § 1581(a).
Corrpo claimed in its protests, filed under 19 U.S.C. §
1514(a)(2), that the subject merchandise was entitled to NAFTA
preferential duty treatment. The asserted claim for NAFTA
treatment under HTSUS MX 8543.30.00 was “denied in full” by
Customs. Customs argues that the Court lacks subject matter
jurisdiction under 28 U.S.C. § 1581(a) over Corrpro’s claim for
NAFTA treatment. According to Customs, a protest made under 19
U.S.C. § 1514(a) must be preceded by a decision by Customs either
through a claim for NAFTA treatment at the time of entry under 19
C.F.R. 181.21(a)1 or through a post-importation petition under 19
1
Section 181.21(a) provides that:
In connection with a claim for preferential tariff treatment
for a good under NAFTA, the U.S. importer shall make a
written declaration that the good qualifies for such
treatment. The written declaration may be made by including
on the entry summary, or equivalent documentation . . . the
symbol “MX” for a good of Mexico, as a prefix to the
subheading of the HTSUS under which each qualifying good is
classified . . . . [T]he declaration shall be bade on a
Court No. 01-00745 Page 6
U.S.C. § 1520(d)2. Since Corrpro failed to do either, Customs
argues that there was no decision regarding NAFTA eligibility to
be contested when Corrpro filed its protests. Therefore,
according to Customs, Corrpro’s protests were premature and
cannot be the basis for an action under 28 U.S.C. § 1581(a). In
essence, Customs seeks to prevent importers from raising a NAFTA
claim for the first time by way of a protest under any and all
circumstances.
The Court finds that Corrpro could not make a claim for
NAFTA treatment at the time of entry or during the § 1520(d)
post-importation period. The relevant statutory language,
complete and properly executed original Certificate of
Origin, or copy thereof, which is in the possession of the
importer and which covers the good being imported.
19 C.F.R. § 181.21(a).
2
Section 1520(d) provides that:
Notwithstanding the fact that a valid protest was not filed,
the Customs Service may, . . . reliquidate an entry to
refund any excess duties . . . paid on a good qualifying
under the rules of origin . . . for which no claim for
preferential tariff treatment was made at the time of
importation if the importer, within 1 year after the date of
importation, files . . . a claim that includes –
(1) a written declaration that the good qualified under
those rules at the time of importation;
(2) copies of all applicable NAFTA Certificates of Origin .
. .; and
(3) such other documentation relating to the importation of
the goods as the Customs Service may require.
19 U.S.C. § 1520(d).
Court No. 01-00745 Page 7
legislative history, and case law do not indicate that an
importer in such a position is precluded from seeking relief via
the § 1514 protest mechanism. Accordingly, the Court finds that
under the circumstances in this case, that Corrpro properly
sought NAFTA treatment in its protests challenging the
“classification and the rate and amount of duties chargeable.”
Customs’ denial in full of these protests constituted appealable
decisions on Corrpro’s NAFTA claims to establish jurisdiction
pursuant to 28 U.S.C. § 1581(a).
1. Corrpro Could Not Have Properly Filed a NAFTA Claim at
the Time of Entry nor Under 19 U.S.C. § 1520(d).
Corrpro contends that a binding Customs classification
ruling in HQ 557046 precluded it from applying for NAFTA
preferential duty treatment at the time of entry. HQ 557046
required Corrpro to enter the subject merchandise under HTSUS
8104.19.00, a subheading that precluded a NAFTA claim. Corrpro
also claims that it could not file a post-importation § 1520(d)
petition because it knew the tariff shift rule was not satisfied
as required by HQ 557046. Therefore, Corrpro could not make a
written declaration attesting that the subject merchandise
qualified for NAFTA treatment within the statutorily-defined
period. Corrpro further notes that filing a NAFTA claim at the
time of entry or within one year of importation would have
exposed it to civil penalties under 19 U.S.C. § 1592 for failing
Court No. 01-00745 Page 8
to exercise reasonable care in following a binding Customs
ruling.
Customs argues that NAFTA eligibility is a separate and
independent matter from the determination of classification.
With respect to Corrpro’s claim that it was unable to file a §
1520(d) petition, Customs counters that Corrpro should have taken
a variety of steps so that it would not be subject to civil
penalties under § 1592. According to Customs, Corrpro could have
included a statement indicating that entry under HTSUS 8104.19.00
was made under protest and that preferential duty treatment would
be sought under HTSUS MX 8543.30.00. Customs contends that
Corrpro should have fully disclosed all circumstances bearing on
the claim, including the ruling precluding NAFTA classification,
in a § 1520(d) petition. Thus, because Corrpro could have sought
NAFTA treatment in a § 1520(d) petition, its failure to do so
should preclude it from appealing Customs’ denials of Corrpro’s
protests.
The Court finds that Corrpro behaved as a reasonable
importer in attempting to comply with Customs tariff
classification requirements, thereby precluding filing a NAFTA
claim at the time of entry or in a § 1520(d) petition. The
standard for appropriate conduct in the importation context is
extremely stringent, and negligence is sufficient to expose a
company to liability for infractions of customs laws. See United
Court No. 01-00745 Page 9
States v. Ven-Fuel, Inc., 758 F.2d 741, 759 (Fed. Cir. 1985)
(“The Court has long stressed the remedial purposes of the
customs laws and the necessity for expansive, common sense
construction so as to effectively promote the public weal . . . .
[T]he compelling public interest in assuring strict compliance
with legislation . . . constitutes, in and of itself, good reason
to hold the citizenry to a comparatively rigorous standard of
compliance.”). Importers are expected to exercise care to avoid
reasonably foreseeable misconduct, and failure to act accordingly
satisfies the intent requirement with regard to violations. Id.
at 747; see also United States v. Modes, Inc., 17 CIT 627, 632-
33, 826 F. Supp. 504, 510 (1993) (holding that plaintiff “knew
that submission of false invoices was illegal in the sense that
he was required by law to file accurate invoices with Customs,
and that he intentionally violated the law”). Failure to follow
a binding Customs ruling constitutes a de facto violation of the
reasonable care standard. See H.R. Rep. 103-361, pt. 1, at 2670
(“The failure to follow a binding ruling is a lack of reasonable
care.”).
Although HQ 557046 was subsequently revoked by Customs, the
ruling was binding on Corrpro at the time of entry and within the
one year from importation permitted by § 1520(d). In order to
comply with the standard of reasonable care, Corrpro was required
to classify the imported products under HTSUS 8104.19.00.
Court No. 01-00745 Page 10
Failure to comply with the Customs ruling and classify the
products under MX 8543.30.00 would have been an intentional
violation of the law. Application for preferential duty
treatment under NAFTA for products classified under HTSUS
8104.19.00 was equally impermissible and would have entailed the
submission of information of questionable veracity. Therefore,
in order to comply with the standard of reasonable care, Corrpro
believed that it could neither claim the products under MX
8104.19.00 nor pursue preferential duty treatment for the
products under HTSUS 8104.19.00. Moreover, given the
comparatively rigorous standard of compliance required by courts
in the importation context, Corrpro properly acted in a way to
ensure that the subject merchandise was classified in accordance
with HQ 557046 by not invoking NAFTA post-importation procedures.
Customs’ argument that Corrpro should have submitted a
“conditional” § 1520(d) petition “under protest” is erroneous.
Corrpro acted with reasonable care and in accordance with law
under the circumstances. The Court cannot find a sufficiently
cognizable basis for requiring an importer to avail itself to
NAFTA preferential duty treatment in light of a binding Customs
ruling that precludes the requisite classification.
2. A NAFTA Claim May Be Raised for the First Time in a
Protest when a § 1520(d) NAFTA Petition Cannot Be Filed
Due to a Binding Customs Ruling.
Court No. 01-00745 Page 11
Customs argues that a decision by Customs on NAFTA treatment
did not precede Corrpro’s protests challenging the initial
“classification and the rate and amount of duties chargeable.”
Because NAFTA eligibility was only raised in the protests, there
was no NAFTA decision that could be challenged, rendering
Corrpro’s NAFTA claim premature.
Corrpro refutes this position, in part relying on HQ
561933, dated September 17, 2002. At issue in HQ 561933 was a
protest against the rate of duty and application for review of
Customs’ denial of NAFTA preferential treatment at the time of
entry. Corrpro quotes the following language in the ruling
letter:
Protesting Denial of NAFTA Claim
***
Decisions relating to the classification and rate and amount
of duties chargeable for merchandise may be protested by an
importer. In the instant case, as the decision to deny a
NAFTA claim for preferential tariff treatment relates to the
rate and amount of duties chargeable for the merchandise
covered by the claim, it is a decision of the Customs
Service that may be properly protested. . . .
Brief in Support of Plaintiff’s Motion for Summary Judgment
(“Pl.’s Br.”) at 10 (quoting HQ 561933 at 7). The plain language
of this excerpt appears to support Corrpro’s contention that a
Customs decision denying a claim for preferential duty treatment
under NAFTA is protestable. As Customs points out (and Corrpro
concedes), however, the importer in HQ 561933 claimed NAFTA
treatment at the time of entry, which was explicitly denied by
Court No. 01-00745 Page 12
Customs. This would seem to indicate that a decision on NAFTA
treatment must be made by Customs before it can be properly
raised in a protest. Notably, however, HQ 561933 does not
explicitly limit claims for NAFTA treatment in such a manner. On
balance, the Court finds HQ 561933 itself non-dispositive but
nonetheless a credible basis for finding that a § 1520(d)
petition is not the exclusive means for seeking NAFTA treatment
subsequent to the time of entry.
Customs cites Power-One Inc. v. United States, 23 CIT 959,
83 F. Supp. 2d 1300 (1999) to support its assertion that a NAFTA
claim requires a prior decision. Power-One states in pertinent
part that:
. . . had this document been a protest, it would have been
premature . . . a sec. 1520(d) petition must come before a
protest. Prior to denial of a sec. 1520(d) claim, Customs
has made no decision which can be protested.
Id. at 964. Drawing on this language, Customs argues that the
prerequisite for filing a proper protest on NAFTA eligibility is
a prior decision on NAFTA eligibility. Memorandum in Support of
Defendant’s Motion to Dismiss for Lack of Jurisdiction, or in the
Alternative, Cross-Motion for Summary Judgment (“Def.’s Br.”) at
14. Hence, because NAFTA treatment for the subject merchandise
was not considered by Customs at any point prior to Corrpro’s
protests, it could not be granted by Customs.
Customs’ reliance on Power-One is unconvincing. In Power-
One, the importer argued that its § 1520(d) petition should be
Court No. 01-00745 Page 13
treated as a protest. See Power-One, 23 CIT at 963, 83 F. Supp.
2d at 1304. Power-One states the unremarkable proposition that
before a protest can be properly filed, there must be a decision
by Customs which can be challenged. See id. at 964. In this
case, Customs asserts a broader proposition: that an absolute
precondition to seeking NAFTA treatment in a protest is the
submission of a § 1520(d) petition and its denial by Customs.
This is erroneous. Section 1520 does not control over § 1514 but
rather permits limited relief as specifically provided for in its
provisions. See Phillips Petroleum Co. v. United States, 54 CCPA
7, 10 (Cust. Ct. 1966) (addressing 19 U.S.C. § 1520(c)). As
evidence of such, the preamble language in § 1520(c),
“Notwithstanding the fact that a valid protest was not filed,” is
identical to that found in § 1520(d). Customs’ argument that the
NAFTA-specific nature of § 1520(d) precludes protests under §
1514 is unavailing. Corrpro should not be required to have filed
a NAFTA claim at the time of entry or in a § 1520(d) petition as
a prerequisite to its § 1514 protests because it could not have
been reasonably expected to do so with HQ 557046 still in effect.
Thus, contrary to Customs’ argument, the key question in this
case under Power-One is whether there was an initial decision
that could be protested. As Corrpro correctly notes, that
decision was Customs’ initial classification of the subject
merchandise under HTSUS 8104.19.00. See Pl.’s Br. at 19. This
Court No. 01-00745 Page 14
initial decision does not specifically have to regard NAFTA
treatment when the importer cannot raise the issue due to a
binding classification ruling, as was the case here.
Corrpro filed protests under § 1514(a)(2), seeking NAFTA
treatment by arguing that the subject merchandise was entitled to
duty-free entry under HTSUS MX 8543.30.00. With its initial
protest, Corrpro submitted a memorandum of fact and law setting
forth the grounds for NAFTA eligibility, which was incorporated
by reference in subsequent protests. In Customs’ protest
decision, the box entitled “Denied in full for the reason
checked” was checked with the explanation “see attached.”
Attached to the protest form was a letter explaining the
reasoning for denying the protest that does not mention the issue
of NAFTA treatment. Customs argues that this attached letter
demonstrates the independent issue of NAFTA treatment was not
considered by Customs and thus was not a basis for an appealable
decision under 28 U.S.C. § 1581(a). Corrpro contends that
Customs’ denial of Corrpro’s protests constituted decisions on
all claims raised in the protests, including Corrpro’s NAFTA
claim. If the protests were not denied in full, Customs could
and should have indicated that the NAFTA claim was not
protestable or indicated that the protest was denied in part.
The Court finds no discernible evidence that Corrpro’s NAFTA
claim was not considered by Customs in the protests. Corrpro’s
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NAFTA claim was adequately raised in the memorandum of fact and
law attached to its protests, which provided the legal grounds
and documentation for satisfying NAFTA rules of origin for the
subject merchandise.
Finally, according to Customs, it is illogical for Corrpro
to claim that HQ 557046 prevented a NAFTA claim at the time of
entry or in a § 1520(d) petition since Corrpro’s protests were
filed before the revocation of HQ 557046. See Defendant’s Reply
Memorandum to Plaintiff’s Opposition to Defendant’s Motion to
Dismiss for Lack of Jurisdiction, or in the Alternative, Cross-
Motion for Summary Judgment (“Def.’s Reply Br.”) at 4. Customs
argues that the same documents that were needed to file a NAFTA
claim at the time of entry or in a § 1520(d) petition were also
needed for its NAFTA claim in the protests. This argument,
otherwise compelling under the facts here, does not dictate
rejecting Corrpro’s claim before the Court. Since Corrpro was
protesting Customs’ initial classification of the subject
merchandise under § 1514(a)(2), it was not required to submit
NAFTA-related documentation as set forth in § 1520(d).
See Power-One, 23 CIT at 963, 83 F. Supp. 2d at 1305 (“Had
Customs truly considered the § 1520(d) claims to be § 1514
protests, it would not have reviewed the documents on the merits
of the NAFTA eligibility.”) (emphasis added). As addressed
below, Corrpro was permitted to file Certificates of Origin in
Court No. 01-00745 Page 16
association with its § 1514 protests “at any time prior to
liquidation of the entry or, if the entry was liquidated, before
the liquidation becomes final.” 19 C.F.R. § 10.112.
Corrpro, in compliance with a standard of reasonable care,
could not file a NAFTA claim at the time of entry or in a §
1520(d) petition because of HQ 557046. Instead, Corrpro filed
timely and proper protests challenging Customs’ “classification
and the rate and amount of duties chargeable,” as set forth in 19
U.S.C. § 1514(a)(2), which Customs denied in full. Accordingly,
because Corrpro is appealing the denial of a protestable decision
by Customs, the Court has jurisdiction over this matter pursuant
to 19 U.S.C. § 1581(a).
B. Corrpro Properly Complied With the Procedural Requirements
for Submitting NAFTA Certificates of Origin.
Corrpro contends that NAFTA Certificates of Origin were
timely submitted. Pl.’s Br. at 20. Citing 19 C.F.R. § 10.112,
Corrpro claims that it satisfied Customs’ requirements by
submitting NAFTA Certificates of Origin for 1999, 2000, and 2001
once its products were reclassified under HTSUS MX 8543.30.00 on
February 4, 2002. Id. at 20-21. As addressed above, Corrpro
argues that it could not apply for preferential treatment prior
to Customs’ reclassification of the subject merchandise and still
adhere to the standard of reasonable care for an importer.
Corrpro therefore requests that the Court accept its post-
Court No. 01-00745 Page 17
importation submission of the NAFTA Certificates of Origin under
19 C.F.R. § 10.112.
Customs argues that Corrpro failed to comply with the
requirements associated with a NAFTA claim. Def.’s Br. at 22-23.
Customs contends that NAFTA submissions are governed by 19 U.S.C.
§ 1520(d) and 19 C.F.R. §§ 181.31 and 181.32 rather than 19
C.F.R. § 10.112. Id. at 23. Customs argues that 19 C.F.R. §
10.112 must yield to the specific provisions of NAFTA governed by
19 C.F.R. §§ 181.31/32. Def.’s Reply Br. at 8. 19 C.F.R. §§
181.31 and 181.32 require that a claim be filed within one year
of importation. Customs claims that Corrpro failed to satisfy
these requirements by submitting its Certificates of Origin on
June 27,
2002 and thereby forfeited its claims for NAFTA treatment. Id.
at 23.
Customs promulgated 19 C.F.R. § 10.112 to ease the burden
associated with the ministerial filings required for duty-free or
reduced duty entry. See Bertrand Freres, Inc. v. United States,
47 Cust.Ct. 155, 159 (1961). It provides for the late filing of
documents relating to duty-free or reduced duty entry of
merchandise “at any time prior to liquidation of the entry or, if
the entry was liquidated, before the liquidation becomes final.”
19 C.F.R. § 10.112. This regulation has been construed as
remedial in nature:
Court No. 01-00745 Page 18
The language of 19 C.F.R. § 10.112 does not limit its
application to certain documents or exclude certain
documents. In addition, Customs did not amend 19 C.F.R. §
10.112 when it promulgated the obligatory language of 19
C.F.R. § 10.183 nor did Customs state that 19 C.F.R. §
10.183 was an exception to the broad remedial effect of 19
C.F.R. § 10.112. Customs promulgated 19 C.F.R. § 10.112 to
alleviate onerous filing requirements arising out of the
narrow construction of duty entitlements; therefore, 19
C.F.R. § 10.112 should be liberally construed.
Aviall of Texas Inc. v. United States, 18 CIT 727, 732, 861 F.
Supp. 100, 104 (1994) (emphasis added); see also Gulfstream
Aerospace Corp. v. United States, 21 CIT 1083, 981 F. Supp. 654(1997).
Following the reasoning in Aviall, the Court holds that 19
C.F.R. § 10.112 supercedes 19 C.F.R. §§ 181.31 and 181.32 as it
does other applicable Customs regulations. Thus, under 19 C.F.R.
§ 10.112, Corrpro may submit its NAFTA Certificates of Origin at
any time prior to liquidation, barring willful negligence or
fraudulent intent in compliance. Corrpro’s adherence to the
standard of reasonable care required of an importer rather than
negligence prevented it from filing Certificates of Origin before
the revocation of a binding Customs ruling that classified the
products under HTSUS 8104.19.00. Corrpro acted in conformity
with 19 C.F.R. § 10.112, which merely requires documents to be
submitted prior to liquidation. It does not stipulate a specific
time frame within which submissions must be made.3 See Bertrand
3
The parties dispute whether the Certificates of Origin
were filed on February 4, 2002 (as stated in the affidavit by
William P. Russo attached to the certificates) or on June 27,
Court No. 01-00745 Page 19
Freres, 47 Cust.Ct. at 159-60. Corrpro’s submission of
Certificates of Origin therefore meets the standard set forth in
19 C.F.R. § 10.112.
C. The Subject Merchandise Satisfies NAFTA Rules of Origin to
Qualify for Classification Under HTSUS MX 8543.30.00.
Corrpro claims that the subject merchandise, imported
magnesium anodes, satisfies NAFTA rules of origin and is
therefore eligible for preferential duty treatment as a matter of
law. Corrpro contends that, to the best of its knowledge, all of
the materials used in the construction of the anodes were of U.S.
origin and therefore NAFTA eligible under HTSUS General Notes
12(b)(i) and 12(b)(iii). Pl.’s Br. at 27. In the alternative,
even if the U.S. origin of the component parts cannot be
demonstrated, Corrpro argues its imported anodes nonetheless
qualify for NAFTA treatment. Pl.’s Br. at 28. According to
Corrpro, if the origin of a component is unknown, the part must
be deemed to be of foreign origin since non-originating materials
are deemed NAFTA eligible under HTSUS General Note 12(b)(ii)(A)
when manufacture in a NAFTA country transforms each component
into a final product with a different tariff classification. Id.Corrpro notes that the requisite tariff shift occurred in the
production of the imported anodes. Pl.’s Br. at 28. According
to Corrpro, the magnesium ingots used to create the anodes are
2002 (the date indicated on the certificates themselves). In the
context of the present litigation, this four-month difference is
immaterial.
Court No. 01-00745 Page 20
provided for under HTSUS 8104.11.01, the galvanized steel straps
used to produce the anodes are provided for under HTSUS
7326.90.85, and all of the alloying chemicals used in the
manufacture of the anodes are provided for under HTSUS Chapter
284. The final product created from these components was
classified as HTSUS 8543.30.00, a tariff classification that is
distinct and separate from those of each of the component parts.
Pl.’s Br. at 28. The transformation occurred in a Mexican
manufacturing plant. Affidavit of William P. Russo (“Russo
Aff.”) at 8. Therefore, Corrpro contends that the requisite
tariff shift occurred and that its magnesium anodes should be
deemed NAFTA eligible as a matter of law.
Customs counters that the evidence submitted by Corrpro is
insufficient to substantiate a claim of NAFTA eligibility for the
imported anodes. Customs underscores Corrpro’s uncertainty as to
the origin of the components used in anode production. Def.’s
Br. at 25. In addition, Customs contends that Corrpro’s
description of the manufacturing process in Mexico is
insufficient to determine whether the requisite tariff shift
occurred. Id. Moreover, Customs argues that Corrpro has not
established how the raw materials would have been classified upon
importation into Mexico. Id. at 25. According to Customs,
4
Specifically: sulfur under HTSUS 2802.02.00; boric acid
under HTSUS 2810.10.00; manganese chloride under HTSUS
2827.39.50; ammonium boroflouride under HTSUS 2826.11.00; and
magnesium chloride under HTSUS 2827.31.00. See Pl.’s Br. at 28.
Court No. 01-00745 Page 21
without an original classification of the component parts,
Corrpro’s contention that a tariff shift occurred in Mexico is
unsubstantiable. Def.’s Reply Br. at 8-9. Consequently, Customs
requests the opportunity to further investigate the veracity and
comprehensiveness of Corrpro’s claim and supporting
documentation. Id. at 8-9. Customs notes that it was never
afforded the opportunity to evaluate the merits of Corrpro’s
NAFTA claim. Id. at 9.
Corrpro’s claim that the imported magnesium anodes at issue
are eligible for NAFTA treatment based on the U.S. origin of
their component parts is without merit. As Customs correctly
observes, the Russo affidavit is unreliable as to the origin of
the component products. See Russo Aff. at 6 (“I was directly
involved in the purchase of these chemicals and, to the best of
my knowledge, all of these materials are of U.S. origin.”). With
regard to both a NAFTA eligibility claim and a motion for summary
judgment, the burden of proof in establishing the essential
elements of the case lies with the movant. Allied International
v. United States, 16 CIT 545, 795 F. Supp. 449 (1992). The mere
assertion of a suspicion regarding the U.S. origin of component
materials by a company official is insufficient to satisfy
Corrpro’s burden of proof with regard to its NAFTA claims under
HTSUS General Notes 12(b)(i) and 12(b)(iii).
Court No. 01-00745 Page 22
That said, Corrpro’s imported magnesium anodes are eligible
for NAFTA preferential treatment under HTSUS General Note
12(b)(ii)(A). Specifically, subdivision (b) of General Note 12,
HTSUS, provides, in pertinent part:
For the purposes of this note, goods imported into the
customs territory of the United States are eligible for the
tariff treatment and quantitative limitations set forth in
the tariff schedule as “goods originating in the territory
of a NAFTA party” only if . . .
(ii) they have been transformed in the territory of Canada,
Mexico, and/or the United States so that -
(A) except as provided in subdivisions (f) of this
note, each of the non-originating materials used in the
production of such goods undergoes a change in tariff
classification described in subdivisions (r), (s) and
(t) of this note or the rules set forth therein[.]
HTSUS General Note 12(b)(ii)(A). Therefore, in order to qualify
as originating for NAFTA purposes, Corrpro must show that the
component parts used to produce the imported magnesium ingots
underwent a change in tariff classification through
transformation in a NAFTA country.5 Corrpro is correct that
5
Customs contends that Corrpro’s failure to detail the
manufacturing process used to produce the anodes precludes a
determination regarding a change in tariff classification.
Def.’s Br. at 25. In so stating, Customs seems to suggest that
an importer is required to detail the nature and extent of the
transformation undergone by non-originating materials to
demonstrate a change in classification. In fact, the rules
pertaining to NAFTA eligibility status explicitly require that an
importer merely demonstrate that the final product would be
categorized under a different HTSUS classification than each of
its component parts and that this tariff shift occurred in a
NAFTA-participant country. Moreover, with regard to rule of
origin marking provisions, the Court has held that Customs
appropriately used its discretion to supplant the “substantial
transformation” standard formerly employed with a tariff shift
Court No. 01-00745 Page 23
because the origin of the anodes’ component parts is unknown, the
materials must be treated as non-originating. See HQ 956622
(Classification of Used Salmon Grill Fish Nets Cut to Material
Size and Packaged for Garden Use; NAFTA Eligibility) (Oct. 31,
1994).
The question then arises as to the manner in which the
materials should be classified. Classification of goods under
the HTSUS is governed by the General Rules of Interpretation
(“GRIs”). GRI 1 provides that “classification shall be
determined according to the terms of the headings and any
relative section or chapter notes and, provided such headings or
notes do not otherwise require, according to the remaining GRIs
taken in order.” Although it is unclear that Customs would have
classified the materials similarly, Corrpro is correct to
identify the magnesium ingots as subject to HTSUS 8104.11.01, the
galvanized steel straps as subject to HTSUS 7326.90.85, and the
alloying chemicals as subject to HTSUS Chapter 28, based on
Customs’ rulings and the explanatory chapter notes pertaining to
each heading. See NY G85211 (The Tariff Classification of
Magnesium Ingots from China, Israel, Ukraine, and the
Netherlands) (Dec. 29, 2000); NY F83602 (The Classification of
Saddle Straps from China and Mexico) (Mar. 24, 2000); NY G80475
(The Tariff Classification of Sodium Benzoate, Zirconium Dioxide,
rule based on a facial change in classification. See Bestfoods
v. United States, 165 F.3d 1371, 1373 (1999).
Court No. 01-00745 Page 24
Boric Acid, and Electrolytic Manganese Dioxide from China,
Romania, and Russia) (Aug. 11, 2000). The component parts were
amalgamated in a manufacturing facility in Monterrey, Mexico to
form the final magnesium anode product imported by Corrpro and
initially classified by Customs under HTSUS 8104.19.00. Russo
Aff. at 8-9.
Based on these findings, the Court determines that the
requisite shift in tariff classification occurred to warrant
NAFTA preferential treatment. Accordingly, the subject
merchandise is entitled to re-classification under HTSUS MX
8543.30.00, duty-free.
IV. CONCLUSION
For the aforementioned reasons, the Court holds that (1)
subject matter jurisdiction exists pursuant to 28 U.S.C. §
1581(a) and (2) the subject merchandise is classifiable under
HSTUS MX 8543.30.00.
Judgment for plaintiff will be entered accordingly.
/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge
Date: September 10, 2004
New York, New York