CBP Issues Interim Rule on DR-CAFTA (Part II - Final)

(The U.S. has already implemented the DR-CAFTA for the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. The U.S. has yet to implement it for Costa Rica; however, government sources state that the proclamation for the implementation of the DR-CAFTA for Costa Rica is being drafted.)

This is Part II of a two-part series of BP summaries on the interim rule, and highlights its regulatory provisions. (See ITT's Online Archives or 06/13/08 news, 08061305, for Part I.)

Import Requirements

Claim Required for DR-CAFTA Preferential Tariff Treatment

Under 19 CFR 10.583, an importer may make a claim for DR-CAFTA preferential tariff treatment, including an exemption from the merchandise processing fee (MPF), by including on the entry summary, or equivalent documentation, the letter ''P'' or "P" as a prefix to the Harmonized Tariff Schedule (HTS) subheading under which each qualifying good is classified, or by the method specified for equivalent reporting via an authorized electronic data interchange system.

Claim Must be Based on Certification or Importer's Knowledge/Information

A claim for DR-CAFTA preferential tariff treatment may be based on: (1) a certification, as specified in 19 CFR 10.584 that is prepared by the importer, exporter, or producer of the good; or (2) the importer's knowledge that the good qualifies as an originating good, including reasonable reliance on information in the importer's possession that the good is an originating good.

Certification To Be Submitted to CBP Upon Request

An importer who makes a claim for DR-CAFTA preferential tariff treatment based on a certification of the importer, exporter, or producer that the good qualifies as originating must submit a copy of the certification at the request of the port director.

Certification has no prescribed format, but must include certain info. The certification has no prescribed format but must be in writing or must be transmitted electronically pursuant to any electronic means authorized by CBP for that purpose. If the certification forms the basis for the claim, it must be in the possession of the importer at the time the claim for preferential tariff treatment is made.

The certification must include the following: (1) specified information identifying the importer of record, the exporter of the good (if different from the producer) and the producer of the good; (2) specified information identifying the responsible official or authorized agent of the importer, exporter or producer signing the certification (if different from (1)); (3) description of the good which must be sufficiently detailed to relate it to the invoice and Harmonized System nomenclature; (4) the HTS tariff classification of the good to six or more digits and the applicable rule of origin set forth in HTS General Note 29 under which the good qualifies as originating; and (5) a statement from the importer certifying the truthfulness of the information on the certification.

Obligations of importer. According to 19 CFR 10.585(a), an importer who makes a claim for DR-CAFTA preferential tariff treatment will be deemed to have certified that the good is eligible for such preferential tariff treatment and is responsible for the truthfulness of the claim and of all the information and data contained in the certification and supporting documents requested by CBP. In addition, the fact that the importer has made a claim or submitted a certification based on information provided by an exporter or producer will not relieve the importer of these responsibilities.

Responsible official/agent must sign certification. The certification must be signed and dated by a responsible official of the importer, exporter, or producer, or by their authorized agents having knowledge of the relevant facts. It must be in English or the language of the exporting party. In the later case, the port director may require the importer to submit an English translation.

Single or multiple shipments. The certification may be applicable to: (1) a single shipment of a good into the U.S.; or (2) multiple shipments of identical goods into the U.S. that occur within a specified blanket period, not exceeding 12 months, set out in the certification.

Non-commercial/low-value imports. 19 CFR 10.586 states that an importer will not be required to submit a copy of a certification for either a non-commercial importation of a good or a commercial importation for which the value of the originating goods does not exceed $2,500, unless the port director determines that such importation is part of a series of importations carried out or planned for the purpose of evading DR-CAFTA's certification requirements.

Importers Claiming Preferential Treatment Must Maintain Records for 5 Years

Under 19 CFR 10.587(a), an importer claiming DR-CAFTA preferential tariff treatment must maintain all records and documents that the importer has demonstrating that the good qualifies for such preferential tariff treatment for a minimum of five years after the date of importation of the good.

Noncompliance May Result in Denial of DR-CAFTA Treatment to the Good

Under 19 CFR 10.588, if the importer fails to comply with any DR-CAFTA requirement under Subpart J, including submission of a complete certification when requested, the port director may deny preferential tariff treatment to the imported good.

Failure to provide third country transportation documentation. The port director may deny preferential treatment to an originating good if the good is shipped through or transshipped in the territory of a country other than a DR-CAFTA Party, and the importer of the good does not provide, at the request of the port director, evidence demonstrating to the satisfaction of the port director that the conditions set forth in 19 CFR 10.604(a) regarding transit and transshipment were met.

Post-Import Duty Refund Claims May be Filed within One Year of Importation

1. CFR 10.590 states that notwithstanding any other available remedy, where a good would have qualified as an originating good when it was imported into the U.S. but no claim for preferential tariff treatment was made, the importer of that good may file a claim for a refund of any excess duties at any time within one year after the date of importation of the good in accordance with the filing procedures set forth in 19 CFR 10.591. (CBP may refund any excess duties by liquidation or reliquidation of the entry covering the good in accordance with its processing procedures in 19 CFR 10.592(c).)

Export Requirements

Certification for goods exported from U.S. to a Party. According to 19 CFR 10.589, any person who completes and issues a certification for a good exported from the U.S. to a Party must provide a copy of the certification (or such other medium or format approved by the Party's customs authority for that purpose) to CBP upon request.

Records must be maintained for 5 years. Any person who completes and issues a certification for a good exported from the U.S. to a Party must maintain, for a period of at least five years after the date the certification was signed, all records and supporting documents relating to the origin of a good for which the certification was issued, including the certification or copies thereof and records and documents associated with the purchase, cost, and value of, and payment for, the good, etc. These records must be made available for examination and inspection by the port director or other appropriate CBP officer in the same manner as provided in CBP's recordkeeping provisions under 19 CFR Part 163.

DR-CAFTA Originating Goods.

Under 19 CFR 10.594, except as otherwise provided in 19 CFR Subpart J and HTS General Note 29(m), a good imported into the customs territory of the U.S. will be considered an originating good under the CAFTA-DR only if:

(a) the good is wholly obtained or produced entirely in the territory of one or more of the Parties;

(b) the good is produced entirely in the territory of one or more of the Parties and: (1) each non-originating material used in the production of the good undergoes an applicable change in tariff classification specified in HTS General Note 29(n), and the good satisfies all other applicable requirements of HTS General Note 29; or (2) the good otherwise satisfies any applicable regional value content or other requirements specified in HTS General Note 29(n) and satisfies all other applicable requirements of HTS General Note 29; or

(c) the good is produced entirely in the territory of one or more of the Parties exclusively from originating materials.

(See interim rule for information on regional value content test, special rule for certain automotive goods, etc.)

Origin Verifications and Determinations

Under 19 CFR 10.616, a claim for DR-CAFTA preferential tariff treatment, including any statements or other information submitted to CBP in support of the claim, will be subject to such verification as the port director deems necessary. In the event that the port director is provided with insufficient information to verify or substantiate the claim, or the exporter or producer fails to consent to a verification visit, the port director may deny the claim for preferential treatment.

Verification of a claim for preferential tariff treatment under DR-CAFTA may be conducted by means of one or more of the following: (1) written requests for information from the importer, exporter, or producer; (2) written questionnaires to the importer, exporter, or producer; (3) visits to the premises of the exporter or producer in the territory of the Party in which the good is produced, etc.

Special rule for verification of textile/apparel imports. Origin verifications for textile and apparel goods may occur regardless of whether a claim is made for preferred tariff treatment. While a verification of a claim of origin for a textile or apparel good is being conducted, CBP may take appropriate action during and following verification, if certain conditions are met, which may include: (i) suspending or denying the application of preferential tariff treatment to the textile or apparel good; (ii) detention of any textile or apparel good exported or produced by the enterprise subject to the verification; (iii) denying entry to any textile or apparel good exported or produced by the enterprise subject to the verification.

Negative origin determinations. According to 19 CFR 10.618, if as a result of an origin verification, CBP determines that a claim for DR-CAFTA preferential tariff treatment should be denied, it will issue a determination in writing or via an authorized electronic data interchange system to the importer that describes the good, CBP's findings of fact, the legal basis for the determination, etc.

Tariff Preference Level

DR-CAFTA TPL claims for non-originating cotton/MMF apparel good of Nicaragua. According to 19 CFR 10.606, a cotton or man-made fiber (MMF) apparel good of Nicaragua described in 19 CFR 10.607 (see below) that does not qualify as an originating good under 19 CFR 10.594, may nevertheless be entitled to preferential tariff treatment under DR-CAFTA under an applicable tariff preference level (TPL).

To make a TPL claim, the importer must include on the entry summary, or equivalent documentation, the applicable HTS Chapter 99 tariff number (9915.61.01) immediately above the applicable subheading in HTS Chapter 61 or 62 under which each non-originating cotton or man-made fiber apparel good is classified.

Goods eligible for TPL. Under 19 CFR 10.607, goods eligible for a TPL claim consist of cotton or MMF apparel goods provided for in HTS Chapter 99, Subchapter XV, U.S. Note 15(b), that are both cut (or knit-to-shape) and sewn or otherwise assembled in the territory of Nicaragua, and that meet the applicable conditions for preferential tariff treatment under DR-CAFTA, other than the condition that they are originating goods. (The preferential tariff treatment is limited to the quantities specified in HTS Chapter 99, Subchapter XV, U.S. Note 15(c).)

Certificate of eligibility at time of claim. Under 19 CFR 10.608, an importer who claims preferential tariff treatment on a non-originating cotton or MMF apparel good must submit a certificate of eligibility issued by an authorized official of the Government of Nicaragua, demonstrating that the good is eligible for entry under the applicable TPL, as set forth in 19 CFR 10.607. The certificate must be in writing or must be transmitted electronically pursuant to any electronic means authorized by CBP for that purpose.

Transshipment of non-originating cotton/MMFapparel. A good will not be considered eligible for preferential tariff treatment under an applicable TPL by reason of having undergone production that would enable the good to qualify for preferential tariff treatment if subsequent to that production the good: (1) undergoes production or any other operation outside the territories of the Parties, other than unloading, reloading, or any other operation necessary to preserve the good in good condition or to transport the good to the territory of a Party; or (2) does not remain under the control of customs authorities in the territory of a non-Party.

Retroactive Preferential Tariff Treatment for Textiles and Apparel

Under 19 CFR 10.625, a textile or apparel good of an eligible DR-CAFTA country that was entered or withdrawn from warehouse for consumption on or after January 1, 2004, and before the date of the entry into force of the Agreement with respect to the last DR-CAFTA country will be liquidated or reliquidated at the applicable rate of duty for that good set out in the Schedule of the U.S. to Annex 3.3 of the Agreement, and CBP will refund any excess customs duties paid with respect to such entry, with interest accrued from the date of entry, provided the good would have qualified as originating, the request for liquidation or reliquidation is filed with the CBP port where the entry was originally filed within 90 days of the entry into force of the DR-CAFTA for the last country, etc. (See ITT's Online Archives or 06/05/07 news, 07060515, for BP summary of CBP final rule on the time period for requesting retroactive DR-CAFTA textile duty benefits/interest.)

Penalties

1. CFR 10. 620 states that except as otherwise provided in 19 CFR Subpart J, all criminal, civil, or administrative penalties which may be imposed on U.S. importers, exporters, and producers for violations of the customs and related laws and regulations will also apply to U.S. importers, exporters, and producers for violations of the laws and regulations relating to the DR-CAFTA.

No civil penalties for prompt, voluntary certification corrections. However, 19 CFR 10.621 adds that civil or administrative penalties under 19 USC 1592 will not be imposed on the U.S. importer, or the exporter or producer in the U.S., who "promptly" and "voluntarily" corrects a claim and/or an incorrect certification as applicable.

(See the interim final rule for additional changes, such as 19 CFR 10.699 being redesignated as 19 CFR 10.625, etc.)

¹Also abbreviated as CAFTA-DR.

²See ITT's Online Archives or 04/18/07, 04/05/06, 07/14/06, and 03/23/06 news, 07041805, 06040515, 06071405, and 06032305, for parts of multi-part BP summaries of Presidential Proclamations 8111, 7996, 8034, and 7987 to implement DR-CAFTA for the Dominican Republic; Honduras and Nicaragua; Guatemala; and El Salvador; respectively, with links to other parts. See ITT's Online Archives or 02/29/08, 08022910, for BP summary announcing that the time limit for Costa Rica to join DR-CAFTA is extended to October 1, 2008.

(See ITT's Online Archives or 03/13/08 news, 06031305, for Part IV of a multi-part BP summary of CBP's original DR-CAFTA implementation instructions, with links to previous parts.)

CBP interim final rule (D/N USCBP-2008-0060; CBP Dec. 08-22, FR Pub 06/13/08) available at http://edocket.access.gpo.gov/2008/pdf/E8-13252.pdf