CBP Issues Instructions on Filing & Acceptance of Claims under the DR-CAFTA (Full Summary)

of Claims under the DR-CAFTA

(Full Summary)

U.S. Customs and Border Protection (CBP) has issued a memorandum providing instructions for the filing and acceptance of claims for preferential tariff treatment of goods made under the U.S.-Dominican Republic-Central America Free Trade Agreement (DR-CAFTA).

To date, the President has declared that the DR-CAFTA will be in effect and implemented for El Salvador only. Therefore, for purposes of these instructions, CBP states that reference to a CAFTA-DR country is the U.S. and El Salvador. The DR-CAFTA took effect for El Salvador on March 1, 2006.

(CBP adds that 19 CFR will be amended to implement the DR-CAFTA and the DR-CAFTA Implementation Act. As such, the instructions contained in this memorandum are subject to change once the regulations are issued.)

(See ITT's Online Archives or 03/03/06 news, 06030305, for BP summary of a CBP notice announcing the temporary non-ABI requirement (see below), and removal of El Salvador's GSP, CBTPA, and CBERA benefits due to implementation of the DR-CAFTA for that country. See ITT's Online Archives or 03/02/06 news, 06030200, for Part I of a multi-part series of BP summaries on Proclamation 7987 implementing the DR-CAFTA.)

Claims are Filed with SPI P for Originating Goods, SPI P for Qualifying Goods

CBP states that preferential tariff treatment may be received for imported goods of a CAFTA-DR country that are eligible as an "originating" good or a "qualifying" good (see definition below). Although the same rules found in General Note (GN) 29(n) apply to determine whether a good is originating or qualifying, there is a distinction between those eligible goods and the indicator for making a claim.

A claim for preferential tariff treatment may be filed at the time of entry summary by placing the Special Program Indicator (SPI) "P" or "P" as a prefix to the HTS subheading for each good or line item for which treatment is being claimed. A good that is originating by meeting the rule of origin set forth in HTS GN 29 may receive preferential duty treatment by using the SPI "P". A good that is qualifying may receive a preferential rate of duty by using the SPI "P" along with the appropriate chapter 98 or 99 HTS number.

An "originating" good is one that meets the general and/or product specific rules of origin set forth in GN 29(b) or (n). An originating good must be more than a product of a country. It must meet the rules of origin of the DR-CAFTA in order to receive benefits.

"Qualifying" goods are certain agricultural goods, such as beef, dairy products and sugar that are subject to quantitative restrictions as found in chapter 98 or 99 of the HTS. A "qualifying" good is one that meets the product specific rule of origin found in GN 29(n), however U.S. materials or inputs are considered to be of a non-Party. Therefore, in determining whether a good meets a specific rule of origin, U.S. materials are considered non-originating.

Temporary Non-ABI Entry Summary Requirement

CBP explains that program updates to the Automated Commercial System (ACS), which allow for automated processing have not been completed. Therefore, until further notice from CBP, importers claiming preference under the DR-CAFTA for El Salvador must file non-Automated Broker Interface (ABI) entries. CBP notes that importers will have the option to file ABI entries at release and follow through with manual entry summaries. This option is allowed only for DR-CAFTA claims and will terminate once ACS programming to allow electronic filing is complete.

Claims Must be Based on "Certification" or "Other Information"

Written/electronic certification, or importer's knowledge (reasonable reliance). CBP states that the importer may make a claim for preferential tariff treatment based on i) a written or electronic certification issued by the importer, exporter or producer, or ii) importer's knowledge to include reasonable reliance on information in the importer's possession that the good qualifies as an originating good according to the rules of origin. The importer must be prepared to submit upon CBP's request the certification or other information setting forth the reasons that the good qualifies as originating. The certification or other information is not required to be on file at the time the claim is made. However, the importer is responsible for retaining supporting documentation, which may be requested by CBP, as to the good's eligibility for preferential treatment at the time the claim was made.

Claims based on single/multiple certification must contain certain information. If the certification serves as the basis for the claim, it does not need to be in a prescribed format, may be submitted electronically and may cover a single shipment or multiple shipments of identical goods not to exceed the time period of 12 months. The certification must not only include the reason the good qualifies as originating, but must contain the required data elements pertaining to the importation of the good, as outlined in Attachment A of CBP's Memorandum. The certification may be submitted in English or Spanish. If submitted in Spanish, CBP may request an English translation.

Importer must exercise reasonable care no matter who generates certification. An importer may submit a certification completed or generated by an exporter or producer or may issue the certification based on information submitted by the exporter or producer that the good qualifies as originating; however, the importer must exercise reasonable care when certifying to the accuracy and truthfulness of the information submitted to CBP. The fact that the importer has issued a certification based on information provided by the exporter or producer or submits a certification executed by the exporter or producer does not relieve the importer of the responsibility to exercise reasonable care.

Claims based on "other information" must include certain information. According to CBP, if the basis for the claim is not a certification but rather is supported by other information, that information must also include the required data elements outlined in Attachment A of CBP's Memorandum, but does not need to include the certifying statement or the blanket period. However, the information must sufficiently support the claim for preference.

Low value shipments. CBP adds that a certification or other information shall not be required for an importation of goods with an F.O.B. value of $2,500 or less unless CBP considers the importation to be carried out or planned for the purposes of evading U.S. laws and regulations. Moreover, if CBP conducts a verification to determine if the goods are in compliance with other U.S. laws and/or regulations, CBP may require the importer to furnish a valid certification regardless of the monetary value of the good.

Record Maintenance

According to CBP, importers are required to maintain records for five years after the date of importation, including certification, if completed, and all records relating to the importation of the good.

Applicability of MPF and HMF

In addition to the reduced and free rates of duty afforded by the DR-CAFTA, CBP notes that goods that qualify for preferential treatment are not subject to the Merchandise Processing Fee (MPF). Merchandise that qualifies for preferential treatment under a Trade Preference Level (TPL) will not be exempt from MPF. In addition, CBP states that no merchandise is exempt from the harbor maintenance fee (HMF).

Non-Textile DR-CAFTA Rules of Origin

Generally, under DR-CAFTA, CBP states that a non-textile good is originating where:

(a) the good is wholly obtained or produced entirely in the territory of one or more of the parties (i.e., currently El Salvador only);

(b) the good is produced entirely in the territory of one or more of the DR-CAFTA parties and

(i) each of the non-originating materials used in the production of the good undergoes an applicable change in tariff classification specified in General Note (GN) 29(n); or

(ii) the good otherwise satisfies any applicable regional value content (RVC) specified in GN 29(n); and

the good satisfies all other applicable requirements; or

(c) the good is produced entirely in the territory of one of more of the DR-CAFTA parties exclusively from originating materials.

Textiles and Apparel DR-CAFTA Rules of Origin

CBP states that textiles and apparel products may qualify as originating under DR-CAFTA if they meet the requirements as specified in the DR-CAFTA. The duty rate for these goods will be identified in the "special" column. CBP notes that these requirements are similar to the North American Free Trade Agreement (NAFTA), but there are some substantial differences.

Below is a summary of the type of processes required for some of the more basic products in order for them to be considered eligible for DR-CAFTA. CBP cautions that there are exceptions even to these requirements, depending on the specific type of product it is. For more specific information CBP advises interested persons to refer to Annex I of the Modification to the HTS to implement DR-CAFTA, USITC Publication 3829 or GN29 to the HTS. CBP notes that for apparel in Chapters 61 & 62 and made-up textile articles in Chapter 63 only the component that determines the essential character for classification must meet the tariff shift rules. It should also be noted that regional sewing thread (U.S. or DR-CAFTA beneficiary) must be used for all articles in Chapters 61-63 in order to qualify for DR-CAFTA.

(a) Yarn - generally, fiber must originate in a DR-CAFTA beneficiary country or the U.S. to qualify for preferential tariff treatment.

(b) Fabric - generally, yarn must originate in a DR-CAFTA beneficiary country or the U.S. to qualify for preferential tariff treatment. Cotton and man-made knit fabric are under fiber forward rules, meaning the fiber must originate in a DR-CAFTA beneficiary country or the U.S. to qualify for preferential treatment.

(c) Apparel - generally, yarn must originate in a DR-CAFTA beneficiary country or the U.S. to qualify for preferential tariff treatment.

Note: CBP notes that there are a number of single transformation rules for luggage, cotton and man made fiber woven dresses other than corduroy, boxer shorts, brassieres and boys' and girls' woven pajamas and nightwear that exist, so one should become familiar with the tariff shift rule found in GN 29(n) for that particular product that you are importing before a CAFTA-DR claim is made.

U.S. Fabric Cut in a DR-CAFTA Beneficiary Country

There is a special provision for goods of Chapter 61, 62 or 63 that are assembled from fabric wholly formed in the U.S. or components that are knit to shape in the U.S. that are cut in the U.S. or in a DR-CAFTA beneficiary country, or both, to pay the NTR rate of duty on only the value added in the DR-CAFTA beneficiary country. Sewing thread to assemble the good must by wholly formed in the U.S. to qualify for this provision (see GN29(d)(iv) and 9822.05.10).

DR-CAFTA Qualifying Based on a Tariff Preference Level (TPL)

There is a TPL for cotton and man-made fiber apparel cut and sewn and otherwise assembled in Nicaragua. However, Nicaragua is not yet a CAFTA-DR eligible country. Merchandise entered under this TPL must use Chapter 9915.61.01. There is no retroactive treatment for goods entering under a TPL.

Costa Rica Wool Apparel

CBP states that Costa Rica has a special provision for woven wool tailored apparel of headings 6203 or 6204 that is cut, sewn and otherwise assembled in Costa Rica. The goods must also meet, as applicable, the visible lining, narrow elastomeric fabric and sewing thread rules. However, Costa Rica is not yet a DR-CAFTA eligible country. Merchandise entered under this provision must use 9915.62.01 - 9915.62.20 and the duty rate for the merchandise entered under this provision is half of the (NTR) rate of duty up to specified annual quantities.

Treatment of Sets (Textile and Non-Textile)

According to CBP, notwithstanding the specific rules of origin set out in GN29, textile or apparel goods classified under General Rule of Interpretation (GRI) 3 of the HTS as goods put up in sets for retail sale shall not be regarded as originating goods unless each of the goods in the set is an originating good or the total value of the non-originating goods in the set does not exceed ten percent of the value of the set determined for purposes of assessing customs duties (see GN 29(c)(v)).

CBP states that non-textile goods classified under GRI 3 of the HTS as goods put up in sets for retail sale will be considered originating for purposes of receiving preferential tariff treatment only if each good in the set is originating per the specific rules of origin set forth in GN 29 or the value of the non-originating goods in the set does not exceed 15 percent of the adjusted value of the set.

Amendments to CBERA and CBTPA

DR-CAFTA countries are "former beneficiary countries." According to CBP, Section 402 of the Act amended Sections 212 and 213 of the CBERA by striking the DR-CAFTA countries from the list of beneficiary countries. The amendments also define a "former [CBERA] beneficiary country" and a "former CBTPA beneficiary country" as those that are no longer eligible for CBERA/CBTPA benefits as a result of entering into an FTA with the U.S. For purposes of the implementation of the DR-CAFTA, CBP explains that a former beneficiary country and a former CBTPA beneficiary country refer to the DR-CAFTA countries that have implemented the Agreement.

Some cost/value of materials from former beneficiary countries, Virgin Islands, P.R. can count toward CBERA value added requirements. In addition, CBERA was also amended to allow the cost or value of materials produced in the territory of the U.S. Virgin Islands, Puerto Rico, and "former beneficiary countries" to be counted towards meeting the 35% value added requirement. CBERA still allows for up to 15% be attributed to the cost or value of materials produced in the territory of the U.S. (other than the U.S. Virgin Islands and Puerto Rico).

Inputs and processing from former beneficiary countries may count towards CBTPA requirements. DR-CAFTA also amended the CBTPA by allowing the remaining CBTPA beneficiary countries to continue to use inputs of, or processing performed in, former CBTPA beneficiary countries in order for a good to be eligible for CBTPA benefits. The amendment provides that a "former CBTPA beneficiary country" will be considered a CBTPA beneficiary country for purposes of determining the eligibility for preferential treatment under CBTPA.

Origin conferring activities must occur in current CBTPA beneficiary countries. CBP states that this amendment allows for inputs of, and processing in, current DR-CAFTA countries to count towards a good meeting the preference rules under CBTPA. However, in order for a good to receive preferential treatment under CBTPA, the origin conferring activity must occur in a current CBTPA beneficiary country.

CBTPA goods may be shipped from DR-CAFTA country. Currently, the CBERA/CBTPA requires a good to be imported directly from a beneficiary country in order to receive CBTPA preferential treatment. Section 402 of the Implementing Act provides that a good will not be disqualified from CBTPA treatment because it is imported directly from a former CBTPA beneficiary country. Goods of current CBTPA beneficiary countries may be shipped from a current DR-CAFTA country and still claim preference under CBTPA.

Country of origin limitation for goods of former CBTPA beneficiary countries (exception will be made for Haiti & Dominican Republic). CBP further states that the amendments also provide for a country of origin limitation in that if a good is a good of a former CBTPA beneficiary country under the non-preferential rules of origin found in 19 CFR 102 (marking rules), then the good is not eligible for CBTPA preferential treatment. An exception to this limitation is afforded to goods that are co-produced in Haiti and the Dominican Republic. Under this exception, a good may receive preferential treatment under CBTPA when origin-conferring activities, such as production, take place in the Dominican Republic so long as the good undergoes processing in Haiti. This exception will take effect when Dominican Republic implements the Agreement.

Correction of DR-CAFTA Claims

Incorrect declarations must be corrected promptly. According to CBP, an importer is required to promptly make a corrected declaration if the importer has reason to believe the declaration was based on incorrect information. The importer is required to submit corrections and pay any additional duties and merchandise processing fee (MPF) within 30 days from the date the error was discovered.

Penalties not assessed for prompt, voluntary corrections. CBP notes that penalties will not be assessed for promptly and voluntarily declaring that imported goods were not originating according to the rules of origin, provided the importer complies with the requirements set forth in 19 CFR 162.74 and did not engage in negligence, gross negligence, or fraud.

Post-Importation Claims

Requirements for post-importation claims. CBP states that if a claim for preference was not made at the time of importation and the goods were originating, the DR-CAFTA permits importers to make post-importation claims for preferential tariff treatment and request a refund of excess duties and/or MPF. The importer may make a post-importation claim no later than one year after the date of importation and must comply with the requirements of 19 USC 1520(d). The importer shall submit a claim in writing to the port where the goods were entered which must include:

A written declaration stating that the good qualified as an originating good at the time of importation and the number and date of the entry or entries covering the good;

A copy of a certification or supporting documentation containing the required data elements of Attachment A of CBP's Memorandum demonstrating that the goods qualified as originating on the day of importation;

A statement indicating whether the entry summary or equivalent documentation was provided to any other person;

A statement indicating whether a protest, petition or request for reliquidation has been filed relating to the good and identification of such filing(s).

If CBP determines that a certification or other information containing the required data elements is illegible, defective or has not been completed in accordance with the requirements, the importer shall be granted no less than five working days to submit a corrected certification. Failure to provide a corrected certification or other information shall result in denial of the post-importation claim.

In addition, CBP shall deny a claim that was not filed timely, or that was based on an invalid certification, or other information. A claim can also be denied following an origin verification if CBP makes a negative determination based on findings discovered during the verification.

Verification by CBP

According to CBP, the CAFTA-DR places the burden of substantiating the validity of the claim for preferential tariff treatment on the importer. An importer may make a claim based on a certification or knowledge or information in his/her possession that the good qualifies as an originating good. CBP may verify the validity of the claim and will direct inquiries for verification via a CBP Form 28, Request for Information, to the importer.

Furhermore, when requested by CBP, the importer shall provide additional documentation above and beyond the certification such as additional cost and manufacturing information. Such information may include records concerning the RVC calculation used in the claim for preference such as the build up or build down methods as outlined in GN 29 of the HTS. This includes, but is not limited to, records concerning the purchase of, cost of, value of, and payment for the good and the purchase of, cost of, value of and payment for all materials used in the production of the good, and the production of the good in its exported form.

In addition, the importer may provide relevant information from the exporter or producer of the good. In many instances, the exporter may be unwilling to provide cost and/or sourcing information to the importer. CBP will still work through the importer. The importer is expected to arrange for the foreign supplier to provide information directly to CBP.

The CAFTA-DR provides flexibility by not mandating the certification or other information be in a prescribed format (such as the NAFTA Certificate of Origin) and by permitting the certification to be submitted to CBP electronically where feasible. (See memorandum for examples of actions that CBP may take when verifying a claim.)

Determination of a Verification

If the importer forwards the certification and/or any other records or documentation demonstrating that the goods qualify for preferential tariff treatment, CBP will notify the importer of the positive determination via a CBP Form 29, Notice of Action, stating that based on the information submitted the goods qualify as originating. The CBP Form 29 will include the HTS number, description of the good, and the relevant rule of origin applied to the good.

If the importer fails to submit a certification or any relevant information, CBP will issue a negative determination via a "Proposed" CBP Form 29. The notice shall specify why the goods do not qualify for preferential tariff treatment and notify the importer that they have 20 days from the date of the notice to provide the certification and/or any related documentation to CBP. The proposed CBP Form 29 will cite the appropriate legal authority and/or regulations and detail the rate and/or value advance where appropriate.

If the importer fails to comply with the proposed CBP Form 29 within 20 days of the date of the notice, or provides a certification and/or any other documentation, and CBP determines, based on the information submitted, that the goods do not qualify for preferential tariff treatment, a negative determination will be issued to the importer via the form of a CBP Form 29 "Action Taken". The notice will specify why the goods do not originate pursuant to the CAFTA-DR rules of origin, cite the appropriate legal authority and/or regulations and detail the rate and/or value advance where appropriate.

If claims were made for preferential tariff treatment based on a blanket certification against which a negative determination was established, CBP shall deny preferential tariff treatment to all importations of identical merchandise covered by that blanket certification for all entries that have not reached final liquidation.

Where CBP determines through verification that an importer has certified more than once, falsely or without substantiation, that a good qualifies as originating, CBP may suspend preferential tariff treatment to identical goods imported by such person until that person proves to CBP's satisfaction that the goods comply with the applicable rules and regulations and qualify for preferential treatment under the Agreement.

If CBP determines that a certification or other information containing the data elements is illegible, defective or has not been completed in accordance with the requirements, the importer shall be granted no less than five working days to submit a corrected certification. Failure to provide a corrected certification shall result in denial of the claim.

CBP Memorandum, including Attachment A (dated 03/03/06) available at http://www.cbp.gov/linkhandler/cgov/import/international_agreements/free_trade/us_dominican.ctt/us_dominican.doc

BP Note

The DR-CAFTA is also referred to as "CAFTA-DR"