Court Opinion

ID: 818712
Source: CourtListenerOpinion
Date Created: 2013-02-03 08:27:34.558114+00
Date Added: 2024-06-11T15:36:29.410670
License: Public Domain

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
Court No. 01-00745                                           Page 15

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