CBP Finds Footwear of Chinese Leather Eligible for AGOA Treatment

Leather and other components from China used to make footwear in Ethiopia satisfy the double substantial transformation requirement to be counted toward the 35% content requirement for African Growth and Opportunity Act treatment, CBP said in an Aug. 18 ruling. The footwear was entered with a Special Indicator “D” for AGOA but CBP at the time denied the AGOA treatment. The importer, VCS Group, pursued a further review of protest over the decision.

The footwear was made at an Ethiopian factory from raw materials from China. The company argues that all the materials “lost their individual identities in Ethiopia when they were cut to shape and sewn, glued, and assembled together, merging into a new and different article of commerce, with a new name, character and use (finished footwear).” CBP agreed that the “operations would render the footwear a 'product of' Ethiopia.”

CBP next had to determine whether a double substantial transformation occurred. The company argued that the rubber and pilea polyurethane from China “underwent a double substantial transformation, first when being cut to shape into components and second when being sewn and assembled into the finished footwear.” CBP agreed that those products “lost their individual identities in Ethiopia when they were transformed into footwear components of certain size and shape suitable for further manufacturing into footwear,” the agency said.

Since a double substantial transformation occurred, the imported items “may be counted toward satisfying the 35 percent value-content requirement of the AGOA,” CBP said. The cost sheet supplied by the company shows that “the percentage of leather uppers produced in Ethiopia and the direct costs of their processing amounts to 48.99 percent the value of the footwear, which exceeds the 35 percent requirement.”