CBP Failed to Correctly Value PET Chips in US-Bahrain FTA Calculation, Importer Argues

CBP failed to consider the "double transformation" of polyethylene terephthalate (PET) chips as inputs into PET film from Bahrain, instead treating the chips as non-originating material for purposes of the minimum value content calculation, Bahrainian importer JBF told the Court of International Trade in a March 16 complaint. The suit challenges CBP's denial of duty-free treatment under the U.S.-Bahrain Free Trade Agreement for goods manufactured by JBF and CBP's refusal to deduct a post-import rebate from the price paid for PET chips, which are a component of PET film (JBF Bahrain v. U.S., CIT # 23-00067).

JBF argued that the PET film met the 35% value content standard because the raw materials, including the PET chips, were substantially transformed before being used in film production and became qualifying materials after undergoing double substantial transformation. But CBP "failed to consider" the PET chips' double substantial transformation, instead treating them as non-originating materials for the purposes of the value calculation of originating materials.

CBP magnified this error by refusing to value the chip inputs using generally accepted accounting principles and instead assigned them a zero percent value. CBP also failed to include the costs of packing materials and operational processing costs as required by the UBFTA, JBF said. Additionally, the post-import rebate should have been deducted from the price paid or payable because the rebate was agreed to before the time of entry and proof of the agreement was supplied to CBP, it said.

JBF imported the merchandise at the Port of Charleston in 2015. Customs liquidated the entry with additional duties, finding that the goods were not subject to duty-free treatment under the UBFTA. JBF then protested and, when that failed, applied for further review. In response, CBP issued ruling HQ H290625 and instructed the port to deny the protest, saying that JBF did not deduct the rebate from the entered value at the time of entry and that the merchandise failed to satisfy the 35% value content requirement under the UBFTA (see 2208080028).