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HQ 555039


June 16, 1989

CLA-2 CO:R:C:V 555039 BJO

CATEGORY: CLASSIFICATION

Kenneth Paley, Esq.
Sharretts, Paley, Carter & Blauvelt, P.C. 1707 L Street, N.W.
Washington, D.C. 20036

RE: GSP Treatment of Articles Consolidated in a Non-Beneficiary Developing Country Free Trade Zone

Dear Mr. Paley:

This is in response to your firm's letter of May 26, 1988, inquiring whether articles are "imported directly" for purposes of the Generalized System of Preferences (19 U.S.C. 2461- 2465)(GSP), if they are produced in a beneficiary developing country ("BDC"), but shipped to a free trade zone in a non-BDC for consolidation prior to their importation to the U.S.

FACTS:

Your client, A&A International, Inc., will purchase electronic component parts in Malaysia, a BDC. The parts will then be shipped in export packaging to a non-BDC, where they will be placed in a free trade zone and consolidated with other goods. The merchandise will not be sold, repackaged, or otherwise manipulated in the non-BDC other than by unloading and loading for shipment. The consolidated shipment will then be exported to the U.S.

ISSUE:

Whether merchandise is "imported directly" for purposes of the GSP if consolidated with other merchandise in a non- beneficiary developing country's free trade zone prior to shipment to the U.S.

LAW AND ANALYSIS:

Eligible articles are entitled to duty-free treatment under the GSP if the sum of the cost or value of materials produced in a BDC plus the direct costs of processing operations performed in
such BDC is equivalent to at least 35% of the articles appraised value at the time they are entered into the U.S., and if the articles are "imported directly" from the BDC into the customs territory of the U.S. See 19 U.S.C. 2461(b)(1). The phrase "imported directly" is defined in section 10.175 of the Customs Regulations (19 CFR 10.175). For purposes of this ruling, we will assume that the articles are GSP eligible, and that the minimum local value-content requirement is met.

Under 19 CFR 10.175, merchandise shipped from a BDC through a non-BDC to the U.S. is "imported directly" if: (1) the merchandise does not enter into the commerce of any other country while en route to the U.S., and the invoices, bills of lading, and other shipping documents show the U.S. as the final destination (19 CFR 10.175(b)); or (2) the merchandise does not enter into the commerce of the intermediate country except for the purpose of sale other than at retail, the shipment remains under the control of the customs authority of the intermediate country, and the shipment is not subjected to operations other than loading and unloading and other activities necessary to preserve the articles in good condition (19 CFR 10.175(d)).

Because the inquiry does not suggest that the invoices, bills of lading and other original shipping documents to be issued in the BDC will show the U.S. as the final destination, it does not appear that the shipment will meet the requirements of 19 CFR 10.175(b). However, it is contended that the requirements of 19 CFR 10.175(d) will be met because the shipment will not enter the commerce of the non-BDC and will not be subjected to activities other than loading and unloading, and that goods entered into a free trade zone in a non-BDC are per se under the control of the customs authority of that non-BDC. With respect to that latter point, it is noted that under 19 CFR 10.175(c), a free trade zone is defined for purposes of that subsection as:

"a predetermined area or region declared and secured by or under governmental authority, where certain operations may be performed with respect to the articles, without such articles having entered the commerce of the country maintaining the FTZ."

The described operations do not appear to constitute more than loading and unloading of the merchandise, and, as such, will not cause the merchandise to enter the commerce of the non-BDC. See HQ 071575, dated November 20, 1984. Accordingly, if the goods remain under customs control while in the intermediate country, then the articles will have been imported directly
within the meaning of 19 CFR 10.175(d). While no information concerning the extent of customs control over articles placed in the non-BDC free trade zone has been submitted, we find that if that FTZ meets the definition stated in 19 CFR 10.175(c), then the shipment will meet the requirements of 19 CFR 10.175(d).

HOLDING:

On the basis of the information presented, it is our opinion that the electronic component parts produced in a BDC but placed in a free trade zone in a non-BDC prior to shipment to the U.S., where they will be subjected to no operations other than loading and unloading, will be "imported directly" from the BDC within the meaning of 19 CFR 10.175(d) if the free trade zone meets the definition stated in 19 CFR 10.175(c).

Sincerely,

John Durant, Director

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