United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1993 HQ Rulings > HQ 0545133 - HQ 0556194 > HQ 0556079

Previous Ruling Next Ruling


HQ 556079


July 2, 1991

CLA-2 CO:R:C:S 556079 WAW

CATEGORY: CLASSIFICATION

Mr. Matthew Chang
C. Itoh & Co. (America) Inc.
335 Madison Ave.
New York, N.Y. 10017

RE: Ethylene glycol shipped from Czechoslovakia to the Netherlands and stored under bond prior to being shipped to the U.S.; GSP; "imported directly"; T.D. 83-144; 19 CFR 10.175

Dear Mr. Chang:

This is in response to your letter dated June 4, 1991, requesting a ruling concerning whether ethylene glycol (also known as ethanediol) imported from the Czech and Slovak Federal Republic (Czechoslovakia) is eligible for duty-free treatment under the Generalized System of Preferences (GSP) (19 U.S.C. 2461-2466).

FACTS:

You state that your subsidiary corporation, C.I. Specialty Chemicals, Inc. is currently negotiating a contract with a foreign supplier to purchase and import ethylene glycol; a product which currently is eligible for duty-free treatment under the GSP. The ethylene glycol will be manufactured by Slovnaft, of Bratislava in the Czech and Slovak Federal Republic (Czechloslovakia). The country of origin of the product (Czechoslovakia) has no outlet on the sea and, therefore, you state that you will ship the product overland from Bratislava to Rotterdam, Netherlands, where it will be held in storage tanks before it is loaded onto a U.S.-bound ocean carrier and shipped to the U.S. You state that the ethylene glycol may be stored in the Netherlands for as long as 30 days. In addition, you maintain that at no time will the ethylene glycol enter the commerce of the Netherlands or any other country of transshipment. From the Czechoslovakia border until the goods are loaded on board the U.S.-bound ship, you state that the merchandise will be held under bond in storage. Your letter concerns specifically the requirement under the GSP that the merchandise be "imported directly" from a beneficiary developing country into the customs territory of the U.S. It is your position that since Czechoslovakia is a landlocked country, the method of shipment described above qualifies as "imported directly" for purposes of satisfying the GSP requirements.

ISSUE:

Whether the ethylene glycol is "imported directly" for purposes of the GSP if it is shipped from Czechoslovakia through a non-BDC where it is held under bond in storage prior to being loaded onto a U.S.-bound carrier and shipped to the U.S.

LAW AND ANALYSIS:

Under the GSP, eligible articles the growth, product or manufacture of a designated beneficiary developing country (BC) which are imported directly into the customs territory of the U.S. from a BC may receive duty-free treatment if the sum of (1) the cost or value of materials produced in the BC, plus (2) the direct costs of the processing operation in the BC, is equivalent to at least 35% of the appraised value of the article at the time of entry into the U.S. See 19 U.S.C. 2463(b).

The 35% value-content and "imported directly" requirements of 19 U.S.C. 2463(b) were conceived as separate and distinct country of origin tests designed to ensure that the benefits of the duty-free program actually accrue to the countries for which they were intended. See The Trade Act of 1973: Hearings on H.R. 10710 Before the Senate Committee on Finance, 93rd Cong., 2nd Sess. 326 (1974) (statement of William D. Eberle, U.S. Special Representative for Trade Negotiations). This goal is accomplished by limiting the opportunities during which non- eligible goods may be commingled with eligible goods. The importer must satisfy both requirements in order to receive duty- free treatment of its merchandise.

Czechoslovakia is a BDC. Based on the information provided, the ethylene glycol appears to be classified under subheading 2905.31.0000, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for "Acyclic alcohols and their halogenated, sulfonated, nitrated or nitrosated derivatives: Diols: Ethylene glycol." This subheading is a GSP eligible provision and, therefore, the ethylene glycol will qualify for duty-free treatment if it is "imported directly" from Czechoslovakia to the U.S. and it satisfies the 35% value- content requirement. You have asked us to address only the "imported directly" issue.

Merchandise which is shipped directly from a BC to the U.S. without passing through the territory of any other country will clearly be "imported directly" to the U.S. from the BC. See section 10.175(a), Customs Regulations (19 CFR 10.175(a)). Recognizing the exigencies of trade and transportation, however, Customs has by regulation defined the term "imported directly" to also include:

(1) A shipment from a BC to the U.S. through the territory of any other country, if the merchandise in the shipment does not enter into the commerce of any other country while en route to the U.S., and the invoice, bills of lading, and other shipping documents show the U.S. as the final destination. See 19 CFR 10.175(b). This provision allows, for example, overland transshipment in bond from landlocked BC's through neighboring countries to the U.S. See HRL 071696 dated May 30,
1984.

(2) A shipment from a BDC to the U.S. through a free trade zone in a second BDC, even though the invoice and shipping documents do not show the U.S. as the final destination, and even if the merchandise is purchased and resold within the free trade zone, other than at retail, for export, provided the merchandise does not enter into the commerce of the country maintaining the free trade zone, and the articles undergo no operations other than (i) sorting, grading, or testing, (ii) packing, unpacking, changes of packing, decanting or repacking into other containers, (iii) affixing marks, labels, or other like distinguishing signs on articles or their packing, if incidental to the foregoing operations, or (iv) operations necessary to ensure the preservation of merchandise in its condition as introduced into the free trade zone. See 19 CFR 10.175(c). This provision allows BDC's to transship merchandise through countries with developed entrepot trade, and thus use to its advantage developed commercial trading institutions and facilities that may not be available in the BDC.

(3) A shipment from a BDC to the U.S. through the territory of any other country, if such shipment remains under the control of the customs authority of the intermediate country, does not enter into the commerce of the intermediate country except for the purpose of sale other than at retail, and the district director is satisfied that the importation results from the original commercial transaction between the importer and the producer and the latter's sales agent; and the merchandise is not subject to operations other than loading and unloading, and other activities necessary to preserve the articles in good condition. 19 CFR
10.175(d). This provision was added in order to encompass within the meaning of "imported directly" the traditional marketing procedure established for Cameroon wrapper tobacco. See T.D. 83-144 (1983).

You claim that the ethylene glycol is "imported directly" from a BDC within the meaning of 19 CFR 10.175(a), because the merchandise will be shipped overland from Bratislava, Czechoslovakia (a BDC) to Rotterdam, Netherlands, where it will be held in storage tanks and subsequently loaded onto a U.S. bound ocean carrier for export to the U.S. You state that the storage in Rotterdam may last as long as 30 days, but at no time will the ethylene glycol enter the commerce of the Netherlands or any other country of transshipment. Additionally, you maintain that from the Czechoslovakia border until the goods are laden onto a ship bound for the U.S., the merchandise will be in bond. You state that due to the geographical situation of the Czech and Slovak Federal Republic, that this method of shipment qualifies as a direct shipment (or direct as possible under the circumstances) within the meaning of the statute.

Merchandise is deemed to have entered the commerce of an intermediate country for purposes of the GSP if manipulated (other than loading and unloading), offered for sale (whether or not a sale actually takes place), or subjected to a title change in the country. See HRL 071575 dated November 20, 1984. In the instant case, the operations you intend to perform in Rotterdam do not appear to constitute more than simple loading and unloading of the merchandise, and, as such, will not cause the merchandise to enter the commerce of the non-BDC pursuant to 19 CFR 10.175(b). You state that the merchandise is shipped from Bratislava to Rotterdam where it is merely stored prior to being loaded onto a carrier for export to the U.S.

Accordingly, if the invoice, bill of lading, GSP certificate, certificate of origin and other original shipping documents issued in Bratislava show the U.S. as the final destination, the ethylene glycol will be considered "imported directly" pursuant to 19 CFR 10.175(b). This requirement is intended both to establish a connection between the imported merchandise and its country of origin and to show that the passage of the merchandise through the intermediate country involved a mere transshipment rather than entry into the commerce of the intermediate country. It should also be noted that whereas this requirement does not preclude multiple modes of transportation such as air, sea or different carriers of the same type, the documents presented as evidence of compliance with this requirement must include the original shipping documents issued in the BDC, showing the U.S. as the final destination.

Alternatively, if the invoice, bill of lading and other shipping documents do not show the U.S. as the final destination, the goods may still be considered "imported directly" under 19 CFR 10.175(d), assuming the goods remain under customs control while in the Netherlands, and the district director is satisfied that the importation results from the original commercial transaction between the importer and the producer.

The district director may waive the submission of evidence of direct shipment when he/she is otherwise satisfied, taking into consideration the kind and value of the merchandise, that the merchandise clearly qualifies for duty-free treatment under the GSP. See 19 CFR 10.174. The decision to grant such a waiver rests solely with the district director.

HOLDING:

Based on the information provided, we find that the ethylene glycol may be considered "imported directly" into the U.S. from Bratislava, Czechoslovakia, when simply transshipped through Rotterdam, Netherlands, for storage pending shipment to the U.S., provided that (1) the invoice, bills of lading, and other shipping documents show the U.S. as the final destination, and (2) the goods remain under customs control while in the Netherlands and the district director is satisfied that the importation results from the original commercial transaction between the importer and the producer.

Sincerely,

John Durant, Director

Previous Ruling Next Ruling

See also: