HQ 0556295 - GSP eligibility of porcelain dolls and other collectibles; Maquiladora program; "imported directly"; 555522; 728811; 19 CFR 10.175(c) - United States International Trade Commision Rulings

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HQ 556295

December 11, 1991

CLA-2 CO:R:C:S 556295 WAW

CATEGORY: CLASSIFICATION

Ernest Cordero, Jr., Esq.
Baker & McKenzie
The Wells Fargo Plaza
Twelfth Floor
101 West Broadway
San Diego, CA 92101-3890

RE: GSP eligibility of porcelain dolls and other collectibles; Maquiladora program; "imported directly"; 555522; 728811; 19 CFR 10.175(c)

Dear Mr. Cordero:

This is in response to your letter of September 26, 1991, on behalf of Paradise Galleries, Inc. ("Paradise Galleries"), concerning the eligibility of porcelain dolls and other collectibles for duty-free treatment under the Generalized System of Preferences (GSP) (19 U.S.C. 2461-2466). No sample was submitted for examination.

FACTS:

Paradise Galleries intends to sell porcelain dolls and other collectibles in the U.S. The merchandise is manufactured in a beneficiary developing country (BDC) located in Asia and will be shipped to the U.S. in containers and entered through the port of Long Beach, California or an alternative port on the West Coast. You state that at no time will the products be entered for consumption in the U.S. Rather, they will be transported in bond to a Maquiladora plant in Tijuana, Mexico where the goods will undergo simple packing operations. In Mexico, each container will be opened and inspected. In some instances, a defective product will be replaced. Packing materials of U.S.-origin and printed inserts of U.S.-origin will also be placed in each package. Finally, mailing labels will be prepared and affixed to each package before the merchandise is shipped to the U.S.

ISSUE:

Whether the porcelain dolls or other collectibles which are shipped from a BDC to the U.S., transported in bond to a Maquiladora plant in Mexico for simple packing operations, and then shipped to the U.S. are considered "imported directly" into the customs territory of the U.S. from a BDC for purposes of the GSP.

LAW AND ANALYSIS:

Under the GSP, eligible articles the growth, product or manufacture of a beneficiary developing country (BDC) which are imported directly into the customs territory of the U.S. from a BDC may receive duty-free treatment if the sum of (1) the cost or value of materials produced in the BDC, plus (2) the direct costs of the processing operations in the BDC, 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 question we are asked to address is whether merchandise which is shipped from a BDC to the U.S., transported in bond to Mexico for repacking under the Maquiladora program, and then exported to the U.S. may be considered to be imported directly into the customs territory of the U.S. from a BDC for purposes of the GSP.

Pursuant to section 10.175(c), Customs Regulations (19 CFR 10.175(c)), the term "imported directly" has been defined in pertinent part as follows:

(c) If shipped from the beneficiary developing country to the United States through a free trade zone in a beneficiary developing country, the merchandise shall not enter into the commerce of the country maintaining the free trade zone, and

(1) The eligible articles must not undergo any operation 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 operations allowed under this section, or

(iv) Operations necessary to ensure the preservation of merchandise in its condition as introduced into the free trade zone.

Subsection 10.175(c)(5), Customs Regulations (19 CFR 10.175(c)(5)) provides:

For the purposes of this section, a free trade zone is a predetermined area or region declared and secured by or under governmental authority, where certain operations may be performed with respect to articles, without such articles having entered into the commerce of the country maintaining the free trade zone; . . .

We have previously held that in-bond plants maintained under Mexican law as the Maquiladora program qualify as free trade zones within the meaning of 19 CFR 10.175(c). See Headquarters Ruling Letter 555522 dated November 26, 1990. In HRL 555522, Customs held that wedding sets are considered "imported directly" into the U.S. from Macau (a BDC) when the merchandise is shipped to the U.S. in bulk, transported under bond to a Maquiladora plant for repackaging, and subsequently imported into the U.S. Similarly, in HRL 728811 dated December 13, 1985, Customs held that where certain goods (probably toys or games) are imported into the U.S. but not entered for consumption, transported under bond to Mexico for repacking in an in-bond plant under the Maquiladora program, and subsequently imported into the U.S., the goods will be considered imported directly from the BDC.

The facts in the instant case are nearly identical to those in the rulings cited above. Accordingly, consistent with those rulings, it is our position that the merchandise in this case will be considered "imported directly into the customs territory of the U.S." from the BDC for purposes of the GSP.

HOLDING:

Based on the information submitted, we find that the porcelain dolls and other collectibles, which are GSP eligible articles, and are shipped from a BDC to the U.S., transported in bond to Mexico for simple packing operations under the Maquiladora program, and then exported to the U.S. will be considered "imported directly into the customs territory of the U.S." from a BDC for purposes of the GSP.

Sincerely,

John Durant, Director

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