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HQ 557249


August 13, 1993

CLA-2 CO:R:C:S 557249 MLR

CATEGORY: CLASSIFICATION

District Director
U.S. Customs Service
Detroit, Michigan 48226

RE: Application for Further Review of Protest No. 3801-3-100108; Denial of duty-free treatment of leather from Paraguay under the Generalized System of Preferences (GSP); imported directly

Dear Sir/Madam:

This is in reference to a protest and application for further review filed by A.L. Gebhardt, contesting the denial of duty-free treatment of leather from Paraguay under the Generalized System of Preferences (GSP).

FACTS:

The protestant claims that leather from Paraguay is eligible for duty-free treatment under the GSP. The leather was shipped from Paraguay to New Jersey where a transportation entry was filed on June 8, 1992, which states that the final foreign destination was Ontario, Canada. The bill of lading shows the port of export as Asuncion, Paraguay, and the consignee as "The District Director of Customs, Buffalo, Niagara Fall, New York, For: Blackhawk Leather Ltd., Acton, Ontario." Consequently, the leather was then transferred to Buffalo, New York, and then shipped to Acton, Ontario, Canada. The commercial invoice indicates that the leather was purchased by Eagle Ottawa of Canada, Ltd., 125 McDonald Blvd, Acton, Ontario, from United States Leather Holding, Inc. of Wisconsin with the net payment due "on arrival of boat in N.Y." The Canadian Customs B-3 Form shows Blackhawk Leather, Ltd., 125 McDonald Ave., Acton, Ontario, as the importer, U.S. Leather Holding as the vendor, and Paraguay as the place of export. The merchandise was released in Canada on June 11, 1992. A GSP Form "A" dated April 22, 1992, is provided showing the importing country as the U.S. and "to order" in the box for "goods consigned to."

The leather was rejected by the Canadian consignee; consequently, it was exported by Eagle Dominion Ltd., 125 McDonald Blvd., Acton, Ontario, to the ultimate consignee in the U.S., A.L. Gebhardt, on July 19, 1992. The leather was entered on July 31, 1992. The protestant states that goods were not manipulated or increased in value while in Canada.

It is stated in your memorandum that because the leather's final destination was Acton, Ontario, Canada, it should not be considered as having been imported directly from the beneficiary developing country (BDC) for purposes of the GSP.

ISSUE:

Whether the leather from Paraguay was "imported directly" for purposes of the GSP if it was shipped from a BDC through the U.S. to a non-BDC, and then entered into the U.S.

LAW AND ANALYSIS:

Under the GSP, eligible articles the growth, product or manufacture of a designated 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 performed in the BDC, is equivalent to at least 35 percent of the appraised value of the article at the time of entry into the U.S. See 19 U.S.C. 2463(b). As provided in General Note 3(c)(ii)(A), Harmonized Tariff Schedule of the United States (HTSUS), Paraguay is a designated BDC for purposes of the GSP, and the leather is classified in subheading 4104.31.60, HTSUS, which is a GSP-eligible provision.

The issue in this case concerns whether the leather from Paraguay is considered to be "imported directly" from the BDC to the U.S., if it is shipped from the BDC through the U.S. to Canada, and subsequently entered into the U.S. Section 10.175, Customs Regulations (19 CFR 10.175) defines the term "imported directly" for purposes of the GSP. Paragraph (a), which sets forth the most restrictive definition of the term, provides that "imported directly" means "direct shipment from the beneficiary country to the United States without passing through the territory of any other country."

Recognizing the exigencies of trade and transportation, however, Customs has by regulation determined that merchandise shipped through a non-BDC to the U.S. is "imported directly" if: (1) 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)}; or (2) if the documents do not show the U.S. as the final destination, the shipment remains under the control of the customs authority of the intermediate country; did 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 or 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 {see 19 CFR 10.175(d)}.

In HRL 064478 dated May 5, 1980, tungsten ore was sent by the owner from Rwanda to Belgium for economic reasons, where another company took title to the ore. After the ore was entered in Belgium on a transit basis, it was shipped to the U.S. It was stated that although multiple modes of transportation which involve transshipment through a country other than a BDC is permitted, if there is a sale of the merchandise in that country, a title change or the original invoices and shipping documents do not show the U.S. as the ultimate destination, then the merchandise will not be considered as "imported directly" for purposes of the GSP. Therefore, it was held that the title change in Belgium was evidence that the ore entered into the commerce of that country. It was also noted that no evidence was presented to show that the original invoices and shipping documents indicated the U.S. as the final destination.

In this case, the shipment of leather does not appear to meet the requirements of either 19 CFR 10.175(b) or (d). Because the leather did not remain under the control of the Canadian Customs authorities as evidenced by the Canadian Customs B-3 Form which shows Blackhawk Leather, Ltd., 125 McDonald Ave., Acton, Ontario, as the importer, U.S. Leather as the vendor, and Paraguay as the place of export, and which indicates that the merchandise was released in Canada on June 11, 1992, the leather does not qualify for duty-free treatment under 19 CFR 10.175(d).

Next, we must consider whether the leather qualifies for duty-free treatment under 19 CFR 10.175(b). In this regard, the shipping documents in their entirety do not show the U.S. as the final destination of the leather as required by 19 CFR 10.175(b). Although the GSP Form "A" shows the U.S. as the importing country, it also states that the goods are consigned "to order." Furthermore, the transportation entry indicates that the final destination is Canada, and the bill of lading shows the consignee as "The District Director of Customs, Buffalo, Niagara Fall, New York, For: Blackhawk Leather Ltd., Acton, Ontario." In addition, the claim for GSP treatment only occurred after the leather was exported from Canada on July 19, 1992; consequently, we find that the leather was not "imported directly" to the U.S. from Paraguay.

HOLDING:

Based on the information submitted, because the shipping documents do not show the U.S. as the final destination, and the leather did not remain under the control of the Canadian Customs, we find that the leather produced in Paraguay, shipped in transit through the U.S. to Canada where it was rejected, and imported to the U.S., was not "imported directly" from the BDC for the purpose of qualifying for duty-free treatment under the GSP. Accordingly, the protest should be denied. A copy of this decision should be attached to Customs Form 19, Notice of Action, to be sent to the protestant.

Sincerely,

John Durant, Director

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