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HQ 557933




September 26, 1994

CLA-2 CO:R:C:S 557933 WAS

CATEGORY: CLASSIFICATION

Mr. Sanjiv Nayyar
Vizag International Ltd.
265-08 74th Ave., Suite F-2
Floral Park, N.Y. 11004

RE: "Imported Directly" Requirement under the GSP; 19 CFR 10.175(b) and 10.175(d); GSP Form A; T.D. 94-47

Dear Mr. Nayyar:

This is in reference to your letter dated May 16, 1994, concerning whether methanol which is produced in Russia and transshipped via Finland to the U.S. satisfies the "imported directly" requirement under the Generalized System of Preferences (GSP) (19 U.S.C. 2461-2466).

FACTS:

According to your submission, you intend to import methanol, or methyl alcohol into the U.S. from Russia. You state that the liquid petrochemical is contained for shipment to the U.S. on ocean-going chemical tankers. The size of each shipment can range from between 0.7 million gallons and 3.5 million gallons, with the current market value ranging between $0.6 million and $2.7 million approximately. You state that the product will be produced in Russia. However, since Russia does not have port facilities which are suitable to load shipping vessels/tankers used for ocean transportation of methanol, the methanol must be sent by rail cars to ports located outside of the country which have such facilities. You state that ports such as Kotka, Finland, Yuzhny, Ukraine, and Ventspils, Latvia have generally been used for sending shipments to western Europe and the U.S. from Russia. You believe that it is probable that your shipments will be loaded at Kotka, Finland and shipped to the U.S.

Additionally, you state that since there is also a shortage of rail cars in Russia, the Russian exporter of methanol, who is also the manufacturer of the methanol, sends as much methanol as it can to Kotka for storage in large tank facilities which it leases in Kotka. Each rail car shipment to Kotka can contain from 30,000 gallons to 250,000 gallons, depending upon the availability of rail cars. You maintain that methanol which is sent by the exporter to storage terminals in Kotka does not enter into the commerce in Finland. You claim that the purpose of transshipment through Finland is strictly to facilitate shipment of the methanol from a land locked country to the U.S. You also state that the commercial invoice, bill of lading and other shipping documents drawn by the Russian exporter on the importer will show the U.S. as the final destination. Accordingly, it is your position that the shipment will be considered "imported directly" from Russia to the U.S. pursuant to the requirements set forth in section 10.175(b), Customs Regulations (19 CFR 10.175(b)).

ISSUE:

Whether methanol which is produced in Russia and transshipped via Finland to the U.S. will satisfy the "imported directly" requirement of the GSP?

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 stated in General Note 4, Harmonized Tariff Schedule of the United States (HTSUS), Russia is considered a designated beneficiary developing country for purposes of the GSP. In addition, the products at issue are classifiable in subheading 2905.11.20, HTSUS, which provides for acyclic alcohols and their halogenated, sulfonated, nitrated or nitrosated derivatives: Methanol: Other. Articles classified under this subheading are eligible for duty-free treatment under the GSP provided that they are a "product of" Russia and satisfy the "imported directly" and 35 percent value-content requirements. You have asked us to address only the "imported directly" issue.

The issue in this case concerns whether merchandise which is produced in Russia and transshipped through Finland before being imported into the U.S. is considered to be "imported directly" from a BDC to the U.S. for purposes of the GSP.

The term "imported directly" from a BDC, for GSP purposes, is defined in section 10.175, Customs Regulations (19 CFR 10.175). Merchandise which is shipped directly from a BDC to the U.S. without passing through the territory of any other country will clearly be "imported directly" to the U.S. from the BDC. See section 10.175(a), Customs Regulations (19 CFR 10.175(a)). Recognizing the exigencies of trade and transportation, however, Customs has by regulation determined that merchandise shipped through a non-BDC to the U.S. may be considered "imported directly" for purposes of the GSP. Subsection 10.175(b) provides that the words "imported directly" encompass the following:

If the shipment is from a beneficiary developing country to the U.S. through the territory of any other country, 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.

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 Headquarters Ruling Letter (HRL) 071575 dated November 20, 1984. In the instant case, the operations that will be performed in Kotka 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). The information that you have submitted provides that the merchandise will be shipped to Kotka from Russia where it will merely be stored, prior to being loaded onto a carrier for export to the U.S.

In HRL 556079 dated July 2, 1991, ethylene glycol was produced in the Czech and Slovak Federal Republic (Czechoslovakia). However, as Czechoslovakia had no outlet on the sea, the produce had to be shipped overland from Czechoslovakia to Rotterdam, Netherlands, where it was held in storage tanks before being loaded onto a U.S.-bound ocean carrier and shipped to the U.S. In HRL 556079, it was possible that the ethylene glycol could be stored in the Netherlands for as long as 30 days. At no time did the ethylene glycol enter the commerce of the Netherlands or any other country of transshipment. Moreover, from the Czechoslovakia border until the goods were loaded on board the U.S.-bound ship, the merchandise was held under bond in storage. We held in HRL 556079 that if the invoice, bill of lading, GSP certificate, certificate of origin and other original shipping documents issued in Czechoslovakia showed the U.S. as the final destination, the ethylene glycol would be considered "imported directly" pursuant to 19 CFR 10.175(b). We stated that 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. Furthermore, we also 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.

In another case involving the transshipment of merchandise from a BDC, HRL 071696 dated May 30, 1984, merchandise was shipped from Swaziland, a landlocked BDC country, through South Africa for shipment to the U.S. In that case, it was deemed impractical from a commercial standpoint to pack the merchandise for shipment in Swaziland. Therefore, the merchandise was transshipped by land to South Africa for both packing and shipment to the U.S. We held that under the facts presented, the packing of the merchandise in South Africa would cause the merchandise to enter the commerce of that country. We also stated that "assuming that shipment by air freight would not be possible, the only solution would be to avoid packing the merchandise in South Africa so that the importation could fall under the terms of section 10.175(b), Customs Regulations (19 CFR

Under the proposed scenario, based on our holding in HRL's 556079 and 071696, the methanol which is sent by rail from Russia to Finland where it is unloaded and stored prior to being shipped to the U.S., will satisfy the "imported directly" requirement under 19 CFR 10.175(b), assuming the commercial invoice, bill of lading and other shipping documents show the U.S. as the final destination.

Furthermore, you have asked us to confirm under the above-described scenario that the following documents will be accepted as evidence that the "imported directly" requirement of 19 CFR 10.175(b) has been satisfied:

(1) A bill of lading drawn by the Russian exporter on the U.S. importer confirming, inter alia, that the shipment being exported to the U.S. commenced in Russia as multiple smaller shipments and was transshipped via Finland to the U.S.

(2) A certificate by the Russian exporter that methanol being exported to the U.S. did not enter into the commerce of Finland or any other country in transit, and was not altered or subjected to any other operations other than loading and unloading, and other activities necessary to preserve it in good condition, after it left Russia.

(3) A commercial invoice and any other shipping documents showing the U.S. as the final destination.

Pursuant to 19 CFR 10.174, the district director may require that appropriate shipping papers, invoices, or other documents be submitted within 60 days of the date of entry as evidence that the articles were "imported directly." In addition, this provision states that any evidence of direct shipment required by the district director shall be subject to such verification as the district director deems necessary. Therefore, we cannot confirm that the foregoing documents will necessarily satisfy the requirements of 19 CFR 10.175, as it is within the discretion of the district director to request any documents that he/she deems necessary as evidence that a shipment satisfies the imported directly requirement for purposes of the GSP.

You have also asked that we address whether the "imported directly" requirement will be satisfied in a situation where you are unable to obtain a GSP Certificate of Origin Form A. In a recent Treasury Decision, T.D. 94-47, (59 FR 94, May 17, 1994), Customs amended the Customs Regulations by removing certain documentation requirements relating to the entry of articles claimed to be entitled to a partial duty exemption or duty-free treatment under various special tariff provisions or programs. Specifically, Customs eliminated use of the Certificate of Origin Form A in connection with claims for duty-free treatment under the GSP. Instead, the GSP Declaration which is required to be presented upon request by the district director may serve as the basic documentary evidence to support the claim for duty-free treatment for merchandise which is not wholly the growth, product, or manufacture of the producing country. Therefore, the absence of a GSP Certificate of Origin Form A with your merchandise will not necessarily defeat the "imported directly" requirement.

You also state that in some instances, the bills of lading given by the manufacturer/exporter for shipments to Finland may not identify the U.S. as the final destination. In this regard, 19 CFR 10.175(d) states as follows:

If the shipment is from any beneficiary developing country to the U.S. through the territory of any other country and the invoices and other documents do not show the U.S. as the final destination, the articles in the shipment upon arrival in the U.S. are imported directly only if they:

(1) Remained under the control of the customs authority of the intermediate country;

(2) 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 (3) Were not subjected to operations other than loading and unloading, and other activities necessary to preserve the articles in good condition.

In the instant case, the shipment of methanol does not appear to satisfy the requirements of 19 CFR 10.175(d). Merchandise which is shipped from any BDC through the territory of any other country and the invoices, bills of lading and other shipping documents do not show the U.S. as the final destination must remain under the control of the customs authority of the intermediate country. You have submitted no information to indicate that the methanol will remain under the control of the customs authority in Finland. Therefore, the merchandise will not satisfy the "imported directly" requirement of 19 CFR 10.175(d), and the methanol will not be eligible for duty-free treatment under the GSP according to this scenario.

HOLDING:

Based on the information provided, the methanol which is sent by rail from Russia to Finland where it is unloaded and stored prior to being shipped to the U.S. will satisfy the "imported directly" requirement under 19 CFR 10.175(b), assuming that the commercial invoice, bill of lading and other shipping documents show the U.S. as the final destination. However, where the shipping documents do not show the U.S. as the final destination, since you have not submitted any information to indicate that the methanol will remain under the control of the customs authority of the intermediate country, the methanol will not satisfy the "imported directly" requirement of 19 CFR 10.175(d), and will not be eligible for duty-free treatment under the GSP.

Sincerely,

John Durant, Director

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