HQ 558764 - Generalized System of Preferences (GSP); "Imported Directly"; 19 CFR 10.175; - United States International Trade Commision Rulings

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 > 1997 HQ Rulings > HQ 546539 - HQ 559177 > HQ 558764

Previous Ruling Next Ruling
HQ 558764

July 20, 1995

CLA-2 R:C:S 558764 DEC

CATEGORY: CLASSIFICATION

Mr. W. Thaddeus Miller
Vice-President - Assistant General Counsel J. Aron & Company
85 Broad Street
New York, New York 10004

RE: Generalized System of Preferences (GSP); "Imported Directly"; 19 CFR 10.175;
T.D. 83-144

Dear Mr. Miller

This is in response to your letter dated September 19, 1994, concerning whether copper which is produced in a beneficiary developing country (BDC) and shipped to other locations, as described below, for sale before being imported into the United States will satisfy the "imported directly" requirement under the Generalized System of Preferences (GSP) (19 U.S.C. 2461-2466).

FACTS:

Your ruling request sets forth the following three scenarios in which you ask Customs to rule on whether the copper is imported directly for purposes of eligibility under the GSP. With respect to scenario 1, you state that the copper is mined and processed by a producer in a BDC into a form conforming to the London Metal Exchange (LME) specifications. The producer will export the copper to an intermediate developed country where it will be placed in bonded storage. The producer will offer the copper for sale or deliver it in satisfaction of its obligations under its LME transactions. The warehouseman issues negotiable LME warrants, each representing a lot of about twenty-five tons, made out to bearer which is evidence of ownership. The copper will remain under the control of the customs authority of the intermediate country and will retain its status as non-imported articles and no duty will be paid. You also state that the copper will not enter the commerce of the intermediate country
except for sale other than at retail and that the copper will not be subjected to processing or other operations that would alter its form.

Separately, the U.S. importer enters into multiple transactions on the LME to buy and sell lots of copper for delivery at a future date. At a future date certain, the importer will offset its various LME obligations to determine the net number of lots to which it will be entitled to take delivery. Simultaneously, other parties who are net sellers on the LME will deliver warrants to the LME clearing house. These warrants were obtained through off-exchange purchases or through a chain of sales that originated from the producers.

Next, the importer will ship the BDC-origin copper to the United States. A single bill of lading is issued for numerous lots of BDC and non-BDC origin copper. You state that a certificate of origin is available for the BDC-origin copper, but that the United States is not shown as the destination.

Scenario 2 assumes the facts stated above remain the same, but the copper will remain in the bonded warehouse in the intermediate country for several months to several years.

Scenario 3 assumes the facts stated in scenario 1 remain the same, but before the copper is transported to the intermediate country, it is sold by the producer to another party, who may or may not be a BDC entity, who transports it directly from the BDC to the intermediate developed country where it remains in bonded storage and then delivers it satisfaction of an LME transaction to the importer or sells it in an off-exchange transaction to another party who in turn delivers the copper to the importer as the result of an LME transaction.

ISSUE:

Whether the copper which is mined and processed in a BDC and imported into the United States in the three scenarios described above satisfy the "imported directly" requirement for purposes 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 United States 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).

The issue in this case concerns whether the copper that is mined and processed in a BDC for sale before being imported into the United States will satisfy the "imported directly" requirement 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). Subsection 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.

The above provision was added as an amendment to the definition of the term "imported directly" by T.D. 83-144 (June 28, 1983). This amendment to the "imported directly" definition was designed specifically to encompass the traditional marketing procedure established for "Cameroon wrapper tobacco." Cameroon wrapper was produced in Cameroon and the Central African Republic. It was sold at an auction held once a year in Paris. The Cameroon wrapper was shipped from the beneficiary countries to a French customs bonded transit warehouse in Le Havre until the Paris auction was completed, at which time the tobacco was reloaded for shipment to its final destination. Because the purchase of the wrapper tobacco occurred after it left the beneficiary country, the bill of lading covering the first leg of the journey only indicated the intermediate destination, and did not show the U.S. as the final destination. While in the transit warehouse, the wrapper tobacco was not subjected to any processing or other operations. Customs found that the Cameroon wrapper tobacco which had been exported from the Cameroon Republic and the Central African Republic to France, auctioned there, and then exported to the United States satisfied the GSP "imported directly" requirement, and thus, the amendment to the "imported directly" definition was created.

With respect to scenario 1 described above, the copper that is mined and processed in a BDC is eligible for duty-free entry under the GSP. The copper is classified under a GSP-eligible provision and it is a product of a BDC. In addition, while the copper is shipped through the territory of another country with documents not showing the United States as the final destination, it will satisfy the imported directly requirement since the copper will remain under the control of the customs authority in the intermediate country and will not enter the commerce of that country except for the purpose of sale other than at retail. Based on the facts presented, it appears that the importation into the U.S. is a result of the transaction between the importer and the producer or his/her's sales agent, and that the copper is not subjected to operations in the intermediate country other than loading/unloading or other activities needed to preserve the copper.

With respect to scenario 2, the copper that is stored in a bonded warehouse in the intermediate country for several months to several years will be considered to be imported directly and qualify under the GSP as long as the requirements of 19 CFR 10.175(d) are met. The amount of time it is warehoused in the intermediate country is irrelevant for purposes of the imported directly requirement.

Under scenario 3, the copper is sold by the producer to another party prior to its importation into the intermediate country and prior to its sale to the U.S. importer. Section 10.175(d)(2) requires that the importation result from the original commercial transaction between the importer and producer or the latter's sales agent to be "imported directly" from a BDC to the United States. See 19 CFR 10.175(d). Since this requirement is not met due to this sale, the copper imported under this scenario does not qualify for eligibility under the GSP.

HOLDING:

Under the first and second scenarios described above, we find that the copper remains under the control of the customs authority of the intermediate country during the time that the copper is warehoused and that while in the transit warehouse, the copper does not enter into the commerce of the intermediate country except for sale other than at retail. Provided that the district director is satisfied that the importation of the copper results from the original commercial transaction between the importer and the producer or the producer's sales agent, the merchandise will be considered to have been "imported directly" into the United States for purposes of the GSP.

The copper described above in scenario 3 does not qualify for duty-free entry under the GSP because it is sold by the producer to another party prior to its sale to the U.S. importer. Section 10.175(d)(2) requires that the importation result from the original commercial transaction between the importer and the producer or the producer's sales agent.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director

Previous Ruling Next Ruling