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HQ 561015



August 13, 1998
CLA-2 RR:TC:SM 561015 KSG

CATEGORY: CLASSIFICATION

TARIFF NO.: 1604.30.20

Reza Zarrin
Caspian Caviar
139 S. Beverly Drive
Beverly Hills, CA 90212

RE: Eligibility of imported Russian caviar for duty-free treatment under GSP; imported directly requirement; 19 CFR 10.175

Dear Ms. Zarrin:

This is in response to your letter of May 20, 1998, asking for a binding ruling concerning the eligibility of imported Russian caviar for duty- free treatment under the Generalized System of Preferences ("GSP").

FACTS:

This case involves imported caviar from Russia. The caviar is shipped from Russia to your affiliated company in Hamburg, Germany to a free trade zone warehouse. Your affiliated company states that the procedures are as follows: In the U.S., Caspian Caviar places an order via fax; the merchandise is then removed from the warehouse in Germany and delivered to the airport with the export paperwork; and the caviar is shipped via airfreight to the airport in Los Angeles, California. Your affiliate states that the caviar does not enter into the commerce of Germany unless it is sold for local consumption.

ISSUE:

Whether the imported caviar is eligible for special tariff treatment under the GSP.

LAW AND ANALYSIS:

Under the GSP, eligible articles the growth, product or manufacture of a designated 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 article is a product of a BDC and 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(a).

Based on the information that you provided, the caviar would be classified at subheading 1604.30.20, Harmonized Tariff Schedule of the United States ("HTSUS"). General Note 3(c)(I), HTSUS, provides, in part, that special tariff treatment under the GSP is indicated in the "Special" subcolumn in the tariff by the symbols "A", "A*," or "A+". Under General Note 4(a), HTSUS, Russia is designated as a beneficiary developing country for GSP purposes. The "Special" subcolumn opposite subheading 1604.30.20, HTSUS, contains the symbol "A", indicating that it is a GSP-eligible provision.

The issue involved in this case is whether the imported caviar, which is shipped from Russia to a warehouse in Germany and then to the U.S., is considered "imported directly" from Russia. The "imported directly" requirement is defined in 19 CFR 10.175, in pertinent part, as follows:

(a) Direct shipment from the beneficiary country to the U.S. without passing through the territory of any other country; or
(b) 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; or
(c) If shipped from the beneficiary developing country to the U.S. 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.
(d) 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 port 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;

Since the imported caviar in this case is not shipped directly from Russia to the U.S., it does not meet the "imported directly" requirements set forth in 19 CFR 10.175(a).

With respect to the applicability of 19 CFR 10.175(b), your affiliate states that the imported caviar does not enter into the commerce of Germany but the shipping documents from Russia do not show the U.S. as the final destination. Based on the facts you presented, the shipping documents only show the U.S. as a final destination when they are prepared in Germany after an order from the U.S. is received. Therefore, the imported caviar does not meet the "imported directly" requirements of 19 CFR 10.175(b).

Germany is not designated as a beneficiary developing country for GSP purposes. Therefore, the "imported directly" requirements set forth in 19 CFR 10.175(c) also are not met.

The only remaining provision under which the imported caviar in this case may be considered "imported directly" is 19 CFR 10.175(d). This provision was added by Customs in 1983 in Treasury Decision ("T.D.") 83-144, dated June 28, 1983, in order to expand the definition of "imported directly" to encompass the traditional marketing procedure established for "Cameroon wrapper tobacco," although there was no intent to limit 19 CFR 10.175(d) to that scenario. The traditional marketing procedure for Cameroon wrapper tobacco is that the wrapper paper is grown in the United Cameroon Republic and the Central African Republic and then the entire production of this product (which is used for cigar wrappers) is shipped to France, where it is stored in bonded warehouses and then sold at auction. The wrapper tobacco is not processed in France except for fumigation and preparation for shipment. The wrapper tobacco does not enter the commerce of France except for the sale at auction. Customs noted that it believed that this amendment was"consistent with the fundamental intent of the GSP to extend direct preferential tariff treatment to the exports of BDC's to encourage economic diversification and export development within those countries." See 48 Fed. Reg. 15153, dated April 7, 1983.

In HRL 555039, dated June 16, 1989, Customs held that electronic component parts from Malaysia shipped to a free trade zone in a non-BDC met the "imported directly" requirement set forth at 19 CFR 10.175(d). Customs concluded that goods entered into a free trade zone are considered under the control of the customs authority of the non-BDC country because by definition, a free trade zone is secured by or under governmental authority. See 19 CFR

In HRL 559621, dated March 18, 1997, magnesium was shipped from Russia to a warehouse in Rotterdam by an independent intermediate buyer not acting as an agent of the Russian producer. Customs held in that case that the magnesium was not "imported directly" pursuant to 19 CFR 10.175(d).

In the instant case, the Russian caviar is transshipped through the territory of another country (Germany), does not have shipping documents prepared in the BDC indicating the U.S. as the final destination, and does not enter into the commerce of the intermediate country except for sale, other than at retail. We will assume for the purposes of this ruling that the free trade zone is under the customs authority of Germany. Based upon the facts presented, the goods are merely loaded, unloaded and maintained in good condition in Germany. Therefore, the only requirement remaining is that the port director must be satisfied that the importation results from the original commercial transaction between the U.S. importer and the producer or the later's sales agent. It appears in this case that the importation of the caviar into the U.S. does not result from any transaction between your company (the U.S. importer) and the Russian producer (or its sales agent), but rather results from the transaction between your company and the affiliated company in Germany. Because this requirement of 19 CFR 10.175(d) is not met, the imported caviar in this case does not satisfy the "imported directly" requirement and therefore, the imported caviar cannot qualify for GSP duty-free treatment.

HOLDING:

Based upon the information submitted, the imported caviar in this case does not satisfy the "imported directly" requirement set forth at
19 CFR 10.175 and, therefore, is not eligible for duty- free treatment under the GSP.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise was 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
Commercial Rulings Division

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