CLA-2 CO:R:C:V 555039 BJO
Kenneth Paley, Esq.
Sharretts, Paley, Carter & Blauvelt, P.C.
1707 L Street, N.W.
Washington, D.C. 20036
Re: GSP Treatment of Articles Consolidated in a Non-Beneficiary
Developing Country Free Trade Zone
Dear Mr. Paley:
This is in response to your firm's letter of May 26, 1988,
inquiring whether articles are "imported directly" for purposes
of the Generalized System of Preferences (19 U.S.C. 2461-
2465)(GSP), if they are produced in a beneficiary developing
country ("BDC"), but shipped to a free trade zone in a non-BDC
for consolidation prior to their importation to the U.S.
FACTS:
Your client, A&A International, Inc., will purchase
electronic component parts in Malaysia, a BDC. The parts will
then be shipped in export packaging to a non-BDC, where they will
be placed in a free trade zone and consolidated with other goods.
The merchandise will not be sold, repackaged, or otherwise
manipulated in the non-BDC other than by unloading and loading
for shipment. The consolidated shipment will then be exported to
the U.S.
ISSUE:
Whether merchandise is "imported directly" for purposes of
the GSP if consolidated with other merchandise in a non-
beneficiary developing country's free trade zone prior to
shipment to the U.S.
LAW AND ANALYSIS:
Eligible articles are entitled to duty-free treatment under
the GSP if the sum of the cost or value of materials produced in
a BDC plus the direct costs of processing operations performed in
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such BDC is equivalent to at least 35% of the articles appraised
value at the time they are entered into the U.S., and if the
articles are "imported directly" from the BDC into the customs
territory of the U.S. See 19 U.S.C. 2461(b)(1). The phrase
"imported directly" is defined in section 10.175 of the Customs
Regulations (19 CFR 10.175). For purposes of this ruling, we
will assume that the articles are GSP eligible, and that the
minimum local value-content requirement is met.
Under 19 CFR 10.175, merchandise shipped from a BDC through
a non-BDC to the U.S. is "imported directly" if: (1) the
merchandise does not enter into the commerce of any other country
while en route to the U.S., and the invoices, bills of lading,
and other shipping documents show the U.S. as the final
destination (19 CFR 10.175(b)); or (2) the merchandise does not
enter into the commerce of the intermediate country except for
the purpose of sale other than at retail, the shipment remains
under the control of the customs authority of the intermediate
country, and the shipment is not subjected to operations other
than loading and unloading and other activities necessary to
preserve the articles in good condition (19 CFR 10.175(d)).
Because the inquiry does not suggest that the invoices,
bills of lading and other original shipping documents to be
issued in the BDC will show the U.S. as the final destination, it
does not appear that the shipment will meet the requirements of
19 CFR 10.175(b). However, it is contended that the requirements
of 19 CFR 10.175(d) will be met because the shipment will not
enter the commerce of the non-BDC and will not be subjected to
activities other than loading and unloading, and that goods
entered into a free trade zone in a non-BDC are per se under the
control of the customs authority of that non-BDC. With respect
to that latter point, it is noted that under 19 CFR 10.175(c), a
free trade zone is defined for purposes of that subsection as:
"a predetermined area or region declared and secured by or
under governmental authority, where certain operations may
be performed with respect to the articles, without such
articles having entered the commerce of the country
maintaining the FTZ."
The described operations do not appear to constitute more
than loading and unloading of the merchandise, and, as such, will
not cause the merchandise to enter the commerce of the non-BDC.
See HQ 071575, dated November 20, 1984. Accordingly, if the
goods remain under customs control while in the intermediate
country, then the articles will have been imported directly
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within the meaning of 19 CFR 10.175(d). While no information
concerning the extent of customs control over articles placed in
the non-BDC free trade zone has been submitted, we find that if
that FTZ meets the definition stated in 19 CFR 10.175(c), then
the shipment will meet the requirements of 19 CFR 10.175(d).
HOLDING:
On the basis of the information presented, it is our opinion
that the electronic component parts produced in a BDC but placed
in a free trade zone in a non-BDC prior to shipment to the U.S.,
where they will be subjected to no operations other than loading
and unloading, will be "imported directly" from the BDC within
the meaning of 19 CFR 10.175(d) if the free trade zone meets the
definition stated in 19 CFR 10.175(c).
Sincerely,
John Durant, Director
Commercial Rulings Division