CLA-2 CO:R:C:S 556185 WAW
Michael J. Biehler, Esq.
Jaeckle, Fleischmann & Mugel
Norstar Building
Twelve Fountain Plaza
Buffalo, N.J. 14022-2292
RE: Ceramic tile shipped from Israel to a Canadian customs
bonded warehouse prior to being shipped to the U.S.;
"imported directly"; Israel FTA
Dear Mr. Biehler:
This is in response to your letter dated August 6, 1991,
requesting our advice on behalf of your client concerning whether
certain products imported from Israel will qualify for duty-free
treatment under the United States-Israel Free Trade
Implementation Act of 1985 ("FTA") (See General Note 3(c)(vi),
Harmonized Tariff Schedule of the United States Annotated
(HTSUSA)).
FACTS:
You represent a Canadian client who intends to purchase
ceramic tile from Israel. The goods will be shipped from Israel
under a Canadian in-transit bond to a Canadian customs bonded
warehouse in Toronto, Ontario. Next, you state that a portion of
the merchandise will be shipped to your client's dealers in
Canada, and a portion will be shipped to your client's dealers in
the U.S. You state that while the goods are in the customs
bonded warehouse, they will remain in the original packaging and
will not undergo any processing or alteration while in Canada.
When the portion of the shipment destined for the U.S. is shipped
from the customs bonded warehouse, the Canadian in-transit bonds
will be cancelled and the goods will be entered into the customs
territory of the U.S.
It is your understanding that the FTA "special" rate of duty
would apply to the portion of the shipment which is destined for
the United States dealers. The question that you have asked us
to address is whether the ceramic tile will be considered to be
"imported directly" for purposes of the FTA when it is shipped
from Israel through an intermediate country where a portion of
the merchandise will be held under bond prior to being shipped to
the U.S.
ISSUE:
Whether the ceramic tile is "imported directly" for purposes
of the FTA if it is shipped from Israel under a Canadian in-
transit bond to a Canadian customs bonded warehouse prior to
being shipped to the U.S.
LAW AND ANALYSIS:
Under the Israel FTA, eligible articles the growth, product,
or manufacture of Israel which are imported directly to the U.S.
from Israel qualify for duty-free treatment, provided the sum of
(1) the cost or value of materials produced in Israel, plus (2)
the direct costs of processing operations performed in Israel is
not less than 35% of the appraised value of the article at the
time it is entered. See General Note 3(c)(vi) HTSUSA.
Annex 3, paragraph 8, of the Agreement on the Establishment
of a Free Trade Area between the United States and Israel
(entered into on April 22, 1985) (hereinafter "the Agreement"),
defines the words "imported directly," in pertinent part, as
follows:
* * * *
(b) if shipment is through the territory of an
intermediate country, the articles in the shipment do
not enter into the commerce of any intermediate country
and the invoices, bills of lading, and other shipping
documents, show the United States as the final
destination; or
(c) if shipment is through an intermediate country and
the invoices and other documents do not show the United
States as the final destination, then the articles in
the shipment, upon arrival in the United States, are
imported directly only if they:
(i) remain under the control of the customs
authority in an intermediate country;
(ii) do not enter into the commerce of an
intermediate country except for the purpose
of a sale other than at retail, provided that
the articles are imported as a result of the
original commercial transaction between the
importer and the producer or the latter's
sales agent;
(iii) have not been subjected to operations
other than loading and unloading, and other
activities necessary to preserve the article
in good condition
* * * *
We have held for purposes of the Generalized System of
Preferences (GSP) that merchandise is deemed to have entered the
commerce of an intermediate country 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 HRL 071575 dated November 20, 1984. The definition
of "imported directly" under the GSP is very similar to that
under the FTA. See section 10.175, Customs Regulations (19 CFR
10.175). In the instant case, the operations that your client
intends to perform in Canada 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
intermediate country. You state that the merchandise will remain
in the original packaging and will not undergo any processing or
alteration while it is in the Customs bonded warehouse.
Accordingly, if the invoice, bill of lading, Israeli-FTA
certificate, certificate of origin and other original shipping
documents issued in Israel show the U.S. as the final
destination, the merchandise will be considered "imported
directly" pursuant to paragraph 8(b), Annex 3 of the Agreement.
Alternatively, if the invoice, bill of lading and other
shipping documents do not show the U.S. as the final destination,
the goods may still be considered "imported directly" under
paragraph 8(c), Annex 3 of the Agreeement, assuming the goods
remain under customs control while in Canada (such as in a
Canadian customs bonded warehouse), and the district director is
satisfied that the importation results from the original
commercial transaction between the importer and the producer.
HOLDING:
Based on the information provided, we find that the ceramic
tile may be considered "imported directly" into the U.S. from
Israel when the merchandise is shipped from Israel under a
Canadian in-transit bond to a Canadian customs bonded warehouse
pending shipment to the U.S. provided that (1) the invoice, bills
of lading, and other shipping documents show the U.S. as the
final destination, or (2) the goods remain under customs control
while in Canada and the district director is satisfied that the
importation results from the original commercial transaction
between the importer and the producer.
Sincerely,
John Durant, Director
Commercial Rulings Division