CLA-2 RR:CR:SM 560688 RSD
Mr. Michael G. Weick
Customs Manager
IKEA North America Services, Inc.
Plymouth Commons
496 W. Germantown Pike
Plymouth Meeting, Pennsylvania 19462
RE: Eligibility of knock-down furniture under the Generalized
System of Preferences ("GSP"); imported directly; 19 CFR
10.175
Dear Mr. Weick:
This is in response your letter of September 29, 1997,
requesting a ruling on the eligibility of knock-down furniture
for duty-free treatment under the Generalized System of
Preferences ("GSP"). We have also received a supplemental letter
dated November 20, 1997, containing documents that are
illustrative of the proposed transactions.
FACTS:
IKEA imports knock-down furniture which originates from the
GSP eligible countries of Macedonia (Former Yugoslav Republic of
Macedonia), Slovakia, and Croatia. You state in your letter that
the merchandise in question is classifiable under various tariff
numbers designated as GSP-eligible products. The merchandise is
shipped from the country of origin to the United States through
consolidation points. The consolidation points are located in
Bulgaria (handling furniture from Macedonia), the Czech Republic
(handling furniture from Slovakia) and Slovenia (handling
furniture from Croatia). They function as transit areas where the
goods are collected and loaded to ensure full container loads.
You indicate that the goods transit through the intermediary
country where the consolidation points are located in order to be
loaded into shipping containers destined for the United States.
Due to the number of small suppliers shipping minimum quantities,
it is necessary
to tranship and consolidate the goods to maximize container fill-rates and reduce ocean transportation costs. The goods are sold
for exportation to the United States from the country of origin
and are destined for the United States upon exportation from the
country of origin.
According to your letter, all invoices, shipping documents,
bills of lading, and certificates of origin will indicate that
the United States is the final destination of the merchandise.
The goods stay in the consolidation point for a relatively short
period of time, usually five to ten days. In the consolidation
points, the goods are not sold, manipulated, offered for sale at
retail, or re-packed, and do not undergo any title change or
enter the commerce of the intermediate country.
To illustrate the transaction, you have provided various
documents such as a purchase order, packing list, CP delivery
receipt, Form A, carrier arrival notice, pro-forma invoice, and
an entry summary submitted to U.S. Customs. These documents
indicate that, in regard to the sample transaction, the United
States is the ultimate destination for the shipped merchandise.
ISSUE:
Whether the knock-down furniture originating in Macedonia,
Slovakia, or Croatia are "imported directly" for purposes of the
GSP when it is shipped through an intermediary country to the
United States as described above.
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 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)(1). For purposes of this ruling, we will assume that
the articles are GSP eligible, are "products of" the GSP country,
and the minimum local value-content requirement is met.
Therefore, the issue in this case concerns whether the
knock-down furniture, which IKEA is importing from Macedonia,
Slovakia, or Croatia, is considered to be "imported directly"
from the BDC to the U.S., if it is first shipped from the BDC to
another intermediary country, and then subsequently entered into
the U.S. Section 10.175, Customs Regulations (19 C.F.R. 10.175)
defines the term "imported directly" for purposes of the GSP.
Under 19 C.F.R. 10.175(b), merchandise shipped from a BDC
through another country to the U.S. is "imported directly" if:
the merchandise "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."
In HQ 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 HQ 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 HQ 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 C.F.R. 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 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 HRL 559535 dated September 20, 1996, calculators from
Thailand, Malaysia, and countries qualifying under the GSP were
temporarily stored in a warehouse in an intermediate country such
as Japan. We held that the calculators shipped through Japan or
another intermediary country before importation into the United
States would satisfy the "imported directly" requirement under 19
CFR 10.175(b), assuming that the commercial invoices, bills of
lading, and other shipping documents show the United States as
the final destination for the merchandise, and the calculators
did not enter the commerce of the intermediate country.
In HRL 555039 dated June 16, 1989, electronic component
parts produced in a BDC were shipped in export packing to a non-BDC, where they were placed in a free trade zone and consolidated
with other goods. The merchandise was not sold, repackaged,
otherwise manipulated in the non-BDC other than by unloading and
loading for shipment. The consolidated shipment was exported to
the U.S. In deciding whether the merchandise entered the
commerce of the non-BDC, we noted that 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.
In the instant case, unlike HRL 555039 there is no
indication that the merchandise will be placed in a foreign trade
zone. Nevertheless we find that if the operations performed in
the intermediate country consists only of consolidating
merchandise by unloading and reloading it into a container for
shipping purposes, then the merchandise will not have entered
into the commerce of the intermediate country. In addition, the
submitted the invoices, bills of lading and other shipping
documents which are supposed to be representative of documents to
be issued in the BDC show that the United States is the final
destination for the furniture. Therefore, if the furniture is
only consolidated in the intermediary country for shipping
reasons, and the documentation shows that the United States is
the final destination of the merchandise, then the shipment of
the knock-down furniture will not have entered the commerce of
the intermediate country and will meet the requirements for being
imported directly under 19 CFR 10.175.
Please note that, pursuant to 19 C.F.R. 10.174, the port
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 port director shall be subject to such
verification as the port director deems necessary. Accordingly,
we are unable to issue a prospective ruling covering any un-liquidated entries pending before a port.
HOLDING:
Assuming that the commercial invoices, bills of lading, and
other shipping documents show the United States as the final
destination of the merchandise, and the furniture does not enter
the commerce of the intermediate country, we find that the IKEA
knock-down furniture originating from either Macedonia, Slovakia,
or Croatia and shipped through either Bulgaria, the Czech
Republic, or Slovenia, where it is consolidated before being
shipped to the U.S., are "imported directly" from the BDCs for
purposes of qualifying for treatment under the GSP.
A copy of this ruling letter should be attached to the entry
documents filed at the time the goods are 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