CLA-2 CO:R:C:S 556079 WAW
Mr. Matthew Chang
C. Itoh & Co. (America) Inc.
335 Madison Ave.
New York, N.Y. 10017
RE: Ethylene glycol shipped from Czechoslovakia to the
Netherlands and stored under bond prior to being shipped to
the U.S.; GSP; "imported directly"; T.D. 83-144; 19 CFR
10.175
Dear Mr. Chang:
This is in response to your letter dated June 4, 1991,
requesting a ruling concerning whether ethylene glycol (also
known as ethanediol) imported from the Czech and Slovak Federal
Republic (Czechoslovakia) is eligible for duty-free treatment
under the Generalized System of Preferences (GSP) (19 U.S.C.
2461-2466).
FACTS:
You state that your subsidiary corporation, C.I. Specialty
Chemicals, Inc. is currently negotiating a contract with a
foreign supplier to purchase and import ethylene glycol; a
product which currently is eligible for duty-free treatment under
the GSP. The ethylene glycol will be manufactured by Slovnaft,
of Bratislava in the Czech and Slovak Federal Republic
(Czechloslovakia). The country of origin of the product
(Czechoslovakia) has no outlet on the sea and, therefore, you
state that you will ship the product overland from Bratislava to
Rotterdam, Netherlands, where it will be held in storage tanks
before it is loaded onto a U.S.-bound ocean carrier and shipped
to the U.S. You state that the ethylene glycol may be stored in
the Netherlands for as long as 30 days. In addition, you
maintain that at no time will the ethylene glycol enter the
commerce of the Netherlands or any other country of
transshipment. From the Czechoslovakia border until the goods
are loaded on board the U.S.-bound ship, you state that the
merchandise will be held under bond in storage. Your letter
concerns specifically the requirement under the GSP that the
merchandise be "imported directly" from a beneficiary developing
country into the customs territory of the U.S. It is your
position that since Czechoslovakia is a landlocked country, the method of shipment described above qualifies as "imported
directly" for purposes of satisfying the GSP requirements.
ISSUE:
Whether the ethylene glycol is "imported directly" for
purposes of the GSP if it is shipped from Czechoslovakia through
a non-BDC where it is held under bond in storage prior to being
loaded onto a U.S.-bound carrier and shipped to the U.S.
LAW AND ANALYSIS:
Under the GSP, eligible articles the growth, product or
manufacture of a designated beneficiary developing country (BC)
which are imported directly into the customs territory of the
U.S. from a BC may receive duty-free treatment if the sum of (1)
the cost or value of materials produced in the BC, plus (2) the
direct costs of the processing operation in the BC, is equivalent
to at least 35% of the appraised value of the article at the time
of entry into the U.S. See 19 U.S.C. 2463(b).
The 35% value-content and "imported directly" requirements
of 19 U.S.C. 2463(b) were conceived as separate and distinct
country of origin tests designed to ensure that the benefits of
the duty-free program actually accrue to the countries for which
they were intended. See The Trade Act of 1973: Hearings on H.R.
10710 Before the Senate Committee on Finance, 93rd Cong., 2nd
Sess. 326 (1974) (statement of William D. Eberle, U.S. Special
Representative for Trade Negotiations). This goal is
accomplished by limiting the opportunities during which non-
eligible goods may be commingled with eligible goods. The
importer must satisfy both requirements in order to receive duty-
free treatment of its merchandise.
Czechoslovakia is a BDC. Based on the information provided,
the ethylene glycol appears to be classified under subheading
2905.31.0000, Harmonized Tariff Schedule of the United States
Annotated (HTSUSA), which provides for "Acyclic alcohols and
their halogenated, sulfonated, nitrated or nitrosated
derivatives: Diols: Ethylene glycol." This subheading is a GSP
eligible provision and, therefore, the ethylene glycol will
qualify for duty-free treatment if it is "imported directly" from
Czechoslovakia to the U.S. and it satisfies the 35% value-
content requirement. You have asked us to address only the
"imported directly" issue.
Merchandise which is shipped directly from a BC to the U.S.
without passing through the territory of any other country will
clearly be "imported directly" to the U.S. from the BC. See
section 10.175(a), Customs Regulations (19 CFR 10.175(a)).
Recognizing the exigencies of trade and transportation, however,
Customs has by regulation defined the term "imported directly" to
also include:
(1) A shipment from a BC to the U.S. through the
territory of any other country, if 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. See 19
CFR 10.175(b). This provision allows, for
example, overland transshipment in bond from
landlocked BC's through neighboring countries
to the U.S. See HRL 071696 dated May 30,
1984.
(2) A shipment from a BDC to the U.S. through a
free trade zone in a second BDC, even though
the invoice and shipping documents do not
show the U.S. as the final destination, and
even if the merchandise is purchased and
resold within the free trade zone, other than
at retail, for export, provided the
merchandise does not enter into the commerce
of the country maintaining the free trade
zone, and the articles undergo no operations
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 the foregoing
operations, or (iv) operations necessary to
ensure the preservation of merchandise in its
condition as introduced into the free trade
zone. See 19 CFR 10.175(c). This provision
allows BDC's to transship merchandise through
countries with developed entrepot trade, and
thus use to its advantage developed
commercial trading institutions and
facilities that may not be available in the
BDC.
(3) A shipment from a BDC to the U.S. through the
territory of any other country, if such
shipment remains under the control of the
customs authority of the intermediate
country, does 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 and the latter's sales
agent; and the merchandise is not subject to
operations other than loading and unloading,
and other activities necessary to preserve
the articles in good condition. 19 CFR
10.175(d). This provision was added in order
to encompass within the meaning of "imported
directly" the traditional marketing procedure
established for Cameroon wrapper tobacco.
See T.D. 83-144 (1983).
You claim that the ethylene glycol is "imported directly"
from a BDC within the meaning of 19 CFR 10.175(a), because the
merchandise will be shipped overland from Bratislava,
Czechoslovakia (a BDC) to Rotterdam, Netherlands, where it will
be held in storage tanks and subsequently loaded onto a U.S.
bound ocean carrier for export to the U.S. You state that the
storage in Rotterdam may last as long as 30 days, but at no time
will the ethylene glycol enter the commerce of the Netherlands or
any other country of transshipment. Additionally, you maintain
that from the Czechoslovakia border until the goods are laden
onto a ship bound for the U.S., the merchandise will be in bond.
You state that due to the geographical situation of the Czech and
Slovak Federal Republic, that this method of shipment qualifies
as a direct shipment (or direct as possible under the
circumstances) within the meaning of the statute.
Merchandise is deemed to have entered the commerce of an
intermediate country for purposes of the GSP 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.
In the instant case, the operations you intend to perform in
Rotterdam 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 non-BDC pursuant to
19 CFR 10.175(b). You state that the merchandise is shipped from
Bratislava to Rotterdam where it is merely stored prior to being
loaded onto a carrier for export to the U.S.
Accordingly, if the invoice, bill of lading, GSP
certificate, certificate of origin and other original shipping
documents issued in Bratislava show the U.S. as the final
destination, the ethylene glycol will be considered "imported
directly" pursuant to 19 CFR 10.175(b). 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. It should also be 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.
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 19
CFR 10.175(d), assuming the goods remain under customs control
while in the Netherlands, and the district director is satisfied
that the importation results from the original commercial
transaction between the importer and the producer.
The district director may waive the submission of evidence
of direct shipment when he/she is otherwise satisfied, taking
into consideration the kind and value of the merchandise, that
the merchandise clearly qualifies for duty-free treatment under
the GSP. See 19 CFR 10.174. The decision to grant such a waiver
rests solely with the district director.
HOLDING:
Based on the information provided, we find that the ethylene
glycol may be considered "imported directly" into the U.S. from
Bratislava, Czechoslovakia, when simply transshipped through
Rotterdam, Netherlands, for storage 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, and
(2) the goods remain under customs control while in the
Netherlands 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