CLA-2 CO:R:C:S 557933 WAS
Mr. Sanjiv Nayyar
Vizag International Ltd.
265-08 74th Ave., Suite F-2
Floral Park, N.Y. 11004
RE: "Imported Directly" Requirement under the GSP; 19 CFR 10.175(b) and 10.175(d); GSP Form A; T.D. 94-47
Dear Mr. Nayyar:
This is in reference to your letter dated May 16, 1994,
concerning whether methanol which is produced in Russia and
transshipped via Finland to the U.S. satisfies the "imported
directly" requirement under the Generalized System of Preferences
(GSP) (19 U.S.C. 2461-2466).
FACTS:
According to your submission, you intend to import methanol,
or methyl alcohol into the U.S. from Russia. You state that the
liquid petrochemical is contained for shipment to the U.S. on
ocean-going chemical tankers. The size of each shipment can
range from between 0.7 million gallons and 3.5 million gallons,
with the current market value ranging between $0.6 million and
$2.7 million approximately. You state that the product will be
produced in Russia. However, since Russia does not have port
facilities which are suitable to load shipping vessels/tankers
used for ocean transportation of methanol, the methanol must be
sent by rail cars to ports located outside of the country which
have such facilities. You state that ports such as Kotka,
Finland, Yuzhny, Ukraine, and Ventspils, Latvia have generally
been used for sending shipments to western Europe and the U.S.
from Russia. You believe that it is probable that your shipments
will be loaded at Kotka, Finland and shipped to the U.S.
Additionally, you state that since there is also a shortage
of rail cars in Russia, the Russian exporter of methanol, who is
also the manufacturer of the methanol, sends as much methanol as
it can to Kotka for storage in large tank facilities which it
leases in Kotka. Each rail car shipment to Kotka can contain
from 30,000 gallons to 250,000 gallons, depending upon the
availability of rail cars. You maintain that methanol which is
sent by the exporter to storage terminals in Kotka does not enter
into the commerce in Finland. You claim that the purpose of
transshipment through Finland is strictly to facilitate shipment
of the methanol from a land locked country to the U.S. You also
state that the commercial invoice, bill of lading and other
shipping documents drawn by the Russian exporter on the importer
will show the U.S. as the final destination. Accordingly, it is
your position that the shipment will be considered "imported
directly" from Russia to the U.S. pursuant to the requirements
set forth in section 10.175(b), Customs Regulations (19 CFR
10.175(b)).
ISSUE:
Whether methanol which is produced in Russia and
transshipped via Finland to the U.S. will satisfy the "imported
directly" requirement of the GSP?
LAW AND ANALYSIS:
Under the GSP, eligible articles the growth, product or
manufacture of a designated 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).
As stated in General Note 4, Harmonized Tariff Schedule of
the United States (HTSUS), Russia is considered a designated
beneficiary developing country for purposes of the GSP. In
addition, the products at issue are classifiable in subheading
2905.11.20, HTSUS, which provides for acyclic alcohols and their
halogenated, sulfonated, nitrated or nitrosated derivatives:
Methanol: Other. Articles classified under this subheading are
eligible for duty-free treatment under the GSP provided that they
are a "product of" Russia and satisfy the "imported directly" and
35 percent value-content requirements. You have asked us to
address only the "imported directly" issue.
The issue in this case concerns whether merchandise which is
produced in Russia and transshipped through Finland before being
imported into the U.S. is considered to be "imported directly"
from a BDC to the U.S. for purposes of the GSP.
The term "imported directly" from a BDC, for GSP purposes,
is defined in section 10.175, Customs Regulations (19 CFR
10.175). Merchandise which is shipped directly from a BDC to the
U.S. without passing through the territory of any other country
will clearly be "imported directly" to the U.S. from the BDC.
See section 10.175(a), Customs Regulations (19 CFR 10.175(a)).
Recognizing the exigencies of trade and transportation, however,
Customs has by regulation determined that merchandise shipped
through a non-BDC to the U.S. may be considered "imported
directly" for purposes of the GSP. Subsection 10.175(b) provides
that the words "imported directly" encompass the following:
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.
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 Headquarters Ruling Letter (HRL) 071575
dated November 20, 1984. In the instant case, the operations
that will be performed in Kotka 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). The information that you
have submitted provides that the merchandise will be shipped to
Kotka from Russia where it will merely be stored, prior to being
loaded onto a carrier for export to the U.S.
In HRL 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 HRL 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 HRL 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 CFR
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 also 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 another case involving the transshipment of merchandise
from a BDC, HRL 071696 dated May 30, 1984, merchandise was
shipped from Swaziland, a landlocked BDC country, through South
Africa for shipment to the U.S. In that case, it was deemed
impractical from a commercial standpoint to pack the merchandise
for shipment in Swaziland. Therefore, the merchandise was
transshipped by land to South Africa for both packing and
shipment to the U.S. We held that under the facts presented, the
packing of the merchandise in South Africa would cause the
merchandise to enter the commerce of that country. We also
stated that "assuming that shipment by air freight would not be
possible, the only solution would be to avoid packing the
merchandise in South Africa so that the importation could fall
under the terms of section 10.175(b), Customs Regulations (19 CFR
10.175(b))."
Under the proposed scenario, based on our holding in HRL's
556079 and 071696, the methanol which is sent by rail from Russia
to Finland where it is unloaded and stored prior to being shipped
to the U.S., will satisfy the "imported directly" requirement
under 19 CFR 10.175(b), assuming the commercial invoice, bill of
lading and other shipping documents show the U.S. as the final
destination.
Furthermore, you have asked us to confirm under the above-described scenario that the following documents will be accepted
as evidence that the "imported directly" requirement of 19 CFR
10.175(b) has been satisfied:
(1) A bill of lading drawn by the Russian exporter on the
U.S. importer confirming, inter alia, that the shipment
being exported to the U.S. commenced in Russia as multiple
smaller shipments and was transshipped via Finland to the
U.S.
(2) A certificate by the Russian exporter that methanol
being exported to the U.S. did not enter into the commerce
of Finland or any other country in transit, and was not
altered or subjected to any other operations other than
loading and unloading, and other activities necessary to
preserve it in good condition, after it left Russia.
(3) A commercial invoice and any other shipping documents
showing the U.S. as the final destination.
Pursuant to 19 CFR 10.174, the district 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 district director shall be subject to such verification as
the district director deems necessary. Therefore, we cannot
confirm that the foregoing documents will necessarily satisfy the
requirements of 19 CFR 10.175, as it is within the discretion of
the district director to request any documents that he/she deems
necessary as evidence that a shipment satisfies the imported
directly requirement for purposes of the GSP.
You have also asked that we address whether the "imported
directly" requirement will be satisfied in a situation where you
are unable to obtain a GSP Certificate of Origin Form A. In a
recent Treasury Decision, T.D. 94-47, (59 FR 94, May 17, 1994),
Customs amended the Customs Regulations by removing certain
documentation requirements relating to the entry of articles
claimed to be entitled to a partial duty exemption or duty-free
treatment under various special tariff provisions or programs.
Specifically, Customs eliminated use of the Certificate of Origin
Form A in connection with claims for duty-free treatment under
the GSP. Instead, the GSP Declaration which is required to be
presented upon request by the district director may serve as the
basic documentary evidence to support the claim for duty-free
treatment for merchandise which is not wholly the growth,
product, or manufacture of the producing country. Therefore, the
absence of a GSP Certificate of Origin Form A with your
merchandise will not necessarily defeat the "imported directly"
requirement.
You also state that in some instances, the bills of lading
given by the manufacturer/exporter for shipments to Finland may
not identify the U.S. as the final destination. In this regard,
19 CFR 10.175(d) states as follows:
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 district 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.
In the instant case, the shipment of methanol does not
appear to satisfy the requirements of 19 CFR 10.175(d).
Merchandise which is shipped from any BDC through the territory
of any other country and the invoices, bills of lading and other
shipping documents do not show the U.S. as the final destination
must remain under the control of the customs authority of the
intermediate country. You have submitted no information to
indicate that the methanol will remain under the control of the
customs authority in Finland. Therefore, the merchandise will
not satisfy the "imported directly" requirement of 19 CFR
10.175(d), and the methanol will not be eligible for duty-free
treatment under the GSP according to this scenario.
HOLDING:
Based on the information provided, the methanol which is
sent by rail from Russia to Finland where it is unloaded and
stored prior to being shipped to the U.S. will satisfy the
"imported directly" requirement under 19 CFR 10.175(b), assuming
that the commercial invoice, bill of lading and other shipping
documents show the U.S. as the final destination. However, where
the shipping documents do not show the U.S. as the final
destination, since you have not submitted any information to
indicate that the methanol will remain under the control of the
customs authority of the intermediate country, the methanol will
not satisfy the "imported directly" requirement of 19 CFR
10.175(d), and will not be eligible for duty-free treatment under
the GSP.
Sincerely,
John Durant, Director
Commercial Rulings Division