CLA-2 CO:R:C:S 557937 WAS
Mr. Mark Austin
Granite International Inc.
P.O. Box 9323
S. Burlington, VT 05407
RE: "Imported Directly"; GSP; 19 CFR 10.175; granite from Zimbabwe and South Africa
Dear Mr. Austin:
This is in response to your letter dated May 26, 1994,
concerning the eligibility of granite blocks from Zimbabwe and
South Africa for duty-free treatment under the Generalized System
of Preferences (GSP) (19 U.S.C. 2461-2466). We had an
opportunity to meet with you on September 8, 1994, to further
discuss this matter. You also submitted additional information
after the meeting which we have incorporated in our ruling.
FACTS:
You state that your company is presently involved in
importing rough granite blocks from Zimbabwe and South Africa
into the U.S. You have presented two scenarios which you have
asked us to consider. Under the first scenario, granite blocks
are imported into the U.S. through Canada. However, the original
bill of lading for the shipment to Canada does not show the U.S.
as the final destination. A trucking company is used to
transport the rough blocks from the port of entry in Canada
(Montreal) to a warehouse in Beebe, Quebec (not a bonded
warehouse). The blocks are held in the warehouse until they are
sold to U.S. purchasers, at which time they are trucked to the
purchaser's facility in the U.S. for processing. You claim that
the blocks do not undergo any changes or repackaging operations
while in the warehouse in Beebe, Quebec.
Under the second scenario, granite blocks are imported from
Zimbabwe and South Africa into the U.S. through Canada, although,
as under the first scenario, the bill of lading for the shipment
to Montreal (the Canadian port of entry) does not show the U.S.
as the final destination. During the time that the blocks are in
transit to Canada, a number of the blocks may be sold to
customers located in the U.S. Those blocks which are sold to
U.S. customers during the voyage to Canada are transported in
bond through Canada by truck to your facility in Barre, Vermont.
You state that these blocks do not enter into the commerce of
Canada while in that country.
ISSUE:
Whether, under the two scenarios described above, the
granite from Zimbabwe and South Africa which is shipped to Canada
and subsequently entered into the U.S. is considered "imported
directly" for purposes of the GSP?
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).
Pursuant to General Note 4(a), HTSUS, Zimbabwe and South
Africa are designated beneficiary developing countries for
purposes of the GSP. Granite is classified in subheading
2516.12, HTSUS, which provides for granite: Merely cut, by sawing
or otherwise, into blocks or slabs of a rectangular (including
square) shape. Articles classified under this provision are
eligible for duty-free treatment under the GSP provided that they
satisfy the "product of," 35% value-content and "imported
directly" requirements.
Merchandise which is wholly the growth, product, or
manufacture of a BDC, or an association of countries treated as
one country under section 502(a)(3) of the Trade Act of 1974 as
amended (19 U.S.C. 2462(a)(3)) and section 10.171(b), Customs
Regulations (19 CFR 10.171(b)), are normally presumed to meet the
35% value-content requirement under the GSP. See 19 CFR
10.176(c).
Under the first scenario, the issue is whether granite from
Zimbabwe and South Africa is considered to be "imported directly"
for purposes of receiving duty-free treatment under the GSP, if
it is shipped from the BDC to Canada where it is transported to a
non-bonded warehouse in Canada, before being sold to a U.S.
customer and subsequently transported into the U.S.
Section 10.175, Customs Regulations (19 CFR 10.175), states
that eligible articles must be imported directly from a
beneficiary developing country to qualify for treatment under the
GSP. According to these regulations, paragraph (a), which sets
forth the most restrictive definition of the term, provides that
"imported directly" means "direct shipment from the beneficiary
country to the U.S. without passing through the territory of any
other country."
Recognizing the exigencies of trade and transportation,
however, Customs has by regulation determined that merchandise
shipped through a non-BDC to the U.S. is "imported directly" if:
(1) 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)); or (2) 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: (a) remained under the
control of the customs authority of the intermediate country; (b)
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 (c) were not subjected
to operations other than loading and unloading, and other
activities necessary to preserve the articles in good condition
(see 19 CFR 10.175(d)).
We have held for purposes of the 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 Headquarters Ruling Letter
(HRL) 071575 dated November 20, 1984.
We held in HRL 556185 dated September 10, 1991, that ceramic
tile shipped from Israel to a Canadian customs bonded warehouse
prior to being shipped to the U.S. was deemed to satisfy the
"imported directly" requirement for purposes of the U.S.-Israel
Free Trade Implementation Act of 1985 ("FTA") (See General Note
8, Harmonized Tariff Schedule of the United States (HTSUS)). In
HRL 556185, the merchandise remained in the original packaging
and did not undergo any processing or alteration while in the
Customs bonded warehouse. We stated that if the invoice, bill of
lading and other shipping documents do not show the U.S. as the
final destination, the goods may be considered "imported
directly" under the U.S.-Israel FTA, provided that 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.
We find that under the first scenario, the shipment does not
meet the requirements of either 19 CFR 10.175(b) or (d). The
invoice, bill of lading and other shipping documents do not show
the U.S. as the final destination as required by 19 CFR
10.175(b). Furthermore, 19 CFR 10.175(d) requires that the
articles remain under the control of customs authorities in the
non-BDC. You state that the granite under the first scenario is
shipped to Montreal, Canada and transported to a non-bonded
warehouse located in Beebe, Canada. The granite does not at any
time enter into a customs bonded warehouse in Canada or remain
under the control of Canadian Customs authorities. Therefore,
because the shipping documents do not show the U.S. as the final
destination, and the granite does not remain under the control of
Canadian Customs, we find that under the first scenario, the
granite is not considered "imported directly" from the BDC for
the purpose of qualifying for duty-free treatment under the GSP.
Under the second scenario, the issue concerns whether
granite from Zimbabwe and South Africa is considered to be
"imported directly" for purposes of the GSP if it is shipped from
the BDC to Canada, sold to a U.S. purchaser during that voyage,
and, when imported into Canada, transported in bond through
Canada by truck to the U.S.
We find that under the second scenario, the shipment
satisfies the "imported directly" requirement as set forth in 19
CFR 10.175(d). The granite is shipped from South Africa or
Zimbabwe to Canada where it remains in bond under the control of
the Canadian customs authorities until it arrives in the U.S.
Furthermore, the operations that take place 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. Therefore,
consistent with our holding in HRL 556185, provided that 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, the granite under this
scenario will be considered "imported directly" from a BDC to the
U.S. for purposes of the GSP.
HOLDING:
Based on the information submitted, under the first
scenario, because the shipping documents do not show the U.S. as
the final destination, and the granite does not remain under the
control of the Canadian Customs, we find that the granite
produced in Zimbabwe and South Africa, shipped to Canada where it
is transported to a Canadian warehouse, and later imported to the
U.S., is not "imported directly" from the BDC for the purpose of
qualifying for duty-free treatment under the GSP.
Under the second scenario, the granite is considered
"imported directly" into the U.S. from a BDC for purposes of the
GSP, provided that when the merchandise is shipped to Canada it
is transported in bond through Canada to the U.S., 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.
Sincerely,
John Durant, Director
Commercial Rulings Division
cc: District Director
St. Albans, Vermont