MAR 2-10 RR:TC:SM 559621 KBR
Port Director
U.S. Customs Service
200 St. Paul Place
Baltimore, MD 21202
RE: Application for Further Review of Protest No. 1303-94-100334 Concerning the Eligibility of Magnesium for Duty-free
Treatment Under the Generalized System of Preferences ("GSP");
Imported Directly; 19 CFR 10,175(b)
Dear Sir:
This is in reference to the above-cited Application for
Further Review and Protest filed by J.P. Reynolds Co., Inc., on
behalf of their client JBA Metals International contesting the
denial of eligibility of magnesium for duty-free treatment under
the Generalized System of Preferences ("GSP").
FACTS:
JBA Metals International ("JBA") is protesting a denial of
eligibility of magnesium for duty-free treatment under the GSP.
The Certificate of Origin,
Form A, indicates that the magnesium was shipped by
AluminProdukt, Ltd. from the Russian Federation to ALPRO Aluminum
Products, Ltd. ("ALPRO") of Cyprus, under contract number
643/26119649/30039-12, dated June 12, 1993. JBA, by contract
dated March 4, 1994, purchased the magnesium from ALPRO. The
commercial invoice confirming the sale of the magnesium from
ALPRO to JBA is dated March 11, 1994. The contract specifies
that the magnesium shall be of Russian origin. The commercial
invoice states that the terms of delivery are "In Warehouse
Rotterdam, duty unpaid". In a conversation with this office on
March 11, 1997, the president of JBA indicated that ALPRO was an
independent intermediary buyer of the magnesium from Russia, and
not acting as an agent of the Russian producer. The shipper of
the magnesium from Rotterdam, Netherlands to Baltimore, MD was
Albatros Shipping & Transport B.V. Albatros issued a
certification dated September 29, 1994, which stated that the
warehouse in Rotterdam where the magnesium was stored was a
bonded warehouse and that the magnesium was held under bond and
no duties were paid on the magnesium. The record also contains
a Customs certificate dated September 21, 1994, and signed by the
Inspector of Customs at Rotterdam, which stated that the
magnesium had arrived there from Estonia and was to be shipped to
the U.S. The magnesium was denied duty-free treatment under the
GSP by your office and was found to be dutiable at 8 percent ad
valorem.
A timely Application for Further Review of the Protest was
filed on October 28, 1994.
ISSUE:
Whether the magnesium from Russia was "imported directly"
for purposes of the GSP when it was shipped through an
intermediary country to the U.S. 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). The phrase "imported directly" is defined in section
10.175 of the Customs Regulations (19 CFR 10.175). At the time
of the subject entry, the magnesium was classified in a
GSP-eligible provision, subheading 8104.11.0000, HTSUS, and both
Russia and Estonia were BDC's.
The primary issue in this case concerns whether the
magnesium from Russia was "imported directly" from a BDC to the
U.S., when it was shipped through Rotterdam, Netherlands, and
subsequently entered into the U.S. Section 10.175, Customs
Regulations (19 CFR 10.175) defines the term "imported directly"
for purposes of the GSP. Under 19 CFR 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
invoices, bills of lading, and other shipping documents show the
U.S. as the final destination.
In this instance, the invoice and certain other shipping
documents do not show the U.S. as the final destination.
Therefore, the magnesium does not meet the requirements of 19 CFR
10.175(b). See HQ 555039 (June 16, 1989), HQ 557640 (January 5,
1994).
Subsection 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.
The specific factual situation which led to the creation of
the amendment to the "imported directly" definition was designed
specifically to encompass the traditional marketing procedure
established for "Cameroon wrapper tobacco." Cameroon wrapper was
produced in Cameroon and the Central African Republic. It was
sold at an auction held once a year in Paris. The Cameroon
wrapper was shipped from the beneficiary countries to a French
customs bonded transit warehouse in Le Havre until the Paris
auction was completed, at which time the tobacco was reloaded for
shipment to its final destination. Because the purchase of the
wrapper tobacco occurred after it left the beneficiary country,
the bill of lading covering the first leg of the journey only
indicated the intermediate destination, and did not show the U.S.
as the final destination. While in the transit warehouse, the
wrapper tobacco was not subjected to any processing or other
operations. Customs found that the Cameroon wrapper tobacco
which had been exported from the Cameroon Republic and the
Central African Republic to France, auctioned there, and then
reexported to the U.S. satisfied the GSP "imported directly"
requirement, and thus, the amendment to the "imported directly"
definition was created. See HQ 557921 (July 27, 1994); HQ 557937
(September 29, 1994); HQ 556373 (January 17, 1992).
The facts in the instant case are distinguished, however, in
that here, ALPRO was not acting as the agent of the Russian
producer as required by 10.175(d)(2). ALPRO was an independent
intermediary buyer and, as a result, the magnesium was not
"imported directly," as required under the GSP.
HOLDING:
Based on the information submitted, we find that the
magnesium shipped from Russia through Rotterdam, Netherlands,
before importation into the U.S., did not satisfy the "imported
directly" requirement under 19 CFR 10.175(d) because the sale to
the importer was not made by the Russian producer of the
magnesium or their agent, but by an independent intermediary
buyer. Therefore, the protest should be denied. A copy of this
decision should be attached to Customs Form 19, to be sent to the
protestant.
In accordance with Section 3A(11)(b) of Customs Directive
099 3550-065 dated August 4, 1993, Subject: Revised Protest
Directive, this decision should be attached to Customs Form 19,
Notice of Action, and be mailed by your office to the protestant
no later than 60 days from the date of this letter. Any
reliquidation of the entry in accordance with the decision must
be accomplished prior to mailing of the decision. Sixty days
from the date of the decision the Office of Regulations and
Rulings will take steps to make the decision available to Customs
personnel via the Customs Rulings Module in ACS and the public
via the Diskette Subscription Service, Lexis, Freedom of
Information Act and other public access channels.
Sincerely,
John Durant, Director
Tariff Classification Appeals Division