CLA-2 RR:TC:SM 559622 KBR
Port Director
U.S. Customs Service
200 St. Paul Place
Baltimore, MD 21202
RE: Application for Further Review of Protest No. 1303-95-100012 Concerning the Eligibility of Magnesium for Duty-free
Treatment Under the Generalized System of Preferences ("GSP");
Imported Directly; 19 CFR 10,175(d)
Dear Sir:
This is in reference to the above-cited Application for
Further Review of Protest filed by John S. Connor, Inc., on
behalf of their client British Metal Canada contesting the denial
of eligibility of magnesium for duty-free treatment under the
Generalized System of Preferences ("GSP").
FACTS:
British Metal Canada/Amalgamet Canada ("BMC") is protesting
a denial of eligibility of magnesium for duty-free treatment
under the GSP. BMC purchased magnesium from Solikamsk Magnesium
Works ("SMW"), a producer of magnesium in Russia. The magnesium
was transported through Kotka, Finland, where it was inspected.
The movement summary states that "the [m]aterial was released to
[BMC] for inspection..." The inspection instructions stated that
the magnesium should be inspected by an inspector familiar with
magnesium metal for physical appearance; any cracks, wrinkles,
holes, spots, blooms, dirt contaminants, marks; the shine and
cleanliness; oxide; discoloration; variance between bundles of
ingots; consistent size and weight; packing; and breakage of
bundles. The inspection took more than one day and an inspection
report was issued dated December 16, 1993. The magnesium was
then transported to Helsinki, Finland and, from there to
Gothenburg, Sweden. The magnesium was then transported to the
U.S. BMC purchased the magnesium from SMW prior to the contract
for sale to the purchasers in the U.S. The contracts for sale by
SWC to BMC show a delivery location of Kotka, Finland. BMC sold
magnesium to Rossborough Manufacturing Co., Hart Metals, Inc.,
and E.S.M. II Inc. A Certificate of Origin dated December 17,
1993, was issued showing the magnesium was destined for Kotka,
Finland. A "post Factum" GSP Certificate of Origin was issued on
March 9, 1994, showing that the magnesium was of Russian origin.
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 and 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). The magnesium
is classifiable under subheading 8104.11.0000, Harmonized Tariff
Schedule of the United States ("HTSUS"), which at the time of the
subject entry was a GSP eligible provision. Also at the time of
the subject entry, Russia was a BDC.
The issue in this case concerns whether the magnesium from
Russia was "imported directly" from the BDC to the U.S., when it
was shipped from the BDC through Kotka and Helsinki, Finland, and
Gothenburg, Sweden; 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 a non-BDC to
the U.S. is "imported directly" if: (1) the merchandise does not
enter into the commerce of any other country while en route to
the U.S., and (2) the invoices, bills of lading, and other
shipping documents show the U.S. as the final destination.
In this instance, the original contract of sale of the
magnesium was from SWC to BMC. This contract and an amended
contract both show as the only delivery location Kotka, Finland.
Therefore, as these documents and certain other shipping
documents do not show the U.S. as the final destination, 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 above provision was added as an amendment to the
definition of the term "imported directly" to expand the
definition to allow for articles to qualify for GSP treatment
under the GSP which: (1) originate in a beneficiary developing
country, (2) are shipped to a developed country and auctioned
there, and (3) then are shipped to the U.S. See T.D. 83-144
(June 28, 1983). 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 goods in this case were shipped from Russia to Kotka,
Finland, where they were warehoused. There is no direct evidence
to show that the magnesium remained under the control of the
customs authority while in the warehouse or during its shipment
through Helsinki, Finland, and Gothenburg, Sweden, prior to its
exportation to the U.S. Further, the magnesium entered into the
commerce of Finland when it was subjected to detailed inspection
in that country. Merchandise enters the commerce of the
intermediate country for purposes of the GSP if manipulated
(other than loading or unloading), offered for sale (whether or
not a sale actually takes place), or subjected to a title change
in that country. See e.g. HQ 071575 (November 20, 1984). In HQ
555181 (June 26, 1989), we held that quality control testing in
the intermediate country constituted more than loading and
unloading and, as a result, the merchandise did not meet the
"imported directly" requirements of 19 CFR 10.175(d). Finally,
there is no evidence that the importation resulted from the
original sale between the importer and the producer or its agent
because there is no evidence that BMC was an agent of SMW, the
producer. Therefore, the magnesium in this case is not
considered "imported directly" from Russia to the U.S.
HOLDING:
Based on the information submitted, we find that the
magnesium shipped from Russia through Kotka, Finland, Helsinki,
Finland, and Gothenburg, Sweden, before importation into the
U.S., did not satisfy the "imported directly" requirement under
19 CFR 10.175. 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