CLA-02:RR:CR:SM 560435 KKV
Mr. Frank M. Murphy
Norman G. Jenson, Inc.
P.O. Box 8008
3030 Commerce Drive
Port Huron, MI 48061-8008
RE: Eligibility of automotive type radiators imported
from Thailand for preferential tariff treatment
under the Generalized System of Preferences (GSP);
interim storage in bonded warehouse; "imported
directly;" 19 CFR 10.175(d); invoices and entry
documents show other than U.S. as final
destination; labeling permissible only in free
trade zone; 19 CFR 10.175(d)(3)
Dear Mr. Murphy:
This is in response to your letter dated April 22,
1997, on behalf of Coulter Radiator Manufacturing, which
requests a binding ruling regarding the eligibility of
certain automotive type radiators for preferential duty
treatment under the Generalized System of Preferences (GSP)
upon their importation into the U.S. from Thailand through
Canada. No sample was submitted with your request.
FACTS:
Your letter indicates that Coulter Radiator
Manufacturing (hereinafter, "Coulter") is a Canadian firm
which supplies automotive type radiators to repair shops in
Canada and the United States. In order to meet customer
expectations, Coulter maintains an inventory of products
which are both produced by Coulter and purchased from
suppliers. One such supplier is located in Thailand.
Orders are regularly placed with the Thai manufacturer to
ensure that inventory is readily available to service orders
regularly received from customers. We are informed that the
radiators are classifiable under subheading 8708.91.50,
HTSUS, and have been certified by the producer as a "product
of" Thailand and meet the requirements of 19 CFR 10.176.
We are informed that Coulter uses historical market
data to identify which items and what quantity levels are
maintained in inventory. Due to production lead times and
international delivery schedules, Coulter manufactures and
purchases goods for inventory and would not necessarily have
an order from a customer when a radiator is produced and
ordered from a supplier. Based upon past business data,
Coulter has a reasonable expectation that it will continue
to receive customer orders and must maintain inventory
available to ship.
Consequently, Coulter would like to receive and store
GSP-eligible radiators at a Customs bonded facility in
Canada. Each radiator is individually packaged and marked
with the country of origin. When received at the bonded
facility, the radiators may be placed in inventory without
payment of duty or immediately shipped in response to a
pending order. As inventory is received at the bonded
facility, it is marked with a label bearing the Coulter name
and part number. We are informed that such labeling does
not alter the product or packaging.
Upon receipt of an order from a customer in the U.S., a
radiator would be removed from the bonded warehouse and
transported to the U.S. under bond. When the shipment is
entered with U.S. Customs, Coulter is the importer of record
and, through a duly authorized agent, accepts responsibility
for all Customs importation procedures, including payment of
duty and fees, if applicable.
For purposes of this ruling, we assume the tariff
classification of the subject merchandise is correct.
ISSUE:
Whether automotive radiators which are the "product of"
Thailand are "imported directly" into the U.S. for purposes
of the Generalized System of Preferences (GSP) when
purchased by a Canadian firm and shipped to Canada for
interim storage in a bonded warehouse for subsequent
shipment to the U.S. in response to variable customer needs.
LAW AND ANALYSIS:
Under the Generalized System of Preferences (GSP),
eligible articles the growth, product or manufacture of a
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
of value of material produced in the BDC, plus (2) the
direct costs of the processing operations in the BDC, is
equivalent to at least 35% of the appraised value of the
article at the time of entry into the United States.
The issue to be resolved is whether the radiators from
Thailand are considered to be "imported directly" into the
U.S. for purposes of GSP duty preference when they are
exported from Thailand under contract from Coulter, shipped
to Canada for labeling and storage in a bonded warehouse and
subsequently entered into the U.S. under contract from
Coulter to U.S. purchasers. Under 19 CFR 10.175(b),
merchandise shipped from a BDC through any other 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 initial contract of sale of the
radiators will be between the Thai seller and Coulter,
located in Canada. At the time of contract between the Thai
manufacturer and Coulter, the subsequent contracts for sale
to U.S. purchasers are not completed. Therefore, because
the documents issued in Thailand show Canada as the final
destination, not the United States, the radiators do not
meet the requirements of 19 CFR 10.175(b).
However, subsection 10.175(d) states:
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.
This provision was added as an amendment to the
definition of the term "imported directly" to expand the
definition to allow articles to qualify for GSP treatment
where such articles: (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 Treasury Decision (T.D.) 83-144, dated June 28, 1983.
In T.D. 83-144, Cameroon wrapper tobacco was produced in
Cameroon and the Central African Republic. The Cameroon
wrapper was shipped from the beneficiary countries to a
French customs bonded transit warehouse in Le Havre until
the sale 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, sold 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 HRL 557921, dated
July 27, 1994; HRL 557937, dated September 29, 1994); HRL
556373, dated January 17, 1992.
In the case under consideration, the radiators are
shipped from a BDC to a bonded warehouse for labeling and
storage and subsequently imported into the United States by
Coulter for its customers. Because the radiators are stored
in a Canadian bonded warehouse, they will remain under the
customs authority of the intermediate country, as required
by 19 CFR 10.175(d)(1). Because we are informed that the
radiators will be withdrawn from storage in the bonded
warehouse for shipment to the U.S. and that Coulter will be
the importer of record for the merchandise upon importation
into the U.S., it appears that the radiators will not enter
the commerce of the intermediary country and that
importation will result from the original commercial
transaction between the importer and the producer, as
required by 19 CFR 10.175(d)(2).
However, we are informed that upon arrival from
Thailand at the bonded facility in Canada, the radiators
will undergo a labeling operation which includes the
placement of a label bearing the Coulter name and part
number on the outside of each box. While section
10.175(c)(1)(iii), Customs Regulations (19 CFR
10.175(c)(1)(iii) specifically lists "affixing marks,
labels, or other like distinguishing signs on articles or
their packing," as a permissible operation, it is applicable
only in instances where merchandise is shipped from a BDC to
the U.S. through a free trade zone in another BDC(see 19 CFR
10.175(c)(1)(iii). Where, as here, merchandise is shipped
from a BDC 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 merchandise may undergo
only loading and unloading, and other activities necessary
to preserve the articles in good condition, pursuant to 19
CFR 10.175(d)(3). Inasmuch as Canada is not a BDC, any
labeling operation is outside the scope of activities
permissible under the regulations and the radiators will not
be eligible for preferential duty preference under GSP upon
entry into the U.S.
HOLDING:
Based upon the information submitted, radiators shipped
from Thailand through Canada, for storage and labeling in a
bonded warehouse before importation into the U.S. will not
satisfy the requirement of being "imported directly" into
the U.S. under either 19 CFR 10.175(b) because the invoices
and other documents do not show the U.S. as the final
destination or 19 CFR 10.175(d) because labeling exceeds the
scope of activities permissible under 19 CFR 10.175(d)(3).
Accordingly, the merchandise will not be eligible for
preferential duty treatment under GSP upon importation into
the United States.
A copy of this ruling letter should be attached to the
entry documents filed at the time this merchandise is
entered. If the documents have been filed without a copy,
this ruling should be brought to the attention of the
Customs officer handling the transaction.
Sincerely,
John Durant
Director
Commercial Rulings Division