OT:RR:CTF:VS H321970 EE
Port Director
U.S. Customs and Border Protection
Port of New York/Newark
1100 Raymond Blvd.
Newark, NJ 07102
RE: Internal Advice; Protest No. 4601-19-104145; Eligibility of Pyroxasulfone Technical for duty-free treatment under the Generalized System of Preferences; Imported Directly Requirement; 19 C.F.R. § 10.175
Dear Port Director:
We are providing internal advice with regard to Protest No. 4601-19-104145 filed by counsel on June 7, 2019, on behalf of the importer, K-I Chemical U.S.A. Inc. (hereinafter, the “protestant”), concerning the eligibility of Pyroxasulfone Technical (“Pyroxasulfone”) for duty-free treatment under the Generalized System of Preferences (“GSP”).
FACTS:
The merchandise at issue consists of Pyroxasulfone entered on September 21, 2017 by the protestant under subheading 2934.99.90, Harmonized Tariff Schedule of the United States (“HTSUS”) as eligible for preferential tariff treatment under the GSP. Since January 9, 2017, the protestant has purchased Pyroxasulfone from its parent company, Kumiai Chemical Industry Co., Ltd. (“Kumiai”), located in Japan. Kumiai purchases the Pyroxasulfone from PI Industries Ltd. (“PI”), a chemical manufacturer located in India, in its finished form and does not further process the Pyroxasulfone. While some U.S.-destined products were shipped directly to the United States in 2017, other products, including the merchandise at issue, were shipped to the Sumitomo customs bonded warehouse in Yokohama, Japan, prior to importation to the United States and did not enter the commerce of Japan. Kumiai retained custody over the U.S.-destined articles while in transport to/from and during storage in the Sumitomo customs bonded warehouse and did not perform any processing after the Pyroxasulfone was exported from India, nor did it undertake any other operations other than unloading, reloading, and related shipping activities.
On February 12, 2018, CBP issued a proposed Notice of Action (CBP Form 29) indicating that verification of the entry revealed that the goods do not qualify for preferential tariff treatment under the GSP. Specifically, CBP indicated that the goods did not meet the requirements of 19 C.F.R. § 10.175. CBP stated that the Japanese certifications were not acceptable and the direct costs of processing operations were not substantiated. On December 10, 2018, the Port issued a Notice of Action (CBP Form 29) advising the protestant that an action had been taken to deny the claim for preferential tariff treatment under the GSP to the entry which was the subject of the verification. Specifically, the port indicated that the goods did not meet the requirements of 19 C.F.R. §§ 10.171-10.178 because: (a) there was insufficient evidence to establish that the goods were “imported directly” as defined in 19 C.F.R. § 10.175; (b) evidence submitted to demonstrate direct shipment was insufficient; (c) there was no proof of manufacturing or factory/labor costs provided; (d) the evidence of processing costs provided could not be substantiated; and (e) there was insufficient evidence to substantiate direct costs of processing of not less than 35 percent of value. Subsequently, CBP reliquidated the entries on December 11, 2018 denying GSP treatment. Counsel for the protestant timely filed a protest on June 7, 2019, claiming that the imported merchandise qualifies for duty-free treatment under the GSP.
The protestant states the imported Pyroxasulfone qualified as originating under the GSP, and therefore the protestant’s claim for duty-free treatment under the GSP was proper and that the payment made to CBP should be refunded in full with interest.
The protestant provided the following documents in support of the claim that the merchandise at issue is entitled to duty-free treatment under the GSP:
-Purchase order no. 370125, dated August 2, 2017, from the protestant to Kumiai for the merchandise at issue for a specified dollar amount. The quantity listed is 136,000 kg. The purchase order indicates CIF Port of NY/NJ term of sale. It is noted on the purchase order that the merchandise should be sent as a direct shipment from India to the United States.
-Invoice number 70301-3, dated August 18, 2017, from Kumiai to the protestant for the merchandise at issue, weighing a total of 8,000 kg for a specified dollar amount. The invoice indicates CIF Newark term of sale. It is noted on the invoice that “final destination is USA only”.
-A packing list from Kumiai to the protestant, dated August 18, 2017, which corresponds to invoice number 70301-3. It is noted on the packing list that “final destination is USA only”.
-A wire transaction statement from the Bank of Tokyo-Mitsubishi UFJ, Ltd. for a wire transfer from the protestant to Kumai for certain dollar amounts dated October 31, 2017.
-A “preview payment” from the Bank of Tokyo-Mitsubishi UFJ, Ltd. for an international wire from the protestant to Kumiai for a certain dollar amount, dated September 11, 2017.
-A bill of lading issued by Maersk Line, dated August 18, 2017, listing the shipper as Kumiai and the consignee as the protestant. The port of loading is Yokohama and the port of discharge is Newark. The weight listed is 8,500 kg. The bill of lading references purchase order no. 370125-3 from the protestant to Kumiai. The bill of lading indicates “final destination USA only”.
-A Certificate of Origin, dated August 29, 2017, issued by the Tokyo Chamber of Commerce & Industry stating that the country of origin of the merchandise at issue is India on the basis of invoice and supporting documents.
-A Declaration of Dangerous Goods listing the shipper as Kumiai and the consignee as BASF Agrochemical Products and the place of departure as Yokohama and the destination as Newark.
-A purchase order, dated April 14, 2017, from the Ihara Chemical Industry Co. Ltd. to PI for the merchandise at issue weighing a total of 312,000 kg for a certain dollar amount. The purchase order indicates CIF destination port term of sale.
-A revised purchase order, dated May 11, 2017, from Kumiai to PI for the merchandise at issue weighing a total of 224,000 kg for a certain dollar amount. The purchase order indicates CIF destination port term of sale.
-Invoice number 9010422, dated May 17, 2017, from PI to Kumiai for the merchandise at issue, weighing a total of 8,000 kg for a certain dollar amount. The invoice indicates CIF Yokohama term of sale. The invoice notes “final destination USA only”.
-A packing list, dated May 17, 2017, from PI to Kumiai which corresponds to invoice number 9010422.
-Cable confirmation, dated June 17, 2017, from Mizuho Bank, Ltd. from Kumiai to PI for a certain dollar amount. Three invoice numbers are listed on the cable confirmation and a hand notation indicating that the payment for one of the invoices is the amount listed on invoice number 9010422.
-Bill of lading no. A327A01559 issued by Interasia, dated May 24, 2017, listing the shipper as PI and the consignee as Kumiai. The place of receipt is Nhava Sheva, India and the place of delivery is Shimizu, Japan. Net weight listed is 6,125.36 kg. The bill of lading references invoice no. 9010422 from PI to Kumiai. The bill of lading indicates “final destination USA only”.
-A Certificate of Origin, dated May 22, 2017, issued by the Comprehensive Economic Partnership Agreement between the Republic of India and Japan stating that the declaration by PI that the country of origin of the merchandise at issue is India is correct. The Certificate of Origin lists the merchandise and indicates that the net weight as 8,000 kg.
-Declaration of Dangerous Goods listing PI as the shipper and Kumiai as the consignee. Place of receipt listed is Mumbai and place of delivery is Yokohama. It is noted that “final destination is USA only”.
-Kumiai’s application for bailment to the Sumitomo Warehouse Co., Ltd., dated May 1, 2017, listing Pyroxasulfone manufactured in India for a certain dollar amount per kg and Pyroxasulfone manufactured in China for a certain dollar amount per kg.
-Cargo insurance issued by Kyoei Fire and Marine Insurance Company, Ltd. to Kumiai, dated August 17, 2017, listing place of loading as Bonded Warehouse, Yokohama to Newark. Invoice no. 70301-3 is listed on the document.
-Billing Statement from the Sumitomo Warehouse, dated June 22, 2017, to Kumiai listing various charges such as charge for documentation and container transportation fees.
-Approval notice for bonded transportation, dated June 16, 2017, listing the applicant as the Sumitomo Warehouse and the importer as Kumiai.
-Billing Statement from the Sumitomo Warehouse, dated August 24, 2017, to Kumiai listing various charges such as charge for outbounding, charge for vanning, and materials for shipping.
-Notice of Admittance from the Sumitomo Warehouse to Kumiai, dated June 21, 2017, listing invoice number 9010422.
-Declaration from the Sumitomo Warehouse stating that the Pyroxasulfone was stored under bonded status at its Yokohama Customs Bonded Warehouse without entering into the commerce of Japan and remained under customs control at all times. The declaration also states that the merchandise was consolidated with other shipments of the same merchandise destined to the United States.
-9203 Outline of the Japan Customs Bonded System.
-Approval notice for re-loading, dated August 15, 2107. The notice lists Kumiai as the shipper and the protestant as the consignee. It lists invoice number 70301-3.
-The manufacturing process of Pyroxasulfone, production flow, and production records.
-PI’s license to manufacture Pyroxasulfone issued by the Government of Gujarat.
-Certificates of analysis from the Quality Control Department.
-PI’s cost accounting methodology.
-Independent auditor certificate regarding the manufacturing and processing costs for the Pyroxasulfone.
-List of raw materials used to produce the Pyroxasulfone and the cost breakout.
-Import/export license issued to PI by the Directorate General of Foreign Trade Government of India.
-A commercial invoice and a packing list, dated February 27, 2017, from PI to Ihara for certain raw materials; a bill of lading, dated March 9, 2017, for the raw materials; a Certificate of Origin issued by the Comprehensive Economic Partnership Agreement Between the Republic of India and Japan for the raw materials.
-Chemical structure of the materials.
-Patent information for Pyroxasulfone like products.
-Pyroxasulfone "Axeev" marketing material information.
-Invoices and bills of lading issued to PI for the raw materials.
-Breakout of the direct costs of processing of the Pyroxasulfone.
ISSUE:
Whether the Pyroxasulfone manufactured in India and imported into the United States via Japan is eligible for duty-free treatment under 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 United States. 19 U.S.C. § 2463(a)(2)(A).
Pursuant to General Note 4(a), Harmonized Tariff Schedule of the United States (“HTSUS”), India is a designated BDC for GSP purposes. It is claimed that the Pyroxasulfone is classified under subheading 2934.99.90, HTSUS, which is a GSP eligible provision.
The first issue in this case concerns whether the Pyroxasulfone manufactured in India is considered to be “imported directly” from India to the United States when it is shipped from India through Japan, and subsequently entered into the United States.
The “imported directly” requirement is defined in 19 C.F.R. § 10.175, in pertinent part, as follows:
(a) Direct shipment from the beneficiary country to the United States without passing through the territory of any other country; or
(b) 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; or
(c) If shipped from the beneficiary developing country to the United States
through a free trade zone in a beneficiary developing country, the merchandise shall not enter into the commerce of the country maintaining the free trade zone…
or
(d) 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 Center 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 Pyroxasulfone is not shipped directly from India to the United States; therefore, it does not meet the “imported directly” requirement set forth in 19 C.F.R. § 10.175(a). With respect to the applicability of 19 C.F.R. § 10.175(b), while it is notated near the bottom of the invoice and the packing list from PI and Kumiai, and the bill of lading that the final destination of the merchandise is the United States, these documents indicate that the port of loading is Nhava Sheva, India and the port of destination is Yokohama, Japan. Consequently, the Pyroxasulfone does not meet the requirement of 19 C.F.R. § 10.175(b). The Pyroxasulfone was not shipped through a free trade zone; therefore, 19 C.F.R. § 10.175(c) is not applicable.
The only remaining provision under which the Pyroxasulfone may be considered “imported directly” is 19 C.F.R. § 10.175(d). 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. 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. 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 Headquarters Ruling Letter (“HQ”) 557921, dated July 27, 1994; HQ 557937, dated September 29, 1994; HQ 556373, dated January 17, 1992.
In the instant case, the Pyroxasulfone is shipped from India to the Sumitomo customs bonded warehouse in Yokohama Japan. It is stated that no other activities were performed in the Sumitomo customs bonded warehouse other than consolidating shipments that were destined to the United States by loading, unloading, and related shipping activities including the removal of obsolete shipping documents from the plastic pouch affixed by PI in India on the outside of the packing. Further, it is stated that the Pyroxasulfone did not enter into the commerce of Japan before it was imported into the United States. Rather, the Pyroxasulfone remained under customs control as the articles were subject to restrictions placed on the inventory stored within the Sumitomo customs bonded warehouse.
We note that there are discrepancies in the documents submitted. For example, the quantity and total price listed on the purchase order, dated August 2, 2017, from the protestant to Kumiai do not match the amounts listed on the invoice from Kumiai to the protestant. Further, the payment from the protestant to Kumiai does not match the amount listed on the commercial invoice from Kumiai to the protestant. The Declaration of Dangerous Goods lists the consignee as BASF Agrochemical Products rather the protestant. There are duplicate purchase orders, one from Ihara to PI and one from Kumiai to PI and the quantity and total value on these purchase orders do not match. It is stated that since Ihara merged back with Kumiai as of May 1, 2017, Kumiai reissued the purchase order to PI under Kumiai’s name. The bill of lading issued by Interasia, dated May 24, 2017, and the Certificate of Origin, dated May 22, 2017, issued by the Comprehensive Economic Partnership Agreement between the Republic of India and Japan, list the classification of the merchandise as subheading 3808.93.90, HTSUS, even though the claimed classification is subheading 2934.99.90, HTSUS. Further, Kumiai’s application for bailment to the Sumitomo Warehouse Co., Ltd., dated May 1, 2017, lists Pyroxasulfone manufactured in India and Pyroxasulfone manufactured in China. It is unclear how the Pyroxasulfone manufactured in India and China are tracked in the warehouse. Based on the discrepancy of the documents submitted, we find that the Pyroxasulfone does not meet the “imported directly” requirement under the GSP.
HOLDING:
Based on the information provided, we find that the Pyroxasulfone does not meet the “imported directly” requirement under the GSP. Accordingly, the imported Pyroxasulfone is not eligible for duty-free treatment under the GSP.
You are to mail this decision to the U.S. importer, through the importer’s customs consultant, no later than 60 days from the date of the decision. At that time, the Office of Trade, Regulations and Rulings, will make the decision available to CBP personnel and the public at www.cbp.gov, through the Freedom of Information Act and other methods of public distribution.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch