CLA-2-95:RR:NC:2:224 D83419
Jacob Holzscheiter
A.N. Deringer, Inc.
PO Box 284
Rt I-89
Highgate Springs VT 05460
RE: GSP Treatment of Ice Skates made in Thailand and the Czech
Republic.
Dear Mr. Holzscheiter:
In your letter dated October 28, 1998, on behalf of Bauer,
Inc., you inquired whether ice skates manufactured in Thailand
and in the Czech Republic were eligible for duty free treatment
under the Generalized System of Preferences (GSP) if, prior to
importation into the United States, they are warehoused in
Canada.
You state that your client will manufacture ice skates wholly
of material of Thailand and Czech Republic origin and ship the
finished skates to the United States with an intermittent stop at
a bonded warehouse in Canada. Two shipment scenarios are offered.
In scenario #1, Bauer, Inc., located in Montreal, Canada, will
purchase ice skates from manufacturers in the Czech Republic or
Thailand. The finished skates will be shipped directly to a
Canadian bonded warehouse without entering the commerce of any
intermediate country. There will be no processing operations
regarding the ice skates other than loading and unloading. As
orders are placed individual shipments will be sent in-bond from
the bonded warehouse to the United States for entry. Bauer Inc.,
Montreal will be the importer of record.
In scenario #2, a company identified as Bauer, USA will
purchase ice skates directly from producers in the Czech
Republic and Thailand and the ordered merchandise will be shipped
directly to a Canadian bonded warehouse for storage. The ice
skates will not be subjected to any operations other than loading
and unloading while in this bonded storage. When an order is
placed the shipment will be sent in bond from the bonded
warehouse to the United States for entry with Bauer USA as the
importer of record. All invoices and shipping documents will show
the United States as the final destination
Ice skates can be classified by reference to General Rule of
Interpretation (G.I.) 1 in subheading 9506.70.4000, Harmonized
Tariff Schedule of the United States Annotated (HTSUSA), the eo
nomine provision for articles and equipment for general physical
exercise...: ice skates and roller skates, including skating
boots with skates attached. The applicable duty rate is 3.5
percent ad valorem.
The GSP is a remewable, preferential trade program that allows
the products of many developing countries to enter the United
States free of duty. 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 United States from a BDC may redceive duty-free
treatment if the sum of the cost or value of materials produced
in the BDC, plus the direct cost involved in the processing of
the eligible article in the BDC is equivalent to at least 35
percent of the appraised value of the article at the time of
entry. See 19 U.S.C. 2463(b).
Both Thailand and The Czech Republic are designated BDCs. See
General Note 3(c)(ii)(A) of the HTSUSA. We have determined that
the subject ice skates are classifiable in subheading 9506.70.40,
HTSUSA, which is a GSP-eligible provision. Therefore, the ice
skates will receive duty-free treatment under the GSP if they are
"products of" Thailand or the Czech Republic, the 35 percent
value-content requirement is satisfied, and they are imported
directly to the U.S. There seems to be no GSP eligibility
question arising from product origin or meeting the local value-content minimum. Eligibility for the ice skates will stand or
fall on whether the given circumstances meet the test of the
"imported directly" requirement.
Section 10.175 of the Customs Regulations (19 CFR 10.175)
defines the expression "imported directly" for purposes of the
GSP. Paragraph (a) provides the most restrictive definition (that
is, direct shipment from the BDC to the United States without
passing through the territory of any other country), and
paragraphs (b)-(d) set forth certain limited derogations or
exceptions from the strict "imported directly" rule contained in
paragraph (a).
Under section 10.175, merchandise shipped through a non-BDC to
the United States is "imported directly" if: 1) the merchandise
does not enter into the commerce of the intermediate country
while en route to the United States, and the invoices, bills of
lading, and other shipping document show the United States as the
final destination (19 CFR 10.175(b)); or 2) the shipment remains
under the control of the Customs authority of the intermediate
country, the merchandise does not enter into the commerce of the
intermediate country, and the port director is satisfied that the
importation results from the original commercial transaction
between the importer and the producer, and the articles of the
shipment are not subjected to operations other than loading and
unloading and other activities necessary to preserve the articles
in good condition (19 CFR 10.175(d)).
The shipment described in your letter's second scenario appears
to meet the "imported directly" requirements of subsection (b) of
Title 19, Part 10, section 175. It describes a shipment of ice
skates exported from a BDC to the United States through the
territory of Canada under circumstances in which the skates in
the shipment do not enter into the commerce of Canada while en
route to the United States, and the invoices, bills of lading,
and other shipping documents associated with the movement of the
ice skates show the United States as the final destination for
the ice skates.
It is not clear from your description of the conditions set
forth in the first scenario that the original shipping documents
to be issued in the BDC will show the United States as the final
destination, as required by 19 CFR 10.175(b). The transhipment
through Canada will not qualify if the merchandise enters the
commerce of the intermediate country such as if the articles are
in some way manipulated or offered for sale or subjected to a
title change in that country.
However, if, as you assert, the skates under this scenario
remain under the control of the customs authority in Canada and
the articles do not enter into the commerce of Canada and Customs
in the person of the district director is satisfied that the
importation results from the original commercial transaction
between the importer and the producer, the shipment meets the
requirements of subsection (d) of section 175, in part 10 of
title 19 (19 CFR 10.175(d)) and will be eligible for duty-free
treatment upon entering the United States by virtue of their GSP
eligibility.
HOLDING:
On the basis of the circumstances of the scenarios provided, it
is our opinion that your client's ice skates, manufactured in
Thailand or the Czech Republic and transported to Canada where
they will await fulfillment of orders from the United States are
considered "imported directly" from the BDC to the United States
as that term is defined in 19 CFR 10.175 and qualify for duty-free treatment under the GSP.
This ruling is being issued under the provisions of Part 1777
of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above
should be provided with the entry documents filed at the time
this merchandise is imported. If you have any questions regarding
the ruling, contact National Import Specialist Tom McKenna at
212-466-5475.
Sincerely,
Robert B. Swierupski
Director,
National Commodity
Specialist Division