Eligibility of imported woven polypropylene fabric for duty-free treatment under the Generalized System of Preferences; imported directly requirement; 19 C.F.R. § 10.175

HQ H064377 October 9, 2009 VAL OT:RR:CTF:VS H064377 EE CATEGORY: Classification Mr. Dave Walser UPS-SCS 2150 Peace Portal Way Blaine, WA 98230 RE: Eligibility of imported woven polypropylene fabric for duty-free treatment under the Generalized System of Preferences; imported directly requirement; 19 C.F.R. § 10.175 Dear Mr. Walser: This is in response to your correspondence dated January 19, 2009, received on June 5, 2009, on behalf of Interwrap Inc. (“Interwrap”), concerning the eligibility of certain woven polypropylene fabric for duty-free treatment under the Generalized System of Preferences (“GSP”). Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division for review. Our ruling is set forth below. FACTS: The merchandise in question consists of rolls of woven polypropylene fabric manufactured in India. The fabric is made by interweaving strips of polypropylene stated to be 5.1 mm in width. The interwoven polypropylene strips are coated on both sides with polyethylene or polypropylene material. A sample of fabric was submitted with your request. Articles made of strips of plastic of an apparent width of over 5 mm are classifiable in Chapter 46 as manufactures of plaiting material. You state that the coated woven polypropylene fabric, consisting of strips of polypropylene exceeding 5 mm in apparent width, is classifiable in subheading 4602.90.00, Harmonized Tariff Schedule of the United States (“HTSUS”). You state that the woven polypropylene fabric is imported directly from India into Canada by Interwrap under the Canadian Duties Relief Program (“DRP”). Interwrap Papers Ltd. then exports the product into the U.S. without further fabrication. Sample invoices, bills of lading, and information concerning the DRP were submitted. ISSUE: Whether the woven polypropylene fabric manufactured in India and imported into Canada under the DRP before exportation to the U.S. 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 U.S. 19 U.S.C. § 2463(a)(2)(A). Pursuant to General Note 4(a), HTSUS, India is a designated BDC for GSP purposes. Based on the information you provided, the woven polypropylene fabric is classified in subheading 4602.90.00, HTSUS, which is a GSP eligible provision. For the purposes of this ruling, we will assume that the woven polypropylene fabric is a “product of” India and that the 35 percent value-content requirement is satisfied. The issue in this case concerns whether the woven polypropylene fabric manufactured in India is considered to be “imported directly” from India to the U.S. when it is shipped from India through Canada, and subsequently entered into the U.S. The “imported directly” requirement is defined in 19 C.F.R. § 10.175, in pertinent part, as follows: Direct shipment from the beneficiary country to the United States without passing through the territory of any other country; or 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 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, 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: Remained under the control of the customs authority of the intermediate country; Did not enter into the commerce of the intermediate country except for the purpose of sale other than at retail, and the port 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 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 woven polypropylene fabric is not shipped directly from India to the U.S.; 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), you state that the woven polypropylene fabric does not enter into the commerce of Canada. However, the shipping documents from India submitted on September 3, 2009 do not show the U.S. as the final destination. The invoice and bills of lading submitted indicate that the delivery location is British Columbia, Canada. Consequently, the woven polypropylene fabric does not meet the requirement of 19 C.F.R. § 10.175(b). The woven polypropylene fabric 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 woven polypropylene fabric 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 woven polypropylene fabric is shipped from India to Canada where it is stored in Interwrap’s warehouse that is not bonded. You state that the merchandise enters into Canada under the Canadian DRP which relieves the payment of duties on imported goods that will eventually be re-exported either in the same condition or after being used, consumed, or expended in the processing of other goods. Key provisions of the DRP provide that duty relief at the time of importation may be granted for imported goods, intended for export from Canada, which are for further processing; display or demonstration in Canada; development or production in Canada of goods for subsequent export; or export without having been used in Canada for any purpose other than the above mentioned. Under the DRP, the goods may remain in Canada for up to four years of the date of release of the goods. Periodic audits are conducted by the Canadian government at the premises of the DRP participants’ to monitor compliance. Even though the Canadian government may have access to the participants’ records, the merchandise does not at any time enter into a customs bonded warehouse in Canada or remain under the control of Canadian Customs authorities. Conceivably, processing could occur under the DRP and this would go beyond the “imported directly” requirements of the GSP. Therefore we find that using the DRP will not necessarily guarantee that the requirements of 19 C.F.R. § 10.715(d)(1) are satisfied. Accordingly, we find that the woven polypropylene fabric will not meet the “imported directly” requirements of the GSP. HOLDING: Based upon the information submitted, the woven polypropylene fabric shipped from India through Canada will not satisfy the “imported directly” requirements set forth under the GSP. 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, Monika R. Brenner Chief Valuation & Special Programs Branch