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

HQ H206716 May 16, 2012 VAL OT:RR:CTF:VS H206716 EE CATEGORY: Classification Mr. Alan R. Klestadt Mr. Kevin W. Leonard Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP 399 Park Avenue, 25th Floor New York, NY 10022 RE: Eligibility of certain bicycles for duty-free treatment under the Generalized System of Preferences; imported directly requirement; 19 C.F.R. § 10.175 Dear Messrs. Klestadt and Leonard: This is in response to your correspondence dated February 22, 2012, on behalf of Specialized Bicycle Components (“Specialized Bicycle”), concerning the eligibility of certain bicycles for duty-free treatment under the Generalized System of Preferences (“GSP”). FACTS: You state that the transactions at issue commence when the importer, Specialized Bicycle, issues purchase orders to Bestway Industrial Co., Ltd. (“Bestway”), located within the Manhattan Special Economic Zone (“Manhattan SEZ”) in Southeast Cambodia, for certain bicycles. Upon manufacture of the bicycles, Bestway will individually package the bicycles and “containerize” them (i.e., load the individually packaged bicycles into a closed container) in the Manhattan SEZ. The containers will then be shipped from Cambodia to the U.S. via the Port of Ho Chi Minh City, Vietnam. You state that the merchandise in the shipments will not undergo any operation in Vietnam other than loading onto the vessel for export to the U.S. Moreover, the commercial documents (including the purchase orders, commercial invoices, and bills of lading) will show the U.S. as the final destination of the goods. You state that the importer will purchase the bicycles “ex-factory, delivery to Ho Chi Minh City.” Specialized Bicycle will assume title and risk of loss at the factory gate in Cambodia. However, as an accommodation to Specialized Bicycle, Bestway will arrange to deliver the merchandise to the Port of Ho Chi Minh City. ISSUE: Whether certain bicycles manufactured in Cambodia and imported into the U.S. via Vietnam are 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), Harmonized Tariff Schedule of the United States (“HTSUS”), Cambodia is a designated BDC for GSP purposes. You state that the bicycles at issue are classifiable under GSP eligible HTSUS provisions. For the purposes of this ruling request, you ask us to assume that the articles are a “product of” Cambodia and satisfy the 35 percent value-content requirement. The issue in this case concerns whether the bicycles manufactured in Cambodia are considered to be “imported directly” from Cambodia to the U.S. when they are shipped from Cambodia through Vietnam, 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: . . . 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 . . . In the instant case, the bicycles are not shipped directly from Cambodia to the U.S. With respect to the applicability of 19 C.F.R. § 10.175(b), you state that the bicycles do not enter into the commerce of Vietnam. You state that the bicycles will not undergo any operations in Vietnam other than loading onto the vessel for export to the U.S. Additionally, you state that the commercial documents, including the purchase orders, commercial invoices, and bills of lading show the U.S. as the final destination of the bicycles. We have held for purposes of the GSP that merchandise is deemed to have entered the commerce of an intermediate country 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 the country. Headquarters Ruling Letter (“HQ”) 071575, dated November 20, 1984. You state that Specialized Bicycle will purchase the bicycles “ex-factory, delivery to Ho Chi Minh City.” As an accommodation to Specialized Bicycle, Bestway will arrange to deliver the merchandise to the Port of Ho Chi Minh City; however, Specialized Bicycle will assume title and risk of loss at the factory gate in Cambodia. We find that the bicycles are not subjected to a title change in the intermediate country. As they will not undergo any operations other than unloading and loading, they do not enter the commerce of Vietnam. Additionally, you state that the commercial documents show the U.S. as the final destination of the bicycles. Accordingly, we find that the bicycles meet the “imported directly” requirement under the GSP. Please note that, pursuant to 19 C.F.R. § 10.174, the port director may require that appropriate shipping papers, invoices, or other documents be submitted within 60 days of the date of entry as evidence that the articles were “imported directly.” In addition, this provision states that any evidence of direct shipment required by the port director shall be subject to such verification as the port director deems necessary. HOLDING: Based upon the information submitted, the bicycles, which are produced in Cambodia, shipped through Vietnam to the U.S. satisfy the “imported directly” requirement set forth under the GSP and are eligible for duty-free treatment 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