VAL OT:RR:CTF:VS H081495 EE
Ms. Elise Shibles
Sandler, Travis & Rosenberg, P.A.
505 Sansome Street Suite 1475
San Francisco, CA 94111
RE: Automotive harnesses, connectors; DR-CAFTA; terminals, shorting clips; GSP
Dear Ms. Shibles:
This is in response to your correspondence dated October 19, 2009, on behalf of FCI USA, Inc. (“FCI”) concerning the eligibility of certain automotive harnesses and connectors for preferential tariff treatment under the Dominican Republic – Central America – United States Free Trade Agreement (“DR-CAFTA”), and the eligibility of certain terminals and shorting clips for preferential tariff treatment under the Generalized System of Preferences (“GSP”).
FACTS:
FCI plans the following supply chain operations:
Automotive harnesses of subheading 8544.30, Harmonized Tariff Schedule of the United States (“HTSUS”), and connectors of subheading 8536.90, HTSUS, will be produced in Honduras by a factory related to FCI. Each of the non-originating materials in the harnesses and connectors are stated to satisfy the change in tariff classification required under General Note (“GN”) 29(n), HTSUS, for DR-CAFTA originating goods. The harnesses and connectors will be shipped directly to the U.S. from Honduras. They will not enter the commerce of the U.S. and will be transported in-bond to Mexico, where they will be stored in a bonded warehouse under the control of the customs authorities of Mexico. When FCI’s customers order the harnesses or connectors, they will be shipped from the bonded warehouse to the U.S.
Automotive harnesses of subheading 8544.30, HTSUS, and connectors of subheading 8536.90, HTSUS, will be produced in Honduras by a factory related to FCI. Each of the non-originating materials in the harnesses and connectors are stated to satisfy the change in tariff classification required under GN 29(n), HTSUS, for DR-CAFTA originating goods. The harnesses and connectors will be shipped from Honduras to Mexico, where they will be stored in a bonded warehouse under the control of the customs authorities of Mexico. When FCI’s customers order the harnesses or connectors, they will be shipped from the bonded warehouse in Mexico to the U.S.
Terminals of subheading 8536.90, HTSUS, will be produced in Brazil. Shorting clips of 8543.70, HTSUS, will be produced in India. It is stated that both products will be produced in accordance with GN 4, HTSUS, pertaining to the GSP, by factories related to FCI. The terminals and shorting clips will be shipped directly to the U.S. from their respective countries of production. They will not enter the commerce of the U.S. and will be transported in-bond to Mexico, where they will be stored in a bonded warehouse under the control of the customs authorities of Mexico. When FCI’s customers order the terminals or shorting clips, they will be shipped from the bonded warehouse in Mexico to the U.S.
Terminals of subheading 8536.90, HTSUS, will be produced in Brazil. Shorting clips of 8543.70, HTSUS, will be produced in India. It is stated that both products will be produced in accordance with GN 4, HTSUS, pertaining to the GSP, by factories related to FCI. The terminals and shorting clips will be shipped from their respective countries of production to Mexico, where they will be stored in a bonded warehouse under the control of the customs authorities of Mexico. When FCI’s customers order the terminals or shorting clips, they will be shipped from the bonded warehouse in Mexico to the U.S.
You state that all of the described goods are sold to FCI by its related companies on an ex works basis. It is stated that at no time will any of the goods enter the commerce of Mexico. The goods will be imported into the U.S. by FCI.
ISSUES:
Whether certain automotive harnesses and connectors produced in Honduras are eligible for preferential tariff treatment under the DR-CAFTA.
Whether certain terminals produced in Brazil and shorting clips produced in India are eligible for preferential tariff treatment under the GSP.
LAW AND ANALYSIS:
DR-CAFTA Eligibility
The Dominican Republic - Central America - United States Free Trade Agreement (“DR-CAFTA” or “Agreement”) was signed by the governments of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States on August 5, 2004. The U.S. Congress approved the DR-CAFTA with the enactment on August 2, 2005, of the DR-CAFTA Implementation Act (the “Act”), Pub. L. 109-53, 119 Stat. 462 (19 U.S.C. § 4001 et seq.). GN 29 of the HTSUS sets forth the rules of origin for the DR-CAFTA. Interim regulations for the DR-CAFTA are set forth in 73 FR 33673, dated June 13, 2008, and are found in section 10.581, Customs Regulations (19 C.F.R. § 10.581 et seq.).
This ruling does not address whether the automotive harnesses and connectors are originating goods under DR-CAFTA. You claim that the automotive harnesses and connectors are eligible for preferential treatment under DR-CAFTA as originating goods, having met the transit and transshipment requirements of the Agreement. 19 C.F.R. § 10.604 provides:
(a) General. A good that has undergone production necessary to qualify as an originating good under § 10.594 of this subpart will not be considered an originating good if, subsequent to that production, the good:
(1) Undergoes further production or any other operation outside the territories of the Parties, other than unloading, reloading, or any other operation necessary to preserve the good in good condition or to transport the good to the territory of a Party; or
(2) Does not remain under the control of customs authorities in the territory of a non-Party.
(b) Documentary evidence. An importer making a claim that a good is originating may be required to demonstrate, to CBP’s satisfaction, that the conditions and requirements set forth in paragraph (a) of this section were met. An importer may demonstrate compliance with this section by submitting documentary evidence. Such evidence may include, but is not limited to, bills of lading, airway bills, packing lists, commercial invoices, receiving and inventory records, and customs entry and exit documents.
See also GN 29(c)(iii), HTSUS.
In the first proposed supply chain operation, the automotive harnesses and connectors, produced in Honduras, will be shipped directly to the U.S. from Honduras. They will not enter the commerce of the U.S. and will be transported in-bond to Mexico, where they will be stored in a bonded warehouse under the control of the customs authorities of Mexico. When FCI’s customers order the harnesses or connectors, they will be shipped from the bonded warehouse to the U.S. You state that the automotive harnesses and connectors will not undergo any further production outside the DR-CAFTA territory. In the second proposed supply chain operation, the automotive harnesses and connectors, produced in Honduras, will be shipped from Honduras to Mexico, where they will be stored in a bonded warehouse under the control of the customs authorities of Mexico. When FCI’s customers order the harnesses or connectors, they will be shipped from the bonded warehouse in Mexico to the U.S. You state that the automotive harnesses and connectors will not undergo any further production outside the DR-CAFTA territory. Based on your descriptions of both scenarios, since the automotive harnesses and connectors will not be subject to any operation other than unloading, storage, and reloading while outside the territories of the DR-CAFTA parties and will remain under the control of the customs authorities of Mexico, we find that they will not be considered to have transited or transshipped through a non-party and thus may qualify for preferential tariff treatment under the DR-CAFTA provided the documentary requirements of 19 C.F.R. § 10.604, and all other requirements of the DR-CAFTA are satisfied.
GSP Eligibility
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 GN 4(a), HTSUS, Brazil and India are designated BDCs for GSP purposes. Based on the information you provided, the terminals are classified in subheading 8536.90, HTSUS, and the shorting clips are classified in subheading 8543.70, HTSUS, which are GSP eligible provisions. For purposes of this ruling, we will assume that the terminals are “products of” Brazil and the shorting clips are “products of” India and that the 35 percent value-content requirement is satisfied.
You claim that the terminals and shorting clips meet the direct shipment requirements of the GSP. 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 third proposed supply chain operation, the terminals, produced in Brazil, and shorting clips, produced in India, will be shipped directly to the U.S. from their respective countries of production. They will not enter the commerce of the U.S. and will be transported in-bond to Mexico, where they will be stored in a bonded warehouse under the control of the customs authorities of Mexico. When FCI’s customers order the terminals or shorting clips, they will be shipped from the bonded warehouse in Mexico to the U.S. Since the terminals and shorting clips are shipped from their respective countries of production to the U.S., transported in-bond to Mexico, and then shipped to the U.S., they do 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 terminals and the shorting clips do not enter into the commerce of Mexico. However, since the U.S. is not identified as the final destination when exported from Brazil or India, the merchandise does not meet the requirements of 19 C.F.R. § 10.175(b). The terminals and the shorting clips will not be shipped through a free trade zone; therefore, 19 C.F.R. § 10.175(c) is not applicable.
The only remaining provision under which the terminals and the shorting clips 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. 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. 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.
19 C.F.R. § 10.175(d) applies in instances where the merchandise is shipped from a BDC to the U.S. through the territory of “any other country”. In the proposed supply chain operation, the terminals, produced in Brazil, and shorting clips, produced in India, are shipped from their respective countries of production to the U.S., transported in-bond to Mexico where they will remain until they are shipped to the U.S. Since the initial shipment is not through the territory of another country, 19 C.F.R. § 10.175(d) is not applicable. Accordingly, we find that under the third proposed supply chain operation, the terminals, produced in Brazil, and shorting clips, produced in India, will not meet the “imported directly” requirement of the GSP. While this scenario may not be that much different from the fourth scenario, the regulations concerning the GSP imported directly requirement are quite specific.
In the fourth proposed supply chain operation, the terminals, produced in Brazil, and shorting clips, produced in India, will be shipped from their respective countries of production to Mexico, where they will be stored in a bonded warehouse under the control of the customs authorities of Mexico. When FCI’s customers order the terminals or shorting clips, they will be shipped from the bonded warehouse in Mexico to the U.S. Since the terminals, produced in Brazil, and shorting clips, produced in India, are not shipped directly from their respective countries of production to the U.S., they do 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 terminals and the shorting clips do not enter into the commerce of Mexico. However, since the U.S. is not identified as the final destination when exported from Brazil or India, the merchandise does not meet the requirements of 19 C.F.R. § 10.175(b). The terminals and the shorting clips were not shipped through a free trade zone; therefore, 19 C.F.R. § 10.175(c) is not applicable. With respect to 19 C.F.R. § 10.175(d), as previously noted, the U.S. is not identified as the final destination when the terminals, produced in Brazil, and shorting clips, produced in India, are exported from their respective countries of production. However, the products will be stored in a bonded warehouse under the control of the customs authorities of Mexico; they will not enter the commerce of the Mexico; and, they are stored in a bonded warehouse until needed to fill orders in the U.S. Accordingly, we find that the terminals, produced in Brazil, and shorting clips, produced in India, meet the “imported directly” requirement of the GSP provided 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.
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 automotive harnesses and connectors, which are produced in Honduras, transported in-bond through the U.S. to Mexico for storage in a bonded warehouse under the control of the customs authority of Mexico, and then shipped into the U.S. will not be considered to have transited or transshipped through a non-party, and thus may qualify for preferential tariff treatment under the DR-CAFTA provided the documentary requirements of 19 C.F.R. § 10.604, and all other requirements of the DR-CAFTA are satisfied.
The automotive harnesses and connectors, which are produced in Honduras, shipped to Mexico and then to the U.S. will not be considered to have transited or transshipped through a non-party, and thus may qualify for preferential tariff treatment under the DR-CAFTA provided the documentary requirements of 19 C.F.R. § 10.604, and all other requirements of the DR-CAFTA are satisfied.
The terminals, which are produced in Brazil, and shorting clips, which are produced in India, transported in-bond through the U.S. to Mexico, and then shipped to the U.S. will not satisfy the “imported directly” requirement set forth under the GSP.
The terminals, which are produced in Brazil, and shorting clips, which are produced in India, shipped through Mexico for storage in a bonded warehouse under the control of the customs authority of Mexico to the U.S. satisfy the “imported directly” requirement 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 CBP officer handling the transaction.
Sincerely,
Monika R. Brenner
Chief
Valuation & Special Programs Branch