OT:RR:CTF:VS H250505 GaK
Edward Jablonski
Advance Auto Parts
5008 Airport Road
Roanoke, VA 24012
RE: GSP; U.S.-Korea Free Trade Agreement; Transshipment
Dear Mr. Jablonski:
This is in response to your eRuling dated October 14, 2013, requesting a ruling on behalf of Advance Auto Parts (the “Company”). Your request concerns the eligibility of merchandise exported from India and South Korea under the Generalized System of Preferences (“GSP”) and the U.S.-Korea Free Trade Agreement (“UKFTA”) respectively. Your request was forwarded to us from the National Commodity Specialist Division on January 23, 2014.
In particular, you ask whether the merchandises manufactured in India and South Korea would qualify for preferential treatment under the GSP and UKFTA if they are shipped to a Free Trade Zone (“FTZ”) in China for temporary storage and further distribution into the U.S.
FACTS:
According to your letter, the Company intends to import hand tools and replacement radio caps from India and windshield wipers and brake parts from South Korea. You state that the goods from India will meet all the qualifications for GSP and that the goods from South Korea will meet the requirements for the UKFTA. The goods will be shipped from its respective country of origin to a FTZ located in China for temporary storage until further distribution into the U.S. The purpose of routing the merchandise to China is for freight consolidation only.
You also provided a letter from the company’s FTZ operator, Danzas AEI Logistics (Shanghai) Co. Ltd. concerning the Wai Gao Qiao FTZ. The letter states that the FTZ operates under the supervision of China Customs and any goods entering the FTZ are considered to be outside the commerce of China for customs purposes.
ISSUE:
Whether temporary storage of the merchandise in the FTZ located in China is permitted under the GSP and UKFTA.
LAW AND ANALYSIS:
GSP
Under the GSP, eligible articles are the growth, product or manufacture of a designated beneficiary developing country (“BDC”) and which are imported directly into the customs territory of the U.S. from a BDC. Eligible articles 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. See 19 U.S.C. § 2463(a)(2). For purposes of this ruling, we will assume that the articles are GSP eligible, they are “products of” the GSP country, and the minimum local value-content requirement is met. However, no evidence has been presented to support the claim for GSP eligibility.
The phrase “imported directly” is defined in section 10.175 of the Customs Regulations (19 C.F.R. § 10.175). Under 19 C.F.R. § 10.175(b), articles shipped from a BDC through any other country to the U.S. are “imported directly” if the articles do not enter into the commerce of any other country while en route to the U.S., and the invoices, bills of lading, and other shipping documents show the U.S. as the final destination.
In Headquarters Ruling Letter (HQ) 560720 dated February 11, 1998, rifle scopes originating in the Philippines, Thailand or another BDC were shipped through an intermediary country and stored in a warehouse before being shipped to the U.S. While the rifle scopes were in the intermediary country, they were not sold, manipulated, offered for sale at retail, did not undergo a change of title, and were not repackaged or subdivided into lots and allocated to different customers in the U.S. or other countries. CBP held that assuming the commercial invoices, bills of lading, and other shipping documents showed the U.S. as the final destination for the merchandise, the rifle scopes would be “imported directly” under 19 C.F.R. § 10.175(b).
Similarly, in the instant case, it is stated that the hand tools and replacement radio caps from India will be merely stored in the consolidation warehouse in the FTZ in China and they will not be entered into the commerce of the intermediate country. While no supporting documentation has been submitted for our review, provided all the commercial invoices, bills of lading, and other shipping documents show the U.S. as the final destination of the merchandise, then the “imported directly” requirement of 19 C.F.R. § 10.175(b) will be met.
Please note that, pursuant to 19 C.F.R. § 10.174, the port director may require appropriate shipping papers, invoices, or other documents to 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. Furthermore, because you have not provided any evidence regarding the other requirements for a claim under the GSP, we cannot rule whether the merchandise, is in fact, entitled to duty-free treatment under the GSP.
UKFTA
Under the UKFTA, goods are considered originating if they are wholly obtained or produced entirely in the U.S. or Korea, each non-originating material used in the production of the good undergoes an applicable change in tariff classification, or the goods otherwise satisfy the regional value content requirements specified in General Note 33(o), HTSUS. See 19 C.F.R. § 10.1014. HTSUS General Note 33(c)(iii) further provides that an originating good will not be considered originating, if the good “undergoes further production or any other operation outside the territory of Korea or of the United States, other than unloading, reloading or any other process necessary to preserve the good in good condition or to transport the good to the territory of Korea or of the United States, or does not remain under the control of customs authorities in the territory of a country other than Korea or the United States.” See also 19 C.F.R. § 10.1025.
For purposes of this ruling request, we will assume that the windshield wipers and brake parts otherwise qualify for UKFTA treatment and that the only issue is the warehousing of the goods in China prior to U.S. distribution. Under this scenario, the transshipment in China may disqualify the merchandise if it violates the transit and transshipment provision of the UKFTA. Here, the only activity occurring outside the U.S. and Korea is temporary storage in a consolidation warehouse and according to the information from Danzas AEI Logistics, the goods will remain under Chinese customs supervision.
Pursuant to 19 C.F.R. § 10.1025(b), an importer claiming that a good is originating may be required to demonstrate compliance with the transit and transshipment provision of the UKFTA by providing documentation such as bills of lading, airway bills, packing lists, commercial invoices, receiving and inventory records, and customs entry and exit documents. Further, 19 C.F.R. § 10.1004 requires that an importer who makes a claim for preferential treatment under the UKFTA must submit, at the request of the port director, a certification stating that the good is originating from the U.S. or Korea.
Please note that the port director may deny preferential tariff treatment to the imported merchandise if the good is shipped through or transshipped in a country other than U.S. or Korea and the importer fails to provide evidence demonstrating to the satisfaction of the port director that the goods are originating. See 19 C.F.R. § 10.1008. Because you have not provided any evidence regarding the other requirements of a claim for UKFTA, we cannot rule whether the good, is in fact, entitled to duty-free treatment under the UKFTA.
HOLDING:
The temporary storage in a FTZ located in China for consolidation purposes is permitted under the GSP as set forth in 19 C.F.R. § 10.175(b) and the transit and transshipment provision of the UKFTA as set forth in General Note 33(c)(iii), HTSUS and 19 C.F.R. § 10.1025.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents are 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 and Special Programs Branch