CLA-2-71:OT:RR:NC:N4:433
Hilmar Dirks Bosch African Gemstones
P.O. Box 650
Hilton, KwaZulu-Natal 3245
South Africa
RE: The tariff classification of precious and semiprecious gemstones from Africa.
Dear Mr. Bosch:
In your letter dated January 12, 2011, you requested a tariff classification ruling.
In your submission you indicate that your company will be exporting rough, precious and semiprecious gemstones from South Africa to the United States. Examples of these gemstones, include sapphires, aquamarine, tanzanite, garnets, and tourmaline. It is stated within your submission that the previous method of cleaning gemstones involved cobbing, the chipping away at the stones through use of a small hammer; however, this method is out of date and more likely to fracture the stones, whereas sawing and careful grinding are a safer method. You further state that (1) the stones purchased are “mine-run,” meaning that you clean some of the stones by grinding or sawing for purposes of removing host-rocks and fractured parts from the stones, and (2) some gemstones, like tourmaline (from certain mines) need to be pre-shaped by grinding, so that they will not crack upon faceting.
Specifically, you ask: how will the grinding and sawing of the rough gemstones affect the tariff classification of these items imported into the United States and are they eligible for preferential duty treatment under the General System of Preferences (GSP) from South Africa, Tanzania and Nigeria?
Heading 7103 of the Harmonized Tariff Schedule of the United States (HTSUS) provides for “Precious Stones (other than diamonds) and semi-precious stones, whether or not worked or graded, mounted or set; ungraded precious stones (other than diamonds) and semi-precious stones, temporarily strung for convenience and transport.”
At the international level, The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System. While neither binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-90. The ENs to heading 7103, states that “the provisions of the second paragraph of Explanatory Note to heading 7102 apply, mutatis mutandis, to this heading.” The ENs to 7102, state that the heading covers “unworked stones, and stones worked, e.g., by cleaving, sawing, bruting, tumbling, faceting, grinding, polishing, drilling, engraving (including cameos and intaglios), preparing as doublets, provided they are neither set nor mounted.” Headquarters Ruling Letter 951197 dated June 24, 1992, determined that subheading 7103.10.20, HTSUS, was applicable in that the semiprecious gemstones were unworked and in the same condition as when mined from the earth. New York Ruling NY K83113 dated February 9, 2004, also ruled that precious and semiprecious gemstones, if unworked, were eligible for duty-free treatment under subheading 7103.10.20. However, based on your description, the gemstones are not eligible for duty-free treatment under subheading 7103.10.20, HTSUS, as the grinding operations to ensure stability in some gemstones and sawing operations to remove impurities and other flaws in other gemstones fall within the meaning of “worked,” as defined by the ENs to heading 7102, HTSUS, as applied to heading 7103, HTSUS. Consequently these precious and semiprecious gemstones would be more accurately classified in 7103.99.5080, HTSUS.
The applicable subheading for the worked, precious and semiprecious gemstones (other than jadeite), will be 7103.99.5080, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Precious stones (other than diamonds) and semi-precious stones, whether or not worked or graded but not strung, mounted or set; ungraded precious stones (other than diamonds) and semi-precious stones, temporarily strung for convenience of transport: Otherwise worked: Other: Other; Other.” The rate of duty will be 10.5% ad valorem.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/.
You have also inquired as to whether the gemstones from South Africa, Tanzania and Nigeria exported to the United States qualify for preferential duty treatment under the GSP. 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% of the appraised value of the article at the time of entry. See 19 U.S.C. 2463(b). 19 CFR 10.176, country of origin criteria, provides merchandise produced in a beneficiary developing country or any two or more countries which are members of the same association of countries, generally, may qualify for duty-free entry under GSP upon the article being either wholly the growth, product, or manufacture of, or is a new or different article of commerce that has been grown, produced, or manufactured in the BDC.
Under 19 CFR 10.175, eligible articles shall be imported directly from a BDC to qualify for treatment under the GSP. For purposes of 19 CFR 10.175, the words “imported directly” in pertinent part means: at (a) direct shipment from the beneficiary country to the United States without passing through the territory of any other country; at (b) if the shipment is from a BDC 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; and at (d) if the shipment is from any BDC 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: (1) remained under the control of the customs authority of the intermediate country; (2) 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 (3) were not subject to operations other than loading and unloading, and other activities necessary to preserve the articles in good condition. See 19 CFR 10.175, a through e, for a complete understanding of the term – imported directly.
For purposes of GSP, South Africa, Tanzania and Nigeria are designated BDC. These countries are not recognized as an association of countries that are treated as one entity under GSP. The further processing of the unworked precious and semiprecious gemstones into sawn and roughly shaped gemstones by African Gemstones of South Africa, does not result in a new or different article of commerce. As such, the unworked gemstones originating in Tanzania or Nigeria, and simply sawn or roughly shaped by African Gemstones, and subsequently exported to the United States would be ineligible for duty-free treatment under GSP, in that these gemstones fail to meet the “imported directly” requirements as specified in the aforementioned paragraph. However, simply sawn or roughly shaped gemstones that were originally mined in South Africa and exported from that country to the United States should qualify for duty-free treatment under GSP.
Articles, classifiable under subheading 7103.10.40, HTSUS, which are products of South Africa, are currently entitled to duty-free treatment under GSP upon [compliance] with all applicable regulations. The GSP, however, is subject to modification and periodic suspension, which may affect the status of your transaction at the time of entry for consumption or withdrawal from warehouse. To obtain current information on GSP, check our Web site at www.cbp.gov and search for the term "GSP".
This ruling is being issued under the provisions of Part 177 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 Neil H. Levy at (646) 733-3036.
Sincerely,
Robert B. Swierupski
Director
National Commodity Specialist Division