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HQ 559705

March 7, 1997

MAR 2-10 RR:TC:SM 559705 KBR


Port Director
U.S. Customs Service
200 St. Paul Place
Baltimore, MD 21202

RE: Application for Further Review of Protest No. 1303-95-100516 Concerning the Eligibility of Ferro Chrome for Duty-free Treatment Under the Generalized System of Preferences ("GSP"); Imported Directly; 19 CFR ?10.175(d)

Dear Sir:

This is in reference to the above-cited Application for Further Review of Protest filed by Samuel Shapiro & Co., Inc., on behalf of their client Minerais U.S., Inc., contesting the denial of eligibility of ferro chrome for duty-free treatment under the Generalized System of Preferences ("GSP").


Minerais U.S., Inc. ("Minerais") is protesting a denial of eligibility of ferro chrome for duty-free treatment under the GSP. The parent company of Minerais ("PM") purchased ferro chrome from Kluchevskoy Ferroalloy Plant ("KFP"), a producer of ferro chrome in Russia. The ferro chrome was transported through Rotterdam, Netherlands and Antwerp, Belgium, after which it was transported to the U.S. PM purchased the ferro chrome from KFP prior to the contract for sale to the subsidiary purchaser in the U.S.

The contract of sale dated September 8, 1994, from KFP to PM shows a delivery location of Holland and sales of 180 tons of the .03% ferro chrome and 120 tons of the .02% ferro chrome. Copies of unsigned contracts between PM and its U.S. subsidiary, indicate as point of delivery of "F.O.B. warehouse Rotterdam", a delivery date December 1994, and purchases of 220,462 pounds and 39,683 pounds of ferro chrome. Invoices 0117724 and 0117725 show that the ferro chrome was shipped from Rotterdam, Netherlands to Antwerp, Belgium prior to being shipped to the U. S. In letters dated September 27, 1995, and October 6, 1995, PM states that the ferro chrome shipped from Antwerp, Belgium to the U.S. was originally purchased specifically to cover the sale to the U.S. subsidiary.

The ferro chrome was denied duty-free treatment under the GSP and was found to be dutiable at 3.1 percent.

A timely Application for Further Review and Protest was filed on November 15, 1995.


Whether the ferro chrome from Russia was "imported directly" for purposes of the GSP when it was shipped through intermediary countries to the U.S. as described above.


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. See 19 U.S.C. 2463(b)(1). The phrase "imported directly" is defined in section 10.175 of the Customs Regulations (19 CFR 10.175).

The issue in this case concerns whether the ferro chrome from Russia is considered to be "imported directly" from the BDC to the U.S., when it is shipped from the BDC through Rotterdam, Netherlands and Antwerp, Belgium; and subsequently entered into the U.S. Under 19 CFR 10.175(b), merchandise shipped from a BDC through a non-BDC to the U.S. is "imported directly" if: (1) the merchandise does 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 this instance, the contract of sale of the ferro chrome was between the Russian seller (KFP) and the parent company of Minerais (PM). The contracts between KFP and PM do not show the U.S. as the point of delivery. It appears that at the time of the contract between PM and KFP, the subsequent contracts for sale to the subsidiary in the U.S. were not completed. Therefore, the documents issued in the BDC do not show the U.S. as the final destination and the ferro chrome does not meet the requirements of 19 CFR 10.175(b). See HQ 555039 (June 16, 1989), HQ 557640 (January 5, 1994).

Subsection 10.175(d) states as follows:

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:

(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 district 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 subjected to operations other than loading and unloading, and other activities necessary to preserve the articles in good condition.

The above 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 T.D. 83-144 (June 28, 1983). In T.D. 83-144, Cameroon wrapper was produced in Cameroon and the Central African Republic. The Cameroon wrapper was shipped from the beneficiary countries to a French customs bonded transit warehouse in Le Havre until the sale 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, sold 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 HQ 557921 (July 27, 1994); HQ 557937 (September 29, 1994); HQ 556373 (January 17, 1992).

In this case, the goods were shipped from Russia to Rotterdam, Netherlands and then to Antwerp, Belgium where they were warehoused. However, there is no evidence to show that the ferro chrome remained under the control of the customs authority while in the warehouses in the two locations. Moreover, the record establishes that the importations resulted from the transaction between the importer and its parent company, rather than between the importer and the producer as is also required by 19 CFR 10.175(d). Therefore, the ferro chrome is not considered "imported directly" from a BDC to the U.S.


Based on the information submitted, we find that the ferro chrome shipped from Russia through Rotterdam, Netherlands and Antwerp, Belgium before importation into the U.S., was not "imported directly" as required under the GSP statute and under 19 CFR ?10.175. Therefore, the protest should be denied in full.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065 dated August 4, 1993, Subject: Revised Protest Directive, this decision should be attached to Customs Form 19, Notice of Action, and be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other public access channels.


John Durant, Director
Tariff Classification Appeals Division

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