HQ 555181: GSP Treatment of Telephone Answering Equipment

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                                         HQ 555181

                                    June 16, 1989

          CLA-2 CO:R:CV:V 555181 BJO

          CATEGORY: Classification

          Mr. John H. Nessley
          President
          Edward S. Zerwekh Company
          P.O Box 368
          Wilmington, California 90748

          Re: GSP Treatment of Telephone Answering Equipment

          Dear Mr. Nessley:

               This is in response to your letters of September 6 and
          November 8, 1988, on behalf of Phone Mate Inc., in which you
          inquired whether telephone answering equipment manufactured in
          Malaysia is eligible for duty free treatment under the
          Generalized System of Preferences (GSP)(19 U.S.C. 2461-2465) if
          containerized and quality control tested in Singapore prior to
          export to the U.S.

          FACTS:

               You state that your client will import telephone answering
          equipment produced by the Asahi Corporation.  The producer will
          manufacture and pack the merchandise for export in Malaysia, a
          beneficiary developing country (BDC), and then transport it to
          Singapore, a non-BDC as of January 1, 1989.  At its Singapore
          plant, which is not a customs bonded area, the producer will load
          the merchandise for export to the U.S. in containers holding only
          Malaysian-manufactured merchandise.  The producer may also, from
          time to time, perform quality control tests on the merchandise in
          Singapore, the results of which will be placed in the box
          containing the tested article.  The invoices, packing lists, and
          GSP Form A for the merchandise will be produced by the Malaysian
          factory, or if the invoice is prepared in Singapore "because of
          office facility purposes," it will be on the producer's Malaysian
          factory letterhead but will contain a statement disclosing that
          it was prepared by the Singapore office.  A copy of the truck
          bill of lading covering movement of the cargo from Malaysia to
          Singapore will be provided.  


















                                         - 2 -

          ISSUE:

               Whether merchandise is "imported directly" to the U.S. from
          a BDC for GSP purposes if it is shipped from the BDC to a non-
          BDC, where it is quality control tested and loaded into
          containers for export to the U.S.

          LAW AND ANALYSIS:

               Under the GSP, eligible articles which are imported directly
          from a designated beneficiary developing country (BDC) into the
          U.S. qualify for duty-free treatment if the sum of the cost or
          value of the constituent materials produced in the BDC plus the
          direct costs involved in processing the eligible article in the
          BDC is at least 35 percent of the article's appraised value at
          the time it is entered into the U.S. See 19 U.S.C. 2463.  The
          phrase "imported directly" is defined in section 10.175 of the
          Customs Regulations (19 CFR 10.175).  For purposes of this
          ruling, we will assume that the merchandise is GSP eligible and
          that the local value-content minimum will be met.

               Under 19 CFR 10.175, merchandise shipped through a non-BDC
          to the U.S. is "imported directly" if: 1) the merchandise does
          not enter into the commerce of the intermediate 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 (19 CFR
          10.175(b)); or 2) the merchandise does not enter into the
          commerce of the intermediate country except for the purpose of
          sale other than at retail, the shipment remains under the control
          of the customs authority of the intermediate country, and the
          shipment is not subjected to operations other than loading and
          unloading and other activities necessary to preserve the articles
          in good condition (19 CFR 10.175(d)).

               The shipment described in your letter does not appear to
          meet the requirements of either subsection.  It is not clear from
          your letter that the original shipping documents to be issued in
          the BDC will show the U.S. as the final destination, as required
          by 19 CFR 10.175(b).  In addition, a transshipment does not
          qualify if the merchandise enters the commerce of the
          intermediate country.  Merchandise enters the commerce of the
          intermediate country for purposes of the GSP if manipulated
          (other than by loading or unloading), offered for sale (whether
          or not a sale actually takes place), or subjected to a title
          change in that country. See Headquarters Ruling 071575, dated
          November 20, 1984.  Because quality control testing constitutes
















                                         - 3 -

          more than a loading and unloading, if such testing is performed
          on the  merchandise in Singapore, it will be deemed to enter the
          commerce of that intermediate country.

               We further find that the shipment will not meet the
          requirements of 19 CFR 10.175(d).  That section requires that the
          articles remain under the control of customs authorities in the
          non-BDC.  Your letter states, however, that the plant in
          Singapore where the operations will be performed is not a customs
          bonded area.  In addition, manipulation of the merchandise
          permitted in the non-BDC under 19 CFR 10.175(d) is limited to
          "loading and unloading, and other activities necessary to
          preserve the articles in good condition." 19 CFR 10.175(d)(3).
          As stated above, quality control testing of the phone equipment
          in Singapore constitutes more than loading and unloading of the
          articles.

          HOLDING:

               On the basis of the information provided, it is our opinion
          that the telephone answering equipment to be manufactured in a
          BDC and transported to a non-BDC for loading into containers and
          occasional quality control testing will not be imported directly
          from the BDC into the U.S. and, therefore, will not qualify for
          duty-free treatment under the GSP.

                                         Sincerely,




                                         John Durant, Director
                                         Commercial Rulings Division


          cc: District Director
              Los Angeles, California


          cc: CLA-2 CO:R:CV:V:BJO:BJO:FNL 6-15-89