H321970

 HQ H321970 November 17, 2022 OT:RR:CTF:VS H321970 EE CATEGORY: Classification Port Director U.S. Customs and Border Protection Port of New York/Newark 1100 Raymond Blvd. Newark, NJ 07102 RE: Internal Advice; Protest No. 4601-19-104145; Eligibility of Pyroxasulfone Technical for duty-free treatment under the Generalized System of Preferences; Imported Directly Requirement; 19 C.F.R. § 10.175 Dear Port Director: We are providing internal advice with regard to Protest No. 4601-19-104145 filed by counsel on June 7, 2019, on behalf of the importer, K-I Chemical U.S.A. Inc. (hereinafter, the “protestant”), concerning the eligibility of Pyroxasulfone Technical (“Pyroxasulfone”) for duty-free treatment under the Generalized System of Preferences (“GSP”). FACTS: The merchandise at issue consists of Pyroxasulfone entered on September 21, 2017 by the protestant under subheading 2934.99.90, Harmonized Tariff Schedule of the United States (“HTSUS”) as eligible for preferential tariff treatment under the GSP. Since January 9, 2017, the protestant has purchased Pyroxasulfone from its parent company, Kumiai Chemical Industry Co., Ltd. (“Kumiai”), located in Japan. Kumiai purchases the Pyroxasulfone from PI Industries Ltd. (“PI”), a chemical manufacturer located in India, in its finished form and does not further process the Pyroxasulfone. While some U.S.-destined products were shipped directly to the United States in 2017, other products, including the merchandise at issue, were shipped to the Sumitomo customs bonded warehouse in Yokohama, Japan, prior to importation to the United States and did not enter the commerce of Japan. Kumiai retained custody over the U.S.-destined articles while in transport to/from and during storage in the Sumitomo customs bonded warehouse and did not perform any processing after the Pyroxasulfone was exported from India, nor did it undertake any other operations other than unloading, reloading, and related shipping activities. On February 12, 2018, CBP issued a proposed Notice of Action (CBP Form 29) indicating that verification of the entry revealed that the goods do not qualify for preferential tariff treatment under the GSP. Specifically, CBP indicated that the goods did not meet the requirements of 19 C.F.R. § 10.175. CBP stated that the Japanese certifications were not acceptable and the direct costs of processing operations were not substantiated. On December 10, 2018, the Port issued a Notice of Action (CBP Form 29) advising the protestant that an action had been taken to deny the claim for preferential tariff treatment under the GSP to the entry which was the subject of the verification. Specifically, the port indicated that the goods did not meet the requirements of 19 C.F.R. §§ 10.171-10.178 because: (a) there was insufficient evidence to establish that the goods were “imported directly” as defined in 19 C.F.R. § 10.175; (b) evidence submitted to demonstrate direct shipment was insufficient; (c) there was no proof of manufacturing or factory/labor costs provided; (d) the evidence of processing costs provided could not be substantiated; and (e) there was insufficient evidence to substantiate direct costs of processing of not less than 35 percent of value. Subsequently, CBP reliquidated the entries on December 11, 2018 denying GSP treatment. Counsel for the protestant timely filed a protest on June 7, 2019, claiming that the imported merchandise qualifies for duty-free treatment under the GSP. The protestant states the imported Pyroxasulfone qualified as originating under the GSP, and therefore the protestant’s claim for duty-free treatment under the GSP was proper and that the payment made to CBP should be refunded in full with interest. The protestant provided the following documents in support of the claim that the merchandise at issue is entitled to duty-free treatment under the GSP: -Purchase order no. 370125, dated August 2, 2017, from the protestant to Kumiai for the merchandise at issue for a specified dollar amount. The quantity listed is 136,000 kg. The purchase order indicates CIF Port of NY/NJ term of sale. It is noted on the purchase order that the merchandise should be sent as a direct shipment from India to the United States. -Invoice number 70301-3, dated August 18, 2017, from Kumiai to the protestant for the merchandise at issue, weighing a total of 8,000 kg for a specified dollar amount. The invoice indicates CIF Newark term of sale. It is noted on the invoice that “final destination is USA only”. -A packing list from Kumiai to the protestant, dated August 18, 2017, which corresponds to invoice number 70301-3. It is noted on the packing list that “final destination is USA only”. -A wire transaction statement from the Bank of Tokyo-Mitsubishi UFJ, Ltd. for a wire transfer from the protestant to Kumai for certain dollar amounts dated October 31, 2017. -A “preview payment” from the Bank of Tokyo-Mitsubishi UFJ, Ltd. for an international wire from the protestant to Kumiai for a certain dollar amount, dated September 11, 2017. -A bill of lading issued by Maersk Line, dated August 18, 2017, listing the shipper as Kumiai and the consignee as the protestant. The port of loading is Yokohama and the port of discharge is Newark. The weight listed is 8,500 kg. The bill of lading references purchase order no. 370125-3 from the protestant to Kumiai. The bill of lading indicates “final destination USA only”. -A Certificate of Origin, dated August 29, 2017, issued by the Tokyo Chamber of Commerce & Industry stating that the country of origin of the merchandise at issue is India on the basis of invoice and supporting documents. -A Declaration of Dangerous Goods listing the shipper as Kumiai and the consignee as BASF Agrochemical Products and the place of departure as Yokohama and the destination as Newark. -A purchase order, dated April 14, 2017, from the Ihara Chemical Industry Co. Ltd. to PI for the merchandise at issue weighing a total of 312,000 kg for a certain dollar amount. The purchase order indicates CIF destination port term of sale. -A revised purchase order, dated May 11, 2017, from Kumiai to PI for the merchandise at issue weighing a total of 224,000 kg for a certain dollar amount. The purchase order indicates CIF destination port term of sale. -Invoice number 9010422, dated May 17, 2017, from PI to Kumiai for the merchandise at issue, weighing a total of 8,000 kg for a certain dollar amount. The invoice indicates CIF Yokohama term of sale. The invoice notes “final destination USA only”. -A packing list, dated May 17, 2017, from PI to Kumiai which corresponds to invoice number 9010422. -Cable confirmation, dated June 17, 2017, from Mizuho Bank, Ltd. from Kumiai to PI for a certain dollar amount. Three invoice numbers are listed on the cable confirmation and a hand notation indicating that the payment for one of the invoices is the amount listed on invoice number 9010422. -Bill of lading no. A327A01559 issued by Interasia, dated May 24, 2017, listing the shipper as PI and the consignee as Kumiai. The place of receipt is Nhava Sheva, India and the place of delivery is Shimizu, Japan. Net weight listed is 6,125.36 kg. The bill of lading references invoice no. 9010422 from PI to Kumiai. The bill of lading indicates “final destination USA only”. -A Certificate of Origin, dated May 22, 2017, issued by the Comprehensive Economic Partnership Agreement between the Republic of India and Japan stating that the declaration by PI that the country of origin of the merchandise at issue is India is correct. The Certificate of Origin lists the merchandise and indicates that the net weight as 8,000 kg. -Declaration of Dangerous Goods listing PI as the shipper and Kumiai as the consignee. Place of receipt listed is Mumbai and place of delivery is Yokohama. It is noted that “final destination is USA only”. -Kumiai’s application for bailment to the Sumitomo Warehouse Co., Ltd., dated May 1, 2017, listing Pyroxasulfone manufactured

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 United States. 19 U.S.C. § 2463(a)(2)(A).Pursuant to General Note 4(a), Harmonized Tariff Schedule of the United States (“HTSUS”), India is a designated BDC for GSP purposes. It is claimed that the Pyroxasulfone is classified under subheading 2934.99.90, HTSUS, which is a GSP eligible provision. The first issue in this case concerns whether the Pyroxasulfone manufactured in India is considered to be “imported directly” from India to the United States when it is shipped from India through Japan, and subsequently entered into the United States. The “imported directly” requirement is defined in 19 C.F.R. § 10.175, in pertinent part, as follows:(a) Direct shipment from the beneficiary country to the United States without passing through the territory of any other country; or(b) 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(c) 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…or(d) 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 no