HQ 0224636 - Right to make entry; 19 U.S.C. 1484 - United States International Trade Commision Rulings

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HQ 224636

August 28, 1993

ENT-1-01-CO:R:C:E 224636 WR

CATEGORY: ENTRY

Patrick D. Gill, Esq.
RODE & QUALEY
295 Madison Avenue
New York, NY 10017

RE: Right to make entry; 19 U.S.C. 1484

Dear Mr. Gill:

This is in response to your letter of April 6, 1993, wherein you requested a binding ruling on behalf of your client, Sumitomo Corporation of America regarding the importation of certain rail cars and rail car shells.

FACTS:

Rail cars and rail car shells owned by Sumitomo Corporation (SC), a trading company, will be consigned to Sumitomo Corporation of America (SCOA). That merchandise will be sold by SC to Morrison Knudson Corporation (MK). The available evidence indicates that SCOA will only act for SC and will not own the merchandise and will not bear any risk of loss.

There is a contract between SC and SCOA under which SC is to perform all contractual requirements with MK. The contract also specifies that SC will negotiate with the actual manufacturer of the merchandise from whom SC will buy that merchandise. The contract does not refer to SC as the principal or to SCOA as SC's agent. The contract requires SCOA to assist SC in negotiations with the buyer, MK. Under the contract SCOA is to assist SC's supplier when requested to do so by SC. SCOA is to assist SC in obtaining inland transportation, document preparation and to transmit communications from SC to MK. Under the contract SCOA will share in 50 per cent of the profit from the sale between SC and MK. There is no contract provision dealing with the situation in which the cost of sales and transportation exceeds the sales price received from MK by SC.

ISSUE:

Whether SCOA has the right to make entry?

LAW AND ANALYSIS:

Under 19 U.S.C. 1484, the right to make entry is limited to an owner, purchaser or a properly authorized customhouse broker. The Customs Service implemented that statute with instructions contained in Customs Directive 3530-02 of November 6, 1984. That directive provided in part:

An "owner" or "purchaser" is defined as any party with a financial interest in a transaction including, but not limited to, the actual owner of the goods, the actual purchaser of the goods, a buying or selling agent. . . ."

There is no evidence to show that SCOA owns the merchandise by way of payment and obtaining title to the goods. It is not claimed that SCOA is the purchaser from SC. It is asserted that SCOA has the right to make entry because it is the selling agent of SC.

A selling agent for Customs purposes is a person who acts for a foreign supplier in selling the supplier's goods to a U.S. importer. Norco Sales Co. v. United States, 65 Cust. Ct. 778, R.D. 11732 (1970). In the case of F.C. Gerlach & Co. et al v. United States, Reap. Dec. 5084, 6 Cust. Ct. 710, 714 (1941), the court discussed the attributes of a selling agent. There, the contract expressly provided for an exclusive agency contract. Here, the contract does not state that it is a contract of agency nor does it refer to the parties as principal and agent. There, the agent was to receive a commission even if the principal did not use the services of the agent. Here, the terms of the contract call for SCOA to provide assistance to SC upon SC's request. However, those terms do not exclude the payment of 50 per cent of the net profits even if SC fails to request assistance from SCOA. In the case, the court found that the foreign manufacturer, and not the U.S. agent, was responsible for delivery to the U.S. purchaser. Here, SC is responsible for performing all contractual requirements with MK. In Gerlach, the court found that the foreign manufacturer was responsible for setting the sales price. Under the SC-SCOA contract, there is no authority for SCOA to set the price. Further, SC collects the sales price and remits the SCOA share to SCOA. The Gerlach court found that the U.S representative of the foreign manufacturer was a selling agent. The significant difference is that in the court case, the contract expressly provided that the contract was an exclusive sales agency contract. Here, the contract is silent as to whether the parties are a principal and agent.

The facts are critical to a proper analysis of whether an agency relationship exists. New Trends Inc. v. United States, 10 CIT 637, 645 F. Supp. 957 (1986). In that case, the court held that one can submit to a degree of control by another without becoming the agent of another. The court, relying on earlier cases, held that significant factors illustrative of an agency showing active control were: the active role of the principal in the sales process, direct negotiations with the suppliers as to price and specifications, the awareness of the subsidiary parties of the principal's role, and the lack of discretion on the part of the agent as to the purchase of the merchandise. While that case dealt with a buying agency, the agency criterion that the court employed are equally applicable to any agency analysis. In the instant case, SC was responsible for controlling the contract both with SC's suppliers and SC's customer MK. Under the SC-SCOA contract, SCOA was responsible only to assist SC in technical and commercial negotiations and only when requested by SC. It was to collect specification information and to transmit this to SC.

The case of Jay-Arr Slimwear Inc. v. United States, 12 CIT 133, 681 F. Supp. 875 (1988), concerned the issue whether the importer's representative was a buying or selling agent. The court first noted that regardless of how the parties characterize the relationship the existence of an agency is determined by examining the actual transaction. Thus, the absence of the words "principal" and "agent" in the SC-SCOA contract is not automatically fatal to finding that an agency was created. The court said at 137:

Examples of services which are characteristic of those rendered by a bona fide agent include: compiling market information, gathering samples, translating, placing orders based on the buyer's instructions, procuring the merchandise, assisting in factory negotiations, inspecting and packing the goods, and arranging for shipment and payment.

Under the SC-SCOA contract SCOA was responsible for assisting SC in negotiations with MK, the customer and with SC's suppliers. SCOA was responsible for collecting changes in specifications and to transmit that information to SC. SCOA was to provide information on inland transportation and to arrange for a performance bond in the name of SC, SCOA was responsible for preparing the necessary documentation on SC's request. Thus, the actual performance terms of the SC-SCOA contract meet those illustrations with respect to an agency and the absence of the terms "principal" and "agent" would not be controlling in this instance. It cannot be over emphasized that a proper determination depends on the actual facts of each situation. To the same effect is Rosenthal-Netter Inc. v. United States, 12 CIT 77, 79, 679 F. Supp. 21 (1988), aff'd 7 Fed. Cir. 11, 861 F.2d 261 (1988); Moss Mfg. Co. Inc. v. United States, 13 CIT 420, 714 F. Supp. 1223, aff'd 8 Fed. Cir. 40, 896 F.2d 535 (1990); Monarch Luggage Co. v. United States, 13 CIT 523, 525, 715 F. Supp. 1115 (1989); and Pier 1 Imports, Inc. v. United States, 13 CIT 161, 167, 708 F. Supp. 351 (1989).

HOLDING:

The Sumitomo Corporation of America (SCOA) is the agent of the Sumitomo Corporation (SC) and, therefore, it has a sufficient financial interest in the subject transaction to entitle it to be importer of record for the rail cars and rail car shells.

Sincerely,

John Durant, Director

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