HQ 114396 - Importer of Record; Customs Business; 19 U.S.C. ?1484; 19 U.S.C. ?1641 - United States International Trade Commision Rulings

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HQ 114396

January 20, 1999

BRO-1-RR:IT:EC 114396 GG

CATEGORY: BROKERS

Mr. James R. Cahill
President
Cahill Customs Consulting, Inc.
P.O. Box 821067
South Florida, Florida 33082-1067

RE: Importer of Record; Customs Business; 19 U.S.C. ?1484; 19 U.S.C. ?1641

Dear Mr. Cahill:

This is in response to your ruling request, dated June 24, 1998, made on behalf of your client, Southern Distributing Enterprises.

FACTS:

Southern Distributing Enterprises ("SDE") is an importer and freight forwarder. SDE specializes in cold storage and the distribution of produce to large retailers. Several foreign corporations operating farms in foreign countries have proposed naming SDE as importer of record for the products that they ship to the United States. The purpose of the arrangement is to have SDE clear the products through Customs, ensure that all applicable other agency requirements are met, and provide logistical, accounting, cold storage, pick and pack, trucking and related services. Upon instruction from the foreign corporations, SDE will also arrange for delivery of the imported products to domestic or Canadian buyers. The buyers pay the foreign corporations for the produce.

Several of SDE's employees are familiarizing themselves with Customs laws and regulations in anticipation of becoming licensed customs brokers. SDE, in assuming the role of importer of record, will be responsible for meeting all licensing, insurance, and bond requirements.

ISSUE:

Whether SDE, an unlicensed importer and freight forwarder, may serve as importer of record of merchandise owned by or sold to others by foreign corporations.

LAW AND ANALYSIS:

Section 484 of the Tariff Act of 1930, as amended (19 U.S.C. record" may make entry. Section 484(a)(2)(B) restricts "importers of record" to the owner or purchaser of the merchandise, or, when appropriately designated by the owner, purchaser, or consignee, a licensed customs broker.

The terms "owner or purchaser" is defined in the "Right to Make Entry" Customs Directive 3530-02, dated November 6, 1984, to be:

[A]ny 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, a person or firm who imports on consignment, a person or firm who imports under loan or lease, a person or firm who imports for exhibition at a trade fair, a person or firm who imports goods for repair or alteration or further fabrication, etc. Any such owner or purchaser may make entry on his own behalf or may designate a licensed customhouse broker to make entry on his behalf and may be shown as the importer of record on the CF 7501. The terms "owner" or "purchaser" would not include a "nominal consignee" who effectively, possesses no other right, title, or interest in the goods except as he possessed under a bill of lading, air waybill, or other shipping document.

Examples of nominal consignees not authorized to file Customs entries are courier services, freight consolidators who handle consolidated shipments ..., and customhouse brokers who are not licensed to transact customs business in customs [broker] districts where a shipment is being entered.

The directive also specifies that in situations where a nominal consignee designates a broker to make entry on his behalf, the broker must be listed as importer of record both on the entry and the entry summary. The broker's bond will be obligated in such cases to secure the payment of duties and taxes.

In the proposed arrangement between SDE and the foreign corporations, SDE will never assume title to the imported merchandise. Therefore, SDE may not claim importer of record status on ownership grounds. The other listed types of involvement which would confer sufficient financial interest in the merchandise also are absent. For example, SDE will not import the
produce on consignment, or as a selling agent acting on the foreign corporations' behalf. Rather, in arranging for the transportation, storage, and repacking of the merchandise, SDE's role will be that of a freight forwarder. If the shipping documents list SDE as a consignee in these transactions, SDE as nominal consignee may appoint a broker to make entry in the broker's name for the shipments. See, National Customs Brokers and Forwarders Association v. United States, 14 CIT 108, 731 F. Supp. 1076 (1990); J.F.K. Customs Brokers v. United States, 745 F. Supp. 113 (E.D.N.Y. 1990). However, SDE would be precluded from serving as importer of record. If SDE is not listed as a consignee, then the actual owners or purchasers will have to enter the merchandise, or arrange for a broker to make entry for them. A consignee of the merchandise could also designate a broker for the transaction.

In addition to being ineligible to be named as importer of record for shipments sent by the foreign corporations, SDE may not perform any activities for those corporations or for the U.S. purchasers of the produce which would fall within the definition of "customs business". This is because only licensed brokers may transact customs business on behalf of another. "Customs business" is defined in 19 U.S.C. ?1641(a)(2) as those activities

[I]nvolving transactions with the Customs Service concerning the entry and admissibility of merchandise, its classification and valuation, the payment of duties, taxes, or other charges assessed or collected by the Customs Service by reason of its importation, or the refund, rebate, or drawback thereof. It also includes the preparation of documents or forms in any format and the electronic transmission of documents, invoices, bills, or parts thereof, intended to be filed with the Customs Service in furtherance of such activities, whether or not signed or filed by the preparer, or activities relating to such preparation, but does not include the mere electronic transmission of data received for transmission to Customs.

An unlicensed person who intentionally transacts customs business for another is subject to a $10,000 penalty per transaction (19 U.S.C. ?1641(b)(6)). Consequently, SDE cannot "clear" the produce sold by the foreign corporations through Customs, if such clearance involves the filing of a consumption entry or amounts to any of the activities described in the above definition. It is immaterial that several of SDE's employees may become licensed brokers; the key is that SDE must itself obtain a brokerage license to transact customs business as a broker. In addition, SDE may not appoint its licensed employees to make entry either for SDE or for other persons. The Customs Service does not regulate the activities of freight forwarders and as such, would have no objection to SDE providing freight forwarding services to the foreign corporations.

HOLDING:

SDE, in its capacity as freight forwarder, lacks sufficient financial interest in the merchandise owned by or sold to others by the foreign corporations to qualify as importer of record. SDE would also be precluded from transacting "customs business" on behalf of either the foreign corporations or the U.S. purchasers of the produce.

Sincerely,

Jerry Laderberg
Chief

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