HQ H007168 - McNeil-PPC, Inc. - United States International Trade Commision Rulings

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HQ H007168

August 2, 2007

OT:RR:CTF:ER H007168RDC

Robert J. Leo, Esq.
Meeks & Sheppard
330 Madison Avenue
39th Floor
New York, NY 10017

RE: McNeil-PPC, Inc.

Dear Mr. Leo:

This is in response to your letter dated 2/16/2007, in which you request a ruling on behalf of your client, McNeil-PPC, Inc., regarding whether "an unrelated third party" may act as importer of record. We agreed that the names of the parties, other than the requestor, McNeil-PPC, are confidential commercial information within the meaning of § 177.2(b)(7), CBP Regulations (19 C.F.R. § 177.2(b)(7)).

FACTS:

According to your correspondence, your client McNeil-PPC, Inc., (McNeil), purchased a line of products from a Seller. These products are produced by "independent, third party contractors" (Producers), which ship the goods to the U.S. The Seller has agreed to provide logistics services for a fee to McNeil. As part of these services, the Seller issues the purchase order, thus the Producers' invoices reflect the Seller as the purchaser and the receiver of the goods. The Producers will issue invoices for the goods to the Seller; the Seller will pay the invoices and be reimbursed by McNeil on a monthly basis. The Seller arranges for transportation of the goods, including the bills of lading and brokerage, to McNeil's distribution centers or to McNeil's customer. The logistics agreement also requires the Seller to "assist with the documentation and filing of necessary documents and declarations" required for importation into the U.S. At the time the goods are shipped, McNeill will own the goods and bear the risk of loss. You assert that the Seller has an "insurable interest or security interest in the goods" because the seller "possibly would not be paid if something happened to the goods while under their control . . . ." We note that the this ruling is based upon the facts as stipulated in McNeil's request of 2/16/2007.

ISSUE:

Does Seller have a financial interest in the imported goods such that it may act as importer of record?

LAW AND ANALYSIS:

Section 1484 describes the requirement for formal entry for consumption and the exceptions thereto. Per 19 U.S.C. § 1484, with enumerated exceptions, all merchandise imported into the customs territory of the U.S. must be entered by the "importer of record" as defined in § 1484(a)(2)(B). Customs Directive (C.D.) 3530-002A (6/27/2001), entitled "Right to Make Entry" defines the terms "owner or purchaser" as:
any party with a financial interest in the 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 . . . . . . . . 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.

Thus, "owner or purchaser of the merchandise" is "any party with a financial interest in the transaction," and is determined by the relationship of the would-be importer to the goods, i.e., the right to make entry is defined by the nature of the would-be importer's financial interest in the goods.

The examples of entities provided in C.D. 3530-002A as those with "financial interest in the transaction" so as to be considered the owner or purchaser of the goods and afforded the right to make entry, a buying or selling agent; one who imports on consignment, under loan or lease, for exhibition, repair, alteration or further fabrication, etc., enjoy something more than a custodial interest in the goods. That is, those considered to have a financial interest in the goods so as to be owners or purchasers, have interests in the goods which go beyond mere custody of the goods as in the bailee-to-bailor relationship evidenced by those excluded from having a financial interest, possessors of "a bill of lading, air waybill, or other shipping document." The requisite financial interest to be considered an owner or purchaser for purposes of making entry has been found when the entity is in some significant way expecting or relying on a financial benefit from the imported goods. The rulings on this matter identify a nexus between the financial welfare of the would-be importer and the imported goods when finding that the financial interest in the goods is sufficient to entitle the would-be importer to act as importer of record.

In HRL 116344 (1/25/2005), we determined that, where the seller of goods retained a "security interest" in the goods to ensure its right to payment for products sold and shipped, such seller retained a continuing "financial interest" in the goods, within the scope of C.D. 3530-002A, so as to enable the seller to act as importer of record with the right to make entry for the merchandise upon importation. In that case, title, ownership and risk of loss passed to the buyer upon the seller's delivery of the products to the foreign carrier for shipment to the customer in the U.S. The seller determined the means of carriage of the sold goods and invoiced the buyer for costs related to the shipment of the goods (shipping, handling, customs, insurance and similar charges). HRL 116344 stated that "significantly, however, notwithstanding that title and ownership of the products pass to the [buyer] upon their delivery to the foreign port of lading for shipment, [the seller], under its sales agreement, retains a "security interest" in all such products delivered to the [buyer] "as security for the performance by [buyer] of all of [buyer]'s obligations arising under this Agreement . . . ."

According to your correspondence, at the time the goods are shipped to the U.S., McNeill will own the goods and bear the risk of loss, but that the Seller retains an "insurable interest or security interest in the goods." Although the actual ownership of the products and risk of loss pass to McNeill at the time the goods are shipped, it is significant in this context that the Seller retains a security interest in the goods. This security interest retained by the Seller is reflective of its financial stake in securing payment for the goods and services it provides to McNeill. As stated in HRL 116344, the prevailing security interest possessed by [the Seller] in the present case would manifestly exceed any interest in the goods by a mere freight forwarder (shipper) or nominal consignee."

Further, you state that the Seller issues the purchase order, thus the Producers' invoices reflect the Seller as the purchaser and the receiver of the goods. The Producers will issue invoices for the goods to the Seller; the Seller will pay the invoices and be reimbursed by McNeil on a monthly basis. By issuing the purchase order and paying the resulting invoices, the Seller has committed to paying for the goods, though it does not own the goods. This obligation to pay the Producers for the goods and await reimbursement from McNeil gives the Seller a financial interest in the goods. The committing of its own resources to purchase the goods initially, and relying on McNeil to replace those resources, creates the requisite nexus between the financial welfare of the would-be importer, here the Seller, and the imported goods sufficient to entitle the Seller to act as importer of record.

HOLDING:

Seller has a financial interest in the imported goods such that it may act as importer of record.

Sincerely,

William G. Rosoff, Chief,

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