Friday, August 22, 2014

Ruling of the Week 5: Right to Make Entry

There is an important and sometimes silly aspect of customs law involving who has the right to make entry. There is a statutory requirement that the importer of record for merchandise entering the U.S. be a party with the right to make entry. Specifically, the IOR may be the owner or purchaser of the goods or a broker appointed on behalf of the owner, purchaser or consignee. That is fine and seems clear. The problem is that it just does not fit with all of the crazy ways international transactions get structured these days. For example, what if Acme Corp. Canada owns some merchandise located in Canada that it wants processed in the U.S. by a third party. There is no purchaser in the U.S. because Acme Canada continues to own the goods. Acme Canada could be the (non-resident) importer as the owner. But, what if Acme Corp. USA decides to offer to help and act as importer? That might be an issue. Acme USA is not the owner (that is Acme Canada), it is not the purchaser, and because the goods are going to a third party, it is not the consignee. What to do?

Customs and Border Protection has been extremely reasonable on this issue, which is a good thing. According to Customs, it views the "owner" of the goods as being any party with a financial interest in the transaction. See Directive 3530-002A (Jun. 27, 2001). Note, this is not any part with a financial interest in the merchandise (for example a lien). Rather, it is a financial interest in the transaction.

In HQ H240983 (Jun. 23, 2014), Customs considered whether a selling agent working for the foreign producer is an "owner" with the right to make entry even though it never takes ownership (in the traditional sense) of the goods. The Directive referenced above explicitly includes buying and selling agents as parties with an interest in the transaction. Consequently, the only real question here was whether the party involved qualifies as a selling agent. If so, no problem.

In this case, the agent's activities were controlled by the seller. Those activities included securing purchase orders, establishing shipping schedules, customer service, and reporting to the seller on the progress of the transaction. The agent also performed post-entry logistical services for which it was compensated. Taken together, the agent qualified as a selling agent and had a financial interest in the transaction over and above its status as an agent. Thus, the agent had the right to make entry as the owner or purchaser of the goods.

All of which is perfectly logical and informative. Of course, what should really happen is that Congress should amend the law to avoid people having to ask this question. The IOR should probably by any party in the U.S. or with a registered agent in the U.S. who is willing to get bonded by a surety and accept responsibility for the shipment. Isn't that pretty close to where we are now?

1 comment:

Anonymous said...

Dear Larry,
Thank you for the insight on the Right to Make Entry. Relative to your final statment "IOR should be any party in the U.S. or with a registered agent...willing to get bonded by a surety adn accept responsibilty for the shipment", do you have experience/cases where CBP is currently allowing this as practice? For example, with ACME Canada consigning goods to the US and ACME US acting as a selling agent - if the actions by ACME US is to act as IOR and Export of Record when material is shipped back to Canada as well as arrange transportation but does not get involved in placing orders with the US 3rd party, however ACME US will receive a % of the invoice value for their services, is this "enough" of a financial interest to deem ACME US as the US IOR? Thank you in advance for your additional comments. Regards. Suzanne