ENT-1-RR:IT:EC 115914 GG
Mr. Michael E. Roll
KMZ Rosenman
2029 Century Park East, Suite 2600
Los Angeles, CA 90067-3012
RE: Right to Make Entry; 19 U.S.C. § 1484; Modification Kits
Dear Mr. Roll:
This is in response to your ruling request, dated February 6, 2003, made on behalf of your client, Tokyo Electron America, Inc. (“TEA”). You ask for expedited treatment, stating that TEA has a clear need for immediate consideration because it is being pressured by its customers to act as the importer of record starting in April 2003 and its sales are vital to its business. You also note that the issues are straightforward given the fact that Customs recently addressed a nearly identical fact pattern in a ruling issued to TEA. Although we do not find these reasons compelling enough to warrant immediate consideration under 19 CFR § 177.2(d), we have nevertheless taken measures to ensure an expeditious response.
You also ask for confidential treatment for certain information, which you have bracketed in your ruling request. Your request is granted.
FACTS:
TEA is a California corporation with its principal place of business in Austin, Texas. It has fifteen sales and service centers in the United States. It is a wholly owned subsidiary of Tokyo Electron Ltd. (“TEL”), a Japanese company that is one of the world’s largest suppliers of advanced equipment technology for global semiconductor manufacturing. TEL sells semiconductor manufacturing equipment to large U.S. semiconductor manufacturers.
TEA’s primary role is to: (1) communicate U.S. customer needs to TEL; (2) make product demonstrations to TEL’s U.S. customers; (3) communicate product specifications and acceptance criteria between TEL’s U.S. customers and TEL; (4) advertise in the United States on behalf of TEL; (5) monitor U.S. customer financial conditions on behalf of TEL; and (6) advise TEL with respect to market conditions. Each of these responsibilities is outlined in a Representative Agreement between TEA and TEL. In return, TEL pays TEA a commission based on a percentage of the sales price between TEL and the U.S. customer. TEA also is responsible for ordering and installing warranty parts for machines ordered by TEL’s U.S. customers.
Customs on January 10, 2002 issued HQ 115260, which held that TEA has the right to enter semiconductor production equipment (i.e., finished machines) in those instances when TEA acts in a selling agent capacity. It also ruled that TEA has the right to enter warranty parts for that equipment. However, Customs was not asked to rule upon the entry of “upgrade and/or modification kits.” The purpose of this ruling request is to confirm that TEA also has the right to enter these kits.
Modification kits are items that are sold to existing customers, and can range from a few simple component parts to hundreds of line items. Modification kits are designed to be a lower cost alternative to purchasing a new semiconductor production machine. The kits help a customer launch new product lines, move to the next level of technology, or simply increase the yields of their current tools. In addition to receiving compensation via a commission for the sale of the modification kits, TEA receives an hourly fee from TEL for the time it takes its engineers to install and test the functioning of the modification kits.
Due to the nature of the kits, most of the line items must be individually classified with the Harmonized Tariff Schedule number. As a result, customers have requested that TEL and TEA offer an alternative sales term (e.g., delivered duty paid) to shift the burden of classifying the kits to TEL and TEA. These transactions are identical to the sales described in HQ 115260, but for the fact that the imported merchandise is a modification kit rather than a complete machine.
ISSUE:
Whether TEA has the right to enter the modification kits.
LAW AND ANALYSIS:
Section 484 of the Tariff Act of 1930, as amended (19 U.S.C. §1484), provides that only parties qualified as the “importer of record” may make entry of imported merchandise. Section 484(a)(2)(B) specifies that the parties qualified to be an importer of record are the owner or purchaser of imported merchandise, or when appropriately designated by the owner, purchaser or consignee of the merchandise, a licensed customs broker.
“Owner” or “purchaser” is defined in Customs Directive 3530-002, dated June 27, 2001, as the following:
… 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, 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 Customs 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.
As mentioned above, Customs in HQ 115260 ruled that TEA had a sufficient financial interest in both the semiconductor manufacturing equipment and the warranty parts to make entry. That conclusion was arrived at primarily by examination of the Representative Agreement and a separate Service Agreement in place between TEL and TEA. It was determined that those agreements conferred on TEA the status of a selling agent, which under the above-cited directive are persons with the right to make entry. We note that the same Representative Agreement requires TEA to “communicate between TEL and the Customers the specifications and acceptance criteria of the Products, and the upgrades, modifications and replacements of key components of the Products." The Service Agreement, in turn, places on TEA the responsibility of providing “the upgrades, modifications and replacements of key components of the Products in accordance with TEL’s instructions.” These duties are extensions of TEA’s duties as a selling agent as discussed in HQ 115260. Accordingly, TEA may enter the modification kits that are the subject of this ruling request.
HOLDING:
TEA has the right to enter the modification kits.
Sincerely,
Glen E. Vereb
Chief,
Entry Procedures and Carriers Branch