RR:IT:VA 546583 KCC
William J. Maloney
Rode & Qualey
295 Madison Avenue
New York, NY 10017
RE: Related parties; 402(g)(1)(C); one person member of the
board of directors of importer and supplier; 402(g)(1)(G);
control
Dear Mr. Maloney:
This is in regard to your letter dated December 6, 1996, on
behalf of IFT International, Inc. You request a ruling
concerning whether IFT International, Inc. is related to one of
its suppliers, [xxxxxxxxxxxxx], pursuant to 402(g)(1) of the
Tariff Act of 1930, as amended by the Trade Agreements Act of
1979 (TAA; 19 U.S.C. 1401a(g)(1)). Additional submissions dated
July 22, and 24, and September 18, 1997, were taken into
consideration in reaching this decision. We regret the delay in
responding to your request.
In your ruling request, you sought confidential treatment
with regard to the names of your client's supplier and the
supplier's parent. For the reasons set forth in your submission,
your request is granted. We have excised, in the public version
of this decision, the bracketed confidential information below.
FACTS:
IFT International, Inc. ("IFT") is an importer of women's
wearing apparel. IFT purchases the apparel from manufacturers
located in Italy who have been licensed by designers to produce
particular fashion lines. The wearing apparel is imported
principally through New York. IFT generally employs sales agents
who assist in soliciting orders from customers. The sales agents
receive a commission based on a percentage of the net sales price
collected by IFT.
You state that IFT is presently entering merchandise
purchased from [xxxxxxxxxxxxxx] ("the supplier") and is declaring
a relationship for Customs entry purposes. In your December 6,
1996, letter you stated that the supplier was a wholly owned
subsidiary of [xxxxxxxxxxxxxxxxxxxxxxxxx] ("Company X").
However, in your July 24, 1997, submission, you state that
Company X no longer owns or has a financial interest in the
supplier. You submitted a letter from Company X to IFT stating
that neither Company X or the supplier own shares of stock or
have any financial interest in one another. Company X has a 20%
interest in IFT which you state is non-controlling. You state
that there is no control, contractual or otherwise, exercised by
Company X over the operations of IFT. Additionally, Company X's
20% interest in IFT is strictly financial and Company X is not
the largest shareholder of IFT. Neither the supplier or IFT own
shares in the other. In your July 22, 1997, submission you state
that a member of the board of directors of IFT is now on the
board of directors of the supplier. However, pursuant to your
July 24th submission, in approximately three weeks, this person
will no longer be on both the supplier and IFT's board of
directors. This person will remain a member of the board of
directors of IFT, but will only be an employee of the supplier.
You request that we address both of these situations in our
response.
ISSUE:
Is the importer, IFT International Inc., related to its
supplier pursuant to 402(g) of the TAA?
LAW AND ANALYSIS:
402(g)(1) of the TAA sets forth the definition of the term
"related persons" and provides, in relevant part, that the
following shall be treated as persons who are related:
(A) Members of the same family, including brothers and
sisters (whether by whole or half blood), spouse,
ancestors, and lineal descendants.
(B) Any officer or director of an organization and such
organization.
(C) An officer or director of an organization and an
officer or director of another organization, if each
such individual is also an officer or director in the
other organization.
(D) Partners.
(E) Employer and employee.
(F) Any person directly or indirectly owning, controlling,
or holding with power to vote, 5 percent or more of the
outstanding voting stock or shares of any organization
and such organization.
(G) Two or more persons directly or indirectly controlling,
controlled by, or under common control with, any
person.
As Company X no longer owns or has a financial interest in
the supplier, based on the information submitted, it does not
appear that they are related pursuant to 402(g)(1) of the TAA.
Thus, the only connection between the supplier and IFT which must
be examined is the person who performs services for both the
supplier and IFT. In the first situation, you state that this
person sits on the board of directors for both the supplier and
IFT. It is our position that in this situation, IFT and the
supplier are related pursuant to 402(g)(1)(C) of the TAA.
However, under the circumstance where the person is on the board
of directors for IFT and is only an employee of the supplier, it
is our position that IFT and the supplier are not related
pursuant to 402(g)(1) of the TAA.
Based on the information submitted, we are unable to
determine whether the parties are related pursuant to
402(g)(1)(G) of the TAA. No information was provided concerning
the supplier and IFT's business practices and relationship.
Thus, we are unable to determine whether the parties are
"directly or indirectly controlling, controlled by, or under
common control with, any person."
HOLDING:
Based on the information submitted, IFT International, Inc.,
is related to its supplier pursuant to 402(g)(1)(C) of the TAA,
where one person sits on the board of directors for both the
supplier and IFT. However, IFT and the supplier are not related
where one person is on the board of directors for IFT and is only
an employee of the supplier.
Based on the information submitted, we cannot determine
whether the supplier and IFT are related pursuant to
402(g)(1)(G) of the TAA.
Sincerely,
Acting Director
International Trade Compliance
Division