OT:RR:CTF:ER
H236325 PTM
Area Port Director
237 West Service Road
Champlain, New York 12919
Dear Port Director,
We are writing in response to your request for internal advice, which you sent to our office on November 28, 2012, concerning the administrative entry of merchandise. Our determination in this matter is set forth below.
FACTS:
First Canadian Diamond Cutting Works (“First Canadian”) is a jewelry manufacturer located in Canada. Overstock.com, Inc. (“Overstock”) is an online retailer of various products, including jewelry valued at $200 or less. In response to inquiries from CBP, First Canadian provided a description of the typical transaction between internet customers, Overstock, and First Canadian. See Letter from First Canadian to CBP Area Port of Champlain, November 16, 2012 (herein the “First Canadian Response”).
First Canadian states that customers may purchase the jewelry online from Overstock. Overstock authorizes the charge for the purchase price to the customer. See First Canadian Response at 2. Depending on the number of items in the order and the nature of the purchases, a customer’s order may be filled by several different suppliers. Id. First Canadian is one such supplier. In further correspondence with this office, First Canadian explains that there is no underlying supplier contract between it and Overstock, but that the two companies have only an established business relationship. Furthermore, First Canadian states that there is no standing order between it and Overstock. That is, there is no contract to purchase a minimum or set amount of merchandise.
Customer orders are relayed from Overstock to suppliers once they are submitted online. Certain jewelry purchases made on Overstock.com are submitted to First Canadian for fulfillment. Overstock’s suppliers, including First Canadian, log into Overstock’s “supplier demand” system and download individual orders to be filled and shipped by that supplier. The order file contains the date and time of the order, the merchandise ordered, the shipping address of the customer and the preferred shipment method. First Canadian downloads the order into its system and sends the information to its warehouse for processing. The warehouse fills the order, packs the parcel, and generates the shipping label for each individual order. First Canadian uploads tracking information to Overstock, including: carrier, tracking number, shipment date, Overstock invoice number and the individual supplier invoice number from the supplier to Overstock. Once the shipment has been picked up for delivery at First Canadian’s warehouse, Overstock marks the order as “shipped” in its system and transmits the tracking number to the customer. At this time, Overstock captures the pre-authorized payment from the customer.
The individual parcels are grouped for ease of shipment by First Canadian but are listed individually on manifests. A sample invoice provided shows the shipment of a piece of jewelry from First Canadian at its address in Canada to a customer at his residence in the United States. The invoice contains a product code, a description of the merchandise sold, the quantity sold, date of the order, country of origin of the merchandise, and customer name and address. A common carrier collects all of the individual packages ready for shipment from First Canadian and transports them to the United States. The packages are entered informally under the administrative entry procedure available to importations of $200 or less by the presentation of the invoice. The individual purchasers of the merchandise are shown on the manifest. First Canadian states that the individual purchasers are the importer of record for the purposes of the entry. Once the packages have been entered into the United States, they are delivered to the U.S. Postal Service or FedEx for delivery to the individual customers. Overstock generates a bi-monthly statement of all invoices for individual orders sent to individual customers and transmits a wire payment to the supplier.
You state that it is the port’s position that First Canadian and Overstock are filling orders pursuant to a contract. See Request for Internal Advice (November 28, 2012) at 4. Therefore, it is your opinion that the shipments are part of a larger “single order or contract” sent separately for the purposes of securing free entry, and are therefore ineligible for the administrative exemption from duty. First Canadian states that the importations are eligible for the administrative exemption from duty, as the transaction complies with statutory and regulatory requirements for the exemption. It states that its position is supported by an information letter issued by this office on May 10, 2010, and previous published rulings.
ISSUE:
Whether the importation of individual online orders of merchandise consigned to individual purchasers valued at less than $200 qualify for the administrative exemption from duty set forth in 19 U.S.C. §1321 and 19 C.F.R. § 10.151.
LAW AND ANALYSIS:
Section 321(a)(2)(C) of the Tariff Act of 1930, as amended, codified at 19 U.S.C. §1321(a)(2)(C) provides for the duty free entry of articles valued at $200 or less. It provides:
§ 1321. Administrative exemptions (a) Disregard of minor discrepancies in collection of taxes and duties; admission of articles free of duty or tax; limit on amount of exemption. The Secretary of the Treasury, in order to avoid expense and inconvenience to the Government disproportionate to the amount of revenue that would otherwise be collected, is hereby authorized, under such regulations as he shall prescribe, to—
* * *
(2) admit articles free of duty and of any tax imposed on or by reason of importation, but the aggregate fair retail value in the country of shipment of articles imported by one person on one day and exempted from the payment of duty shall not exceed an amount specified by the Secretary by regulation, but not less than—
* * *
(C) $200 in any other case.
The privilege of this subdivision (2) shall not be granted in any case in which merchandise covered by a single order or contract is forwarded in separate lots to secure the benefit of this subdivision (2); …
The administrative exemption from duty was established by the Customs Simplification Act of 1953 (Pub L. 67-243), which had as its primary purpose of “the saving of time, money, and complications in the administration of our customs laws.” See Senate Report No. 632. To that end, the law “[eliminated] certain unnecessary annoyances and inequities which [plagued] both the Government and private parties engaged in the import-export business.” Id. Consistent with that those objectives, the law authorized CBP “to admit articles free of duty when the expense and inconvenience of collecting the duty or tax would be disproportionate to the amount of such duty, but it limits the amount imported by one person in any one day.” Id. The CBP regulation promulgated thereunder, 19 C.F.R. §10.151, provides:
§ 10.151 Importations not over $200.
Subject to the conditions in § 10.153 of this part, the port director shall pass free of duty and tax any shipment of merchandise, as defined in § 101.1 of this chapter, imported by one person on one day having a fair retail value, as evidenced by, an oral declaration, or the bill of lading (or other document filed as the entry) or manifest listing each bill of lading, in the country of shipment not exceeding $200, unless he has reason to believe that the shipment is one of several lots covered by a single order or contract and that it was sent separately for the express purpose of securing free entry therefor or of avoiding compliance with any pertinent law or regulation. Merchandise subject to this exemption shall be entered under the informal entry procedures (see subpart C, part 143, and §§ 128.24, 145.31, 148.12, and 148.62, of this chapter).
Thus, shipments of merchandise of $200 or less imported by one person by one day are entitled to duty free entry. Furthermore, the regulation focuses on the importer’s transaction. However, importers may not split a shipment that has an aggregate value of over $200 into two or more shipments of lesser value for the sole purpose of securing duty free entry or for avoiding compliance with other laws.
The language of both 19 U.S.C. §1321 and 19 C.F.R. §10.151 put the focus of the exemption from duty on the importer of the merchandise, inasmuch as it may only be claimed on importations of merchandise of $200 or less by one person on one day. Thus, it is necessary to ascertain who is importing the merchandise, and whether the importation by that importer exceeds $200 on one day. In this case, each order of jewelry originates from an individual customer and is filled by First Canadian. The order is relayed from Overstock to First Canadian. First Canadian fills the order and sends it directly to the purchaser, rather than to Overstock. In other words, Overstock simply acts as an intermediary party in the transaction, and the focus must be on the individual importer for the purposes of claiming the exemption under 19 U.S.C. §1321. In the arrangement described, the merchandise is imported by one person, the internet customer, on one day, and is valued at less than $200. Consequently, the individual orders cannot be said to a part of a single order sent separately for the express purpose of securing free entry under 19 U.S.C. §1321 and 19 C.F.R. §10.151, as the entirety of each importer’s order is $200 or less. Therefore, provided the value of the individual purchases are $200 or less, they are eligible for duty-free entry pursuant to 19 C.F.R. §1321 and 19 C.F.R. §10.151.
CBP has consistently permitted orders of merchandise of $200 or less ordered online or through a catalog and delivered directly to the purchaser to enter duty-free pursuant to 19 U.S.C. §1321 and 19 C.F.R. §10.151. For example, in HQ 115828 (Dec. 2, 2002), Sears Roebuck contracted with a supplier based in Canada to fulfill orders placed by customers from its catalogs and internet sales channels. Most of the orders were for merchandise valued at less than $200. Once the orders were placed with Sears Roebuck, it would transmit the order to the supplier in Canada. The supplier filled the order from inventory and shipped the merchandise directly to the customer in the United States. We held that those shipments could be imported free of duty under the informal entry procedures, because the merchandise was imported by one person (the purchaser) on one day. You state that this case is distinguishable from HQ 115828 in that the supplier was partially owned by Sears Roebuck, unlike the situation here where Overstock and First Canadian are unrelated parties. Based on this distinction, it is your position that the analysis therein does not apply. We do not agree. In both cases the retailer facilitates the importation of merchandise of $200 or less to individual importers in the United States. Furthermore, we note that neither 19 U.S.C. §1321 nor 19 C.F.R. §10.151 require that a retailer and overseas shipper be unrelated parties. So long as the merchandise is $200 or less, imported by one person on one day, it is eligible for the exemption.
Two additional rulings clarify that the focus for claiming the exemption from duty under 19 U.S.C. §1321 must be on the person importing the good, rather than the retail party facilitating that importation. In HQ H114562 (January 7, 1999), we addressed a situation where customers in the United States placed orders of cosmetics with sales agents. The orders were filled from a distribution center in Canada, but were shipped to the sales agent in the United States, who would in turn deliver the item to the purchaser. Although the individual orders were typically valued at less than $200, all of the orders were imported by the sales agent instead of directly to the purchaser. In that ruling, we stated that:
the $200 per day value limit will apply to the sales agents, not to the individual purchasers. (In contrast, the $200 per day value limit would apply to each individual purchaser if the parcels were sent directly from Canada to the individual purchasers.) This means that Section 321 may not be used if the aggregate value of the parcels received by a sales agent on a given day exceeds $200.
See HQ H114562. Thus, in this situation the sales agent, rather than the individual customer, was considered the importer. Consequently, the $200 a day limit applied to the agent. By contrast, in HQ 115779 (Aug. 29, 2002), we held that purchases of textiles of $200 or less, ordered online and shipped from overseas directly to customers for their personal use, were entitled to entry under 19 U.S.C. §1321, provided that they were imported by one person on one day and not part of a single shipment broken up into increments for the purpose of avoiding duty. The merchandise here is shipped directly to the purchasers, rather than to Overstock. As the ruling explains, the $200 per day value limit applies to each individual purchaser. Because the individual orders of jewelry of $200 are shipped directly to the customer, the administrative exemption from duty should apply.
HOLDING:
Online purchases of jewelry of $200 or less placed by individual purchasers and shipped directly to the customer in the United States by an overseas supplier are entitled to duty free entry under the provisions of 19 U.S.C. §1321 and 19 C.F.R. 10.151, provided that the use of the exemption is restricted to one person on one day.
Please note that 19 C.F.R. §177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruing letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
Sincerely,
Myles B. Harmon
Director, Commercial and Trade Facilitation Division