BRO-1-RR:IT:EC 114396 GG
Mr. James R. Cahill
President
Cahill Customs Consulting, Inc.
P.O. Box 821067
South Florida, Florida 33082-1067
RE: Importer of Record; Customs Business; 19 U.S.C. 1484; 19
U.S.C. 1641
Dear Mr. Cahill:
This is in response to your ruling request, dated June 24,
1998, made on behalf of your client, Southern Distributing
Enterprises.
FACTS:
Southern Distributing Enterprises ("SDE") is an importer and
freight forwarder. SDE specializes in cold storage and the
distribution of produce to large retailers. Several foreign
corporations operating farms in foreign countries have proposed
naming SDE as importer of record for the products that they ship
to the United States. The purpose of the arrangement is to have
SDE clear the products through Customs, ensure that all
applicable other agency requirements are met, and provide
logistical, accounting, cold storage, pick and pack, trucking and
related services. Upon instruction from the foreign
corporations, SDE will also arrange for delivery of the imported
products to domestic or Canadian buyers. The buyers pay the
foreign corporations for the produce.
Several of SDE's employees are familiarizing themselves with
Customs laws and regulations in anticipation of becoming licensed
customs brokers. SDE, in assuming the role of importer of
record, will be responsible for meeting all licensing, insurance,
and bond requirements.
ISSUE:
Whether SDE, an unlicensed importer and freight forwarder,
may serve as importer of record of merchandise owned by or sold
to others by foreign corporations.
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. Section 484(a)(2)(B) restricts
"importers of record" to the owner or purchaser of the
merchandise, or, when appropriately designated by the owner,
purchaser, or consignee, a licensed customs broker.
The terms "owner or purchaser" is defined in the "Right to
Make Entry" Customs Directive 3530-02, dated November 6, 1984, to
be:
[A]ny 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 customhouse 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.
Examples of nominal consignees not authorized to file
Customs entries are courier services, freight
consolidators who handle consolidated shipments ...,
and customhouse brokers who are not licensed to
transact customs business in customs [broker] districts
where a shipment is being entered.
The directive also specifies that in situations where a
nominal consignee designates a broker to make entry on his
behalf, the broker must be listed as importer of record both on
the entry and the entry summary. The broker's bond will be
obligated in such cases to secure the payment of duties and
taxes.
In the proposed arrangement between SDE and the foreign
corporations, SDE will never assume title to the imported
merchandise. Therefore, SDE may not claim importer of record
status on ownership grounds. The other listed types of
involvement which would confer sufficient financial interest in
the merchandise also are absent. For example, SDE will not
import the
produce on consignment, or as a selling agent acting on the
foreign corporations' behalf. Rather, in arranging for the
transportation, storage, and repacking of the merchandise, SDE's
role will be that of a freight forwarder. If the shipping
documents list SDE as a consignee in these transactions, SDE as
nominal consignee may appoint a broker to make entry in the
broker's name for the shipments. See, National Customs Brokers
and Forwarders Association v. United States, 14 CIT 108, 731 F.
Supp. 1076 (1990); J.F.K. Customs Brokers v. United States, 745
F. Supp. 113 (E.D.N.Y. 1990). However, SDE would be precluded
from serving as importer of record. If SDE is not listed as a
consignee, then the actual owners or purchasers will have to
enter the merchandise, or arrange for a broker to make entry for
them. A consignee of the merchandise could also designate a
broker for the transaction.
In addition to being ineligible to be named as importer of
record for shipments sent by the foreign corporations, SDE may
not perform any activities for those corporations or for the U.S.
purchasers of the produce which would fall within the definition
of "customs business". This is because only licensed brokers may
transact customs business on behalf of another. "Customs
business" is defined in 19 U.S.C. 1641(a)(2) as those activities
[I]nvolving transactions with the Customs Service
concerning the entry and admissibility of merchandise,
its classification and valuation, the payment of
duties, taxes, or other charges assessed or collected
by the Customs Service by reason of its importation, or
the refund, rebate, or drawback thereof. It also
includes the preparation of documents or forms in any
format and the electronic transmission of documents,
invoices, bills, or parts thereof, intended to be filed
with the Customs Service in furtherance of such
activities, whether or not signed or filed by the
preparer, or activities relating to such preparation,
but does not include the mere electronic transmission
of data received for transmission to Customs.
An unlicensed person who intentionally transacts customs business
for another is subject to a $10,000 penalty per transaction (19
U.S.C. 1641(b)(6)). Consequently, SDE cannot "clear" the
produce sold by the foreign corporations through Customs, if such
clearance involves the filing of a consumption entry or amounts
to any of the activities described in the above definition. It
is immaterial that several of SDE's employees may become licensed
brokers; the key is that SDE must itself obtain a brokerage
license to transact customs business as a broker. In addition,
SDE may not appoint its licensed employees to make entry either
for SDE or for other persons. The Customs Service does not
regulate the activities of freight forwarders and as such, would
have no objection to SDE providing freight forwarding services to
the foreign corporations.
HOLDING:
SDE, in its capacity as freight forwarder, lacks sufficient
financial interest in the merchandise owned by or sold to others
by the foreign corporations to qualify as importer of record.
SDE would also be precluded from transacting "customs business"
on behalf of either the foreign corporations or the U.S.
purchasers of the produce.
Sincerely,
Jerry Laderberg
Chief
Entry Procedures and Carriers
Branch