ENT 1-01
OT:RR:CTF:ER
H265228 SMS
Joseph A. Acayan
Givens & Johnston
950 Echo Lane, Suite 360
Houston, TX 77024-2788
Re: Request for a determination of the right to make entry, by Company A
Dear Mr. Acayan:
This is in response to your letter dated May 14, 2015, requesting a ruling on whether Company A has the right to make entry, and satisfies the criteria of “Importer of Record”, in connection with the imported Plant. Counsel has requested confidential treatment be accorded to certain information submitted in connection with this ruling request. In consideration of the request and sufficient justification presented pursuant to 19 CFR § 177.2(b)(7), this office will not identify the parties having any connection to the transactions under review nor any of the financial information provided to U.S. Customs and Border Protection (“CBP”). Information for which confidentiality is being accorded will be denoted in brackets in the confidential ruling response and will be redacted in any public version.
FACTS:
Company A designs, procures components for construction, and constructs plants. Company B produces and sells plants. On October 17, 2014, Company A and Company B entered into an agreement (“the Agreement”) for the procurement and construction of a turnkey Plant. Company B has entered into contracts to purchase foreign material and equipment for the Plant from foreign sources. Some of the materials, supplies, equipment, machinery, and other goods, used to assist in the production of the plant will be imported into the United States. Company A will not take ownership or title of the imported Plant parts or components. Company B will remain the owner of the imported parts and components. However, under the Agreement, Company A will serve as contractor to manage all imports, transport materials, store materials, and construct and install the imported parts and components. Company A will be responsible for the work to construct the plant, for paying the cost of the engineering, design, labor, and the procurement of technical and professional services. Moreover, Company A is responsible for any import taxes, customs duties and excise taxes payable on the imported parts and components and makes arrangements for customs clearance. Upon release from Customs custody, Company A is also responsible for delivery of the imported parts and components to the construction site and storage of the imported parts and components.
More importantly, while the title of the imported parts and components rests with Company B, the risk of loss is assumed by Company A. Article XVI, Section 16.8 of the Agreement states that Company A on behalf of Company B, will have the duty of care, custody, control, and risk of loss for any item of the imported equipment, which commences from the time of first landing of the item in the U.S. port of entry. Under Article III, Section 3.1, Company A assumes all responsibility for the Plant parts and components, including the importation and transportation from the port of entry to the plant site, and the storage of the equipment. Company A will arrange transportation insurance covering any risks related to transporting the materials. The title of all onshore work or local equipment will pass to Company B free and clear of all liens, claims, judgments, security interests, or encumbrances. Article XXIV, Section 24.1 obligates Company A to obtain insurance for the imported equipment, makes Company A liable for deductibles, and states that Company A assumes the risk of loss of the onshore work and equipment, until acceptance of the work. Based on the above, Company A believes that it has sufficient “financial interest” in the imported parts and components to qualify as importer of record.
ISSUE:
Whether Company A has sufficient “financial interest” in the imported parts and components to have a right to make entry.
LAW AND ANALYSIS:
Section 484(a)(1) of the Tariff Act of 1930, as amended (19 U.S.C. § 1484(a)(1)) provides that only parties qualifying as the “importer of record” may make entry. Those qualified parties are identified as the “owner” or “purchaser” of the goods or a broker appointed on behalf of an owner, purchaser, or consignee under 19 U.S.C. §1484(a)(2)(B). Owner and purchaser are further defined in Customs Directive, (“C.D.”), 3530-002A, dated June 27, 2001. Section 5.3.1 of the directive provides:
5.3.1 The terms “owner” and “purchaser” include 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.
C.D. 3530-002A. The directive explains that the terms owner and purchaser include any party with a financial interest in a transaction. Owners or purchasers have more than custodial interest in the goods. Id. Owners or purchasers have a financial interest in the goods that goes beyond that of a bailee or nominal consignee. The directive also provides examples of entities that have a “financial interest in the transaction” so as to be considered the owner or purchaser of the goods and afforded the right to make entry: a buying or selling agent; one who imports on consignment, under loan or lease, for exhibition, repair, alteration or further fabrication, etc., enjoy something more than a custodial interest in the goods. Id. “Financial interest” is defined as a nexus between the financial welfare of the owner or purchaser and the imported goods. See H007168 (Aug. 2, 2007) (noting that past rulings have identified “a nexus between the financial welfare of the would-be importer and the imported goods when finding that the financial interest in the goods is sufficient to entitle the would-be importer to act as importer of record”). Therefore, if Company A can show that it has a financial interest in the Plant at the time of entry, sufficient enough to constitute a nexus between Company A’s financial welfare and the imported goods, it may serve as the importer of record.
In Headquarters Ruling (“HQ”) 222020, dated August 1, 1990, we examined the right to make entry of a company that processed sugar, post-entry, also known as “tolling.” In HQ 222020, the company imported the goods, without title, but performed processing on the goods, under a “tolling” agreement. Additionally, in HQ 222020 there were contractual conditions that imposed the assumption of risk of loss on the importer, required the importer to purchase applicable insurance for the imported merchandise, and provided for the advancement of monies to process the goods. We concluded in HQ 222020 that these post-entry procedures and contractual terms demonstrated a financial interest for the importer, sufficient to justify a right to make entry even though the importer lacked title to the goods. In HQ 115805, dated January 7, 2003, a company sought to become the importer of record of rocket satellite materials. Its involvement with the materials included the planning and performing of prelaunch, launch, and post launch activities required to assemble, test, transport, and launch the rocket satellites. Id. The Technical Services Agreement between the requester and actual purchaser of the materials outlined the requester’s responsibilities, which included: control of, access to, and storage of imported materials, as well as obtaining licenses from the U.S. Department of State, Office of Defense Trade Controls, who demanded the requester ultimately be responsible for the goods. Id. CBP held that the responsibilities and tasks required of the requester are similar to the processing, testing, and installation procedures previously confirmed to afford the performer of those tasks, the right to make entry. Id. Moreover, in HQ 228151, dated January 22, 1999, we held that a company that was not the buyer and did not have title to the goods, but was hired solely to make post-entry installations of imported television equipment into news vans, had the right to make entry. See also, H247460 (Dec. 19, 2013) (the right to make entry is demonstrated where the requester was compensated for post-entry processing performed on the imported merchandise).
Similarly, in this case, Company A will perform significant post-entry procedures and services on the imported Plant parts and components, for compensation. Per the Agreement, Company A will perform, furnish, be responsible for, and pay the cost of all engineering and design, labor, procurement, technical and professional services for the Plant. Company A will be responsible for and assume the risk for the Plant’s parts during importation, storage, transportation, and installation at their final destination site, as well as arrange for insurance coverage related to the transportation of the goods. Company A is obligated to replace, repair, or reconstruct any and all equipment or supplies furnished that is lost, damaged, or destroyed prior to the transfer of control. The contractual terms and post-entry work conducted on the satellites in HQ 115805, the sugar in HQ 222020, and television equipment in HQ 228151, which included: planning, insuring, integrating, assembling, testing, and the transporting of parts and finished products, correlates very closely to the work done in the instant case, which includes insuring, transporting, assembling, constructing, and testing of parts and components into the final product—the Plant. This precedent is useful to demonstrate that the post-entry construction work on the Plant is sufficiently substantive to give Company A the right to make entry, even though it lacks title to the goods. Thus, Company A has a sufficient financial interest in performing substantive post-entry procedures on the imported merchandise to serve as importer of record. Company A’s financial interest in the Plant’s parts and components at the time of entry is sufficient to constitute a nexus between Company A’s financial welfare and the imported goods. On account of its post-entry activities and financial interest in the imported goods, Company A is considered an “owner or purchaser” of the imported parts and components and has the right to make entry as importer of record per 19 U.S.C. § 1484.
HOLDING:
On account of its contracted post-entry responsibilities and financial interest in the imported goods, Company A has the right to make entry of the imported parts and components as the importer of record per 19 U.S.C. § 1484.
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.” If the terms of the import or export contracts vary from the facts stipulated to herein, this decision shall not be binding on CBP as provided for in 19 C.F.R. § 177(b)(1), (2) and (4), and § 177.9(b)(1) and (2).
Sincerely,
Carrie L. Owens, Chief
Entry Process and Duty Refunds Branch