ENT 1-03
OT:RR:CTF:ER
H312266 SMS
Ms. Lauren Wyszomierski
White & Case LLP
701 Thirteenth Street, NW
Washington, DC 20005-3807
Re: Request for a determination of the right to act as importer of record by Marmen, Inc.
Dear Ms. Wyszomierski:
This is in response to your request for a ruling, dated June 22, 2020, on behalf of Marmen, Inc. (“Marmen”). Your request is regarding whether Marmen meets the criteria of “Importer of Record” as defined in Customs Directive No. 3530-002A, in connection with utility scale wind towers. We note that Marmen asserts that its customers are non-public business proprietary information. Accordingly, to preserve confidentiality, we refer to these entities, i.e., Marmen customers, collectively as “Company X.”
FACTS:
In your letter, you request confirmation that Marmen may act as the importer of record for utility scale wind towers. You explain that typical wind towers are shipped in sections because of their extreme heavy weight. Marmen manufactures and sells “up to 7-section towers” for exportation to the United States to Company X. Marmen invoices Company X after production is complete; title and risk of loss pass to Company X after payment or 30 days after invoicing, whichever occurs first. You explain that typically the payment or 30-day post invoice occurs prior to exportation of the wind towers to the United States. Marmen also stores the completed wind tower sections until Company X retrieves them, prior to importation. Company X is responsible for all transportation cost, but Marmen provides a warranty and guarantee on the imported merchandise, as well as maintains responsibility for any expense for repairs of any defective towers after delivery to the United States.
In addition to the above listed responsibilities, Marmen presents two specific payment scenarios for consideration.
Company X would make full payment of the invoiced amount before importation into the United States. In this scenario, title would pass to Company X prior to importation, and Marmen would only be responsible for any costs related to potentially defective towers, post-importation.
Marmen would only require Company X to make a partial payment, 98 %, of the invoiced value, after production and prior to importation. After importation, specifically the day after cargo release from U.S. Customs and Border Protection (“CBP”), Company X would then pay the remaining 2% balance owed. Marmen explains, it would maintain a “security interest” in the wind towers at the time of their importation, which will expire upon Company X’s full payment. Additionally, Marmen is still responsible for the cost to repair for any defective towers, post-importation.
On July 7, 2021, Regulations and Rulings reached out to Marmen for clarification on the two proposed agreements and the extent of the need for post-importation repair. On September 22, 2021, Marmen responded with further details. Due to their size, the towers are imported in sections, and Company X, the customer of the wind towers, assembles them in the United States. You explain that Marmen maintains insurance on “its products” and is obligated to fix any defective merchandise. Specifically, you explain that less than 1% of all imported towers are defective and would need Marmen provided repairs. Repairs are normally minor, such as paint-touch ups or replacing components, such as lights, and would be done by Company X. Under the terms of its guarantee, Marmen reimburses Company X for any needed repairs. However, in rare circumstances Marmen sends a technician to handle the repairs. Most defects are discovered weeks, if not months or years, after importation. Marmen’s warranty is valid until 24 months after the towers are placed in operation or 48 months after delivery to the customer’s project site. Lastly, you explain that Marmen is responsible for paying all customs duties, taxes, and fees; however, the cost of such entry requirements is included in the invoiced price of the tower, paid by Company X.
Marmen asserts that it typically enters into an annual agreement with Company X, which governs the terms of their purchase orders, payments, and warranty policy. Company X issues Marmen purchase orders, covering multiple towers, on a monthly reoccurring basis. Marmen contends that due to its warranty policy that guarantees the merchandise after importation, and the fact that it produces wind towers subject to regular purchase orders, it “has an ongoing financial incentive after importation to continue ‘operations as arranged with regard to the goods’ and maintain its business with the customer.” Thus, Marmen believes it has sufficient financial interest in the imported wind towers, under both payment agreements, to make entry as the importer of record under 19 U.S.C. §1484(a)(1).
ISSUE:
Whether Marmen has sufficient financial interest in the goods, at the time of entry, to act as importer of record.
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.
Accordingly, C.D. 3530-002A, explains that the terms owner and purchaser include any party with a significant financial interest in the 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. “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). In Headquarters Ruling Letter (“HRL”) 231255, dated March 28, 2006, CBP explained that a key factor in determining financial interest is whether a party is in some significant way expecting or relying on a financial benefit from the imported merchandise. The focus of the inquiry is whether a reciprocal relationship between the party and the goods exists or whether a nexus between the financial welfare of the would-be importer’s business activities and the imported merchandise can be identified. Id. Therefore, if Marmen has a financial interest in the wind towers at the time of entry, sufficient to constitute a nexus between its 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. 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 that the importer had a financial interest in the sugar, sufficient to justify a right to make entry even though the importer lacked title to the goods. Id.
Additionally, in HQ H265228, dated August 24, 2016, we found that post-entry obligations, such as assumption of risk during importation, storage transportation and installation after importation, as well as providing insurance for the imported goods created a significant financial interest in the goods. Also, in HQ H265228, Company A furnished and paid for of all engineering and design, labor, procurement, technical and professional services for the imported merchandise. Lastly, Company A was also obligated to replace, repair, or reconstruct any and all equipment or supplies furnished if lost, damaged, or destroyed prior to the transfer of control. While Company lacked title to the goods, we found that it had a sufficient financial interest in performing substantive post-entry procedures on the imported merchandise to serve as importer of record. Id.
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 were 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).
Conversely, in HQ H080181, dated December 30, 2009, we found GAP lacked a sufficient interest in the imported goods of its subsidiaries. Here, GAP was not the owner or purchaser of the imported goods but entered into an agreement that obligated GAP to pay all duties and related fees to CBP for each Customs transaction; however, these fees were fully reimbursed and thus we found this obligation was mitigated by the obligation of the subsidiaries to pay back all of the costs paid by GAP. Specifically, we held GAP’s agreement did not create any right or interest for GAP in the goods purchased by the subsidiaries, nor did it give GAP title to the imported goods. GAP also did not gain a financial benefit from the goods, nor did GAP perform substantive post-entry procedures on the goods that would give GAP a sufficient financial interest in the goods. Id. Similarly, in HQ H242069, dated February 6, 2014, we found that a company that contracted to transport and deliver household goods did not have sufficient financial interest to serve as importer of record of the goods. In HQ H242069, Masterpiece entered into a contract with an overseas employer to transport and safeguard employee household goods until the employees established a presence in the United States. We found that Masterpiece’s financial interest in the goods was similar to that of a freight forwarder because it effectively possessed no other right, title, or interest in the goods beyond the contract calling to arrange for the transportation, storage, and delivery of the merchandise.
In Marmen’s first proposed payment agreement, Marmen’s U.S. customer, Company X would make full payment of the goods, customs duties, taxes, and fess to Marmen prior to importation into the United States. Marmen would be responsible for making Customs payments to CBP, but title and risk of loss, would pass to Company X prior to importation. Marmen would be responsible for any costs related to any potentially defective towers, post-importation. However, repairs are normally minor in nature and are needed on less than 1% of imports. Any defective tower would not be discovered until after all entry procedures are complete and the goods are released to Company X. We find in this scenario, Marmen does not have a sufficient financial nexus with the goods at the time of entry to allow it to have the right to make entry. Unlike in, HQ H265228 and 115805, Marmen does not maintain title to the goods, it does not assume any risk, but for minor repairs, and it has not described any significant post-importation processing, such as assembling the towers, that it would perform after importation. Similarly, to HQ H080181, Marmen is not the owner or purchaser of the goods, and the agreement does not create any significant right or interest between Marmen, and the goods purchased by Company X. Accordingly, the first proposed transaction between Marmen and Company X, does not confer upon Marmen a sufficient financial nexus at the time of entry; and Marmen does not have the right to make entry of these goods.
The second proposed agreement between Marmen and Company X is very similar to the first; however, Marmen would require Company X to make only a partial payment of the goods prior to importation, with 2% of the invoiced balance due the day after cargo release. Marmen explains, it would maintain a “security interest” in the wind towers at the time of their importation, which will expire upon Company X’s full payment. Again, Marmen would be responsible for fixing any potentially defective towers, post-importation. The only difference here is that full payment would not be received prior to entry; however, full payment is still afforded to Marmen and is not contingent on any potential post-entry Marmen responsibilities. Additionally, as you explain “title and risk of loss pass to Company X after payment or 30 days after invoicing, whichever occurs first” you also explain that typically, 30 days after invoicing occurs prior to exportation to the United States. So, here title to the goods and risk of loss remain with Company X at the time of importation. The fact that a mere partial 2% payment in the goods remains after entry, is not enough to afford Marmen a sufficient financial nexus between itself and the imported goods. Like with GAP in H080181, where we found that full reimbursement to Gap, mitigated its obligation, Company X is obligated to Marmen to make full payment of the tower after importation, and therefore this split payment arrangement, with only 2% remaining, does not provide the sufficient nexus to allow Marmen to act as importer of record. Marmen receives no fee for its services related to the entry of the goods or for any potential repairs. Again, like above, the fact that title and risk of loss has already passed to Company X, and repairs would not be necessary on more than 99% of all towers, this arrangement too does not rise to the level of post-importation activities as we outlined in previous rulings.
Because Marmen has not demonstrated a significant financial interest in the imported wind towers, we find that there is not a sufficient financial nexus, at the time of entry, between Marmen and the imported goods. Accordingly, Marmen does not have the right to make entry. Lastly, we note that payment to CBP of any duties, taxes, and fees owed on the towers constitutes customs business. See 19 U.S.C. §1641(a)(2). Accordingly, we find that the payment may only be transmitted to CBP by the importer of record or a licensed customs broker. See, e.g., HQ H277473 (June 15, 2018) and HQ 115248 (Aug 28, 2001).
HOLDING:
Based on the above, we find that Marmen does not have a sufficient financial interest in the imported towers, to act as importer of record.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all 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 CBP 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,
Gail K. Kan, Chief
Entry Process and Duty Refunds Branch