CBP Ruling H240983

HQ H240983 June 23, 2014 ENT 1 OT:RR:CTF:ER H240983 RGR Area Port Director U.S. Customs & Border Protection 200 East Bay Street Charleston, SC 29401 Dear Area Port Director: This is in response to your request for internal advice, dated April 11, 2013, pursuant to 19 C.F.R. § 177.11(a), regarding the “right to make entry” by the importer, Seacon Corporation (“Seacon”). Upon review, we have determined that Seacon has the right to make entry of the goods as importer of record. FACTS: This internal advice concerns an inquiry initiated by the Port of Charleston, South Carolina in connection with two entries of a product invoiced as Antioxidant 6PPD(CAS# 793-24-8) (“liquid antioxidant”), which is a liquid imported in ISO tanks and used as an antioxidant for natural and synthetic elastomers. The manufacturer of the liquid is Sinopec Chemical Sales Company Limited Nanjing Branch (“Sinopec”). Seacon is in the business of importing rubber chemicals from China. Seacon is listed on the U.S. Customs and Border Protection (“CBP”) Form 7501 entry summaries for the two entries referenced in this internal advice request as the importer of record. The ultimate purchaser in this transaction is Michelin North America (“Michelin”). Seacon and Sinopec have entered into an Agreement to Supply Liquid 4020 to the North American Rubber Industry (“Service Agreement”) whereby Seacon acts as an extension of Sinopec in the United States to manage the supply of the liquid antioxidant to the Michelin tire plants. The Service Agreement sets forth various obligations for which Seacon is responsible. In your memorandum dated February 27, 2013, you explain that Seacon negotiates supply contracts with Michelin on behalf of Sinopec by taking the manufacturer’s price, the cost to heat the liquid antioxidant, the duty, the freight, and a percentage for itself as the selling agent. To further evidence Seacon’s role in securing purchase orders between Sinopec and Michelin, you provide email correspondence dated March 2012 between the president of Seacon and Michelin, and between the president of Seacon and Sinopec, in which Sinopec directs Seacon to negotiate the purchase orders with Michelin on behalf of Sinopec. Under the terms of the Service Agreement, Seacon is responsible for the following: (1) securing purchase orders from Michelin for the liquid antioxidant, which will be issued directly to Sinopec; (2) after securing a purchase order, Seacon coordinates with Michelin and Sinopec to establish a shipping schedule to meet Michelin’s delivery requirements; (3) providing customer service and sales support for all tire plants purchasing the liquid antioxidant, which will include visits to the individual tire plants as well as visits to corporate headquarters of the tire companies; (4) performing the ISF 10+2 filing with the U.S. Department of Homeland Security (“DHS”) for each ISO tank exported by Sinopec to Michelin; (5) working as a C-TPAT Registrant with DHS; (6) maintaining an adequate surety bond with CBP; (7) acting as the importer of record and filing an I.D. Entry for Sinopec when clearing Customs; (8) transmitting Sinopec’s invoice to the appropriate party for each ISO tank delivery; and (9) communicating with Sinopec customers to ensure that Sinopec invoices are paid on time. The Services Agreement also sets forth particular obligations that Seacon is responsible for in coordinating and completing the local logistic work for ISO tanks delivered to Michelin plants. Under these obligations, Seacon must perform the following tasks: (1) maintain a fleet of ISO tank chassis sufficient to transport the number of ISO tanks required by Sinopec; (2) offer Sinopec storage of ISO tanks at its Charlotte facility for any safety stock that Sinopec wishes to keep in the United States to ensure there is no interruption in supply; (3) heat the ISO tanks prior to delivery; and (d) deliver the heated ISO tanks to the tire plants when required. The terms of the Service Agreement set forth compensation paid by Sinopec to Seacon in consideration for its services and for delivery of the liquid antioxidant to Michelin plants as follows: DDP price – (FOB price + prepaid freight charges + Insurance fee) = Seacon Compensation Although Seacon acts as an extension and selling agent of Sinopec in the United States under the terms of the Service Agreement by, among other things, negotiating supply contracts with Michelin on behalf of Sinopec, the purchase orders for the goods are between Michelin and Sinopec, not between Michelin and Seacon. According to email correspondence dated September 24, 2012 between CBP and the president of Seacon, Michelin pays Sinopec once it is billed for the goods, and then Sinopec compensates Seacon. In addition, the bill of lading only shows Seacon as a Notify Party. Moreover, in your memorandum dated February 27, 2013, you state that according to the president of Seacon, Seacon never takes ownership of the goods.  Because Seacon never takes ownership of the imported goods, the Port of Charleston sought further guidance as to whether Seacon has the right to make entry as the importer of record. ISSUE: Whether Seacon has sufficient “financial interest” in the imported liquid antioxidant to make entry as the importer of record under 19 U.S.C. § 1484(a)(1). 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 either in person or by an agent authorized by the party in writing. 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 (emphasis added). C.D. 3530-002A states that the terms owner and purchaser include any party with a financial interest in a transaction. According to C.D. 3530-002A, owners or purchasers have more than custodial interest in the goods. Owners or purchasers have a financial interest in the goods that goes beyond that of a bailee. “Financial interest” means there is 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”). If Seacon’s financial interest in the goods at the time of entry as Sinopec’s selling agent and logistical service provider is sufficient to constitute a nexus between Seacon’s financial welfare and the imported goods, it may serve as the importer of record. In Headquarters Ruling Letter (“HQ”) 115914, we addressed a similar set of facts regarding the right to make entry as an importer of record where the requester rendered services in a selling agent capacity. In that case, the requester, a U.S. subsidiary, communicated U.S. customer needs to its foreign parent company; made product demonstrations to the foreign parent’s U.S. customers; and communicated product specifications and acceptance criteria between U.S. customers and the foreign parent company. In return, the foreign parent paid the U.S. subsidiary a commission based on a percentage of the sales price between the foreign parent and the U.S. customer. Each of these responsibilities was outlined in a Representative Agreement between the subsidiary and its foreign parent company. There, we held that the requester had a sufficient financial interest in the goods to make entry. We came to this conclusion based on the Representative Agreement. The requester’s responsibilities as outlined in the Representative Agreement conferred on the requester the status of a selling agent. Because it was determined that the requester was a selling agent, it had sufficient interest to make entry under C.D. 3530-002A. See HQ 115914 (Apr. 7, 2003). In determining whether Seacon is a selling agent, CBP looks at whether Sinopec as the principal can control Seacon’s conduct with respect to the matters entrusted to Seacon by Sinopec. See Rosenthal-Nettter, Inc. v. United States, 679 F.Supp.21, 23 (Ct. Int’l Trade 1988). Here, the Service Agreement calls upon Seacon to secure purchase orders from the tire plants on behalf of Sinopec and to coordinate with Michelin and Sinopec to establish a shipping schedule, provide customer service and sales support, and send written reports to Sinopec of its visits with customers. In addition, email correspondence between the president of Seacon, Michelin, and Sinopec also evidences a selling agent relationship similar to that found in HQ 115914 whereby Seacon, as the selling agent, communicates product specifications, offer terms, and acceptance terms between Sinopec as the principal, and Michelin as the U.S. customer. While Seacon negotiates the sale directly with Michelin on behalf of Sinopec, it is Sinopec that controls the terms of the offer between Sinopec and Michelin. Thus, Sinopec controls Seacon’s actions with respect to securing purchase order pricing details in connection with the services underlying the Service Agreement. Therefore, Seacon is acting as a selling agent of Sinopec. In addition to Seacon’s role as Sinopec’s selling agent, Seacon has an additional financial interest in the underlying transaction through its role as a logistical services provider. In H100056, dated November 15, 2010, we addressed a scenario where the requester was engaged to perform substantive post-entry procedures on the merchandise in exchange for payment. In that case, the requester performed importation and storage services pursuant to a formal Services Agreement. One of the additional services required under the Services Agreement was the environmental waste disposal of hazardous materials or reactive chemical waste products. The Services Agreement specified that the requester would be paid for the services that it provided. In H100056, we held that the requester had a sufficient financial interest to enter the goods as importer of record. Here, Seacon performed post-entry logistical procedures such as heating the ISO tanks prior to delivery to Michelin. In exchange for the selling agent services and post-entry procedures performed in connection with the liquid antioxidant, Seacon received compensation equal to the DDP price – (FOB price + prepaid freight charges + insurance fee), which according to Seacon, amounts to the cost of heating up the imported liquid antioxidant plus a selling commission. Thus, Seacon also has a sufficient financial interest in performing substantive post-entry procedures on the imported merchandise to serve as importer of record. On account of this financial interest in the imported goods as both a selling agent and a logistical services provider, Seacon is considered an “owner or purchaser” and has the right to make entry as importer of record per 19 U.S.C. § 1484. HOLDING: Seacon has the right to enter the imported liquid antioxidant as importer of record. This decision should be mailed by your office to the party requesting Internal Advice no later than 60 days from the date of this letter. On that date, Regulations and Rulings, Office of International Trade, will make the decision available to CBP personnel and the public on the CBP Home Page at www.cbp.gov, by means of the Freedom of Information Act and other methods of public distribution. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division