Right to make entry; Buying Agent

HQ H275549 April 6, 2017 ENT 1-01 OT:RR:CTF:ER H275549 TP Suzanne Richer Amber Road 2633 Main Street, Suite 102 Lawrenceville, New Jersey 08648 Re: Right to make entry; Buying Agent Dear Ms. Richer: This is in response to your letter dated February 5, 2016, requesting a ruling on whether Overseas Food Trading, Ltd. (“Overseas”), as a buying agent, has the right to make entry, and satisfies the criteria of “Importer of Record”, in connection with the imported goods. FACTS: Overseas Food Trading, Ltd. imports olive oil into the United States. Pompeian, Inc. (“Pompeian”) manufactures and distributes cooking oils and vinegars. Pompeian is a sister company of Overseas. According to Overseas, the two companies operate as separate entities with a common owner having direct control over both companies. Overseas and Pompeian entered into an agreement (“the Agreement”), for the sourcing of goods, effective July 12, 2016. The Agreement sets forth various obligations for which Overseas is responsible. In your email correspondence dated March 17, 2017 and April 5, 2017, you explain that Overseas negotiates the terms of offer with each foreign supplier and then reviews the offer, and Pompeian drafts the contract and places the order with the foreign supplier containing the terms Overseas negotiated. Under the Agreement, Overseas is responsible for the following: (1) sourcing vegetable oils for Pompeian from foreign suppliers; (2) arranging shipments in accordance with Pompeian’s schedule; (3) full compliance review of each foreign supplier including FDA registration and monitoring, kosher certification, documentation for organic goods if possible, traceability, etc.; (4) negotiating contract prices of goods with foreign suppliers based on market conditions; (5) acting as the importer of record and facilitating entries of goods in the U.S.; (6) and communicating with foreign suppliers if Pompeian has an issue regarding the quality of the product delivered. According to the Agreement, Overseas is paid a fee for its work per metric ton and this fee is invoiced per operation. Overseas does not receive any compensation from foreign suppliers. Pompeian owns the goods and has the risk of loss. Pompeian is responsible for delivery of the imported goods. Overseas negotiates the freight rates and provides loading instructions, but Pompeian is the responsible party who is billed directly by the foreign suppliers. Pompeian is also responsible for duties and third-party expenses such as Customs exams, broker fees or any Governmental agency fee in connection with transactions pursuant to the Agreement. ISSUE: Whether Overseas has sufficient “financial interest” in the imported goods 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 Overseas can show that it has a financial interest in the goods at the time of entry, sufficient enough to constitute a nexus between Overseas’ financial welfare and the imported goods, it may serve as the importer of record. In Headquarters Ruling Letter (“HQ”) 115914, dated April 7, 2003, 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. Similarly, in HQ 240983, dated June 23, 2014, CBP examined the right to make entry of an importer acting as an agent on behalf of the manufacturer. The importer’s responsibilities included negotiating supply contracts with the ultimate purchaser; establishing a shipping schedule to meet the purchaser’s delivery requirements; providing customer service; and acting as the importer of record and filing an I.D. Entry for the manufacturer when clearing Customs. The importer never took ownership of the goods. CBP held that the responsibilities and tasks required of the importer, specifically the post-entry procedures the importer performed and the compensation the importer received for the transactions were adequate to make entry. In determining whether an agency relationship exists, the primary consideration is the right of the principal to control the agent’s conduct with respect to those matters entrusted to the agent. See Rosenthal-Netter, Inc. v. United States, 679 F. Supp. 21, 23 (Ct. Int’l Trade 1998). The existence of a buying agency agreement has been viewed as supporting the existence of a buying agency relationship. See Dorco Imports v. United States, 67 Cust. Ct. 503, 512 R.D. 11753 (1971). In addition, the courts have examined such factors as: whether the purported agent's actions were primarily for the benefit of the principal; whether the principal or the agent was responsible for the shipping and handling, and the associated costs; whether the intermediary was operating an independent business, primarily for its own benefit; and whether the purported agent was financially detached from the manufacturer of the merchandise. See Rosenthal-Netter, 679 F. Supp. at 23; New Trends, Inc. v. United States, 645 F. Supp. 957 (Ct. Int’l Trade 1986). See also HQ 113894, dated June 20, 1997; HQ 225332, dated October 12, 1994; and HQ 224636, dated August 28, 1993. Therefore, Overseas is an agent if Pompeian, as the principal, can control Overseas’ conduct with respect to the matters entrusted to Overseas by Pompeian and if Overseas’ actions are primarily for the benefit of Pompeian. Here, the Agreement requires Overseas to negotiate price and contract terms with foreign suppliers on behalf of Pompeian, and to coordinate a shipping schedule in accordance with Pompeian’s schedule. Overseas is responsible for all relationships with the foreign suppliers including, but not limited to, full compliance review of each supplier, per the Agreement. Overseas is also responsible for communicating with foreign suppliers if Pompeian is unsatisfied with the quality of the product delivered. Overseas will be subject to the express direction of Pompeian and will source olive oil from foreign suppliers based on Pompeian’s needs. Approval of pricing, delivery and any other terms will rest with Pompeian who will also bear all shipping costs and the risk of loss. Because all terms of offers and orders are approved and processed by Pompeian, Overseas acts as an agent for Pompeian. In exchange for its services, Overseas receives compensation from Pompeian based on the amounts imported and the invoice will be assessed per operation, according to the Agreement. Thus, Overseas also has a sufficient financial interest in performing its responsibilities and tasks as a buying agent for the imported merchandise to serve as importer of record. On account of this financial interest in the imported goods as a buying agent, Overseas is considered an “owner or purchaser” and has the right to make entry as importer of record per 19 U.S.C. § 1984. HOLDING: On account of its contracted responsibilities and financial interest in the imported goods, Overseas has the right to make entry of the imported goods 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, Monika R. Brenner, Acting Chief Entry Process and Duty Refunds Branch