Request for Internal Advice; Right to Make Entry.

90 K Street N.E., Washington, DC 20229 U.S. Customs and Border Protection HQ H330864 September 6, 2023 OT:RR:CTF:ER H330864 ASZ Center Director Pharmaceuticals, Health, and Chemicals Center of Excellence and Expertise New York Field Office Re: Request for Internal Advice; Right to Make Entry. Dear Center Director: This is in response to your memorandum, dated March 24, 2023, requesting internal advice per 19 C.F.R. § 174.11 on whether Hhoya USA Inc., meets the criteria to act as “importer of record,” as defined in Customs Directive No. 3530-002A, in connection with certain entries of erythritol. We have considered the facts and issues raised, and our decision follows. This office has taken into consideration the information presented to the port and to this office. We received supplemental information via e-mails dated June 9, 2023, and July 3, 2023, and spoke with counsel for Hhoya USA Inc., on June 29, 2023. Counsel asserts that the disclosure of certain information relative to this matter could potentially cause substantial harm to the competitive position of the parties involved. Based on our review of the matter we have concluded that the information in question is eligible for confidential treatment under 6 C.F.R. § 5.12; accordingly, we have granted the request for confidentiality. Appropriate steps will therefore be taken to ensure that the information remains confidential. However, please note that the provisions of the Freedom of Information Act (“FOIA”) (5 U.S.C. § 552), the Trade Secrets Act (18 U.S.C. § 1905) and/or the Privacy Act of 1974 (5 U.S.C. § 552a) will prevail in any conflict that may arise regarding the confidentiality and disclosure of information. Accordingly, any information submitted in connection with this matter may be subject to disclosure, if requested, if it is subsequently determined that the information is not protected by the Trade Secrets Act, the Privacy Act, or an exemption of the FOIA. FACTS: This internal advice concerns two entries of erythritol made in 2020. The subject erythritol was sold by a Chinese manufacturer to Hhoya BV. Hhoya BV issued payment to the manufacturer for the merchandise and paid the applicable duties and taxes. Hhoya BV’s sister company, HHoya USA, Inc. (Hhoya USA), was listed as the importer of record on the two entry summaries. The sister companies operate as separate entities under common ownership. Hhoya USA and Hhoya BV executed a Commission Agreement (the Agreement) on January 1, 2022. The Agreement is intended to memorialize actions taken since 2019, which would include the two entries in question. Under the Agreement, Hhoya BV appoints Hhoya USA as its agent for purposes of providing business consulting services, quarterly reporting, financial analysis, and other mutually agreed upon services. Hhoya USA’s specific duties are “to introduce and promote the goods and services provided by [Hhoya BV] to new business developments and existing customer base.” Hhoya USA will also provide “any and all policies and procedures that new business development requires.” Hhoya USA lacks the authority to bind Hhoya BV to any agreement or contract. Hhoya BV assumes the risk of loss and acquires title to the imported merchandise once the merchandise arrives in the United States. Once the merchandise is released, it is delivered to a third-party warehouse by the carrier. The Agreement also stipulates the payment of a commission to Hhoya USA. Prior to 2022, the commission was [x] of the logistics and duty costs incurred in importing the goods provided by Hhoya BV. After 2022, the commission is [x] of all sales of services by Hhoya BV in the United States. We requested additional information via e-mail on May 8, 2023, regarding the specific duties performed by Hhoya USA in connection with the two subject entries. In a June 9, 2023, e-mail response, counsel for Hhoya USA explained that due to workforce shortages during the pandemic, Hhoya USA outsourced its role to a third-party consulting company via a Business Consultation Agreement. The third-party company performed the following duties relating to the subject entries: helped to manage Hhoya BV’s accounts in the United States, supported Hhoya BV’s sales managers, and helped to coordinate information flow between U.S. customers and Hhoya BV. Furthermore, it was also noted that prior to 2018, Hhoya BV’s U.S. customers purchased products through Hhoya USA, but as of 2019, Hhoya BV sells directly to customers while Hhoya USA serves as sales support for those transactions. ISSUE: Whether Hhoya USA has sufficient “financial interest” in the imported goods, at the time of entry, to act as the 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 (“Directive” or “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. Owners or purchasers have a financial interest in the goods that goes beyond that of a bailee or nominal consignee. “Financial interest” means there is a nexus between the financial welfare of the owner or purchaser and the imported goods. See HQ H007168 (Aug. 2, 2007) (noting that 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 Hhoya USA can show that it has a financial interest in the goods at the time of entry, sufficient enough to constitute a nexus between its financial welfare and the imported goods, it may serve as the importer of record. In Headquarters Rulings (HQ) H240983 (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 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 and selling agent procedures the importer performed and the compensation the importer received for the transactions, demonstrated a sufficient financial nexus between the agent and the goods as to entitle the agent to make entry. In HQ H318453 (June 30, 2021), CBP held that the ruling requester had a sufficient financial interest in the goods to act as the importer of record. The requester entered an agency relationship to sell wine on behalf of European wineries, for a fee. In that case, the agent would enter into sale/purchasing agreements with wineries and U.S. wholesalers. Additionally, the Contract of Services agreement set forth the agent’s obligations as follows: obtain the necessary federal licenses, bonds, certifications, and other approvals; assist with obtaining state licenses, permits, and approvals prior to shipment of the wine to the United States; assist with all the logistical needs in shipping the goods from Europe to the United States and within the United States; obtain a licensed customs broker to make entry; provide an e-commerce platform to promote the wine to U.S. based wholesalers and retailers; act as a sales representative for the winery to retailers and wholesalers in the United States; accept purchase orders from the wholesalers on behalf of the wineries; and assist with tax credits and tax reimbursements in Europe. In HQ 115914 (April 7, 2003), we addressed the right to make entry as an importer of record, where the requester also 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. The requester’s responsibilities as outlined in the Representative Agreement conferred on the requester the status of a selling agent and, we found it had sufficient interest to make entry under C.D. 3530-002A. In contrast, in HQ H312266 (Oct. 29, 2021), Marmen, the seller of the goods, required its customer to make a partial payment of the goods prior to importation, with 2% of the invoice balance due the day after cargo release. Additionally, Marmen was responsible for fixing any potentially defects once entered. We determined that Marmen did not maintain a “security interest” sufficient to establish a significant financial interest in the imported merchandise because Marmen was still entitled to the full payment as it was not contingent upon any potential post-entry responsibilities and Marmen did not possess title to the goods or risk of loss at the time of importation. Similarly, in HQ H324098 (June 5, 2023), a company providing logistical consultation services to foreign and domestic shippers was found not to have a sufficient financial interest in the goods at the time of entry. The company had no more than an unspecified “security interest” in the imported goods. Although the company characterized its role in the transaction as a seller’s agent, the facts did not give rise to a seller agent role for purposes of determining the right to make entry. Instead, we found that its role in the transaction closely resembled that of a nominal consignee, who cannot be the “owner” or “purchaser,” rather than a seller’s agent. There was no evidence that the company had a sufficient financial interest in the goods so as to act as importer of record. Hhoya USA asserts that it acts as the sales agent for the owner of the goods, facilitates logistics, and receives a commission in return, and therefore, has a sufficient financial interest to act as the importer of record. Hhoya USA cites to HQ H240983 and HQ H318453 to support its argument. The facts in this case are not analogous to the facts in those rulings. As explained above, in HQ H240983, the agent negotiated the supply contracts with the purchaser, established shipping schedules, and performed substantive post-entry procedures on the goods in exchange for payment. In HQ H318453, the agent entered into sale/purchasing agreements, obtained necessary licenses and permits, and assisted with tax credits and reimbursements, among other things. By contrast, Hhoya USA contracted a third-party consultant to help manage Hhoya BV’s accounts, support Hhoya BV’s sales managers, and help coordinate information flow between the customers and Hhoya BV. These descriptions are vague and provide little insight about the relationship of Hhoya USA to the imported goods. Nothing in the Agreement indicates that Hhoya USA (or its contractor) was empowered to enter into purchase agreements or negotiate with customers, as was the case in the rulings cited above. In fact, as of 2019, Hhoya USA no longer sells directly to Hhoya BV’s customers, but rather serves as “sales support” to Hhoya BV’s sales. The facts at hand do not evidence that Hhoya USA has a sufficient financial interest in the goods so as to act as importer of record. With regard to the commission, the payment of commission alone does not give rise to a sufficient financial interest in the goods. In our prior rulings, we have considered the payment of a commission as a factor in our determination when the agent was providing services in a selling agent capacity. For example, in HQ 115914, the agent was paid a commission based on a percentage of the sales price of the goods in return for its services as a selling agent. We found that the agent had the right to make entry. As discussed above, Hhoya USA has not demonstrated that it served the role of a selling agent. Without more, the commission alone, which was only [x] of the logistics and duty costs incurred in importing the goods, does not establish a significant nexus between Hhoya USA’s financial interest and the imported goods. See HQ H324098 (June 5, 2023). Accordingly, in no way can Hhoya USA be characterized as an “owner” or "purchaser” with sufficient financial interest in the goods so as to act as importer of record. There is no evidence that Hhoya USA has a sufficient financial interest in the goods so as to act as importer of record. While Hhoya USA may characterize its role in the transaction as seller’s agent, which would ordinarily be permitted pursuant to C.D. 3530-0002A, based on the above, the facts do not give rise to a seller agent role for purposes of determining the right to make entry. Consequently, Hhoya USA did not have a sufficient financial interest in the two entries of erythritol, at the time of entry, to act as importer of record. HOLDING: Hhoya USA did not have sufficient financial interest in the erythritol, at the time of entry, to act as importer of record. Sixty days from the date of this decision, the Office of Trade, Regulations and Rulings, will make this decision available for CBP personnel and to the public on the CBP Home Page at http://www.cbp.gov by means of the Freedom of Information Act and other methods of publication. Sincerely, Monika Brenner, Interim Branch Chief Entry Process and Duty Refunds Branch