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US-Based Affiliate Not a Selling Agent, Didn't Have Right to Make Entry, CBP Says

The U.S. affiliate of a Dutch multinational company didn’t have the right to make entry, despite claiming to act as a sales agent and receiving a commission based on sales of the underlying merchandise, CBP said in a ruling recently posted to its Customs Rulings Online Search System (CROSS) database.

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Without the power to enter into a purchase agreement or negotiate with customers, Hhoya USA, the “sister company” and affiliate of the Netherlands-based Hhoya BV, didn’t perform duties in line with a selling agent. The duties it had didn’t create a sufficient financial interest to be characterized as an “owner” or “purchaser,” so it couldn’t act as importer of record, and its commission structure didn’t give it enough of a financial interest, the agency said.

The ruling, which dates from Sept. 6 despite its recent posting date, came in response to an internal advice request from CBP’s Pharmaceuticals, Health, and Chemicals Center of Excellence and Expertise. It concerned two 2020 entries of erythritol, which Hhoya BV bought from a Chinese manufacturer, also paying applicable duties and fees. Hhoya USA was listed as importer of record on the entry summaries.

A commission agreement between Hhoya BV and Hhoya USA that covered the relevant period appointed Hhoya USA as Hhoya BV’s agent for “providing business consulting services, quarterly reporting, financial analysis, and other mutually agreed upon services,” CBP said. Hhoya USA was to “introduce and promote” Hhoya BV’s goods to new and existing customers. Hhoya USA didn’t directly sell to Hhoya BV’s U.S. customers.

In return, Hhoya USA received as commission a percentage of the “logistics and duty costs incurred in importing the goods provided by Hhoya BV.” Hhoya BV assumed risk of loss and title of the imported goods once they arrived in the U.S.

Prior to the entries at issue in the ruling, Hhoya USA “outsourced its role to a third-party consulting company.” The consultant helped manage Hhoya BV’s U.S. accounts, supported Hhoya BV’s sales managers, and helped to coordinate communications between Hhoya BV and its U.S. customers.

Under the customs laws, only the owner or purchaser of goods, or a broker, may qualify as importer of record and make entry. CBP’s customs directive on the right to make entry says owners or purchasers must have a financial interest in the goods, defined as a nexus between the financial welfare of the owner or purchaser and the imported goods. A buying or selling agent may qualify as importer of record, the directive says.

Hhoya USA “has not demonstrated that it served the role of a selling agent,” CBP said. The descriptions of its activities “are vague and provide little insight about the relationship of Hhoya USA to the imported goods,” CBP said.

“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 other past rulings where CBP found the selling agent had the right to make entry, despite not taking title or risk of loss for the relevant goods, the agency said. “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,” CBP said.

Also, “the payment of commission alone does not give rise to a sufficient financial interest in the goods,” CBP said. Rather, CBP has considered commission payments “as a factor in our determination when the agent was providing services in a selling agent capacity,” it said. Hhoya USA’s commission, which was “only” a percentage of logistics and duty costs, “does not establish a significant nexus between Hhoya USA’s financial interest and the imported goods,” CBP said.

“The facts do not give rise to a seller agent role for purposes of determining the right to make entry,” CBP said. “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.”