BRO-1-RR:IT:EC 115248 GG
Ms. Karen E. Kelly
Transportation Manager
Casio Corporation of America
570 Mt. Pleasant Avenue
Dover, New Jersey 07801
RE: Ruling Request on Corporate Structure; Subsidiary Entities; Customs Business; Confidentiality of Records; 19 U.S.C. §1641; Recordkeeping; 19 U.S.C. §1508
Dear Ms. Kelly:
This is in response to your ruling request, dated August 9, 2000, and related letters dated November 22, 2000, and December 1, 2000, concerning organizational changes made by the Casio group of companies. You seek confirmation that the changes comply with Customs laws and regulations.
FACTS:
The Casio Computer Company, Ltd., of Tokyo, Japan, wholly owns Casio Holding, Inc., of Dover, New Jersey. Casio Holding, Inc., in turn wholly owns four subsidiaries: Casio Manufacturing; Casio Communications, Inc.; Casio Techno; and Casio Corporation of America (“CCA”). It also has an 80% interest in another subsidiary, Casio, Inc. All five subsidiaries are incorporated.
CCA was established to provide supply chain, financial and market research services to its four sister companies. Each one of these four sister companies imports merchandise, and each serves as importer of record and uses its own importer identification number in import transactions.
The international logistics department of CCA stores its sister subsidiaries’ records and interfaces with the various customs brokers appointed by the sister corporations. It also files rulings and protests on their behalf and verifies tariff numbers and duty amounts. The financial group makes payments to vendors and to Customs on behalf of the various sister companies. CCA bills the subsidiaries for its services.
ISSUE:
Whether the described activities of CCA violate Customs recordkeeping requirements or the requirement that a person have a broker’s license to conduct customs business on behalf of others.
LAW AND ANALYSIS:
Section 641(b)(1) of the Tariff Act of 1930, as amended (19 U.S.C. §1641(b)(1)), provides that no person may conduct customs business (other than solely on behalf of that person) unless that person holds a valid customs broker’s license. “Persons” for purposes of the rules pertaining to customs brokers are defined in 19 CFR §111.1 as “individuals, partnerships, associations, and corporations.” Subsidiary sister corporations, although related through common ownership, are separate legal persons. See Headquarters Ruling Letters HQ 114166, dated February 2, 1998, HQ 223804, dated June 29, 1992, and Customs Service Decision (C.S.D.) 81-40. Therefore, an unlicensed corporation may not conduct customs business on behalf of a related sister corporation.
The aforementioned rule raises the issue of whether CCA is conducting customs business on account of the services it provides to its sister corporations. “Customs business” is defined in 19 U.S.C. §1641(a)(2) as:
Those activities involving transactions with the Customs Service concerning the entry and admissibility of merchandise, its classification and valuation, the payment of duties, taxes, or other charges assessed or collected by the Customs Service on merchandise by reason of its importation, and the refund, rebate, or drawback of those duties, taxes, or other charges. It also includes the preparation of documents or forms in any format and the electronic transmission of documents, invoices, bills, or parts thereof, intended to be filed with the Customs Service in futherance of such activities, whether or not signed or filed by the preparer, or activities related to such preparation, but does not include the mere electronic transmission of data received for transmission to Customs.
We will first address the filing of rulings and protests, the verification of tariff numbers and duty amounts, and the payments made to Customs and to vendors. A discussion of CCA’s interactions with brokers and its retention of its sister corporations’ records will follow.
Filing of Protests and Ruling Requests
CCA files ruling requests and protests on behalf of its sister corporations. Under current regulations, any authorized agent of the importer of record may file protests and ruling requests. (19 CFR §§174.3 and 174.12(a)(6); 19 CFR §177.1(c)). Therefore, CCA, if duly authorized as an agent, may file ruling requests and protests on behalf of its sister corporations.
Verification of tariff numbers
CCA verifies tariff numbers for merchandise imported by the sister companies. CCA does not explain what is meant by “the verification of tariff numbers”. However, by this we infer that CCA plans to check the accuracy of tariff numbers which have been selected by another involved party to the transaction, such as the shipper or the sister importer or a licensed customs broker. The tariff numbers applicable to imported merchandise are determined by classifying the merchandise in accordance with the Harmonized Tariff Schedule of the United States (“HTSUS”). Therefore, tariff verification will necessarily involve the classification of merchandise.
As noted above, “customs business” includes those activities involving transactions with Customs concerning the classification of merchandise. It also includes the preparation, and activities relating to the preparation, of documents intended to be filed with Customs in furtherance of a customs business activity. In HQ 114404, dated March 16, 1999, Customs interpreted this to mean that an unlicensed person would be precluded from classifying another person’s merchandise which was going to be the subject of an entry filed with Customs.
Clearly, any communication with Customs, whether written or oral, about the classification of merchandise will constitute “an activity involving transactions with Customs concerning . . . [the] classification [of merchandise] . . . ”. Filing an entry containing HTSUS numbers, or discussing an article’s classification with an import specialist, are examples of such communication. To give effect also to the second sentence of the statutory “customs business” definition, cited above, it is evident that the preparation of the entry documents, and the gathering of the information which will be placed on those documents, are customs business activities. This gathering of information is an activity “relating to the preparation” of the entry documents. In the classification context, this means that a person will require a broker’s license not only to prepare entry documents for another person, but also to gather classification data which will be reflected on the entry.
The verification of tariff numbers prior to entry is a customs business activity when the possibility exists that corrected classification information derived from the verification process will end up on the entry. This is because such verification is “an activity relating to the preparation” of the entry documentation. CCA may not perform classification verifications on merchandise ordered by its sister companies under such circumstances.
Verification of duty amounts
CCA also verifies duty amounts for its sister corporations. It is unclear whether the verification takes place before or after the duties are paid. Assuming the verification takes place prior to duty payment, CCA would probably have to review the prepared entries and the paperwork supporting the data contained in the entries. Such review might include checking whether the duty rates applied to the merchandise properly attach to the selected tariff numbers, and then determining whether the projected duties were correctly calculated. For the reasons stated in the preceding paragraph, this type of duty verification may only be performed by the importer or by a licensed broker when the possibility exists that corrected duty information derived from the duty verification process will ultimately appear on the entry.
Duty payments
CCA states that it makes payment to Customs and to vendors on behalf of the various sister corporations. By this, we infer that the payments to Customs are payments of duties, taxes and related charges which come due as a result of the filing of entries. The payment of duties, taxes and charges to Customs is “an activity involving transactions with Customs concerning . . . the payment of duties, taxes, or other charges assessed or collected by Customs on merchandise by reason of its importation” (19 U.S.C. §1641(a)(2)). As such, it is customs business and may only be done by the importer of record or by a licensed customs broker.
At this juncture we wish to distinguish the holding in C.S.D. 81-40, supra, which in pertinent part held that a company would not be precluded from paying the duties owed by a related corporation. We submit that C.S.D. 81-40 was written prior to the first statutory definition of “customs business”, which appeared upon enactment of the Trade and Tariff Act of 1984 (Public Law 98-573). That definition unequivocally provided that the payment of duties and related charges was a customs business activity. Of course, this does not change Customs view, as stated in C.S.C. 81-40, that there is no prohibition against someone else assuming liability for the duties owed by another person. However, in the foregoing situation, the transaction must be structured in such a manner that only the importer of record or a licensed broker tenders the actual payment to Customs.
CCA also makes payments to vendors of the sister corporations. Customs does not regulate such private financial arrangements.
Recordkeeping
CCA asks whether it may retain the records of its sister corporations. Section 508(a) of the Tariff Act of 1930, as amended (19 U.S.C. §1508(a)) requires importers, amongst others, to keep records which pertain to the importation of the merchandise and which are normally kept in the ordinary course of business. Importers who cannot produce entry records to Customs within a reasonable time after a demand for their production is made may be subject to the recordkeeping penalties of 19 U.S.C. §1509. However, Customs does not require that the records required of importers be kept in any particular place. The only requirement is that the records must be produced in a timely manner to avoid penalties. Thus, the sister corporations may place their records with CCA for safekeeping. However, it will be incumbent upon the sister corporations to effect a timely production should Customs ask for production of the records.
Interfacing with Brokers
Finally, CCA states that it “interfaces” with the various customs brokers selected by the sister corporations. The ruling request does not provide details of the extent of the interaction. However, we reiterate that CCA may not engage in activities on behalf of its related sister companies which amount to customs business. This prohibition would extend to serving in an intermediary role if such role required active participation in decisions and activities relating to the preparation or filing of Customs documents for imported merchandise, or relating to any other action amounting to customs business on behalf of the sister corporations.
HOLDING:
CCA, as an unlicensed person, may not conduct customs business for its related sister companies. CCA, if duly authorized by the importer, may file ruling requests and protests on behalf of its sister corporations, because current regulations allow any authorized agent to do so. When the possibility exists that corrected classification and duty information derived from a verification process will be reflected on the entry, such verification is an activity related to the preparation of entry documents and, as such, is customs business. CCA may not pay to Customs duties owed by its sister corporations, because the payment of duties to Customs is by definition a customs business activity. CCA may make payments owed by its sister companies to vendors, because Customs does not regulate financial arrangements between importers and vendors. Finally, CCA may “interface” with Customs brokers on behalf of its sister corporations only to the extent that the discourse does not involve any customs business issues.
With respect to recordkeeping, CCA may store the entry records of its related sister corporations at its own facility. It will be incumbent upon the sister corporations to effect a timely production of the records should Customs ask for their production.
Sincerely,
Larry L. Burton
Chief
Entry Procedures and Carriers Branch