- Type : • HTSUS :
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Related:
115248
BRO 3-05
OT:RR:CTF:ER
H261011 ECG
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP
Arthur W. Bodek, Esq.
399 Park Avenue
25th Floor
New York, NY 10022
Re: Request for Ruling Regarding Whether the Proposed Use of a Single Account Constitutes Customs Business
Dear Mr. Bodek:
This is in response to your ruling request, dated January 12, 2015, and phone conversation on January 30, 2015, on behalf of [X] (“Company A”) regarding whether the use of a single bank account from which affiliated companies draw monies to pay for their respective customs duties constitutes customs business or a corporate compliance activity. You have asked that certain information submitted in connection with this ruling request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets and all attachments to this ruling request, forwarded to our office, will not be released to the public and will be withheld from published versions of this ruling. The company names have been replaced in the public version of the document. Our response follows.
FACTS:
According to your letter and subsequent phone conversation, Company A and [X] (“Company B”) are separately incorporated entities that are both wholly-owned subsidiaries of [X] (“Company C”). Company A and Company B are assigned separate importer numbers, maintain separate customs bonds, and separately import their respectively branded merchandise. Currently, Company A and Company B maintain separate ACH accounts that sweep funds to pay for their respective customs duties. In practice, an ACH account is programmed to automatically sweep monies out of an account electronically to pay duties to U.S. Customs and Border Protection (“CBP”) as they are owed. Company A’s ACH account sweeps monies from its account and Company B’s ACH account sweeps monies from its account.
You also explained that Company A and Company B contemplate funding both of their ACH accounts by a single bank account. Specifically, this single bank account would provide the funds from which both ACH accounts sweep their monies and would be managed internally by Company A. In this proposed scenario, both Company A and Company B would maintain their separate ACH accounts. There would be no change as to how the ACH accounts are established with CBP or in the way that CBP receives its payments from either company. The only thing that changes from current practice is where Company B’s ACH account sweeps monies. The proposed arrangement also involves an internal reconciliation between Company A and Company B, which consists of an intercompany transfer of funds from Company B to Company A to cover the amount withdrawn by Company B’s ACH account from the account that Company A manages. Company A claims that the proposed management of money in a single account for affiliated companies is not customs business, and if it is, then it constitutes a corporate compliance activity.
ISSUE:
I. Whether the use of a single bank account to fund separate ACH accounts constitutes customs business.
LAW AND ANALYSIS:
You argue that the management of money in a single bank account that provides the funds for separate ACH accounts used by affiliated companies does not constitute customs business. 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. The regulatory definition of “customs business,” which closely follows the language set forth in 19 U.S.C. § 1641(a), is provided in 19 C.F.R. § 111.1 as:
those activities involving transactions with CBP concerning the entry and admissibility of merchandise, its classification and valuation, the payment of duties, taxes, or other charges assessed or collected by CBP on merchandise by reason of its importation, and the refund, rebate, or drawback of those duties, taxes, or other charges. “Customs business” also includes the preparation, and activities relating to the preparation, of documents intended to be filed with CBP in furtherance of any other customs business activity, whether or not signed or field by the preparer. . .
Thus, if the management of money in a single bank account to fund separate ACH accounts falls within those activities described, then it constitutes customs business.
To comply with the statutory definition of customs business, a transaction with CBP to pay customs duties must be structured in such a manner that only a licensed broker or the importer of record tenders the payment to CBP. In HQ 115248, dated August 28, 2001, CBP analyzed whether a company could make payments to CBP and vendors on behalf of its sister corporations. First, CBP found that the company could not make payments to CBP on behalf of its sister corporations because the payments were transactions with CBP concerning the payment of duties, taxes, and other charges collected by CBP by reason of the merchandise’s importation, and therefore, constituted customs business. However, CBP noted that a person may assume the liability for duties owed by another person in accordance with Customs Service Decision 81-40, but that such a transaction must still be structured in a manner where the customs broker or importer of record tenders the payment to CBP. Second, CBP found that the company could make payments to vendors on behalf of its sister companies. In reaching that conclusion, CBP stated that it does not regulate such private financial arrangements.
In the instant case, the use of a single bank account to fund separate ACH accounts does not constitute customs business. Unlike the company in HQ 115248 that was not permitted to pay duties to CBP on behalf of its sister companies because it constituted customs business, the companies at issue here continue to pay their respective duties to CBP as importers of record despite consolidating the bank accounts. Specifically, Company A maintains its ACH account and Company B maintains its ACH account, where each ACH account pays CBP duties as they are owed. In this proposed plan, each company continues to individually transact with CBP to pay its respective duties. Rather than change the payment structure between the two companies and CBP like in HQ 115248, the proposed use of a single bank account with consolidated management changes the companies’ internal organization of money. It the companies’ payments to CBP of duties, other charges, and taxes assessed by CBP on merchandise by reason of its importation that amounts to customs business. Whether the companies pay CBP with funds obtained from a single bank account or separate bank accounts does not affect each company’s transaction with CBP for the payment of duties. Thus, the use of a single bank account to fund separate ACH accounts does not amount to customs business.
Furthermore, much like in HQ 115248, where the company was permitted to pay vendors on behalf of its sister corporations because such activity was not customs business, Company A and Company B’s proposed internal reconciliation between the two companies for its single bank account is similarly not customs business. Here, the arrangement includes an internal reconciliation between Company A and Company B that consists of an intercompany transfer of funds from Company B to Company A to cover the amount withdrawn by Company B’s ACH account from the single bank account. This internal payment does not involve a transaction with CBP to pay customs duties, rather it is a private financial arrangement. Much like in HQ 115248 where CBP stated that it does not regulate a private financial arrangement like payments to a vendor on behalf of a sister company as they do not constitute customs business, CBP would similarly not regulate a transaction of money between two companies. Therefore, the proposed consolidation of bank accounts merely changes the internal management of money in the single account used by the two companies, while maintaining each company’s ACH account to individually transact with CBP, and thus, does not constitute customs business. As we have determined that the use of a single bank account to fund separate ACH accounts does not constitute customs business, we do not need to consider whether such activity constitutes a corporate compliance activity.
HOLDING:
Based on the above, the use of a single bank account to fund separate ACH accounts does not constitute customs business.
Please note that 19 C.F.R. § 177.9(b) 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 ruling 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.”
Sincerely,
Carrie L. Owens, Chief
Entry Process and Duty Refunds Branch