CLA-2 OT:RR:CTF:VS H232917HkP
Port Director
Port of Blaine
U.S. Customs and Border Protection
9901 Pacific Highway
Blaine, WA 98230
ATTN: Entry Unit
RE: Application for Further Review of Protest No. 3004-12-100028; Subheading 9801.00.20, HTSUS; 19 CFR § 10.108; Same Importer requirement
Dear Port Director:
This is in response to your memorandum, dated July 17, 2012, forwarding the Application for Further Review of Protest no. 3004-12-100028, filed on behalf of Quad-Lock Building Systems Ltd. (“Quad-Lock”) on July 16, 2012. At issue is whether the protestant meets the requirements of subheading 9801.00.20, Harmonized Tariff Schedule of the United States (“HTSUS”). In reaching our decision we have taken into consideration information submitted to the port by the importer.
FACTS:
The protestant, Quad-Lock, is a Non-Resident Importer (“NRI”) located in Canada. It is the parent of a group of companies involved in the manufacture and sale of Quad-Lock insulated concrete form (“ICF”) wall systems. Other companies in the group include Aqua-Pak Styro Containers Ltd. (“Aqua-Pak”), located in Canada, and Building Technologies Inc. and Styro Products, Inc., both located in the United States.
On December 25, 2011, Quad-Lock, using its unique importer number, imported a mold classified under subheading 9801.00.20, HTSUS, which allows goods previously imported into the U.S. and subsequently exported under a lease or similar use agreement to be re-imported into the U.S. free of duty. Styro Products was listed as the ultimate consignee on the Entry Summary. According to 2006 Entry documents, the mold was originally imported on August 17, 2006, by NRI Aqua Pak, using its unique importer number, for consignee Styro Products. The mold was classified under heading 8544, HTSUS, and the required customs duties were paid.
On January 10, 2012, the Port issued a Request for Information to Quad-Lock requesting documentation that would support the claim of duty-free treatment. In its February 9, 2012, response, Quad-Lock stated that Styro Products was founded in mid-2006 to manufacture the Quad-Lock building system in the U.S., and that Aqua-Pak or Quad-Lock imported machinery, equipment and materials into the U.S. for Styro Products. Aqua-Pak or Quad-Lock (on behalf of Aqua-Pak) also transferred a number of molds from Canada to the U.S., with the intention of transferring ownership of the molds from Aqua-Pak to Building Technologies, which would then lease the molds to manufacturers of the Quad-Lock system. Quad-Lock stated that the lease-back system was an effort to avoid the repeated payment of customs duties on the same molds when leased outside the U.S. Quad-Lock also stated that ownership of the molds was transferred from Aqua-Pak to Building Technologies on January 1, 2012. The only documentation submitted to support this claim was a one sentence “To Whom it May Concern” letter, dated January 1, 2012, stating that specified EPS molding tools, including the mold at issue, are owned by Building Technologies.
On March 5, 2012, the Port issued a Notice of Action to Quad-Lock proposing to liquidate the goods under subheading 8477.90.85, HTSUS, because insufficient documentation had been received to support the claim of duty-free entry under subheading 9801.00.20, HTSUS, which requires that the goods be reimported by or for the account of the person who imported them into, and exported them from, the United States. On April 13, 2012, the Port liquidated the entry as proposed.
Quad-Lock timely protested the Port’s action on July 16, 2012, on the basis that the mold at issue was exported to Canada pursuant to a lease between Aqua-Pak and Building Technologies, whereby Aqua-Pak would use the mold to manufacture the ICF system exclusively for Quad-Lock. The lease agreement, dated July 1, 2011, was submitted. Quad-Lock did not state when the mold was exported to Canada, who exported the mold, or provide any export documents.
On February 25, 2013, this office attempted to directly contact the protestant concerning the identity of the exporter of the molds subsequently reimported under subheading 9801.00.20, HTSUS, and for further information on the ownership of the molds at the time they were exported subject to the lease agreement between Building Technologies and Aqua-Pak. A response was not received. On March 11, 2013, this office contacted the protestant’s broker with the same request for information. The broker informed us that the protestant’s contact person had retired and also submitted some documents. On March 12, 2013, this office informed the broker that the documents he provided were already in our possession. No further information was presented. On April 2, 2013, this office made another request to the broker for information responsive to the questions first asked of Quad-Lock in February 2013. As of the date of the writing of this decision, the broker has not responded.
ISSUE:
Whether the mold initially imported by Aqua-Pak and subsequently reimported by Quad-Lock qualifies for duty-free treatment under subheading 9801.00.20, HTSUS.
LAW AND ANALYSIS:
Subheading 9801.00.20, HTSUS, provides duty-free treatment for:
[a]rticles, previously imported, with respect to which the duty was paid upon such previous importation or which were previously free of duty pursuant to the Caribbean Basin Economic Recovery Act (CBERA) or Title V of the Trade Act of 1974 (Generalized System of Preferences)(GSP), if (1) reimported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, after having been exported under lease or similar use agreements, and (2) reimported by or for the account of the person who imported it into, and exported it from, the United States.
Section 10.108 of the U.S. Customs and Border Protection (“CBP”) Regulations, 19 C.F.R. § 10.108, provides that free entry shall be accorded under subheading 9801.00.20, HTSUS, whenever it is established to the satisfaction of the port director that the article for which free entry is claimed was duty paid on a previous importation, is being reimported without having been advanced in value or improved in condition by any process of manufacture or other means, was exported from the United States under a lease or similar use agreement, and is being imported by or for the account of the person who previously imported it into, and exported it from the United States. It should be noted that CBP has denied subheading 9801.00.20, HTSUS, treatment in situations where such evidence was not provided. See, e.g., Headquarters Ruling Letter (“HQ”) 556528, dated May 27, 1992 (subheading 9801.00.20, HTSUS, denied because no evidence was provided that would indicate that the labeling applicator machine under consideration was exported under lease or similar use agreement).
The Port is of the opinion that the requirements of 19 C.F.R. § 10.108 are not met because the initial importer, NRI Aqua-Pak, and the importer reimporting the merchandise, NRI Quad-Lock, are not the same person.
The protestant argues that 19 C.F.R. § 10.108 applies to related parties that transfer assets between themselves. Because the protestant owns all the companies involved and all the companies share the same Chief Executive Officer (“CEO”), the protestant argues that the CEO, “regardless of the names on the import documents”, is the person by and for whom the mold was initially imported into the U.S., and who exported it to Canada and then reimported it into the U.S.
In HQ 557536 (Jan. 7, 1994), an importer exported equipment for lease to foreign customers. The equipment was initially imported into the U.S. by another party and then acquired by the importer. At the end of each lease period, the importer re-entered the equipment into the U.S. as foreign articles and paid the appropriate duty. Customs found that, although the importer was not the original importer, it had in fact imported the equipment into the U.S., paid the applicable duty, exported the equipment to a foreign company pursuant to a lease agreement, and subsequently imported the same equipment into the U.S. Therefore, any subsequent entry of the equipment satisfied the requirements of subheading 9801.00.20, HTSUS.
Likewise, in HQ 553676 (Feb. 28, 1986), a mold was imported from Portugal into the U.S., and subject to duty-free treatment under the Generalized System of Preferences (GSP) by Max Klein Company of Wisconsin. The mold was subsequently exported to a Canadian manufacturer under a lease agreement by Bow Plastics Ltd. in an exclusive right and license agreement, which gave Bow Plastics the authority to transport the molds back and forth and to pay duties. The mold was reimported into the U.S. from Canada by Bow Plastics and duty paid. The mold was later returned to Bow Plastics in Canada for a second production run and again reimported by Bow Plastics. Duty-free treatment was granted because the mold was imported into the U.S. on both occasions from Canada by Bow Plastics, after having been exported by that company.
However, in HQ 067920 (Aug. 31, 1982), (decided under section 801.00, Tariff Schedules of the United States (TSUS), the precursor to subheading 9801.00.20, HTSUS), a crane company placed a purchase order for a crane with an American-based company who accepted the order and in turn passed the order to an affiliated factory in Sweden. The foreign-made crane was then entered into the U.S. by and for the account of the American-based company and, after sale, was forwarded to the crane company's jobsite in the U.S. The crane company subsequently exported the crane under a lease agreement to a Mexican firm. The crane was later returned to the U.S. by and for the account of the crane company. Customs held that although the crane may have been imported for the crane company because of a purchase agreement, the entry documents show that the American-based company was the importer of record and duty was paid by that firm. It was a separate business entity from the crane company and failed to show that it was acting as an agent “by or for the account" of the crane company, the exporter and re-importer of the crane. Therefore, the requirements of the section were not met.
Under the CBP Regulations, an “importer” is “the person primarily responsible for the payment of any duties on the merchandise, or an authorized agent acting on his behalf.” 19 CFR § 101.1. Every importer is required to have an importer identification number. See 19 CFR § 24.5. In this case, the CEO of Quad-Lock is not the importer of record for any of the importations. Further, the entity that initially imported the mold, Aqua-Pak, is not the same entity that re-imported the mold, Quad-Lock, as evidenced by the fact that they have separate identification numbers. We have no information on which entity exported the mold or on whether the mold was exported and reimported on more than one occasion.
It is a basic principle of corporate law that a corporation is a separate and distinct legal being. See Moberly v. United States, 4 Cust. Ct. 91, C.D. 294 (1940). Therefore, although Quad-Lock and Aqua-Pak are in a parent-subsidiary relationship, they are separate legal entities. See Tennessee Valley Authority v. ExxonNuclear Co., Inc., 753 F.2d 493, (6th Cir. 1985). Accordingly, as separate entities or "persons," importation by Quad-Lock of the merchandise initially imported by Aqua-Pak under these facts does not constitute an importation by or for the account of the person who initially imported such item. See HQ 560256 (July 23, 1997), and HQ 561005 (Aug. 5, 1998).
Given these facts and the absence of information establishing that the previous importation and the subsequent importation were by or for the account of the same person, we find that the requirements of subheading 9801.00.20, HTSUS, and 19 C.F.R. § 10.108 have not been met. We find, therefore, that the port was correct in denying duty-free entry under subheading 9801.00.20, HTSUS.
HOLDING:
The mold is not entitled to duty-free entry under subheading 9801.00.20, HTSUS.
The protest should be denied. In accordance with the Protest/Petition Processing Handbook (CIS HB, December 2007), you are to mail this decision together with the Customs Form 19 to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to the mailing of the decision. Sixty days from the date of the decision the Office of International Trade, Regulations and Rulings, will make the decision available to CBP personnel and to
the public at www.cbp.gov by means of the Freedom of Information Act and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division