One of the many frustrations facing international traders trying to import goods into the US is whether or not they will be accepted as importer of record by Customs and Border Protection (CBP). CBP established a program to deal with what it views as the irregularities frequently associated with shipments originating in China (among other countries) — the New Importer Task Force. This effort is focused in specific industries, especially those where antidumping and/or countervailing duty is assessed on imported goods.
As a starting point, to qualify as importer of record, the party must either own the goods or have a financial interest in them (e.g., lien rights). See 19 U.S.C. 1484. This would seem to be a straightforward analysis. If you made and sold the goods or purchased goods from one party and sold them to another, that should qualify you as importer of record.
When in doubt, to test the role of the party claiming to be the importer, CBP rejects the entry and demands a list of supporting documentation that typically includes, but is not limited to:
- an original endorsed bill of lading
- a copy of the arrival notice
- a copy of the delivery order (including the name of the company to whom the goods will be shipped upon cargo release)
- verification of the point of contact and the company that takes control of the merchandise upon cargo release
- if a broker is involved, a valid power of attorney (to include a scanned copy of a verifiable form of personal identification from the importer or corporate officer who signed the power of attorney, i.e., a driver's license, government identification, or passport (if a non-resident foreign person)
- a copy of the CBP Form 301 bond
- proof of payment from the importer to the seller and from the ultimate consignee to the importer
- proof of payment for the ocean freight charges and insurance, and, if not paid, documentation evidencing the billing information as to the amounts owed, who is being paid, and who is paying
- a letter from the importer's financial institution directly to CBP (not through the importer) attesting to the existence of the importer's account at that financial institution to include the importer's EIN/IRS number and contact details for the bank officer issuing the letter
- proof the importer is legally registered to do business in its state or country of formation, to include articles of incorporation identifying the corporate officers
- any contract between the manufacturer and importer (to include the product description, quantity, price, delivery date, place of delivery, and the date or condition that causes the contract to expire)
- a confirmation of the sale, including the purchaser's signature
- an explanation about the role of any third parties (whose existence is evident from the commercial documents) in the importation or sale of the merchandise and the relationship between that party and the importer
- a copy of the contract between the importer and the ultimate consignee
Sometimes that document list also includes a cost breakdown for the finished goods, the relevant term of sale, and how prices are determined (meaning document your price negotiations). We have also seen instances in which Chinese export documents are demanded (in the original Chinese and translated into English). Also, in the case of a non-resident importer (typically in the delivery duty paid [DDP] context), written evidence of the identity of the US agent for service of process.
Importers respond with the relevant documentation, and the vast majority of the time, the response from CBP is that documentation is not sufficient, leaving the importer to either export the goods or identify an acceptable importer who will make entry in his or her own name. First, this is crafty on CBP's part because no reason is given, only the conclusion. If one inquires further, and assuming the person who signed the decision can actually be reached, typically one ends up in a very confusing conversation because the question of qualifying as the importer and CBP accepting the value declared seem to get jumbled. While it is accurate to say that CBP may question whether the value stated at time of entry is appropriate, that does not automatically equate to the importer not owning the goods, which is the key fact to determine whether or not the company qualifies as importer of record.
This process is crafty on the part of CBP for a second reason. By framing the decision as providing the option to export the goods or identify another party who qualifies and will make entry in its own name, CBP avoids giving grounds for the original importer to be able to protest and so seek court review of the decision made.
In the US Trade Facilitation and Trade Enforcement Act (TFTEA), effective in 2016, Section 114 called for the establishment of an Importer of Record Program. Section 116 required minimum standards be set that brokers are to meet in identifying all importers.
The Importer of Record Program requires CBP to develop criteria so that sufficient information is submitted to allow CBP to verify the existence of the importer, to identify linkages and affiliations between importers, and to identify address and corporate structure changes between importers. CBP was also mandated to maintain a centralized database of importer numbers.
Regarding customs brokers, CBP is to identify the information a broker is to collect, establish reasonable procedures a broker is to follow to verify the authenticity of the information provided, and require the broker to maintain those records, subject to a $10,000 penalty for each failure to comply.
June 2017 saw publication of a new CBP Form 5106, the form used to create and update any importer identity. Among the new bits of information required are the number of entries the company expects to file yearly; company information, such as a brief business description, a North American Industry Classification System (NAICS) code, a Data Universal Numbering System (DUNS) number, and any self-filer code. Additionally, the company is to report when it was established, the name and Internal Revenue Service (IRS) number for any related current or former businesses, the contact details for its primary bank, any unique identifier on its formation documents and where formed, its business structure, along with the identity of any beneficial owners and officers (to include the Social Security or passport number of the individuals).
The last word from CBP about how brokers validate importers is dated May 2018 and reads as follows: "Here are some ways the broker can validate a Power of Attorney [POA]:
-To the greatest extent possible, have POA’s completed in person so the grantor’s unexpired government issued photo identification (driver’s license, passport, etc.) can be reviewed.
-Check applicable websites to verify the POA grantor’s business and registration with the State authority.
-If the principal uses a trade or fictitious name in doing business, confirm that the name appears on the POA.
-Verify that the importer’s name, importer’s number, and Employer Identification Number (also known as the Federal Tax Identification Number) on the POA match what is in the Automated Commercial Environment (ACE).
-Verify the importer’s address is a “brick and mortar” location on a public mapping program, and not simply a “postal box” or undeveloped parcel of land.
-Dial the provided phone landline number for authentication.
-Cross-check the provided information through a third party entity, i.e., credit report, DUN’s number, or similar business identifying entity.
-Access the client’s website for depth of content versus only a surface containing a landing page.
-Check whether the POA grantor is named as a sanctioned or restricted person or entity by the US government. See the Bureau of Industry and Security’s Export Enforcement at this link."
See this link to read the full posting.
The New Importer Task Force would seem to serve very different purposes from Section 114 and 116 of TFTEA. What these topics have in common is companies had better be prepared with documentation beyond just the commercial invoice, packing list, and transportation document when filing entry.
TFTEA also identified the following priority trade issues: agriculture programs, antidumping and countervailing duties, import safety, intellectual priority rights, revenue, textiles and wearing apparel, and trade agreements and preference programs. Where do your shipments fit among these priorities?
Are you prepared to document your role and why you qualify as importer of record? If not, best to get ready now. Questions are no doubt coming!
Susan Kohn Ross is an international trade attorney with Mitchell Silberberg & Knupp in Los Angeles. Contact her at email@example.com.