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HQ 224433

July 1, 1993

CON-9-CO:R:C:E 224433 SR


Ms. Constance Lewis
Acting Director
Seizures & Penalties Division

RE: Internal Advice request concerning expanding the TIB provisions to allow domestic sale to purchasing agent; 19 U.S.C. 1202; 19 CFR 10.31

Dear Ms. Lewis:

This request for internal advice was initiated by a letter dated December 21, 1992, from Radix Group International.

Customs conducted a forum in Houston, Texas, in which attending parties recommended changes in various aspects of Customs procedures. The recommendation currently at issue involves the regulations concerning importations temporarily imported free of duty under bond (TIB). The "Houston Recommendation # 2" is as follows:

Simplify the exportation evidence to allow the broker to certify that the imported merchandise is the same as exported. This action will avoid invoicing dissimilarities for imports and exports. Change the regulation to allow multiple sales where the merchandise is always intended for export."

The participants in the forum suggested a change in the interpretation of "domestic sale" to allow a domestic purchasing agent to buy TIB goods as an agent for an overseas purchaser. Currently, if goods under a TIB are sold they are subject to liquidated damages. The participants felt that a domestic purchasing agent should be allowed to purchase TIB goods if they are then exporting them to an overseas purchaser. It is argued that the goods are not purchased for his own account, but rather as an agent representing the overseas buyer.

Generally, purchasing agents represent foreign companies by purchasing equipment needed by the company. They arrangement shipment of the merchandise, sometimes storing it in their warehouse. If the purchasing agent buys merchandise that is in this country under the TIB then they would have to pay liquidated damages that equal double the duty if it is considered to be a
domestic sale.

The provisions of the law governing temporary importation under law are provided for in Subchapter XIII of the Harmonized Tariff Schedule of the United States (HTSUS) (19 U.S.C. 1202). U.S. Note 1(a) of Subchapter XIII provides as follows as follows:

The articles described in the provisions of this subchapter, when not imported for sale or for sale on approval, may be admitted into the United States without the payment of duty, under bond for their exportation within 1 year from the date of importation . . .

The language of the statute is clear; however, in the past Customs has allowed TIB merchandise to be sold provided the sale is for export. T.D. 54640 (25) states as follows:

Merchandise which is to be sold in the United States for exportation to a foreign purchaser is not imported for sale or sale on approval within the meaning of section 308, as amended, that phrase relating only to sales within the United States for domestic use or consumption.

Pursuant to this T.D., in order to sell goods that are entered under a TIB the purchasing agent must be acting in the capacity of an agent for a foreign principle. It must be shown that the purchasing agent was a nominal consignee, that they never owned title to the goods. If the purchasing agent purchased the goods then later found a foreign purchaser, this would be considered a domestic sale and would violate the terms of the TIB. We requested sample copies of sales contracts from the Houston trade contact to see if the agency capacity is clearly disclosed, but she was unable to provide any copies.

The intention of the statute is to allow goods to enter the U.S. free of duty as long as they are exported without entering the commerce in this country. By allowing a nominal consignee to purchase goods that are only for export the goods do not enter the commerce. However, it would seem that this would allow goods in the country under a TIB to compete at an advantage with goods that are in the U.S. that have had to pay the duty. By allowing a sale in the U.S., even if it is for export, the goods would in essence be in the stream of commerce of the U.S. by competing against U.S., or imported duty paid goods for sale.

Another potential problem to consider is the fact that the broker that acted as importer of record is held liable if the goods are not exported. If multiple party sales are allowed the merchandise will be out of the control of the broker who, as
importer of record, could be held for liquidated damages, under 19 CFR 10.39(d)(1), if the purchasing agent fails to export the goods.


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