Issue 282, December 5, 2000
In an effort to clarify which importer identification number should be provided for reporting the "ultimate consignee" on an entry, Customs posted a draft directive on its bulletin board. Comments are due on December 15th.

The debate over who should be the ?ultimate consignee? involves more than quibbling over how to fill out a form because Customs? audit and enforcement activity often targets ultimate consignees. While the draft directive is geared more toward reminding importers about the correct importer identification number to use for an ultimate consignee, importers should be careful in declaring the ultimate consignee. Recent experience shows that parties to domestic transactions who have merchandise drop shipped to them often find themselves involved with Customs because the importer listed the domestic buyer as the ultimate consignee.

When the current CF 7501 was published as a proposed rule in 1982, it included a section for declaring the "ultimate consignee" of an imported product to Customs. The original proposed instructions for completing the "ultimate consignee" section stated that, if applicable, the importer should record "the name and address, including zip code, of the individual or firm for whose account the merchandise is imported." Several parties commented that "ultimate consignee" should be defined to cover situations such as duty included sales, drop shipments, several ultimate consignees, and trading companies. Customs rejected the concerns of the commentators and adhered to its original definition, which Customs claimed was adequate.

Several years later, Customs revisited the issue and required importers to declare as the "ultimate consignee" the "identity of the party in the United States to which the imported merchandise would be delivered." This suggested that the place to where an article was physically shipped determined the ultimate consignee, although the actual proposed regulation suggested that if the importer was the purchaser of the article, the importer should be listed as the ultimate consignee. Customs' proposed several examples to clarify the regulation but ultimately deleted them because Customs' claimed they were "confusing." Customs promised to work with the trade community to create clearer examples and, in 1992, Customs set forth 16 different examples to illustrate who should be listed as the "ultimate consignee." These examples make clear that a U.S. buyer in a domestic transaction with a U.S. seller is not the ultimate consignee when the merchandise is drop shipped to the U.S. buyer by a foreign company.

The draft directive notes that Customs will soon be issuing a directive to clarify who qualifies as an "ultimate consignee." In the meantime, importers that use drop shipments to deliver merchandise to their customers should review the parties they list as the ultimate consignee to ensure that they do not unnecessarily subject their customers to Customs? scrutiny.

Our contributing writer, Michael Roll, is an attorney at Katten, Muchin & Zavis in Chicago and can be reached via email or 312-902-5200.

Please note that due to the complex nature of the subject matter, Danzas AEI cannot be responsible for actions taken by the reader in reliance on the information contained herein without prior consultation with Danzas AEI.