When structuring an export transaction, it is important to understand who the “Ultimate Consignee” will be. For simple transactions where there is one buyer and one seller, and the goods simply move from the buyer to the seller this this is fairly straight forward. However, there are transactions that are more complicated. The Census Bureau charged with maintaining export statics published Part I of a series of blog posts to address common questions related to the Ultimate Consignee in export transactions. The Post focuses particularly when the end user and the Ultimate Consignee are located in different countries.
The Foreign Trade Regulations (FTR) define the Ultimate Consignee as the entity located abroad that receives the export shipment, which can be the end user or the Foreign Principal Party in Interest (FPPI).
The FTR instructs the Electronic Export Information (EEI) filer to “report the Ultimate Consignee as known at the time of export.” The blog explores practical examples of reporting the Ultimate Consignee, including scenarios where the US Principal Party in Interest (USPPI) has varying degrees of knowledge about the FPPI and end users. It highlights the significance of the Ultimate Consignee Type and Country of Ultimate Destination in these reporting situations.
The blog highlights the below examples:
1. The first and most common scenario occurs when the U.S. Principal Party in Interest (USPPI)/U.S. seller has one Foreign Principal Party in Interest (FPPI)/foreign buyer who is also the only company abroad actually receiving the goods for consumption.
The FPPI/foreign buyer is the party located abroad actually receiving the goods for consumption. Therefore, that party is the Ultimate Consignee.
2. The USPPI has knowledge of the FPPI/foreign buyer who is receiving the goods and is in the business of further distributing or reselling the goods to other parties. For competitive reasons, the FPPI/foreign buyer refuses to disclose its customers/end users to the USPPI, even upon request by the USPPI.
It shows due diligence when the USPPI requests the name and address of the end user(s) from the FPPI/foreign buyer, but there is no guarantee that the FPPI/foreign buyer will disclose its customers. This is where the Ultimate Consignee Type becomes very important to the federal government. In this scenario, the AES filer reports reseller/distributor as the Ultimate Consignee Type because the USPPI has the knowledge of the FPPI/foreign buyer’s intent and business practice to resell/distribute the goods. Since there is only knowledge of the FPPI/foreign buyer receiving the goods, report the FPPI/foreign buyer as the Ultimate Consignee.
3. In this third scenario, the FPPI/foreign buyer has disclosed the country of the end user(s) to the USPPI. Therefore, the USPPI has knowledge of the actual country of destination, but still does not know the name(s) of FPPI/foreign buyer’s customer(s).
Since at the time of export there is only knowledge of the FPPI/foreign buyer who is receiving the goods, the USPPI reports the FPPI/foreign buyer as the Ultimate Consignee, reseller/distributor as the Ultimate Consignee Type, and the known country of the end user (the country of the FPPI/foreign buyer’s customer) as the Country of Ultimate Destination.
This blog provides valuable guidance to ensure compliance with export regulations, helping exporters navigate the complexities of identifying and reporting the Ultimate Consignee in international trade transactions.
It is important to understand and file the proper information on the Automated Export System (AES). Any person, including USPPIs, authorized agents or carriers, who knowingly fails to file or knowingly submits, directly or indirectly, to the U.S. Government, false or misleading export information through the AES, is subject to a fine not to exceed $10,000 or imprisonment for not more than five years, or both, for each violation.
If you have any questions, regarding EEI filing or the proper party to a transaction please contact any attorney at Barnes Richardson and Colburn.