Who are you? What role do you play in the international transaction?

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It is important to know who you are and what role you play in an international transaction; otherwise, you risk becoming stuck in the murky waters of Trade Compliance. 

Language is already an art form, but it is often perceived that law complicates this art. In our age of globalized trade, products can touch more than 100 people, businesses or organizations as they move along the supply chain before reaching the consumer.

Like a good play, law defines who the characters are. If you do not fit the definition, it is likely that the law does not apply to you, with some exceptions.

International trade is wrought with defined players to whom various regulations apply. Global Edge publishes a comprehensive glossary of terms applicable to international trade; however, it is imperative that you exercise diligence and discretion when defining your identity and role in any transaction.

Imagine the complexities of understanding the implications of a ‘buyer’ being listed on shipping documentation who is, in fact, operating as a purchasing agent. That’s the reality that unfolded with Tianjin Leviathan Corporation, a subsidiary of the Leviathan Corporation, and it’s a reality that U.S. Customs thoroughly exposed in an anti-dumping lawsuit from May of 2023.

What was the deal in question? It was a sizable order of tires from a Chinese manufacturer, totaling $30,734.00, plus commissions amounting to $2,151.36. Customs initially classified Tianjin as the buyer, but supplementary evidence submitted by Leviathan revealed a masked truth.

Tianjin Leviathan was not merely a buyer. It was actively playing the role of a purchasing agent, engaged in market research, supplier identification, price negotiation and translation services. Importantly, Tianjin bore no risk of loss for the goods, further supporting the reclassification.

This pivotal ruling is a clear reminder that labels alone do not define a transaction. Customs is focused on the substance of the transaction, not just its appearance.

The key takeaway:

Be vigilant in your operations and ensure that you are aware of the serious implications of transaction misclassification. Customs isn’t one to be fooled and they have shown that they will unearth any concealed corporate shell games.

As always, the SBDC Go Global Initiative is here to help Wisconsin’s international trade community navigate these murky waters.