It goes without saying that a lot of things relating to U.S. trade law require some thought. Take exports, for example. Ohio-based Vigilant Global Trade Services says that determining the U.S. Principal Party in Interest (USPPI) is not always straightforward.
Compliance managers have to figure this out because USPPIs are ultimately responsible for filing export documents. Unfortunately, international trade is very rarely black-and-white. Transactions can involve multiple steps and multiple parties. Indeed, there is plenty of room for confusion in determining who the USPPI is. So how do compliance managers figure it out?
The Strict Definition
A compliance manager’s best tool for determining USPPI is the government’s strict definition of that person or entity. Here is how the U.S. Census Bureau defines the USPPI:
“The USPPI is the person or legal entity in the United States that receives the primary benefit, monetary or otherwise, from an export transaction.”
Key in on the word ‘primary’. When a compliance manager has a firm grasp of what the primary benefit of an export transaction is, they can more easily identify the USPPI. Note that an export transaction may have secondary benefits as well. It is only the primary benefit a compliance manager needs to worry about here.
Who Can Be the USPPI?
Because primary benefits are so broad, the number of entities that could qualify as a USPPI on an export transaction is pretty extensive. For a better understanding, we turn to the U.S. Census Bureau once again. Here are five entities they suggest as examples of USPPIs:
- Wholesalers and distributors
- Product manufacturers
- Order parties
- Customs brokers
- Foreign entities.
In order for a foreign entity to be a USPPI by U.S. trade standards, an authorized representative of that entity must be on U.S. soil when the export transaction takes place. For example, let us say a buyer employed by a British company comes to the U.S. to look over a shipment of goods prior to purchasing.
Let us also say that the buyer likes what he sees. He purchases the shipment and then contracts a third-party to facilitate packing and shipping. That buyer’s company receives the primary benefit of export transaction – that benefit being the shipment of goods to the buyer’s country. Therefore, the buyer is the USPPI.
Sometimes It is Easy, Sometimes It is Not
It is sometimes easy for compliance managers to determine who the USPPI is on a given transaction. Then again, sometimes it is not. Circumstances dictate everything. A couple of examples should illustrate the point.
First up, it’s pretty easy to determine when a product manufacturer is the USPPI. Imagine the Acme Widget Company (AWC) sells a shipment of 50,000 widgets to a retailer in Canada. AWC uses no intermediaries whatsoever. They pack the widgets, ship them, and receive payment directly from the customer. The primary benefit of the transaction is the payment. Therefore, AWC is the USPPI.
Now, let us make it a bit more complicated by adding in global distributors. Instead of selling its widgets to a Canadian retailer, assume AWC sells them to a variety of distributors. One or more of those distributors then turns around and sells the products to Canadian retailers. AWC was still paid for its products, but they were not involved in the export transaction. The distributors derive the primary benefit of their respective transactions, so they are the USPPIs for each one.
The U.S. Census Bureau says questions about USPPIs come up quite frequently. Again, that’s because export transactions are not always simple. The more moving parts to a given transaction, the harder it is to determine USPPI.