By: Omari Wooden
How do you report a drop shipment in the Automated Export System (AES)? First, let’s discuss a hypothetical scenario that involves a drop shipment. A foreign party purchases a product from a U.S. Principal Party in Interest (USPPI), (i.e. U.S. seller, U.S. manufacturer, U.S. distributor) and then that foreign party directs the USPPI to ship those goods to another foreign party. For example, Company A in Germany purchases 20 tons of yellow dent corn for $4,000 from a U.S. seller, but Company A directs the U.S. seller to ship the corn to Company B, their customer in France. Even though Company A has purchased the corn for $4,000, they are selling the corn to Company B in France for $5,000. How should this shipment be reported in the AES?
When the topic of drop shipment arises, the questions are normally related to the parties and the value to be reported. Using the example above, let’s first discuss the value required to be reported. The value to be reported in the AES is the selling price between Company A and the USPPI. You would not report the selling price between Company A and Company B because we want to capture the U.S. selling price not the foreign selling price, which typically includes mark-ups. So in this example, $4,000 is the value required to be reported in the AES.
The next question is who should be listed as the Ultimate Consignee? FTR 30.1 defines the ultimate consignee as “the person, party, or designee that is located abroad and actually receives the export shipment.” Therefore, since Company B actually receives the export shipment they are the ultimate consignee, Company B is the Ultimate Consignee. What about Company A? Company A is the Foreign Principal Party in Interest and the party that purchased the goods from the USPPI. However, as far as the AES reporting is concerned Company A is not reported in the export transaction.
If you need any more assistance or clarification on this matter or other regulatory requirements, please contact the Regulations, Outreach and Education Branch on 800-549-0595, Menu Option #3.