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From January 5, Every Console Entry Asks Whether the Importer Is American. Nintendo's Answer Is 124 Acres of Washington Real Estate

By Nia 13 min read Industry Hardware Console Economics AI Memory
From January 5, Every Console Entry Asks Whether the Importer Is American. Nintendo's Answer Is 124 Acres of Washington Real Estate

The checkbox

On 6 November 2026, U.S. Customs and Border Protection published a thirty-one-page interim final rule in the Federal Register. It is titled, flatly, "Heightened Requirements for Foreign Importers of Record." It creates a new Part 110 in Title 19 of the Code of Federal Regulations, a part that did not exist before, and it does one thing the console business has never had to do: it makes the Americanness of an importer a legal declaration, filed with every entry, on forms that every console in America passes through.

The rule takes effect 60 days later, on 5 January 2027. Comments close the same day; customs brokers must be in full compliance by 6 May 2027.

The declaration is a checkbox — "Yes" or "No" in the electronic equivalent — added to CBP Form 3461 and Form 7501. Yes means the importer qualifies as a U.S. importer of record under the new §110.2. No means it is a foreign importer of record under §110.3, and is therefore subject to a separate regime: it may not enter merchandise for consumption unless it is itself CTPAT-validated or routes the entry through a CTPAT-validated broker.

Read the rule's own definition and a strange thing happens. The question is not whether the importer is an American company. It is whether at least 51% of its beneficial owners — traced through every layer of corporate ownership to natural persons — are American citizens or green-card holders who control it, or whether it directly owns "a significant amount of unencumbered real property in the United States."

For the American subsidiary of a Japanese platform holder — the entity that imports one of the three console families sold in America — the first half of that test fails on its face. Which leaves the second half, and a word CBP never defines.

The two-prong test

Here is §110.2(a), quoted exactly:

"To be considered a U.S. importer of record, a party must be: (1) An individual who is a United States citizen or lawful permanent resident; or (2) An entity that meets the following requirements: (i) The entity must be located in the United States; (ii) The entity must be organized under the laws of the United States; and (iii) Either: (A) At all times, at least 51% of beneficial owner(s) of the entity, as defined in §110.1, must be United States citizens or lawful permanent residents and have control of the entity; or (B) The entity must maintain direct ownership of a significant amount of unencumbered real property in the United States at all times."

The structure is conjunctive. Being incorporated in Delaware, employing Americans, paying American payroll tax and filing American entries is (i) and (ii). It is not (iii).

And §110.1 defines "beneficial owner" with the reach CBP intends: a natural person who exercises "substantial control" over the entity or owns at least 25 percent of it, including "circumstances where multiple layers of entity ownership exist between the natural person and the entity." The preamble is explicit that this is aimed at entities "incorporated/formed in the United States and owned entirely by one or more other entities" whose ultimate owners "are not U.S. citizens or lawful permanent residents."

That is a precise description of how the console industry imports. Nintendo of America Inc. is a Washington corporation and, per Nintendo's own corporate outline, one of its principal affiliated companies; its parent is in Kyoto. Sony Interactive Entertainment LLC, which runs PlayStation, is a subsidiary of Sony Group Corporation in Tokyo. ASUS's American arm answers to ASUSTeK in Taipei; Lenovo's to Lenovo Group in Hong Kong; Hori's to Hori in Tokyo.

By the text, none of them qualifies on ownership. Their only route through (iii) is the real-estate prong — assuming they clear the "located in the United States" verification at all.

The instrumentality test

§110.2(b) is where the rule stops being a definition and becomes a judgment. To verify that an entity is "located in the United States," CBP says it "will take into account, among other considerations, the size and scale of the overall operations of the entity and whether it is an instrumentality of a foreign manufacturer without a substantial presence in the United States."

It then lists six criteria CBP "may consider in its discretion": whether the entity's principal place of business is in the United States; whether it has a physical presence "where substantial business transactions are conducted, such as paying employees, generating revenue, or operating retail locations"; whether it "maintains sufficient unencumbered physical domestic assets"; whether it "directly owns a sufficient amount of unencumbered real property"; whether its gross sales exceed its cost of goods sold and it is "structured in a manner that it is anticipated to generate its own profit"; and whether it is "sufficiently capitalized."

A subsidiary with 6,800 employees, its own profit and loss, and its own retail presence reads differently under those criteria than a brass-plate importer does, and CBP's own language suggests the agency knows it. But "instrumentality" and "substantial presence" are judgment calls, made on documents CBP requests, with no published scoring and no appeal route described in the rule.

The word CBP did not define

"Significant amount" appears four times in the rule. It is defined nowhere. §110.1 defines "beneficial owner" and "physical domestic assets" — cash in a U.S. bank account, Treasury bonds, and real property, inventory, machinery and equipment physically in the United States — but it does not say how much land, or how much value, is significant.

The §110.2(b) factors verify (i), not (iii); they create no safe harbour. But they are the only guidance CBP has given itself about how to treat a large, real, foreign-owned American subsidiary, and they read like a test the agency expects such companies to pass.

Except that the rule never says so, and the declaration is still a declaration.

What the preamble never says

We searched the full text of the rule for the words "subsidiary," "subsidiaries," "wholly owned," "foreign parent," and "multinational." The count is zero.

CBP wrote about foreign individuals and shell companies with mail drops. It wrote about entities that "may list a U.S. address, which may be the address of an agent or post office box." It wrote about IORs that "listed a U.S. address but who would more accurately be classified as foreign," including those "self-labeling as U.S. IORs in good faith but not meet the standard."

It did not write a single sentence about the ordinary structure through which a Japanese or Chinese manufacturer imports into the United States: a wholly owned American subsidiary with American employees and a Japanese or Chinese shareholder register.

That silence matters because the subsidiary is the case where the rule's arithmetic produces an absurd answer. A company can be American in every operational sense and still fail a test that counts beneficial owners by citizenship.

What it means for the console business

We can verify one side of the ledger completely. Nintendo of America Inc. owns its American headquarters outright. King County's parcel records list ten parcels under the Nintendo name, totalling about 124 acres and assessed at roughly $295 million. The main campus at 4600 150th Avenue NE in Redmond — the county's property name is "NEW NINTENTO CORPORATE HEADQUARTERS," typo included — is assessed at $30.6 million for land and $68.9 million for improvements. There is also a distribution site at 401 South Fork Avenue SW, vacant land, parking, and sports fields.

On the real-estate prong, that is not a close question. Whatever "significant" means, 124 acres and a $295 million assessment clears it, assuming the property is unencumbered — and the county's public record does not disclose encumbrances either way.

The other side of the ledger is not hidden at all — it is printed in Sony's annual report. Sony's Form 20-F for the year ended 31 March 2026 carries a table of major property, plant and equipment. One row is "Sony Interactive Entertainment LLC (California, United States) — G&NS — Cloud-related facilities, etc." Its land column reads "—" and its area column reads "(—)": none. Its buildings are carried at ¥10,675 million, its right-of-use assets at ¥69,024 million, and it employs 6,800 people. The figures are consolidated, so they include the entity's subsidiaries.

Zero owned land. Buildings worth more than ten billion yen. On the "significant amount of unencumbered real property" prong, is that enough? Nobody — not CBP, not Sony — has said.

So the industry splits three ways. A company whose control sits with American citizens can clear (iii)(A) — Valve, majority-owned by a U.S. citizen, is the clean example. A company that owns its American dirt, like Nintendo, clears (iii)(B) on any ordinary reading of the word. And a company that is foreign-owned and, on the face of its own filings, owns no American land — Sony's PlayStation entity, which imports a very large share of the consoles sold in the United States — is the one for whom the undefined word has to do the work.

The rule gives them a checkbox and a comment period, and not much else.

The 32 percent and the 650 brokers

The rule's regulatory impact analysis contains the numbers that make this more than a drafting puzzle.

Between October 2020 and February 2026, CBP counted almost one million active U.S. importers of record. Sixteen percent of all IORs were foreign. Of those foreign IORs, 0.4 percent were CTPAT-validated. Sixty-eight percent already used a CTPAT-validated broker, which means the remaining 32 percent — on the order of tens of thousands of importers — must either join a program most of them are not eligible for, or change brokers.

CTPAT eligibility is the trap. The rule's own footnote lists who may apply: "U.S. importers of record; non-resident Canadian importers; U.S./Canada highway carriers... Mexican and Canadian manufacturers." A Shenzhen or Tokyo company is not on that list. CBP contemplates foreign IORs becoming "CTPAT validated," but the program's importer category is written for American importers and Canadian residents.

That pushes the whole foreign channel onto the broker bench. CBP counted 3,100 brokers who filed entry summaries in the period; 21 percent are CTPAT-validated. That is roughly 650 firms for the entire United States, and CBP's own analysis estimates that the average broker will have to obtain and keep documentation for about 323 U.S. IORs as a result of the rule.

The stakes are not theoretical for CBP. It reports $1.01 billion in unpaid principal owed by non-CTPAT foreign IORs, a collection rate of 3.1 percent against 15.2 percent for American importers, and an average open bill of $68,763 for the non-validated foreign group. It is buying collection capacity with a gate.

The second shoe is under $2,500

Buried in the section on alternatives is the sentence that matters most to the cheap end of the hardware market.

Executive Order 14411, signed on 3 June 2026, directs CBP to prohibit foreign importers of record from filing informal entry at all. CBP did not do that in this rule. It said it "has not implemented that prohibition in this interim final rule," will keep monitoring, and "welcomes public comment on this alternative."

Informal entry is the channel for shipments of merchandise not exceeding $2,500 in value — the threshold in 19 CFR 143.21(a). That is the customs lane a single console, a single handheld, or a single controller travels in when it is bought direct from a foreign seller and shipped to an American address.

If CBP pulls that lever, every one of those parcels needs a formal entry, a bond, and an importer of record that passes the new test. The rule that was written about shell companies importing counterfeit goods would end the direct-to-consumer model for the retro handheld industry by defining its parcels out of the informal lane.

CBP is explicit that it is reserving the option. It is also explicit that it did not analyze the small-business consequences of the rule it did publish: because it issued the rule as an interim final rule invoking the foreign-affairs and good-cause exceptions to notice and comment, it states that "a regulatory flexibility analysis is not required under the RFA."

The sellers most affected — the ones shipping $60 handhelds — are precisely the small entities the analysis would have covered.

What happens on January 5

Three dates matter. On 5 January 2027, the rule takes effect and the declaration checkbox appears on every entry and entry summary; comments on the interim final rule are due the same day. By 6 May 2027, brokers must be in full compliance, with a delayed-compliance request process for those who need it.

An inaccurate declaration is not a technicality. The rule lets CBP impose a live-entry requirement — duties paid before the merchandise leaves custody — when an importer "inaccurately declares" its status, and it amends the penalty guidelines under 19 U.S.C. 1592, the fraud/negligence statute.

For the console industry the practical question is not whether CBP intends to reclassify Nintendo of America. It is whether, in the sixty days between publication and effect, anyone writes the sentence that says what happens to a wholly owned American subsidiary of a foreign parent. Right now the rule contains a test for that company, a declaration about that company, and a penalty regime for getting the declaration wrong — and no analysis of the company itself.

The comment docket is USCBP-2026-1387. It closes on the day the checkbox goes live.

What we could not establish

Three limits, stated plainly. First, CBP has discretion under §110.2(b), and it may treat large foreign-owned subsidiaries as U.S. IORs in practice even though the text does not say so; we rate that outcome plausible but unconfirmed. Second, the rule does not specify how to count beneficial owners when control is exercised by a board rather than a shareholder — Nintendo's largest shareholder holds 16.05 percent, below the rule's 25 percent threshold, so its beneficial owners are the individuals who exercise control, Japanese and American alike, and the 51 percent arithmetic depends on a counting method CBP has not supplied. Third, "real property" plainly includes buildings, so Sony's ¥10.7 billion of buildings could be argued to be significant even with no land; and the King County record establishes ownership and assessed value, not encumbrance — "unencumbered" is a legal condition the assessor does not record.

What is not in doubt is the instrument: a thirty-one-page rule, effective in sixty days, that turns the right to import a console into a citizenship question with an undefined threshold.

Sources

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