CBP Finds Seller Had Too Much Control Over Importer to Prove Bona Fide Sale
A Canadian clothing company cannot declare the transaction values based on sales to its related importer in the U.S., CBP found in a Nov. 5 internal advice ruling (here). The ruling, HQ H243327, was in response to an application for further review of protest, filed by the importer, White Wave USA (WWU), which imports apparel from the seller, White Wave Canada (WWC). CBP found there's insufficient evidence to prove the two acted as independent sellers and buyers.
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The issue involves several Port of Champlain, New York entries in 2011 and 2012 in which WWU declared values based on invoice between it and WWC. The port subsequently sought more information from the importer, pointing out that WWU did not provide "documentation from the foreign manufacturer to WWC, purchase orders between WWC and WWU, bank statements or other payment information, bills of lading, or WWU’s U.S. tax returns," said CBP. The agency later revalued the merchandise "based on the price paid by WWU’s U.S. customers."
The importer's lawyer challenged CBP's revaluation and said a bona fide sale had occurred between the seller and importer and that the price used is acceptable because it was sufficient to ensure a profit. "However, counsel did not make any legal arguments on the issue of bona fide sale and only addressed the issue of whether the price was sufficient to ensure a profit," said CBP. The importer's provided documentation seems to show that "the same invoices issued to U.S. customers serve as the purchase orders to WWC," said CBP. "Consequently, it appears that the ordering process is initiated by the importer’s sales representatives who solicit and take orders from U.S. customers."
There similarly seems to be little or no separation between the seller and importer within other business dealings, said CBP. For instance, WWU appears to have access to WWC's landed cost calculations, typically considered to be confidential business information, CBP said. Also considering the information from the importer "indicates that the importer had virtually no presence in the" U.S., there's not enough evidence to show that the seller and the importer were acting as a buyer and seller independent from each other, the agency said. As a result, "we find that the merchandise should be appraised under transaction value using the sales from WWC in Canada to the ultimate consignees," said CBP.
Although the importer requested a further review of protests, for a protest to qualify, the importer must allege that the port’s decision was inconsistent with a CBP ruling or with the port’s decision on the same or substantially similar merchandise, said CBP. The importer's lawyer instead relied on an Informed Compliance Publication, the agency said. Still, "due to the nature of the issue raised, we have decided to respond to the submission by providing internal advice," said CBP.