CBP Finds Evidence of Bona Fide Sale Between Related Parties Lacking

JS International filed its protest after CBP liquidated 33 entries of undisclosed merchandise in 2016. "The Port of Champlain liquidated the entries at issue based upon the price paid by U.S. retailers for the imported merchandise" and "does not believe there is bona fide sale" between the related foreign seller, JS Canada, and the U.S. distributor, JS US, CBP said. The company said the "port’s action is inconsistent with decisions made by the port with respect to substantially similar transactions" and that "any action by the port on this protest should be suspended because of pending litigation in the Court of International Trade by another importer which protestant believes impacts the question of law at issue here." JS International didn't specify the litigation, CBP said.

The company argued that JS US is the U.S. buyer and is not JS Canada's selling agent. JS International provided some emailed orders as evidence of a sale between the related companies, but "the emails fail to support the claim," CBP said. "While we note that JS US pays JS Canada for certain administrative services, some distinction between the sale from JS US to the U.S. customer and sale from JS Canada to JS US should exist," the agency said. "The submitted emails support the position that JS US sold merchandise for JS Canada, but they do not provide support to the proposition that JS US did so as an owner of the merchandise as opposed to a selling agent for JS Canada." CBP also noted that a JS employee was listed as the salesman on the invoices, "although the invoices purport to be from JS US to its customers."

The invoice also mentions terms of sale as “FOB POINT Montreal, Quebec” and not Delivered Duty Unpaid, as previously described, CBP said. The company said that difference was the result of a "computer glitch," but other invoices from 2011 mention FOB Montreal, which means "that the 'computer glitch' occurred for a minimum of four years without being noticed by either the seller, JS US, or the U.S. retail customers receiving the merchandise," CBP said.

The agency expressed further skepticism that the glitch occurred. "Risk of loss with regard to commercially shipped merchandise is an important business consideration," CBP said. “'FOB Point, Montreal Quebec,' appears on every invoice from JS US to every U.S. customer which was submitted to CBP for the merchandise at issue in this protest and in the previously submitted documentation. Further, counsel relies heavily on the Incoterms used in the transactions to show a bona fide sale existed between the related parties, as no other documentation upon which to rely, such as a contract, existed between the related parties or between the U.S. customers and JS US. Taking these three factors into consideration, the explanation that FOB POINT Montreal, Quebec appearing on the U.S. customers’ invoices from JS US is a 'computer glitch' is simply not convincing."

The documentation provided and the lack of evidence that JS US paid JS Canada for the imported goods "leads this office to agree with the Port of Champlain that there was no bona fide sale between JS Canada and JS US," CBP said. "The documentation supports the port’s view that JS US acted as a selling agent for JS Canada."

The company also argued that because two entries were liquidated without change previously, it's "entitled to treatment with regard to the entries at issue," CBP said. But no evidence was provided to show a review of the company's entries since 2011, the agency said. While entries from 2005 and 2011 were mentioned in support of treatment, CBP said the transaction was too different to apply. Even so, "the treatment claim fails primarily because the evidentiary requirement" was not met, the agency said.