CBP Rules on What Evidence Supports a Bona Fide Sale
A recent CBP ruling grapples with the issue of whether a sale between a contract manufacturer and a non-resident importer would be considered as a bona fide sale for export to the U.S., and if so, whether the sale may be used for appraisement purposes under transaction value.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
CBP answered this question in HQ H343576, saying that "the appraisement of the merchandise should be based upon the price paid by the importer," based on the information it presented to CBP with the question.
The ruling involves Edge Zero, an Australia-based energy technology company and non-resident importer.
Edge Zero had a valuation question about its Compact Smart Grid Data Logger (Model EE-405).
After manufacturing of this good occurs in Country A by an unnamed contract manufacturer, Edge Zero takes possession of the good at the factory and arranges to ship it directly from Country A to the U.S. Once in the U.S., it is stored in a third-party warehouse and remains there until the product gets shipped to fulfill an order.
Edge Zero claims that the sale is a bona fide sale for export to the U.S., and it provided various documents to CBP, such as a product fact sheet, a quotation from the contract manufacturer, an order note, a contract manufacturer's invoice to the importer for the merchandise and an air waybill, among other items.
In analyzing this case, CBP noted that since no single factor is decisive in determining whether a bona fide sale has occurred, it looks at factors such as whether the purported buyer assumed the risk of loss for, and acquired title to, the imported merchandise. It also accepts evidence such as payment by check, bank transfer, or payment by any other commercially acceptable means to show that consideration has passed -- however, "a general transfer of money from one corporate entity to another, which cannot be linked to a specific import transaction, does not demonstrate passage of consideration," CBP said.
In this particular situation, CBP noted that the documents submitted by the importer support the existence of a bona fide sale. The quotation from the contract manufacturer to the importer that lists delivery terms, as well as the commercial invoice and packing list from the contract manufacturer to the importer, indicate that there is an obligation to deliver when goods are available.
"The importer assumes title and bears risk of loss at the contract manufacturer’s premises in Country A [X]," CBP said. The air waybill that lists the contract manufacturer as the shipper and the importer as the consignee also corresponds to the commercial documents provided, the agency continued, while the international payment report for payment from the importer to the contract manufacturer includes an amount that corresponds to 15% of the contracted price as agreed upon and noted on the quotation from the contract manufacturer to the importer.
Considering this evidence, the appraisement of the merchandise should be based upon the price paid by the importer, CBP concluded.