Application for Further Review of Protest No. 0712-16-100169; Related Parties; Bona Fide sale; Selling Agent

HQ H285847 July 12, 2018 OT:RR:CTF:VS H285847 CMR CATEGORY: Valuation U.S. Customs and Border Protection Apparel, Footwear and Textiles Center Attn: Jason Lemieux 237 West Service Rd Champlain, NY 12919 RE: Application for Further Review of Protest No. 0712-16-100169; Related Parties; Bona Fide sale; Selling Agent Dear Center Director: This is in response to the referral of the Application for Further Review (“AFR”) of Protest No. 0712-16-100169 to this office for our review. The protest is against the action taken by the Port of Champlain liquidating 33 entries of merchandise based upon the price paid by the U.S. customer, as opposed to the transfer price between a Canadian party and its related importer of record. The entries occurred from December 2014 through December 2015, and were liquidated between May 27, 2016 and July 1, 2016 (with one exception). We note that the protest was timely filed by counsel, Sandler, Travis, & Rosenberg, P.A., on behalf of the protestant, Group JS International Ltd. with regard to all but one entry. That entry [XXXXXXXXXXX] was liquidated on March 2, 2018. A protest filed on November 23, 2016, against the liquidation of this entry is premature and, as such, invalid. The AFR was properly approved as the protestant has argued that the port’s action is inconsistent with decisions made by the port with respect to substantially similar transactions. In addition, the protestant asserts 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, though the protestant failed to specify the litigation. Finally, protestant’s claim of treatment previously accorded to substantially identical transactions presents new facts and arguments not considered previously by U.S. Customs and Border Protection (“CBP”). Protestant has met the requirements for AFR under 19 CFR § 174.24(a), (b) and (c). A conference call was held with counsel by this office on March 15, 2018. In reaching our decision, we have considered all information submitted in the protest package, and all supplemental submissions received by this office. Supplemental submissions were made on March 15, 2018; May 17, 2018; and June 7, 2018. FACTS: The protestant, Group JS International Ltd., acts as the importer of record. The parties involved in the importations include the foreign seller, Groupe JS International (registered as 8647313 Canada Inc.) (hereinafter, “JS Canada”), the related U.S. distributor, Group JS International Ltd. (hereinafter “JS US”), and U.S. customers (retailers). Initially, JS US claimed “first sale” transaction value, but now claims transaction value between the related parties, JS Canada and JS US, as the basis of appraisement for the imported merchandise based upon the transfer price between the parties. Counsel explains in a submission to the port, dated November 16, 2015, that the transfer price between the parties is established at [xx]% of the first sale price plus $[x]/piece for freight. Counsel for the protestant explains that JS Canada places all purchase orders to overseas vendors on behalf of JS Canada and JS US under the Incoterms free on board (“FOB”) or ex-works (“EXW”). The merchandise is entered into Canada by JS Canada. JS Canada sells to JS US under the Incoterm delivered duty unpaid (“DDU”). It is claimed that title transfers with risk of loss based upon the Incoterms used. Counsel states that for sales to JS US, JS Canada pays the costs for transportation, insurance and bears the risk of loss until the goods enter the United States, then JS US assumes the risk of loss. Per counsel, “[t]he terms of sale between JS US and its customers are either FOB Champlain or delivered to the customer’s door (Prepaid), depending on the agreement between the parties. JS US factors its accounts receivable to a financing company [XXXXXXXXXX]. The invoices to JS US’s customers indicate that they are to pay the factor. JS US is incorporated in Delaware with its headquarters in New York City. Counsel states, “With regard to the type of operations performed in the U.S., please note that JS US continues to function as a showroom and design center.” Per counsel, all design functions of the two related companies are grouped under JS US, “while JS Canada provides all support services including general finance, administrative and information technology functions.” In addition, each company retains its own sales force. See Counsel’s letter, dated November 16, 2015. In support of the protest, counsel submitted six exhibits. Some of these exhibits consist of documentation regarding much earlier entries of merchandise. Exhibit 1 consists of an August 6, 2004 email from counsel to “Groupe JS” sending an attachment of an analysis of middleman transactions. Exhibit 2 is a copy of a letter from CBP, dated September 13, 2004, notifying JS Canada of CBP’s intent to conduct a North American Free Trade Agreement (“NAFTA”) verification visit. Exhibit 3 is CBP Form 28, Request for Information, dated November 1, 2005, and counsel’s response, dated November 17, 2005, on behalf of JS US. In the November 2005 letter, counsel stated that “the inter-company pricing has been arrived at by making use of a computed value analysis and all statutory elements of value, including profit, are included in the price.” Exhibit 4 consists of a CBP form 28, Request for Information, dated May 19, 2011, and counsel’s response, dated July 11, 2011, on behalf of JS US. In the July 2011 letter, counsel stated that “[a]s a general premise, the inter-company price between JS Canada and JS USA is based upon a formula of [XXX]% of the U.S. net resale price at which JS USA sells to its customers in the U.S.” Exhibit 5 consists of the response from counsel, on behalf of JS US, to a CBP Form 28, Request for Information, dated July 17, 2015, requesting information with regard to a 2015 entry of merchandise. In Exhibit 5, counsel supplies information with regard to that 2015 entry, which is one of the entries at issue in this protest. Counsel submitted copies of purchase orders consisting primarily of emails which lack any terms of sale, some of which merely forward purchase orders from U.S. customers also lacking any terms of sale (Appendix A); a list of employees for JS US with their job descriptions (Appendix B); and a copy of a sales invoice between JS Canada and JS US which lack any terms of sale (Appendix C). Counsel also provides documents asserted to be evidence of proof of payment for this transaction (Appendix D). These documents show payment by JS US’s customers to the finance company with whom JS US factors its accounts receivable. The documents in this exhibit include invoices from JS US to its U.S. customers and show terms of sale of FOB Point Montreal, Quebec. The invoices also identify the salesman, some include charges for freight, and all include the following statement: All of our rights & interests in and to the A/R arising from this invoice have been assigned, made over & sold to [XXXXXXXXXXXXXXXX] All payments should be made to: [XXXXXXXXXXXXXXXXXXXX XXXXXXX] Montreal QC [XXXXXX] Finally, counsel has provided a copy of documents submitted to CBP in response to a Request for Information, dated May 19, 2011, regarding an entry by JS US (Appendix E). The response, submitted by counsel, is dated July 11, 2011, and involved an entry of merchandise by JS US during March 2011. The entry was valued based upon the transfer price between JS US and JS Canada (registered as 3632571 Canada Inc.). The transfer price was based upon a formula of [XXX]% of the U.S. net resale price at which JS US sold merchandise to its customers in the United States. Exhibit 6 is a copy of the first page of JS US’s 2014 tax return (identified as “Group J.S. International Ltd. & Sub” on the form). Counsel submitted this to show CBP that JS US lists an amount on the tax form for cost of goods sold and an amount for bad debt. Counsel submits that this supports their claim that a bona fide sale occurred between JS Canada and JS US claiming “[i]f Groupe JS USA were nothing more than a selling agent, they would have no purchases (Cost of Goods Sold) and would have no bad debt.” Counsel states “the bad debt consists entirely of customers failing to pay Groupe JS USA.” March 14, 2018; May 17, 2018; and June 7, 2018 supplemental submissions to this office provided answers to questions posed by us regarding the transactions at issue. The March 14, 2018 and May 17, 2018 submissions also include a list of JS Canada’s 2015 employees; a copy of the factoring agreement between the factor and JS Canada (as 3632571 Canada Inc.), JS Canada (as 8847313 Canada Inc., also known as Newco), and Group JS International Ltd.; proof of payment; a freight invoice; bills of lading; and freight forwarder receipts to show that JS Canada pays the freight to Champlain, NY; documents to show that JS US pays the customs broker; a U.S. customer’s “Vendor Operations Manual;” a copy of an insurance policy which applies to both JS Canada and JS US; a letter from the Canadian corporate counsel for the JS related party companies involved in the transactions at issue; a letter from the Port of Champlain, dated March 21, 2017, indicating that the port accepted a reasonable care claim with regard to entries finally liquidated, but notifying JS Group’s counsel that any entries not finally liquidated were value advanced and all entries should be entered in accordance with the CBP Form 29, Notice of Action, dated May 9, 2016; amendments to the factoring agreement which became effective on January 15, 2016 (after the timeframe at issue); a copy of Group JS International’s Combined Financial Statements, unaudited, dated November 30, 2015; a transfer pricing study for the taxation year ending November 30, 2014; and, five sets of documents purported to match invoices directly to the factoring company’s statements. Counsel submits that JS Canada’s accounting department maintains these accounting statements for both JS Canada and JS US as part of the administrative services it provides JS US for a fee. The June 7, 2018 submission responded to CBP questions, and clarified that JS Canada factors its accounts receivable from sales to unrelated parties in Canada and the United Kingdom with the factoring company. The submission also includes a copy of a “Client Position Report”, dated December 1, 2015, from the factoring company. The client, i.e., the name that appears at the left side top of each page of the report, is identified as “Group JS (8647313 Canada Inc.),” in other words, JS Canada. Under the section entitled, “Account Details,” “Accounts Receivable,” four accounts are listed, including one which is designated as JS US’s accounts receivable. The factoring agreement, as previously noted, is between the factor and JS Canada (as 3632571 Canada Inc. and as 8847313 Canada Inc., “Newco,” the successor of 3632571 Canada Inc.) and JS US. An email from the factoring company, dated March 7, 2018, indicates the factor “has a single factoring agreement with JS Group in which both JC Canada and JS US are named.” The email summarizes the treatment of JS US and JS Canada customers’ payments against factored accounts receivable. The factor indicates that it “keeps a separate record of all JS US accounts receivable and JS Canada accounts receivable.” On page 2 of the factoring agreement, dated March 21, 2014, in the initial language prior to the sections, it is stated that JS Canada, as Newco, “agrees to be solidarily bound for the payment and fulfillment to [the factor] of all of JS Canada’s and JS USA’s present and future debts and obligations under the Factoring Agreement as amended and restated by the present Amended and Restated Factoring Agreement.” The agreement indicates that the term “you” in the agreement “shall include JS Canada, JS USA, and Newco.” Section 19 of the factoring agreement provides the following: 19.1 You shall be and remain solidarily (and jointly and severally) liable towards us for the payment and fulfillment of all indebtedness and obligations hereunder. 19.2 You shall be considered as one single person for the purposes of calculating all matters hereunder. 19.3 All references to “you” hereunder shall, whenever the context requires, be deemed to constitute references to both of you. 19.4 We shall be entitled, in our discretion from time to time, to keep separate accounts for each of you. Notwithstanding the keeping of such separate accounts, we may deal with each of you and with each of your accounts as if each of you and each of your accounts were one sole account and, without limiting the generality of the foregoing, we shall be and remain fully authorized to apply any debits and/or credits to any or all of such accounts and to transfer debits and credits between such accounts and/or either of you as we may, in our sole discretion, deem appropriate. [Emphasis added.] We note that the same individual signed for each related party, i.e., 3632571 Canada Inc., Group JS International Ltd., and 8647313 Canada Inc., in that individual’s capacity as president of each company. In the submitted transfer pricing study, it is stated, at page 37, that “[t]he executive management team of JS Canada is in charge of maintaining all customer relationships.” It further states that “JS Canada is the owner of all contractual relationships related to the Company’s customers.” “Company” refers to JS Canada and JS US. See Group JS International Ltd Transfer Pricing Study For the Taxation Year Ending November 30, 2014, at 5. In response to a request for clarification of the statement regarding JS Canada’s ownership of all contractual relationships, CBP was informed in the June 7, 2018 submission, in part: In our industry, the purchase order from the customer is in essence the binding document which is destined as the Contract between the buyer and seller. There is no actual contract, but rather a purchase order and a vendor manual (for larger customer accounts). The Port of Champlain liquidated the entries at issue based upon the price paid by U.S. retailers for the imported merchandise. The port does not believe there is bona fide sale between JS Canada and JS US, but rather that JS US is a selling agent for JS Canada. Thus, the port considers the sale for export to the United States to be between JS Canada and the U.S. retailers. Counsel submits that JS US has received treatment, as discussed under 19 CFR § 177.12. Specifically, counsel claims that CBP accorded JS US treatment to substantially identical transactions when it approved JS US’s related party and first sale transactions reviewed by CBP in 2012 and 2013 “and liquidated all subsequent entries accordingly.” However, no documentation was submitted as evidence that CBP inquired about any of JS US’s entries during 2012 or 2013. ISSUE: Whether a bona fide sale of merchandise occurred between JS US and JS Canada or whether JS US was a selling agent for its related party, JS Canada. LAW AND ANALYSIS: Merchandise imported into the United States is appraised in accordance with Section 402 of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 (TAA; 19 U.S.C. § 1401a). The preferred method of appraisement is transaction value, which is defined as the “price actually paid or payable for the merchandise when sold for exportation to the United States” plus certain statutory additions. 19 U.S.C. § 1401a(b)(1). The statutory additions include any selling commissions incurred by the buyer with respect to the imported merchandise. In this case, the importer, JS US, purports to be the U.S. buyer of the merchandise from its related party in Canada, and not JS Canada’s selling agent. In order to have a sale, there must be a transfer of property for consideration. See VWP of America, Inc. v. United States, 175 F.3d 1327 (Fed. Cir. 1999); and J.L. Wood v. United States, 62 CCPA 25, 505 F.2d 1400, C.A.D. 1139 (1974). Counsel submits there is a sale between JS Canada and JS US, and submitted documents in Exhibit 5 which are directly related to the transactions at issue to support that claim. Among the documents submitted in Exhibit 5, counsel provided emails to show the U.S. retail customers ordering merchandise from JS US and JS US ordering the merchandise from JS Canada. See Exhibit 5, Appendix A. However, the emails fail to support the claim. The emails in Exhibit 5, Appendix A, are identified as “Copies of orders from JS US to JS CANADA – JS US Orders from JS Canada by forwarding e-mails (sic) containing the purchase orders sent by clients in USA to JS US.” However, a close examination of the emails show that they do not support the claim for which they are submitted. A JS Canada employee [XXXXXXXXX], Senior Account Executive is identified as the salesman on a purchase order to an online U.S. retailer [XXXXXX] and instructed another JS Canada employee [XXXXXXXXX], Reception/Order Entry in an email dated June 30, 2015, to ship out a garment, noting the order was placed by [XXXXX]. JS US’s list of employees does not list anyone named [XXXXX]. Emails show JS US employees acting as if they are selling for JS Canada, not JS US. For instance, in an email, dated June 26, 2015, from a JS US employee, [XXXXXXXX], to a JS Canada employee, [XXXXXXX], the JS US employee asks if the U.S. customer’s credit card is on file. Another email, dated June 26, 2015, shows a JS US employee, [XXXXXXXXXXX], telling a JS Canada employee, [XXXXXXXX], that she has permission to charge a customer’s credit card which is on file and ship the merchandise. An email, dated May 18, 2015, from a JS US employee, [XXXXXXXXXX], to a JS Canada employee, [XXXXXXXX], requests “Please extend 30% off” and further informs the JS Canada employee to: find attached the completed credit card application form! Kindly help in submitting it to [the factoring company]. 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 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. We also note that one of the invoices in Exhibit 5, Appendix D lists a JS Canada employee [XXXXXXXXX] as the salesman on the invoice, although the invoices purport to be from JS US to its customers. One invoice identifies an individual as the salesman who is not listed on either JS Canada’s or JS US’s lists of employees for the time period, but whose name appears on an invoice dated, March 15, 2011, and submitted in Exhibit 5, Appendix E. In addition, the sales transactions between JS Canada and JS US are stated to be DDU, yet all of the invoices from JS US to its customers contain terms of sale of “FOB POINT Montreal, Quebec.” In the March 14, 2018, submission by counsel, documents were submitted to show that JS Canada pays the freight to ship the merchandise to the United States. Included as Exhibit 4 to the submission were three complete sets of export documents. We note that the last document in this exhibit was a copy of an invoice from JS US to a U.S. retail customer with a handwritten notation, “Print Mel’s email,” and the “F.O.B. Point Montreal, Quebec” is circled with “FOB Champlain” handwritten above it. In addition, a JS Canada employee, [XXXXXXXXXX], is identified as the salesman on the invoice. Counsel informed us that this invoice was not for the sample transaction selected for review. Counsel submitted the correct corresponding U.S. customer invoices for the transaction. A review of the invoices reveals that for all but two, JS US employees were identified as the salesmen on the invoices. However, on two invoices, the same JS Canada employee, [XXXXXXXXXXX], was identified as the salesman. In our conference call with counsel on March 15, 2018, counsel stated that the use of the FOB Montreal Incoterm on the U.S. customer invoices was, according to counsel’s client, the result of a computer glitch. As part of counsel’s protest submission, counsel included documents submitted to CBP in response to an inquiry in 2011 from the same port regarding transactions that counsel submits are nearly identical to the transactions at issue herein. See Counsel’s Exhibit 5, Appendix E. These 2011 documents include invoices from JS US to U.S. customers. We note that these invoices, dated in 2011, like the 2015 invoices for the merchandise under protest, indicate that the FOB Point is Montreal, Quebec. This 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. Risk of loss with regard to commercially shipped merchandise is an important business consideration. “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 invoice which was inadvertently supplied in the March 14, 2018, submission seems to indicate FOB Champlain may have been the correct Incoterm, at least for that U.S. customer’s transaction. That would accord with counsel’s description of U.S. customers assuming risk of loss (and title) based upon FOB Champlain. The merchandise was shipped to United Parcel Services (“UPS”) at Champlain, NY. UPS then delivered the merchandise to the U.S. customers. Although counsel has submitted documentation to show that JS Canada pays the freight company to ship the merchandise to UPS in Champlain, NY, and documentation to show that JS US pays the broker for the duties and related fees to support the claim that JS Canada sells to JS US under the Incoterm DDU, the documentation between the related companies lacks any terms of sale. In this case, the merchandise is not “delivered” until it reaches the shipping destination, that is, to UPS in Champlain, NY. UPS delivers the merchandise to the U.S. customers who take on the risk of loss, and title, based upon FOB terms of sale. If JS US did assume the risk of loss, and take title to the merchandise, it would have been fleeting at best, or a “flash title.” Finally, Appendix D does not contain any evidence that JS US paid JS Canada for the merchandise for which it acted as importer of record. The submitted documentation only shows that JS US customers made payment to the factoring company with whom JS US and JS Canada factored their accounts receivable. This point was raised in the conference call with counsel on March 15, 2018. However, a review of the supplemental submissions fails to show payment from JS US to JS Canada for the imported merchandise. There cannot be a sale without a transfer of consideration. The submitted documentation simply does not show that such a transfer occurred between JS US to JS Canada. In the May 17, 2018 submission from counsel, each of the five sets of documents includes pages from the “Cash Receipt Journal” for JS US (maintained by JS Canada for JS US), pages from the factoring companies records showing payments from U.S. customers on various invoices or credit card payments; but there is no documentary evidence of payments from JS US to JS Canada for the imported merchandise. Reliance is placed upon the factoring agreement as evidence of payment. Under the factoring agreement, JS US has no control over the monies paid for the merchandise shipped to U.S. customers. When the factor receives payments from JS US’s customers, it has complete discretion as to the application of the payments to the JS US or JS Canada accounts, as well as complete discretion regarding the transfer of debits and credits between these accounts. While the related parties expect CBP to recognize them as separate companies and to accept their assertion that JS US buys merchandise from JS Canada and resells it, the factoring company with whom the related parties factor their accounts receivable treats them as one, as evidenced by the passages cited in the FACTS portion of this decision. CBP has not been provided with any evidence of a transfer of funds from JS US for the payment of imported merchandise purchased from JS Canada. It seems the factoring arrangement the related parties have entered into is the reason. The “Client Position Report” submitted with the June 7, 2018 supplemental submission provided a summary position of the account for Group JS (“8647313 Canada Inc.”). It is in the account details where a separate listing appears for JS US (“Group JS International Ltd.”) under the heading “Accounts Receivable.” The remaining three accounts are for JS Canada’s accounts receivable under three different currencies – Canadian dollars, U.S. dollars and the British Pound. In order to have a sale, there must be a transfer of consideration in exchange for the goods. While there is evidence of the U.S. customers paying for the merchandise they received, CBP has not been presented with any evidence of any kind whatsoever to show the transfer of funds to JS Canada as payment for merchandise sold to JS US. In Rosenthal-Netter, Inc. v. United States, 12 CIT 77, 679 F. Supp. 21 (1988), aff’d. 861 F.2d 261 (1988), the Court of International Trade articulated various factors that should be considered in deciding whether a bona fide agency relationship exists. In citing to the Restatement (Second) of Agency § 14K comment a(2) (1958), the court pointed out that “a characteristic of a seller is ‘[that] he acts in his own name and receives the title to the property which he thereafter is to transfer.’” While a seller must have title to merchandise in order to sell it, as you cannot sell what you do not own; an agent may obtain title to merchandise without it negating the agency. See Rosenthal-Netter, Inc., at 79 F. Supp. 26, Footnote 6, citing J.C. Penney Purchasing Corp. v. United States, 80 Cust. Ct. 84, C.D. 4741, 451 F. Supp. 973 (1978) which relied on Mitsui & Co. (U.S.A.), Inc. v. United States, 66 Cust. Ct. 553, 556, R.D. 11740 (1971). Counsel submits that JS US receives title to the imported merchandise based upon the Incoterm DDU and sells to U.S. customers based upon FOB Champlain or delivered to the customer’s door (prepaid). However, other than the invoices to the U.S. customers with the term “FOB Montreal,” the submitted documentation lacks any terms of sale to support the claims made. Even if we were to accept counsel’s assertion, passage of title to JS US, by itself, would not support the assertion that JS US was a buyer/seller of the merchandise, as opposed to an agent acting on behalf of JS Canada. See Rosenthal-Netter, Inc., supra. Further, as discussed, with U.S. customers’ terms of sale of FOB Champlain, if JS US attained title, it was only momentary. Evidence of payment for the merchandise must also be provided to show that JS US was not merely a selling agent for its related party in Canada. A selling agent may provide various services to its principal, such as, seek customers, collect orders, or otherwise assist the seller in the sale of merchandise. In this case, the evidence in the file shows that JS US collects orders from U.S. customers and passes those orders on, via email, to JS Canada. With regard to a principal-agent relationship, it is the seller, and not its agent, who has the ultimate authority with respect to the sale of the goods. See What Every Member of the Trade Community Should Know About: Buying and Selling Commissions, at 5. The transfer pricing study presented to CBP states on page 5 that “JS Canada is the owner of all contractual relationships related to the Company’s customers.” As “Company” refers to both JS Canada and JS US, this statement supports CBP’s belief that it is JS Canada who has the ultimate authority with respect to the sale of goods to customers in the United States. It owns “all contractual relationships.” The clarification provided in the June 7, 2018 submission did not clarify or dispute the statement from the transfer pricing study, but merely tried to clarify that “the purchase order from the customer is in essence the binding document.” As to counsel’s assertion that because JS US designates amounts for “cost of goods sold” and “bad debts” on its U.S. Federal tax return it cannot be a selling agent, we are unpersuaded. While a company’s tax return may provide CBP with useful information when reviewing that company’s transactions, it is not determinative of CBP’s decision with regard to transactions under the customs laws. Considering the totality of the documentation presented to CBP, that is: The presence of terms of sale only on the invoices from JS US to U.S. customers wherein the terms of sale are “FOB Montreal, Quebec;” The presence of a JS Canada employee’s name on invoices to U.S. customers identifying the JS Canada employee as the salesman; The factoring agreement whereby the factor treats JS Canada and JS US as one and the factor has complete discretion with regard to the allocation of funds received between the JS Canada and JS US accounts; The failure to provide evidence that JS US paid JS Canada for the imported merchandise; The transfer pricing study which states that “JS Canada is the owner of all contractual relationships related to the Company’s customers;” leads this office to agree with the Port of Champlain that there was no bona fide sale between JS Canada and JS US. The documentation supports the port’s view that JS US acted as a selling agent for JS Canada. Treatment Counsel believes that as JS Group had two entries reviewed previously and liquidated without change, JS Group is entitled to treatment with regard to the entries at issue. The evidentiary requirements of establishing a treatment are set forth in the CBP Regulations which provide, in relevant part, at 19 CFR § 177.12(c)(1): (i) There must be evidence to establish that: A) There was an actual determination by a Customs officer regarding the facts and issues involved in the claimed treatment; (B) The Customs officer making the actual determination was responsible for the subject matter on which the determination was made; and (C) Over a 2-year period immediately preceding the claim of treatment, Customs consistently applied that determination on a national basis as reflected in liquidations of entries or reconciliations or other Customs actions with respect to all or substantially all of that person's Customs transactions involving materially identical facts and issues[.] Determinations of whether a treatment occurred will be made by CBP on a case-by-case basis and will involve consideration of all relevant factors, including whether the past transactions were reviewed by CBP personnel. See 19 CFR § 177.12(c)(1)(ii). With regard to the evidence required for establishing a treatment, 19 CFR § 177.12(c)(1)(iv) provides: The evidentiary burden as regards the existence of the previous treatment is on the person claiming that treatment. The evidence of previous treatment by Customs must include a list of all materially identical transactions by entry number (or other Customs assigned number), the quantity and value of merchandise covered by each transaction (where applicable), the ports of entry, the dates of final action by Customs, and, if known, the name and location of the Customs officer who made the determination on which the claimed treatment is based. In addition, in cases in which an entry is liquidated without any Customs review (for example, the entry is liquidated automatically as entered), the person claiming a previous treatment must be prepared to submit to Customs written or other appropriate evidence of the earlier actual determination of a Customs officer that the person relied on in preparing the entry and that is consistent with the liquidation of the entry. With regard to counsel’s argument for treatment, no evidence has been submitted of a review of the protestant’s entries since 2011. The one entry raised in support of treatment occurred in 2011. In 2011, JS Canada was registered with the Canadian government as 3632571 Canada Inc., a different legal entity from the JS Canada in this matter. Counsel has submitted a letter from JS Canada’s corporate counsel stating that all of the assets of the “Old JS,” referring to JS Canada as 3632571 Canada Inc., were sold to the “New JS,” referring to 8647313 Canada Inc., and that JS Holdco owns both companies. The corporate counsel indicates that the New JS carries on business in the same manner and under the same terms and conditions as Old JS, and that its customers and selling practices are exactly the same as was carried on by Old JS. However, based upon their customs counsel’s submissions in 2011, and counsel’s submission herein, the transactions in 2011 and in 2015 are not the same. By letter, dated November 16, 2015, the port was informed that JS Canada places all purchase orders to overseas vendors on behalf of itself and JS US. JS US purchases from JS Canada. This was also the case with regard to the 2011 entry that was reviewed. However, in a letter dated November 11, 2011, counsel submitted a copy of JS US’s federal tax return for 2010 and stated that during 2010, JS US purchased merchandise directly from overseas vendors, as well as from its related party, JS Canada. The inference was that JS US could and did purchase merchandise independently of JS Canada. This is different from the structure of the transactions presented in the November 16, 2015 letter by counsel. Furthermore, in the June 7, 2018 submission, it is stated that the numerical methodology for determining the transfer price has changed throughout the years. Although, it is also asserted that “the same reasonable care results,” the fact that the numerical methodology has changed with respect to determining the transfer price between the parties means that any review of an earlier transaction or transactions using a different methodology cannot serve as a basis for treatment. A review of whether a transaction between related parties is a bona fide sale includes the structure of the transaction, the roles of the parties, and whether the transaction is arm’s length. Changes in any aspects of these factors negates any argument of treatment based upon a prior transaction. The other entry counsel raises to support treatment, occurred in 2005. That entry was reviewed primarily for eligibility of the merchandise under the NAFTA, though we note that the CBP Form 28 did request information regarding pricing and the customs valuation determination. In a letter, dated November 17, 2005, counsel advised the Port of Champlain that the intercompany price was arrived at by making use of a computed value analysis and all statutory elements of value, including profit, were included in the price. Thus, in 2005, the parties utilized yet another differing formula to determine the transfer price for merchandise. As such, we do not find liquidation of the entry without change, after review, to be persuasive as supportive of a treatment claim with regard to the valuation of the merchandise. While we addressed the entries cited by counsel to support a claim for treatment, the treatment claim fails primarily because the evidentiary requirements set forth in the CBP Regulations have not been met. No information with regard to entries involving materially identical transactions in the two-year period preceding the transactions at issue as required by 19 CFR § 177.12(c)(1)(i)(C) or and § 177.12(c)(1)(iv) has been submitted. Therefore, we find no support for the treatment claim. HOLDING: The protest should be denied. In accordance with the Protest/Petition Processing Handbook (CIS HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with this decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (“CROSS”) at https://rulings.cbp.gov/, which can be found on the U.S. Customs and Border Protection website at http://www.cbp.gov and other methods of public distribution. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division