CIT Finds Bills of Lading Allowable as Transshipment Evidence

Bills of lading provided to CBP by third-party shippers as part of transshipment penalty litigation are allowed as evidence despite claims that such documents do not meet the requirements of permissible hearsay, the Court of International Trade said in a Jan. 3 ruling. The case involves Harvic International, which allegedly transshipped apparel from China through Bangladesh, the Philippines or Korea. The Justice Department filed the suit “seeking a civil penalty of $405,042.90, plus interest and costs” after Harvic did not pay any of CBP's penalty demands.

Harvic sought a summary judgment from the court because the government is lacking in “admissible evidence to show that the subject entries originated in China,” it said. “As part of its investigation, CBP requested bills of lading and other documents from numerous shipping companies, including Hanjin and Hyundai, for thousands of shipments of textile goods that entered the United States between 2006 and 2010,“ the court said. Since those bills of lading come from third parties, the documents should be considered hearsay and not allowed as evidence, Harvic told the CIT.

The CIT examined the applicable legal tests for whether such documents are allowable hearsay evidence. Based on declarations from former CBP officials about general CBP practices, “the court therefore concludes that the Government has shown that Customs incorporated entry documents, including the Hanjin/Hyundai bills of lading, into its own records and relied on those records in its day-to-day administration of customs laws and policies,” it said.

The CIT also shutdown arguments that claimed the bills of lading were inadmissible because the documents were collected for the purposes of prosecution or litigation. “Customs did not request that Hanjin and Hyundai prepare the bills of lading in furtherance of a targeted investigation into Harvic or the subject entries,” the CIT said. “To the contrary, Customs requested various records from numerous sources, including shipping companies, as part of its overall examinations and research related to illegal transshipments of textiles and apparel.” The motion for summary judgment was therefore rejected.

The court also rejected a motion for summary judgment from the Justice Department. “Unfortunately for the Government there is conflicting evidence on the record about the origin of the subject entries that precludes entry of summary judgment in favor of the Government,” it said. As a result, “the court therefore must resolve the discrepancy between the country of origin as identified in Harvic's import documentation and the country of origin as identified in the Hanjin/Hyundai bills of lading,” it said.

(United States v. Harvic International, Ltd., Slip Op. 20-3, CIT # 16-00273, dated 01/03/20, Judge Gordon)

(Attorneys: Mikki Cottet for plaintiff U.S. government; Michael T. Cone of FisherBroyles for defendant Harvic International, Ltd.)