Meyer Corp., U.S. v. United States

• Decision Date: 01 March 2021
• Docket Number: Court No. 13-00154,Slip Op. 21 - 26
• Parties: MEYER CORPORATION, U.S., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

MEYER CORPORATION, U.S., Plaintiff, v. UNITED STATES, Defendant.

Slip Op. 21 - 26

Court No. 13-00154

UNITED STATES COURT OF INTERNATIONAL TRADE

March 1, 2021

Senior Judge Aquilino

Opinion & Order

[Upon trial as to transaction value of imported cookware, judgment for the defendant.]

Joseph M. Donley and Lisa Carney Eldridge, Clark Hill PLC, and John P. Donohue, Ciardi Ciardi & Astin, of Philadelphia, PA, for the plaintiff.

Beverly A. Farrell, Trial Attorney, U.S. Department of Justice, Civil Division, Commercial Litigation Branch, of Washington, DC, for the defendant along with Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, Justin R. Miller, Attorney-in-Charge, and Paula S. Smith, Attorney, Office of Assistant Chief Counsel, International Trade litigation, U.S. Customs and Border Protection, of counsel.

AQUILINO, Senior Judge: This test case considers valuation under 19 U.S.C. §1401a of 125 different sets of cookware (pots and pans) imported from the People's Republic of China and the Kingdom of Thailand, a beneficiary developing country ("BDC"). Its focus is (1) the "first sale" rule articulated by Nissho Iwai America Corp. v. United States, 982 F.2d 505 (Fed.Cir. 1992); (2) preferential treatment of entries from Thailand under the Generalized System of Preferences ("GSP"), 19 U.S.C. §2461 et seq.; and (3) whether circular metal "blanks" imported into Thailand from the People's Republic of China ("PRC") underwent a "double substantial transformation" as required by Customs and Border Protection ("CBP") interpretation of the GSP¹ for purposes of both of those valuation issues.

I

A

Previously, the court granted in part and denied in part each party's cross-motion for partial summary judgment on the first two of the three issues presented. Meyer Corp., U.S. v. United States, 41 CIT ___, 255 F.Supp.3d 1348 (2017).

The Nissho Iwai "first sale" rule requires (1) bona fide sales that are (2) clearly destined for the United States (3) transacted at arm's length and (4) absent any distortive nonmarket influences. Whether due to first sale tests being generally applied to transactions from market economy countries, the last consideration has generally been neglected, but it is not irrelevant in the context of this case.

CBP's interpretation of Nissho Iwai's first sale rule led it to the following considerations: In order to establish "entitlement" to first sale valuation, an importer needs to provide (1) a detailed description of the roles of each of the parties involved in a multi-tiered transaction and (2) a complete paper trail relating to the imported merchandise that shows the structure of such transaction. Def. Ex. 12, Determining Transaction Value in Multi-Tiered Transactions, T.D. 96-87, 30 Cust.Bull. 52 (Jan. 2, 1997).² Thus, the same documentation required to establish a bona fide sale and an export destined for the United States are applicable for a multi-tiered transaction, even when the parties to that transaction are related.

The valuation statute applies special rules when the buyer and seller are related parties under 19 U.S.C. §1401a(g). See 19 C.F.R. §152.103(j),(l); Def. Ex. 12; Def. Ex. 15, Determining the Acceptability of Transaction Value for Related Party Transactions, p. 6 (April 2007). These rules state that when parties are related, a sale is at "arm's length" only if (i) an examination of the "circumstances of the sale" of the imported merchandise indicates that the relationship between the buyer and seller did not influence the price actually paid or payable, or (ii) the transaction value closely approximates a test value. 19 U.S.C. §1401a(b)(2); Def. Ex. 15, p. 7.

These foregoing CBP publications are entitled to a degree of deference. "[T]he well-reasoned views of the agencies implementing a statute constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance . . . and [w]e have long recognized that considerable weight should be accorded to an executive department's construction of a statutory scheme it is entrusted to administer." United States v. Mead Corp., 533 U.S. 218, 227-28 (2001) (internal quotations and citations omitted).

Under Nissho Iwai, 982 F.2d at 509, Meyer must further establish the absence of any market-distortive influences on the price of the cookware, both for that manufactured in the PRC and for the Thai cookware with components from China. The court previously took judicial notice of the fact that the PRC is a non-market economy. 41 CIT at ___, 255 F.Supp.3d at 1361. One method that could be used to establish the absence of PRC non-market influence are the factors used by entities located there to obtain a duty rate other than the country-wide rate established by the U.S. Department of Commerce in antidumping-duty proceedings involving non-market economy participants. See, e.g., Advanced Tech. & Materials Co. v. United States, 36 CIT ___, 885 F.Supp.2d 1343 (2012).

To obtain a separate rate in that context, an entity must satisfy three de jure factors and four de facto factors. "The de jure factors are (1) an absence of restrictive stipulations associated with an individual exporter's business and export licenses, (2) any legislative enactments decentralizing control of companies, and (3) other formal measures by the government decentralizing control of companies." Id., 36 CIT at ___, 885 F.Supp.2d at 1347. Typically-considered de facto factors include "(1) the ability to set export prices independently of the government and without the approval of a government authority, (2) the authority to negotiate and sign contracts and other agreements, (3) the possession of autonomy from the government regarding the "selection" of management, and (4) the ability to retain the proceeds from sales and make independent decisions regarding the disposition of profits or financing of losses." Id.³

Further, for viable transaction value, there must be sufficient information available with respect to the amounts of the statutory additions, if any, set forth in 19 U.S.C. §1401a(b)(1):

The transaction value of imported merchandise is the price actually paid or payable for the merchandise when sold for exportation to the United States, plus amounts equal to— (A) the packing costs incurred by the buyer with respect to the imported merchandise;

(B) any selling commission incurred by the buyer with respect to the imported merchandise;

(C) the value, apportioned as appropriate, of any assist;

(D) any royalty or license fee related to the imported merchandise that the buyer is required to pay, directly or indirectly, as a condition of the sale of the imported merchandise for exportation to the United States; and

(E) the proceeds of any subsequent resale, disposal, or use of the imported merchandise that accrue, directly or indirectly, to the seller.

See Def. Ex. 12. "If sufficient information is not available, for any reason, with respect to any amount referred to in the preceding sentence, the transaction value of the imported merchandise concerned shall be treated, for purposes of this section, as one that cannot be determined." Id.

With respect to Meyer's GSP claims, in order to be eligible, an imported article must satisfy the following conditions:

(1) the article must be the 'growth, product or manufacture' of a beneficiary developing country (BDC); (2) the article must be imported directly from a BDC into the customs territory of the United States; and

(3) the sum of (a) the cost or value of the material produced in the BDC plus (b) the direct costs of processing operations performed in the BDC must not be less than 35% of the appraised value of such article at the time of its entry into the customs territory of the United States.

See 19 U.S.C. §2463(a)(2)(A). See also Dal-Tile Corp. v. United States, 28 CIT 358, 393 (2004).

In addition, in order to count towards GSP a non-BDC material input as an article that is "produced" in a BDC, the raw material must undergo a double (or dual) substantial transformation. Torrington Co. v. United States, 764 F.2d 1563, 1567 (Fed.Cir. 1985). In that case, the appellate court affirmed the trial court's determination that a dual substantial transformation occurred when wire was first transformed into swages, a separate article of commerce with a "distinctive name, character, or use," and the second substantial transformation occurred when the swages were transformed into needles, another distinctively named article of commerce. Id.

B

Plaintiff's papers herein explain that in 2006, having arranged "middleman" procurement by that point to its apparent satisfaction, it sought approval from CBP to appraise the imported sets on the basis of the "first sale" rule between related parties articulated by Nissho Iwai. See 19 U.S.C. §1401a. Meyer also sought GSP treatment for sets procured through the Thai supply chain because Thailand is a BDC under the GSP.

Meyer made two presentations for first sale valuation, with the assistance of accountants PwC, to one of CBP's import specialists at the Port of San Francisco. The first, in September 2006, concerned the Thai supply chain. The import specialist approved the proposed valuation on the basis of the first sale the next month. Accordingly, Meyer began making entry based upon such valuations.

The second presentation, also by PwC on behalf of Meyer, occurred approximately a year later, again to the same import specialist. This concerned the Chinese supply chain. It, too, was approved.

Shortly after approval, the import specialist referred the matter to CBP's Office of Field Operations at the Port of San Francisco for an audit of those first sale valuations. It concluded with respect to both of the Thai and Chinese supply chains that the first sale transactions met the first two of the Nissho Iwai tests (i.e., bona fide sales and clearly destined for the United States) but also that they had not been at arm's length. The audit report additionally...