Stride Rite Corp. v. United States

• Decision Date: 09 January 1985
• Docket Number: Court No. 81-5-00631.
• Citation: 605 F. Supp. 279
• Parties: STRIDE RITE CORP., Plaintiff, v. The UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

605 F. Supp. 279

STRIDE RITE CORP., Plaintiff, v. The UNITED STATES, Defendant.

Court No. 81-5-00631.

United States Court of International Trade.

January 9, 1985.

COPYRIGHT MATERIAL OMITTED

Doherty, Melahn & Middleton, William E. Melahn, Boston, Mass., for plaintiff.

Richard K. Willard, Acting Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office and Jerry P. Wiskin, U.S. Dept. of Justice, Civil Div., Washington, D.C., for defendant.

RESTANI, Judge:

Plaintiff, an importer of children's and youths' footwear brought this action to contest the Customs Service's ("Customs") valuation of duties on its merchandise according to American Selling Price ("ASP"). ASP is a method of valuation formerly found at 19 U.S.C. § 1402(a)(4) (1976) which was repealed in 1979.¹ Plaintiff's goods were exported between December 16, 1977 and March 9, 1978 and entered at the port of Boston, Massachusetts.² Using the Junior Jogger made by the Bata Shoe Company, an American manufacturer, as the prototype, Customs appraised plaintiff's children's and infants' footwear at $5.30 per pair, less 2% packed and appraised the youths' and boys' products at $5.85 per pair, less 2% packed. Contesting the use of the Bata prototype, plaintiff argues that there was no ASP in this case and therefore the correct basis of appraisement was Export Value, 19 U.S.C. § 1402(d) (1976) (repealed 1979) or alternatively United States Value, 19 U.S.C. § 1402(e) (1976) (repealed 1979).³ Only if the ASP valuation was improper, must the court consider plaintiff's proposed valuations. 19 U.S.C. § 1402(a) (1976) (repealed 1979).

The ASP "method of valuation ignored the price of the imported article and turned instead to the price at which such articles of American manufacture were freely offered for sale for domestic consumption." Converse Rubber Co. v. United States, 64 Cust.Ct. 779, 782, 314 F.Supp. 1241, 1243 (1970), aff'd, 66 Cust.Ct. 652, 328 F.Supp. 493 (1971). ASP appraisement was designed to protect domestic manufacturers of limited classifications of goods, including certain coal tar products and certain goods, "by virtue of a Presidential proclamation issued under section 336 of the Tariff Act of 1930 (19 U.S.C. § 1336)" R. Sturm, Customs Law & Administration § 44.1 (2d ed. 1982), citing Bestway Products, Inc. v. United States, 58 Cust.Ct. 613 (1967). Among the classifications of goods to which ASP appraisement applied was certain footwear "wholly or in chief value of India rubber or substitutes for rubber." T.D. 54,521; see also E. Dillingham, Inc. v. United States, 67 Cust.Ct. 457, 328 F.Supp. 1392 (1971). At the operative time in this case, ASP valuation was applied to footwear with a rubber portion over fifty percent by weight and classifiable under the Tariff Schedules of the United States ("TSUS") 700.60 according to headnote 3(b), Part 1A, Schedule 7 of the TSUS. It is, of course, that classification which is relevant in the instant case. Pursuant to § 336, like or similar merchandise was the focal point of ASP law and the standard for selection by Customs of a prototype American article.

It is upon the "like or similar" requirement that plaintiff bases its first attack on the appraisement. Plaintiff's merchandise, the Stride-Rite Flyer is a rubber soled shoe with a canvas upper. Customs's prototype, the Bata Junior Jogger, is also a rubber soled shoe but has a nylon upper. The shoes are both of vulcanized rubber construction, the soles of both shoes are calendared with a series of "zig-zag" striations and indentations, and both shoes appear to be modeled on the athletic shoes currently worn by adults for running and jogging.

The terms "like" and "similar" have been subject to judicial interpretation. The two terms present separate standards. The term "like" means the same or identical. Albert F. Maurer Co. v. United States, 51 CCPA 114, 117 (1964). The difference between the nylon and canvas uppers, as well as ornamental design detail, prevents the subject products and the prototype from being "like" products. Hence, the question is only whether the two products are similar. Id.

Courts have delineated a four part test for "similarity" in which the factors to be considered are:

(1) similarity of material

(2) commercial interchangeability

(3) adaptability to the same use

(4) competitive character

A. Zerkowitz & Co. v. United States, 58 CCPA 60, 65, 435 F.2d 576, 580 reh'g. denied, 58 CCPA 72, 438 F.2d 1240 (1970), cert. denied, 404 U.S. 831, 92 S.Ct. 72, 30 L.Ed.2d 60 (1971), dismissed on remand, 69 Cust.Ct. 228 (1972); United States v. Japan Import Co., 2 Cust.Ct. 926, 932 (1939). In the Zerkowitz case, the Court of Customs and Patent Appeals stressed the commercial interchangeability factor when it explained:

... Similarity under 19 USC 1336 is, as our predecessor court wrote in United States v. Wecker & Co., 16 Ct.Cust. Appls. 220, 225, T.D. 42837 (1928),

... to be measured by much the same homely rule that applies to the prospective customer who enters a store seeking some utilitarian article of a certain specific name and style; he finds the article requested is not in stock but that another article, of approximately the same price and which will perform the same functions, is capable of the same use and may be substituted therefor, is available. Such an article is a similar article, notwithstanding the price, the methods of construction, and the component materials may be somewhat different; but, for all utilitarian purposes, one is a substitute for the other.

And, we would now add, it is approximately what the customer wanted and acceptable to him as a substitute.

58 CCPA at 67-68.

At trial plaintiff sought to differentiate between its canvas shoe and the nylon prototype on two grounds in order to demonstrate that the shoes did not meet the four part test. First, plaintiff's witness Dr. Park stated that the differences between the material in the uppers of the shoes made the prototype far more durable but allowed only plaintiff's Flyer to be merchandised as washable. Stride-Rite vice-president for merchandising, Mark Cocozza, testified that the Flyer was specifically made of canvas so that it could be washed. Plaintiff thus argued that washability prevented commercial interchangeability.

Defendant's witnesses, on the other hand, presented the view that washability was not a major difference and would not prevent the shoes from being commercially interchangeable. Furthermore, the court gives little weight to Dr. Park's testimony on the issue of commercial interchangeability because he was shown to have no experience in marketing shoes. The burden was on plaintiff to prove a differentiation in the mind of the ultimate purchaser of the shoes by a preponderance of evidence, and that burden was not met here. Cf. Park Avenue Imports Co. v. United States, 62 Cust.Ct. 1035, 1043, 299 F.Supp. 528, 534 (1969).

Second, plaintiff argued that the shoes were not designed for the same use because the prototype is a "dress" shoe while the subject product is a play shoe. The testimony of plaintiff's own witnesses is inconsistent on this issue. And defendant's witnesses testified to the contrary. Furthermore, the physical evidence of the merchandise itself indicates the article in issue is a children's play shoe. Thus, plaintiff has failed to meet its burden. Accordingly, the court finds that the subject product, the Flyer, and Customs prototype, the Junior Jogger, are "similar" for purposes of the ASP law.

A finding of similarity alone is not enough, however, to sustain an ASP appraisement. For not only must the prototype be similar to the subject product, but it must be freely offered for sale in the principal market of the United States. 19 U.S.C. § 1402(g). Plaintiff makes several challenges to Customs' finding that the Bata Junior Jogger was freely offered for sale.

In the first instance, plaintiff argues that Customs relied upon incomplete, inaccurate, and vague information in reaching its determination concerning the Bata shoe. Plaintiff argues that Customs' decision was based on answers to a questionnaire (Pl. Exhibit 5) filed by Bata executive Lee Kursewicz which was not well researched and which did not contain specific answers.⁴ Although there was testimony demonstrating that Mr. Kursewicz did not examine company records when filling out the questionnaire, the testimony at trial showed the questionnaire to be essentially accurate.⁵ Thus, the presumption of correctness given to the appraiser's decision was not overcome. See Hudson Shipping Co. v. United States, 43 CCPA 19, 28 (1955).

As its next argument on the freely offered for sale issue plaintiff urges that Bata did not follow its own price list because it provided discounts and different payment schemes to certain purchasers. Plaintiff's witness Mr. Weedon testified that he examined Bata's files and found several variances from the price list submitted to Customs. Discounts alone, however, do not mandate a finding that a product was not freely offered. See Aceto Chemical Co. v. United States, 51 CCPA 122, 125 (1964).

The Aceto court held that when a chemical company sold some of its product below list price and some at list price but offered its product to all purchasers at list and allowed any purchaser to buy the product at the list price, the list price would be used as a "freely sold" price.⁶ Id. Here the evidence at trial demonstrated that there were substantial sales at list price terms and discounts or different payment terms were given for legitimate business reasons or were the result of inadvertence. Thus, despite the presence of a few instances of deviations from price list terms in the instant case, the prototype may be said to have been freely offered for sale at the list price as long as the prototype was available to anyone desiring to purchase it at that price.

Plaintiff next argues that Bata divided its...