Trimil S.A v. United States, Slip Op. 19-161

• Decision Date: 17 December 2019
• Docket Number: Court No. 16-00025,Slip Op. 19-161
• Parties: TRIMIL S.A, Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

419 F.Supp.3d 1307

TRIMIL S.A, Plaintiff,
v.
UNITED STATES, Defendant.

Slip Op. 19-161
Court No. 16-00025

United States Court of International Trade.

December 17, 2019

419 F.Supp.3d 1308

Robert B. Silverman, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, LLP, of New York, NY, argued for Plaintiff. With him on the brief were Robert F. Seely and Alan R. Klestadt.

Jamie L. Shookman, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, NY, argued for Defendant. With her on the brief were Chad A. Readler, Acting Assistant Attorney General and Amy M. Rubin, Assistant Director. Of Counsel on the brief was Chi S. Choy, Office of the Assistant Chief Counsel, U.S. Customs and Border Protection.

OPINION

Eaton, Judge:

Plaintiff Trimil S.A. ("Plaintiff" or "Trimil"), an importer of Giorgio Armani S.p.A. ("Armani") apparel, appeals from U.S. Customs and Border Protection's ("Customs") denial of its protest regarding twelve entries of clothing¹ imported from Italy and Hong Kong.

By its motion for summary judgment, Trimil challenges Customs' calculation of the transaction value² of the clothing, pursuant

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to 19 U.S.C. § 1401a. See Pl.'s Mem. Supp. Mot. Summ. J., ECF No. 23, 1 ("Pl.'s Br."); Pl.'s Resp. Def.'s Cross-Mot. Summ. J., ECF No. 36 ("Pl.'s Resp."). Specifically, Trimil objects to Customs' inclusion, in transaction value, of the amounts of advertising fees and trademark royalty fees, that Trimil paid to third parties. See Compl., ECF No. 2, ¶¶ 19, 20, 22. The addition of these fees to the clothing's transaction value increased the amount of Trimil's duties.

Defendant the United States ("Defendant" or the "Government") cross-moves for summary judgment, contending that the advertising fees and trademark royalty fees paid by Trimil fall under transaction value either as part of "the price actually paid or payable" for the imported merchandise, or as a statutorily authorized addition that was paid as a condition of sale. See 19 U.S.C. § 1401a(b)(1), (D) (2012)³ ; Def.'s Mem. Opp'n Pl.'s Mot. Summ. J. & Supp. Def.'s Cross-Mot. Summ. J., ECF No. 28, 1 ("Def.'s Br."); Def.'s Reply, ECF No. 41.

The court has jurisdiction under 28 U.S.C. § 1581(a) (2012). See Compl. ¶ 13; Answer, ECF No. 5, ¶ 13. The court finds that (1) Plaintiff properly conceded the design fees as a dutiable assist added to price actually paid or payable; (2) the advertising fees are not dutiable because they are neither part of price actually paid or payable, nor do they fit within a statutory addition to price; and (3) the trademark royalty fees are not dutiable because they are neither part of price actually paid or payable, nor do they fit within a statutory addition to price.

BACKGROUND

I. Customs' Transaction Value Determination

Trimil is an importer of wearable apparel bearing the trademarks of Mani, Armani Collezioni, and Armani Jeans. See Pl.'s Br. Ex. 2, ECF No. 23-2, Ballestrazzi Aff. ¶ 5; Pl.'s Stmt. Material Facts, ECF No. 23, ¶¶ 1, 4, 5 ("Pl.'s SMF"). Confezioni di Matelica S.p.A. ("Vendor Matelica") and Deanna S.p.A. ("Vendor Deanna") (collectively, the "seller-manufacturers") manufactured Trimil's orders of Armani-trademarked merchandise.⁴ Pl.'s SMF ¶¶ 6, 7.

Trimil imported twelve entries⁵ of Armani-trademarked apparel between 2008 and 2009. See Pl.'s SMF ¶ 4. The company paid an amount based on its estimation of the duties it would owe Customs at the time of entry based on the invoice price of

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the clothing together with additional amounts for design fees,⁶ advertising fees, and trademark royalty fees that it had paid to Armani and Armani's subsidiary, G.A. Modefine S.A. ("Modefine"). See Ballestrazzi Aff. ¶¶ 5, 10, 11, 15, 16; Pl.'s SMF ¶ 51.

Customs determined the dutiable transaction value of Trimil's imported merchandise based on Trimil's declarations as to value and payment of its estimated duties. See Pl.'s Br. Ex. 1, ECF No. 23-1, Bassani Aff. ¶¶ 29-33; Def.'s Br., ECF No. 28-3, Ex. 3.

Trimil later paid its duties in full through reconciliation entries.⁷ Pl.'s SMF ¶¶ 8, 9, 53. Customs continued to include the advertising fees and trademark royalty fees in its final calculation of transaction value. Pl.'s SMF ¶¶ 47, 50.

On July 22, 2010, Trimil timely filed a protest covering the twelve entries. See Def.'s Br., ECF No. 28-3, Ex. 5. Customs denied the protest on September 24, 2010. See Def.'s Br. Ex. 5.

On May 12, 2016, Trimil commenced this litigation arguing that the total invoice price paid to the seller-manufacturers, less the advertising fees and trademark royalty fees, represents the total price of the imported merchandise, and therefore also represents the dutiable transaction value. See Compl.; Pl.'s SMF ¶ 19.

II. Agreements Governing the Disputed Advertising Fees and Trademark Royalty Fees

Trimil entered into two sets of agreements with Armani and Armani's subsidiary Modefine. Trimil entered into the first set of agreements, consisting of two design and advertising agreements, with Armani. See Pl.'s Br. Ex. 2 ("Design & Advertising Agreements"); see also Pl.'s SMF ¶ 39. At the same time, Trimil entered into the second set of agreements, consisting of two trademark licensing agreements, with Modefine.⁸ See Pl.'s Br. Ex. 2 ("Trademark Agreements"); see also Pl.'s SMF ¶ 30. By the terms of the four agreements (collectively, the "Agreements"), Trimil was a design, advertising, and trademark licensee of Armani. See Pl.'s Br. Ex. 3, ECF No. 23-4, Ballestrazzi Dep. at 35:4-36:4. The Agreements were entered into prior to the manufacture of the imported merchandise. Pl.'s SMF ¶¶ 30, 39.

One of the two Design & Advertising Agreements provided stylistic and advertising assistance for the Mani- and Armani Collezioni-trademarked clothing, and the other provided assistance for the Armani Jeans-trademarked clothing. Pl.'s SMF ¶¶ 39, 40. The purpose of these contracts was to "enhance retail sales of the trademarked merchandise within the United States." Pl.'s SMF ¶ 41. Under each agreement, Trimil paid two separate fees to Armani—a design fee and an advertising fee. These fees were equal to a percentage

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of the net revenue of Trimil Corp. (Trimil S.A.'s U.S. subsidiary), or, in the alternative, a guaranteed minimum fee for both design and advertising. Pl.'s SMF ¶ 42. The calculation of these payments to Armani was based on Trimil Corp.'s future U.S. sales of the imported clothing. Pl.'s SMF ¶ 46.

As to the Trademark Agreements, one agreement covered the Mani and Armani Collezioni trademarks, and the other covered the Armani Jeans trademarks. Pl.'s SMF ¶ 30. The purpose of these agreements was to "provide[ ] Trimil SA with a license to manufacture, purchase, and to sell the Armani-trademarked merchandise in the United States." Ballestrazzi Aff. ¶ 12. Under these two agreements, Trimil paid Modefine trademark royalty fees. Pl.'s SMF ¶ 31. As with the Design & Advertising Agreements, the calculation of these payments to Modefine was based on Trimil Corp.'s future U.S. sales. Pl.'s SMF ¶¶ 38, 46. The Trademark Agreements also provided "a guaranteed minimum trademark royalty amount." See Pl.'s SMF ¶ 31.

Trimil concedes that the design fees it paid pursuant to the Design & Advertising Agreements are properly part of the clothing's transaction value as a dutiable assist under 19 U.S.C. § 1401a(b)(1)(C). See Pl.'s SMF ¶¶ 53, 54; Bassani Aff. ¶ 35 (characterizing the design fees as "assists"). Accordingly, Trimil only contests the dutiability of advertising fees and trademark royalty fees.

Failure to comply with the terms of the Design & Advertising Agreements by Trimil would be grounds for Armani to terminate them. See Design & Advertising Agreements, § 12(3)(IV). Likewise, Trimil's failure to make royalty payments to Modefine would be grounds for Modefine to terminate the Trademark Agreements. See Trademark Agreements, § 16(3). Further, if Trimil failed to maintain its status as a trademark licensee under the Trademark Agreements, Armani could terminate the Design & Advertising Agreements. See Design & Advertising Agreements, § 12(3)(VII) ("Armani may also terminate this contract ... if, for any reason, [Trimil] ceases to be a licensee of the ‘Armani’ Trademark.").

STANDARD OF REVIEW

Under Rule 56, "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." U.S. CT. INT'L TR. R. 56(a); see also Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The court reviews de novo Customs' denial of protests. See , e.g. , LDA Incorporado v. United States , 39 CIT ––––, ––––, 79 F. Supp. 3d 1331, 1338 (2015) (citing 28 U.S.C. § 2640(a)(1) ).

LEGAL FRAMEWORK

Whenever possible, Customs appraises imported merchandise on the basis of its "transaction value." See 19 U.S.C. §...