Meyer Corp. v. United States

614 F. Supp. 3d 1376, 2023 CIT 13

• Court: United States Court of International Trade
• Decided: February 9, 2023
• Docket: 13-00154
• Status: Published

Opinion

Slip Op. 23-13

UNITED STATES COURT OF INTERNATIONAL TRADE

- - - - - - - - - - - - - - - - - - - - -x Senior Judge Aquilino

MEYER CORPORATION, U.S., :

Plaintiff, :

v. : Court No. 13-00154

UNITED STATES, :

Defendant. :

- - - - - - - - - - - - - - - - - - - - -x

Opinion & Order

[Upon appellate remand to “the court to reconsider whether Meyer may rely on the first-sale price”, that reconsideration on the record at bar concludes that it may not.]

Decided: February 9, 2023

John M. Peterson, John P. Donohue, Richard F. O’Neill, and Patrick B. Klein, Neville Peterson LLP, New York, NY, for the plaintiff.

Justin R. Miller, Attorney-in-Charge, and Beverly A. Farrell, Senior Trial Attorney, U.S. Department of Justice, Civil Division, Commercial Litigation Branch, International Trade Field Office, New York, NY, and Brian M. Boynton, Principal Deputy Assistant Attorney General, Civil Division, and Patricia M. McCarthy, Director, U.S. Department of Justice, Civil Division, Commercial Litigation Branch, Washington, D.C., for the defendant.

AQUILINO, Senior Judge: The mandate of the U.S. Court of

Appeals for the Federal Circuit (CAFC”) having issued pursuant to

its decision to remand supra sub nom. Meyer Corp. v. United States, Court No. 13-00154 Page 2

43 F.4th 1325, 1333 (2022) (“Meyer III”), has led the parties to

file papers in regard thereto.

Presumed herein is familiarity with this test case on

valuation under 19 U.S.C. §1401a of 125 different sets of pots and

pans imported from the People’s Republic of China (“PRC”) and the

Kingdom of Thailand and the extensive record and prior decisions

thereon. See Meyer Corp. v. United States, 41 CIT ___, 255

F.Supp.3d 1348 (2017) (“Meyer I”) (summary judgment granted in part

and denied in part); Meyer Corp. v. United States, 45 CIT ___, Slip

Op. 21-26 (March 1, 2021) (“Meyer II”) (opinion after trial;

judgment for defendant).

The CAFC affirmed the finding that steel discs exported

to Thailand from China underwent only one substantial

transformation, not two, and that the resultant cookware for the

U.S. was thus not entitled to duty-free treatment. Meyer III, 43

F.4th at 1330-32. It also vacated and remanded plaintiff-

appellant’s first-sale claim, stating that “there is no basis in

the statute for Customs or the court to consider the effects of a

nonmarket economy on the transaction value and require a party to

show the absence of all ‘distortive nonmarket influences.’” Id. at

1332. The CAFC decision goes on to state that 19 U.S.C. Court No. 13-00154 Page 3

§1401a(b)(2)(B) “concerns effects of the relationship between the

buyer and seller, not effects of government intervention, and

especially not with government intervention that affects the

industry as a whole.” Id. at 1332-33.

From this court’s perspective, because the purpose of the

General Agreements on Tariff and Trade was to promote trade

liberalization among market-oriented countries and help spread

democratic values that were associated with capitalism, in

opposition to fascism and the “Iron Curtain” that was descending on

Europe in the aftermath of World War II,1 the fact that the

valuation statute presupposes a “market” environment focusing on

the individual transaction is unsurprising. That was the purpose

of the GATT negotiations.

That does not mean, however, the statute as written

necessarily contemplates zero distinction between sellers operating

in market economies and those operating in nonmarket economies,

1 See, e.g., GATT 1947: How Stalin and the Marshall Plan helped to conclude the negotiations, available at https://www.wto.org/english/tratop_e/gatt_e/stalin_marshall_ conclude_negotiations_e.htm (last checked this date). Court No. 13-00154 Page 4

particularly in view of the judge-made “first sale” rule2 on the

“price paid or payable” of 19 U.S.C. §1401a(b)(1) (“[i]f sufficient

information is not available, for any reason,3 with respect to any

amount” necessary to increase the “price actually paid or payable

for imported merchandise . . . by the amounts attributable” to the

items listed as (A) through (E) of §1401a(b)(1)(packing costs,

selling commissions, assists, royalties, license fees, and, of some

import to this case, “the proceeds of any subsequent resale,

disposal, or use of the imported merchandise that accrue, directly

or indirectly, to the seller”), then the transaction value of the

imported merchandise concerned “shall” be treated as one that

cannot be determined). It was the CAFC itself, in fact, which

articulated the concept of “the absence of any non-market

influences that affect the legitimacy of the sales price” -- apart

from the language of the statute itself. See Nissho Iwai Am. Corp.

v. United States, 982 F.2d 505, 509 (Fed.Cir. 1992).

2 That rule evolved from the prior concept of “export value.” See Tariff Act of 1930 §402(d) (June 17, 1930). It has been maintained by various judicial decisions, even under the current valuation statute. See, e.g., United States v. S.S. Kresge Co., 26 CCPA 349, 352 (1939); R.J. Saunders & Co. v. United States, 42 CCPA 55, 59 (1954); United States v. Getz Bros. & Co., 55 CCPA 11 (1967); E.C. McAfee Co. v. United States, 842 F.2d 314 (Fed. Cir. 1988); and Nissho Iwai Am. Corp. v. United States, 982 F.2d 505 (Fed.Cir. 1992). 3 Emphasis added. Court No. 13-00154 Page 5

Be that as it has been, the current CAFC panel having,

seemingly unequivocally, answered Meyer II’s earlier question or

observation on that point, this court, accordingly, will continue

its consideration of the substance of the matter, as developed

before, during, and after trial.

I

The plaintiff commenced this action seeking first-sale

treatment for its imported cookware from the PRC, and duty-free

treatment under the Generalized System of Preferences (GSP) for

certain cookware imported from Thailand, a beneficiary developing

country (BDC). After extensive discovery, the parties cross-moved

for partial summary judgment on whether cookware sets containing a

non-de minimis, non-BDC component could qualify the entire set for

GSP treatment; and whether Meyer’s imported cookware is viably

valued at the price between the Thai producer and a middleman

(first-sale price), both of which are Meyer related. Meyer I, 41

CIT at ___, 255 F.Supp.3d at 1350-51.

On the set issue, this court determined that the presence

of a non-BDC component in a set would not preclude BDC components

from receiving GSP treatment, although such treatment would not

extend to a non-BDC component. Id., 41 CIT at ___, 255 F.Supp.3d Court No. 13-00154 Page 6

at 1355-59. However, the issue of whether the Thai-made components

were entitled to duty-free treatment under the GSP was yet to be

resolved. In determining whether first-sale could present a viable

value for the related entities, this court found that the

government had not waived the issue of Meyer’s failure to provide

its parent’s financial information as requested during discovery.

Id., 41 CIT at ___, 255 F.Supp.3d at 1360-61. This court further

held that “[a]ll of the entities relevant to that issue [i.e.

dealing at arm’s length] are related, and therefore the financial

information pertaining to the parent is also relevant to examining

whether any non-market influences affect the legitimacy of the

sales price.” Id., 41 CIT at ___, 255 F.Supp.3d at 1361. Finally,

after noting that the first-sale-transaction issue revealed

disputed material facts, this court required the parties to confer

and propose how to proceed. Id., 41 CIT at ___, 255 F.Supp.3d at

1362.

Ultimately, a trial was held on the issue of whether

certain Thai cookware had undergone double substantial

transformation and thus satisfied the requirements for duty-free

treatment under the GSP, and also the issue of whether the

first-sale-transaction price was a viable value for the imported

merchandise. Between the Meyer I decision and commencement of the Court No. 13-00154 Page 7

trial, Meyer did not amend its discovery responses to include its

parent’s financial information. Although the plaintiff presented

direct testimony from five witnesses at trial, such testimony did

not include witnesses from Meyer Manufacturing Company Limited

(Meyer Hong Kong) or from Meyer International Holdings Limited

(Meyer Holdings), the direct parent company of the plaintiff, the

Thai producer, Meyer Macau, Meyer Hong Kong, and the indirect

parent of the PRC producer.

After trial, the parties submitted competing findings of

fact and conclusions of law. After considering them, this court

concluded that GSP treatment was not available for Thai cookware

manufactured from steel discs obtained from the PRC because no

double substantial transformation of the discs had occurred by the

Thai manufacturing process. Meyer II at *50.

This court further held that, “[b]ased on the applicable

law and the evidence adduced at trial, the plaintiff has also

failed to establish that it should be entitled to use the

transaction value between the China producer and Meyer Hong Kong or

the Thai producer and Meyer Macau (‘first sale’) for the

appraisement of the imported cookware.” Id. This court noted

that, for the “all costs plus profit” test, costs are critical and Court No. 13-00154 Page 8

that the costs of the inputs from the PRC are suspect.4 It also

found that “no CBP regulation requires that the ‘firm’ mentioned in

19 C.F.R. §152.103(l)(1)(iii) be the ‘parent’ of the importing

party.” Id.

Regardless, even if the costs of inputs were not suspect,

this court observed that the parent company “Meyer Holding[s]

presumptively had the ability to influence the price paid or

payable for them.” Id. at *51. Moreover, “[w]ithout financial

statements, th[is] court has no concept of the extent to which the

finances of the Meyer group units are truly independent ‘silos’ of

one another, or the extent to which there might have been state

influence or assistance to some degree.” Id. For whatever reason,

in vacating and remanding Meyer II, the CAFC does not address these

observations.

II

Facts drive the law. It is not the other way around.

Even ignoring the fact that the claimed transaction values involve

4 The CAFC decision does not directly address this necessary observation, which remains an element of this cost-plus- profit case, even if 19 U.S.C. §1401a(b)(2)(B) “concerns effects of the relationship between the buyer and seller, not effects of government intervention, and especially not with government intervention that affects the industry as a whole.” Court No. 13-00154 Page 9

inputs from a non-market-economy country in the merchandise at

issue, this court still cannot ignore plaintiff’s non-

responsiveness to defendant’s request for information during

discovery. The fact that the government herein was not provided

with the financial information pertinent to plaintiff’s parent

company hampered its ability to discern whether or not the parent

of the plaintiff provided any form of assistance to reduce costs.

As this court previously observed (here excising any inference of

“nonmarket consideration” in accordance with the CAFC opinion):

Even if “true” costs of such inputs could be determined, Meyer Holding[s] presumptively has had the ability to influence the price paid or payable for them, for example by providing its subsidiaries access to credit and capital on terms that are not available to competitors without the same level of bargaining power with creditors, or even at “below market” rates. Without financial statements, the court has no concept of the extent to which the finances of the Meyer group units are truly independent “silos” of one another . . ..

The most that plaintiffs’ witnesses could testify to was that they were unaware of any such assistance . . .. At trial, the defendant only lightly explored the extent to which such considerations might be considered [ ]distortive. But then again, the defendant never had the ability to probe deeper, in part because it was never provided the financial information it requested in discovery in order to be able to ask or answer probing questions.

The court understands that the Meyer parent is not subject to this litigation and that the plaintiff, as its “independent” subsidiary, can claim an inability to obtain such information from it. However, given that the parent has an interest in seeing these types of matters Court No. 13-00154 Page 10

resolved favorably, it is therefore presumed to be forthcoming, even unprompted, to provide whatever CBP deems necessary to assist in their resolution, and the fact that in that regard there has apparently been considerable “resistance” throughout this case to that not unreasonable discovery request and the “assistance” that the parent could have provided its subsidiary to address necessary questions . . ., speaks volumes.

. . . [T]he foregoing leads the court to doubt that accurate ascertainment of the “true” value of the “price paid or payable” at the first sale level in the customs duty sense has been demonstrated in this case.

Meyer II at *50-51.

As the defendant points out, the prior analysis shows

that plaintiff’s failure to provide the financial information

requested by it during discovery provided an independent reason as

to why Meyer could not demonstrate a true first-sale value absent

of influence - not from a nonmarket-economy country per se — but

from the relationships of the related parties. And the plaintiff

had been forewarned by the court’s Meyer I decision as to the

importance of that financial information but chose not to

supplement its discovery responses.

Furthermore, “[a]lthough this Court may exercise such

discretion to rectify a significant flaw in the conduct of the

original proceeding, [t]he purpose of a rehearing is not to

relitigate the case.” Tianjin Magnesium Int'l Co. v. United Court No. 13-00154 Page 11

States, 36 CIT 1698, 1699 (2012) (quotations and citations

omitted). As discussed above, an extensive record was developed

before this court. It is more than sufficient for conducting

reconsideration now.

Finally, this court considers that the CAFC’s holding of

Nissho Iwai’s “nonmarket influences” as simply referring to

influences growing out of the relationship of buyer and seller that

distort the price paid or payable, coupled with its “remand for

th[is] court to reconsider whether Meyer may rely on the first-sale

price”, negates any need for further proceedings now.5 The

plaintiff had more-than-adequate opportunity to make its case for

first-sale treatment, and any suggestion now for a retrial is

inconsistent with Rule 1 of the USCIT rules to “secure the just,

speedy, and inexpensive determination of every action and

proceeding.”

III

In view of the foregoing, and given the precision of the

CAFC remand quoted above, mandating Customs and Border Protection

to acquiesce in plaintiff’s plea for liquidation of its merchandise

5 Plaintiff’s motion(s) filed after the CAFC mandate issued regarding possible such proceedings can be, and they hereby are, dismissed. Court No. 13-00154 Page 12

on the basis of its first sale is not warranted, and this court’s

judgment entered in Meyer II is therefore hereby affirmed.

So ordered.

Decided: New York, New York February 9, 2023

/s Thomas J. Aquilino, Jr. Senior Judge