Industry News

Appeals Court Questions First Sale Decision

Dec, 16, 2024
By: Pietro N. Bianchi


On December 13, 2024, the U.S. Court of Appeals for the Federal Circuit (“CAFC”) remanded a case, Meyer Corporation, U.S., v. United States, back to the Court of International Trade to again review the case based (only) on the evidence on record. For background, Meyer Corp., U.S. (“Meyer”) imported finished cookware from distributors in Macau and Hong Kong that purchased the finished cookware from manufacturers in Thailand and China. Meyer, the distributors, and the manufacturers are all related business entities, under Meyer International Holdings, Ltd. (“Meyer Holdings”). Meyer argues that the first-sale price, the price the distributors paid to the manufacturers, should be used for Customs value. Customs assessed duties based on the second-sale price, the price Meyer paid the distributors, for Customs value.

In related party transactions, such as the case here, transaction value of the imported merchandise, or “the price actually paid or payable for the merchandise when sold for exportation to the United States,” (plus certain amounts) can be used “if an examination of the circumstances of the sale of the imported merchandise indicates that the relationship between such buyer and seller did not influence the price actually paid or payable.” 19 U.S.C. § 1401a.

The CIT held Meyer’s failure to produce Meyer Holdings’ financial documents “hampered” the Court’s ability to determine whether the corporate relationship influenced the price in its analysis of the circumstances of sales. Meyer stated it did not possess Meyer Holdings’ financial documents, and they were not relevant. CAFC noted that the government never objected to a lack of production or pursued a motion to compel. CAFC held that the CIT was not allowed to draw adverse inferences because Meyer did not fail to comply with any discovery orders. CAFC noted language from the CIT decision indicating negative inferences were drawn in support of the opinion and determined that the CIT’s “opinion makes clear that it suspected Meyer of being dishonest in its reporting.”

Further, CAFC noted that the CIT did not analyze the evidence on record, including: “evaluate the credibility of the witnesses, weigh the evidence that was before it, or explain why, as a matter of law, that record evidence was or was not sufficient for Meyer to meet its burden.” Since the CIT based its decision on suspicion and did not weigh the evidence, the CAFC remanded the case to be decided on its merits. The CAFC emphasized that it was not advocating for a specific finding on remand:

“Meyer was entitled to have its case heard on the merits of the record it presented, not disposed of based on conclusory speculation.”

Whether the evidence Meyer presented establishes that the first-sale price can be used is yet to be seen. Valuation for related party transactions involve complex legal analysis and no small amount of evidence. If you have questions about valuation, transaction value, or related party transactions, do not hesitate to contact an attorney at Barnes Richardson, & Colburn LLP.