On February 9, 2023 the U.S. Court of International Trade (CIT) issued an opinion (Meyer Corp. vs United States, slip op. 23-13) which may impact the use of the “First Sale” method of duty appraisement. The court ruling highlights the need for importers to provide sufficient information to CBP when seeking approval to use the First Sale to make entry.
The case involved an ongoing dispute between Meyer Corp. and CBP over the valuation (and GSP treatment) of merchandise imported from the People’s Republic of China and Thailand. The transactions at issue involved the manufacture and sale of cookware between Meyer’s related companies. At issue in the case was whether Meyer Corp. was required to provide access to its parent’s financial records in order to show that first sale values from China were not only arms-length but were also unaffected by China’s status as a nonmarket economy.
In a previous decision, the Court of Appeals for the Federal Circuit (CAFC) stated that the CIT had misinterpreted the first sale rule to require importers to consider the effects of a nonmarket economy on first sale values. The CAFC held that the first sale rule only requires that the goods be clearly destined for export to the United States, and that the relationship between the buyer and seller does not influence the transfer price. The CAFC had remanded the case back to the CIT to reconsider Meyer’s qualifications for first-sale duty treatment.
On remand, the CIT restated its opinion that the value statute does not necessarily contemplate that there is no distinction between sellers operating in market economies and those operating in nonmarket economies. The court noted that Meyer’s failure to respond to the government’s request for financial information regarding Meyer’s parent company did not allow the court to discern whether or not the parent company provided any form of assistance to reduce costs. The court held that the failure to provide financial information was an independent reason for the court to find that the relationship between the related parties may have influenced the price and therefore negated the use of transaction value and first sale appraisement.
The CIT’s decision, while limited to the specific facts of this case, is likely to embolden CBP to more routinely seek access to the supplier’s financial records and to more aggressively scrutinize related party pricing arrangements involving suppliers in non-market economies. Further analysis and additional judicial interpretation may be required to fully address these questions and provide clarity to importers.
Please feel free to contact Alan R. Klestadt ([email protected]) or any of the other attorneys in our office if you have any questions regarding the Meyer decision or the use of the first sale rule of appraisement.