CIT Wrongly Used 'Dual Burden of Proof' in First Sale Case, Meyer Tells CAFC

The Court of International Trade improperly applied the "dual burden of proof" when it denied Meyer Corp. "first sale" valuation on its imports of cookware, Meyer told the U.S. Court of Appeals for the Federal Circuit in a Jan. 10 reply brief. The dual burden of proof practice was previously eliminated, so CIT improperly applied this standard when it denied Meyer first sale but sustained CBP's valuation of the imports based on their second sale rate, Meyer said (Meyer Corporation v. United States, Fed. Cir. #21-1932). "Despite its prodigious length (120 pages), the CIT's opinion consists mainly of a recitation of the parties' proposed post-trial findings and contains very little by way of legal analysis," the company said.

CIT ruled in March that first sale treatment may not be applicable to non-market economy exports (see 2103020040). The judge said that entanglement between Meyer and Chinese companies made it difficult to determine whether the transaction was conducted at arm's length and undistorted by non-market influences -- two of the criteria required for receiving the valuation. However, the court stopped short of ruling that all non-market economy goods are ineligible for the valuation.

The court ended up sustaining CBP's valuation based on its second sale, which was CIT's "most serious error" since it violates its obligation under the 1984 CAFC decision that ended the "dual burden of proof," Meyer said. That opinion held that the court doesn't have to find that both the government misclassified something and that the plaintiff's proposed classification is correct. The Federal Circuit also mandated that the lower court has a duty to find the correct result by whatever means necessary.

“Was it not incumbent upon the CIT, per the Jarvis Clark rule, to examine the ‘second sales’ for acceptability as well?" Meyer asked. "Yet CIT declined to examine the 'second sales' at all, and entered judgment appraising plaintiff’s goods at the second sale values. Jarvis Clark prohibits such unexamined acceptance.”

Meyer also further argued against CIT's analysis of the factors going into first sale valuation (see 2108180060). For instance, CIT suggested that the existence of non-market distortions could be evaluated by looking at the the factors the Commerce Department uses in NME dumping cases to find whether a company is free of government control. This reading is clearly upended by the preamble to the General Agreement on Tariffs and Trade, which "draws a bright-line distinction between dumping theory and theories of valuation law," Meyer said.

CIT's focus on NME distortions should be discarded since such distortions are "simply irrelevant" to the valuation of goods for CBP purposes, Meyer said. "By focusing on unspecified ''non-market economy influences' -- presumably dumping, subsidies and similar 'unfair trade practices' -- the CIT has taken its eye off the prices charged for the imported merchandise and instead focused on whether costs incurred for input materials reflects 'unfair' trade practices -- an undefined concept in customs valuation law."