Federal Circuit Suggests No Consideration of NME Factors When Assessing First Sale Valuation

The U.S. Court of Appeals for the Federal Circuit signaled during an April 6 oral argument that whether a country is a non-market economy would not stand as a criterion in determining whether to grant an import first sale valuation. Responding to arguments from John Peterson, counsel for importer and plaintiff Meyer Corp. and Beverly Farrell of DOJ, three Federal Circuit judges -- Judge Todd Hughes in particular -- said that it was unlikely the government would succeed in defending the use of this criterion in customs law, as non-market economy principle is reserved for trade remedy laws (Meyer Corp. v. United States, Fed. Cir. #21-1932).

In March 2021, the Court of International Trade called into question the use of first sale valuation for goods from non-market economies, kicking the question to the Federal Circuit (see 2103020040). The case concerns cookware imported by Meyer from its subsidiary manufacturers in Thailand and China to its subsidiary middleman in China. Judge Thomas Aquilino said that it was unclear whether the transaction was conducted at arm's length -- one of the conditions for receiving first sale -- since the goods came from a non-market economy.

In doing so, Aquilino effectively created a fourth criterion for customs to weigh when granting first value: whether a good is absent market-distorting influences (see 2201270041). Whether this addition to the first sale calculus is legal is the central question in the Meyer case.

Holding oral argument over this question, the three judges -- Hughes, Chief Judge Kimberly Moore and Raymond Clevenger -- indicated that this position would be struck down. "I get that you're valiantly trying to defend it, and I assume you get that it doesn't seem like you're going to prevail on it, but isn't that the whole point of antidumping and countervailing duty statutes, is to get at underlying unfair trade practices?" Hughes asked in response to Farrell's argument. "We don't get at it through customs law."

Farrell replied that while she understands that addressing non-market economy concerns falls under the purview of trade remedy cases, there's a potential effect on price if a good comes from a non-market economy. Hughes then pointed out that there's a potential effect on price in market economies as well if the manufacturer is receiving an illegal subsidy. This, Hughes said, would bring customs law into a new domain that few want it to venture into.

"I think you’re opening up a can of worms here that even Customs doesn’t want opened up because it dramatically changes these valuation trials at the CIT and gets into many trials on antidumping duties and things like that," the judge said. "It doesn’t seem to me … sure, it’s interesting, I guess, but it doesn’t seem to me a correct reading of the statute or the case."

A portion of the oral argument was also spent determining what exactly the court would remand the case for, insinuating that a remand was imminent. In all, three options were discussed: the Federal Circuit could remand the case for a new trial perhaps with more specific instructions on finding whether or not first sale is warranted, remand the case to "go through the citations" the court has already made to the record or vacate, and remand the case to let CIT determine if a new trial is needed.

Meyer is vying for a new trial while DOJ is pushing for the second option. The third option was floated by Moore, who was establishing the court's paths of action during the oral argument. Farrell contested the possibility of a new trial, arguing that "no one should get a second bite at the apple" when considering the administrative record and the facts available in the case.