Non-Market Economy Status Doesn't Affect First Sale Treatment, Federal Circuit Says

CBP has no basis to consider a country’s non-market economy status when determining whether to grant first sale treatment to a transaction, the U.S. Court of Appeals for the Federal Circuit said Aug. 11 in a widely anticipated decision involving cookware imported by Meyer.

Overturning a decision of the Court of International Trade (see 2103020040), the Federal Circuit ruled that a requirement from its 1992 decision in Nissho Iwai that a transaction be “absent any nonmarket influences” to qualify for first sale treatment applies to the buyer-seller relationship, and not to the effects of government intervention in the economy as a whole. The cookware at issue, which had been denied first sale treatment by CBP, was manufactured in China and Thailand. China is a non-market economy in antidumping duty cases.

“The trial court misinterpreted our decision in Nissho Iwai to require any party to show the absence of all ‘distortive nonmarket influences,’” the Federal Circuit said. “There is no basis in the statute for Customs or the court to consider the effects of a nonmarket economy on the transaction value. The statute requires only that ‘the relationship between [the] buyer and seller did not influence the price actually paid or payable,’” the appeals court said.

If Congress had wanted to distinguish between market and non-market economies for first sale treatment, it would have done so expressly, as it does for AD duty cases, the Federal Circuit said. And while World Trade Organization agreements provide for differing treatment for non-market economies in trade remedy cases, they do not take non-market economy status into account for valuation. “The trial court’s reading of Nissho Iwai creates a risk that Customs will value goods from different countries unequally, even though neither the valuation code nor another specific provision authorizes differing treatment,” the appeals court said.

“Because the Court of International Trade relied on its misreading of Nissho Iwai to reject Meyer’s first-sale price, we vacate and remand for the court to reconsider whether Meyer may rely on the first-sale price,” the Federal Circuit said. The appeals court also affirmed CIT’s decision that the cookware did not undergo a double substantial transformation for the purposes of qualifying for duty-free treatment under the Generalized System of Preferences benefits program.

(Meyer Corporation v. U.S., Fed. Cir. #21-1392, dated 08/11/22, Judges Kimberly Moore, Raymond Clevenger and Todd Hughes. Attorneys: John Peterson of Neville Peterson for plaintiff Meyer Corporation; Beverly Farrell for defendant U.S. government)