Meyer Says CIT's Adverse Inference Based on 'Pure Speculation' in First Sale Case

The Court of International Trade improperly relied on an adverse inference in rejecting importer Meyer Corp.'s claim for first sale treatment related to the valuation of its cookware imports, Meyer told the U.S. Court of Appeals for the Federal Circuit in a Sept. 21 reply brief. Meyer claimed that the trade court's inference, which the importer said is the "centerpiece" of the U.S. defense, is based solely on "pure speculation" and shows that the court committed "clear error" (Meyer Corp. v. United States, Fed. Cir. # 23-1570).

Meyer's case initially revolved around a question raised by CIT about whether first sale valuation could ever be used for goods coming from non-market economies. The Federal Circuit found that CBP has no basis to consider a nation's NME status when deciding whether to grant first sale treatment, and sent the case back for CIT to consider Meyer's shipments specifically (see 2208110060). In its second opinion, the trade court said the cookware imports don't qualify for first sale treatment due to the failure of Meyer's parent company, Meyer International Holdings, to submit financial information (see 2302090053).

The government argued in its brief that CIT correctly relied on that failure as the basis for rejecting first sale treatment. The court said that if the records had been produced, they might have had evidence of NME influences that could have rendered first sale treatment unacceptable. Meyer argued that the conditions for drawing an adverse inference aren't present in this case given that Meyer International Holdings wasn't a party to the proceeding and the importer didn't have access to its parent company's financials, which the trade court itself acknowledged.

The government never pressed the importer to produce its parent company's financials, Meyer said. When faced with an objection to the inference from Meyer on three distinct grounds, "the Government did absolutely nothing," the brief noted. Meyer added that no evidence proved that the importer failed to provide the financials with a "culpable state of mind." This culpability finding is "an essential element of imposing a negative inference," the company claimed. What's more is that the parent company isn't involved in the production or sale of the subject imports, nor in the manufacture or sale of any other of Meyer's products -- a fact the U.S. didn't contest.

Meyer also argued that the trade court erred by not then ruling on whether the cookware imports qualify for second sale valuation, which is the price of the goods sold by the middlemen to Meyer. The law says that where a classification argument fails, the court can order further proceedings to reach the correct result. Key Federal Circuit precedent in Jarvis Clark Co. v. U.S. goes further, telling the court that it must find the correct result "by whatever procedure is best suited to the case at hand." As a result, Meyer says the court erred in adopting second valuations without looking to the factors cited in rejecting the first sale appraisements.

The government argued that this claim is an "overreading" of Jarvis Clark. In response, Meyer said that this opinion clearly mandates that the powers rooted in the law be used to find the correct result by whatever procedure is best, demanding "active scrutiny by the court." The trial court "may not passively uphold an unexamined Customs determination simply because an importer's evidence was in its view insufficient to allow the Court to glean the 'correct result,'" the brief said.