Company Appeals CIT Ruling That It Exports Its Goods to US

A Canadian-owned company told the U.S. Court of Appeals for the Federal Circuit in an opening brief March 1 that its "internal inventory transfer" from a Canadian warehouse to New York was not a sale for export, and its goods shouldn’t have been liquidated using transaction value with a 75.75% “uplift” (Midwest-CBK, LLC v. U.S., Fed. Cir. # 24-1142).

CIT wrongly found that a prior precedent was unsupported by current law and, in doing so, reinstated another rule that it overturned in 1992, the company said.

In an appeal from a Court of International Trade decision -- a negative ruling the company itself sought after it was barred from filing an interlocutory appeal -- Midwest-CBK explained it had been based in Cannon Falls, Minnesota, until it was purchased by Canadian investors, who had it move its merchandise into their Canadian warehouse (see 2205200032).

However, Midwest argues its sales are domestic, as each of its 2013-2016 sales “was consummated when the company delivered the goods to the customer’s carrier of choice” in Buffalo.

It valued its goods using their deductive value, rather than their transaction value, when entering them with CBP for that reason. However, after multiple yearlong extensions during which the agency conducted an audit of its goods, CBP liquidated them using transaction value at a valuation 75.75% higher than Midwest-CBK's deductive value calculation.

Midwest argued before CIT that it was a domestic supplier whose goods should have been liquidated using their deductive values. It also claimed that CBP hadn’t had grounds to keep extending its liquidation deadlines. After losing on both claims, the company filed a motion with the trade court to dismiss the remainder of its case contesting the value of its goods because it went under in 2018 and “had few resources to assist in such a task.”

Midwest argued that the trade court had been wrong because “the fact that goods are physically located outside the United States when a domestic sale is agreed to does not transform the domestic sale into a sale ‘for exportation to the United States.’”

The court erred by rejecting a similar 1989 case, Orbisphere Corp v. U.S., as precedent, it said. CIT claimed that case’s holding was based on another 1933 decision that was reached under a prior statute; but the 1989 case itself was heard under current law, Midwest said.

By treating Midwest’s sales as U.S. exports and allowing its goods to be valued using their transaction costs, the court was “reinstating” an old rule from the 1990 case Brosterhous v. U.S. that it “explicitly overturned” in the 1992 case Nissho-Iwai American Corp. v. U.S., the company said.

Midwest also argued that CBP hadn’t had the grounds to extend its deadline for liquidating Midwest’s goods because it “had in its possession ‘the information needed’ for the appraisement of Midwest's entries.”