On Remand, US Court of International Trade Again Rejects Transaction-Value Calculation Based on “First Sale” Prices Involving Non-Market Economy Parties

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A recent (February 9, 2023) US Court of International Trade ("CIT") remand opinion, Meyer Corp., US v. United States,1 has revived various global supply-chain apprehensions that a previous (August 11, 2022) reversal by the US Court of Appeals for the Federal Circuit ("CAFC")2 had temporarily eased. The earlier (March 1, 2021) CIT decision,3 which the CAFC subsequently vacated, would have prevented importers' calculations of dutiable value from lawfully applying the "first sale" rule whenever "related-party" transactions involved non-market economies ("NME"), such as China's. When it vacated and remanded the lower court's decision, the CAFC scolded the CIT for improperly requiring China's NME status not to affect invoiced prices. The CAFC instructed the CIT to consider only whether the relationship between the first-sale buyer and seller had affected such prices. The CIT now has found, once more, that the importer did not meet its burden to prove that the entities' relationship had no effect. This time, however, the CIT has blamed not China's NME but the importer's failure to provide certain financial records.

Statutory Framework and Relevant Facts

The statutorily preferred means for appraising imported goods' dutiable value is the "transaction value" method.4 The relevant statute defines "transaction value" as "the price actually paid or payable for the merchandise when sold for exportation to the United States," plus certain enumerated additions and minus certain statutorily required deductions.5 An importer may use the "transaction value" method, however, only in certain circumstances. Specifically, the importer ordinarily must be able to show:

  1. That the invoiced transaction used to determine the imported goods' value was a bona fide sale—i.e., that in the transaction, someone actually "sold" the imported goods;
  2. If so, that this sale of the imported goods—even when located at the upstream end of a multi-tiered chain of sales and resales—was "for exportation to the United States" (a.k.a. the "first sale" rule);
  3. That "sufficient information" supports any statutorily required additions to and deductions from invoiced prices for this sale; and
  4. If the imported goods' buyer and seller are "related" entities, that "the price actually paid or payable" nevertheless reflects arm's-length principles.6

As our previous client alert explained, the importer in Meyer purchased China-origin cookware sets and Thailand-origin cookware sets that included China-origin components. Both sales channels involved a related middleperson in Thailand, although a second middleperson in China also sometimes participated. One of the questions at issue was whether the importer's calculation of dutiable value could lawfully use the "transaction value" price that a related middleperson paid to a related manufacturer, even if both were located in Thailand (i.e., the "first sale" price).

CAFC's Vacating of CIT's Earlier Meyer Decision

Regarding the second and third of the four prerequisites for applying the "transaction value" method, the original CIT Meyer decision, which the CAFC vacated and remanded, held that the "first" sales at issue did not have sufficient documentation (a) to disprove the existence of any possibly hidden subsidy resulting from China's NME and (b) to prove that prices reflected arm's-length principles. In reaching its conclusion, the CIT's earlier decision had expansively interpreted one small phrase in a famous CAFC decision commonly known as Nissho Iwai.7 Relying on Nissho Iwai's authority, the CIT opinion had broadly stated: "... this court has doubts over the extent to which, if any, the 'first sale' test ... was intended to be applied to transactions involving NME participants or inputs."8

According to the CAFC's decision vacating and remanding, the CIT's earlier Meyer decision had "misinterpreted Nissho Iwai to impose a requirement beyond what the statute and regulations demand." Specifically:

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." 19 U.S.C. § 1401a(b)(2)(B). This provision concerns effects of the relationship between the buyer and seller, not effects of government intervention, and especially not with government intervention that affects the industry as a whole.9

In vacating the CIT's decision, the Meyer CAFC accordingly reaffirmed the four prerequisites that we have summarized above for using "transaction value" to calculate dutiable values and disparaged any imposition of an extra, fifth requirement when transactions implicate NMEs.

CIT's New, Remand Meyer Decision

The CIT remand decision affirms the outcome of the CIT's original decision, but on different grounds.10 This time around, the CIT focuses on the importer's failure, both during discovery and at trial, "to provide its parent's financial information."11 In so focusing, the CIT applies what it calls the "all costs plus profit" test,12 whereby, consistent with its regulations, CBP must accept a related-party price if it is "adequate to ensure recovery of all costs plus a profit which is equivalent to [i.e., equal to or higher than] the firm's overall profit [i.e., the operating profit—meaning gross profit minus operating expenses—of the seller's parent] realized over a representative period of time (e.g., on an annual basis [including the sales date for the entry at issue]), in sales of merchandise of the same class or kind."13 This cluster of facts is one of only three propositions that, to satisfy the statutory "circumstances of the sale" test for prices' consistency with arm's-length principles, a related seller's and buyer's facts may establish.14 Although the CIT's previous opinion also mentioned the same facts and legal issue, readers of the earlier decision reasonably glommed onto the CIT's having found suspect the reported costs of any inputs from the PRC; the new CIT opinion, by contrast, finds missing only the needed evidence of an operating profit of the parent company.15

The new CIT opinion also addresses a procedural issue. The previous trial, says the CIT, has already provided the importer with an adequate opportunity to develop the evidentiary record on the one issue that the CAFC remanded.16 Therefore, the CIT declines the importer's request that the CIT conduct further proceedings and so give the importer a second bite at the apple.


One-tenth the length (12 pages) of its prior decision (120 pages), the CIT's new remand opinion in Meyer ultimately admits that the CAFC "seemingly unequivocally" rejected the CIT's previous NME theory,17 and acknowledges that "the valuation statute," while presupposing "a 'market' environment," focuses "on the individual transaction."18 The new CIT opinion nevertheless also includes, as dictum, a legislative-historical prologue explaining the CIT's previous consideration of possible NME influences.19 That prologue: (1) denies that "the statute as written necessarily contemplates zero distinction between sellers operating in market economies and those operating in nonmarket economies" (emphasis added);20 (2) highlights statutory language expressly barring an importer's use of transaction values if "any reason"—presumably including NME influence—deprives the importer or CBP of "sufficient information" to calculate required additions to invoiced prices (emphasis in original);21 and (3) chides "the CAFC itself" for having, in Nissho Iwai, brandished language requiring "the absence of any non-market influences that affect the legitimacy of the sales price."22

Whether importers will appeal the CIT's latest decision in Meyer to the CAFC again is uncertain. If upheld, the CIT's decision could again force many importers to reassess their valuation methods or their sourcing patterns, because these often involve not only related-party transactions but also NME inputs, processing, suppliers and middlepersons, and because entities in NMEs sometimes cannot provide the same kinds of evidence as entities in market economies. Please stay tuned. We will keep you posted if the results of any CAFC appeal change or clarify the CIT's latest statement of law.

The CIT's most recent opinion in Meyer Corp., U.S. v. United States is available online here.

Please let us know if you have any questions.

1 Meyer Corp., U.S. v. United States, Slip Op. 23-13, Ct. No. 13-00154 (Ct. Int'l Trade Feb. 9, 2023).
2 Fed. Cir. Case No. 2021-1932 (decided Aug. 11, 2022) (hereafter "Meyer CAFC"). 
3 Meyer Corp., U.S. v. United States, Slip Op. 21-26, Ct. No. 13-00154 (Ct. Int'l Trade Mar. 1, 2021).
4 19 U.S.C. §§ 1401a(a)(1)(A) and 1401a(b); compare to 19 C.F.R. §§ 152.101(b)(1) and 152.103. 
5 19 U.S.C. § 1401a(b).
6 19 U.S.C. § 1401a(b); also, 19 C.F.R. §§ 152.103(b)-(g), 152.103(i), 152.103(j)(1)(iv), 152.103(j)(2), and 152.103(l). Generally, the claim that a price will reflect arm's-length principles means that the relationship between the seller and buyer will not improperly cause one of them to act against its own best interests and the price to be much higher or lower than it would have been were the seller and buyer not related. The statute, regulations and cases interpreting them, however, set forth specific tests for determining whether arm's-length principles have governed export prices.
7 Nissho Iwai American Corp. v. United States, 982 F.2d 505 (Fed. Cir. 1992).
8 Slip Op. 21-26 at 120.
9 Meyer CAFC at 11.
10 Slip Op. 23-13 at 11-12.
11 Slip Op. 23-13 at 6-10. 
12 Slip Op. 23-13 at 7-8.
13 19 C.F.R. § 152.103(l)(1)(iii) ("Interpretive note 3"); see also HQ H235527 (Aug. 4, 2015) (interpreting "profit" to mean operating profit), HQ H258447 (Jan. 19, 2016) (interpreting "the firm's overall" profit to mean the profit of the company's parent), HQ H235527 (Aug. 4, 2015) (same), HQ H235527 (Aug. 4, 2015) (interpreting the one-year period for the parent company's comparison data to include the sales date for the entry at issue), HQ H235527 (Aug. 4, 2015) (interpreting "equivalent to" to mean equal to or higher than), and HQ H235527 (Aug. 4, 2015) (requiring that the relevant operating profit of the parent firm be attributable to sales of merchandise of the same class or kind, even though sales of those goods might not all have been for exportation to the United States).
14 See 19 U.S.C. § 1401a(b)(2)(B). 
15 Slip Op. 23-13 at 6-8. Compare to Slip Op. 21-26 at 15, 115 and 118.
16 Slip Op. 23-13 at 10-11.
17 Slip Op. 23-13 at 5.
18 Slip Op. 23-13 at 3.
19 Slip Op. 23-13 at 3-4.
20 Slip Op. 23-13 at 3.
21 Slip Op. 23-13 at 4, citing 19 U.S.C. § 1401a(b)(1).
22 Slip Op. 23-13 at 4, citing Nissho Iwai Am. Corp. v. United States, 982 F.2d 505, 509 (Fed.Cir. 1992).

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