Meyer Corp., U.S. v. United States
1:13-cv-00154
| Ct. Intl. Trade | Mar 1, 2021Background
- Meyer Corporation, U.S. imported cookware sets produced in Thailand (MIL) and China (MZQ); many transactions used related-party middlemen in Macau (MMC) and Hong Kong (MHK). Meyer Holdings is the common parent.
- Meyer sought (1) transaction-value appraisal using the Nissho Iwai “first sale” rule (value at manufacturer→middleman sale), and (2) GSP duty-free treatment for Thai-origin sets (Thailand is a GSP BDC). CBP initially approved at the port but later denied after audit and HQ internal advice.
- CBP rejected first-sale treatment on grounds that the related-party transactions were not arm’s-length and that required documentation/financial proof was lacking; CBP also concluded certain clad metal discs imported from China into Thailand did not undergo a required “double substantial transformation” for GSP.
- At bench trial Meyer introduced testimony (company managers and PwC expert Pinkerton) and GSP/cost sheets; CBP introduced its valuation specialist (Brenner) and relied on audit/IAR conclusions. The court permitted some PwC summary exhibits but reserved weight assessment.
- The court found Meyer failed to prove by a preponderance that (a) first-sale values were arm’s-length and free of non-market distortions (noting PRC non-market-economy concerns and missing parent-company financials), and (b) the Chinese clad discs underwent a double substantial transformation in Thailand. Judgment for the United States.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| First-sale valuation (Nissho Iwai) — Thai supply chain | Meyer: bona fide, clearly-destined sales; MMC negotiated independently; PwC benchmarking and cost analyses show normal pricing/all-costs-plus-profit | CBP: transactions were related; Meyer failed to produce purchase orders, payments, and parent financials; comparable studies rely on incomplete data; PRC inputs raise non-market distortion concerns | Denied — Meyer failed to meet burden to show arm’s-length prices and absence of non-market influence; first-sale value not accepted |
| First-sale valuation — China supply chain | Meyer: PwC analysis shows bona fide, destined sales and profit margins within benchmarking interquartile ranges; MZQ pricing recovers costs+profit | CBP: MHK role mischaracterized (MMC does pricing/assigns orders); benchmarking used public-company data and did not address PRC non-market effects; insufficient transactional proof | Denied — insufficient evidence that China→MHK prices meet arm’s-length/normal-pricing tests and non-market distortion question unresolved |
| GSP eligibility — effect of non-BDC components (glass lids) | Meyer: presence of non-BDC lids should not automatically disqualify a set if Thai-origin content + processing ≥ 35% | CBP: HQ IAR concluded glass lids disqualified some sets; CBP audit questioned calculations | Court: prior summary judgment prevented wholesale disqualification by lids; but on contested items plaintiff failed to prove GSP entitlement where other requirements failed |
| Double substantial transformation (clad discs from PRC worked in Thailand) | Meyer: Thai manufacturing involves multi-step complex processing (14 steps) and creates commercially distinct WIP shells after step 6; therefore discs undergo two substantial transformations and can be treated as Thai-origin for GSP | CBP: only one substantial transformation occurs (deep drawing into shell); later finishing steps do not create a new article of commerce or change character/use; step-6 WIP sales are de minimis and only to related parties | Held: No double substantial transformation — discs do not become Thai-originating materials; GSP ineligibility for those items affirmed |
Key Cases Cited
- Nissho Iwai Am. Corp. v. United States, 982 F.2d 505 (Fed. Cir.) (first-sale rule for related-party valuations requires bona fide, destined-for-US, arm’s-length sales without non-market distortions)
- Torrington Co. v. United States, 764 F.2d 1563 (Fed. Cir.) (double substantial transformation requires two distinct substantial transformations producing articles with distinctive name, character, or use)
- United States v. Mead Corp., 533 U.S. 218 (2001) (agency interpretations implementing statutes merit deference when well-reasoned)
- Luigi Bormioli Corp. v. United States, 304 F.3d 1362 (Fed. Cir.) (transaction value is primary appraisal method; price actually paid or payable governs)
- VWP of Am., Inc. v. United States, 175 F.3d 1327 (Fed. Cir.) (burden rests on party challenging CBP appraisal)