Tuesday, September 17, 2013

Big Tuna Loses Appeal

The U.S. Court of Appeals for the Federal Circuit has affirmed the decision of the Court of International Trade in Del Monte Corporation v. United States. For my post on the underlying case, see here. The decision is here.

You may recall that the classification issue in this case boiled down to whether tuna meats packed in pouches with sauces containing small amounts of oil are deemed to be "in oil" for purposes of tariff classification. Two prior decisions are at play in this argument. A 1915 case called Strohmeyer & Arpe holds that fish cooked in oil then partially drained and packed in another liquid, which subsequently absored a portion of the cooking oil remaining in the fish, is fish packed in oil. A subsequent case called Richter Bros. found that fish that had been fried in oil, drained, and then packed in in a non-oil liquid, was not "packed in oil" because the oil was not used in the packing process. While these cases appear to be somewhat at odds, the Federal Circuit distinguished both on the grounds that neither case involved oil used in the packing materials. In this case, the oil was in the pouch, not the fish, and, therefore, neither case contradicts Customs' classification.

The second issue had to do with valuation and I gave it short shrift in my first post. The value question can be reduced to whether post-entry price adjustments were actually part of a formula for purposes of an acceptable transaction value. The adjustments here were made by the producer in Thailand to account for decreased production costs and the recovery of useful tuna meat by the packer. After making entry, Del Monte paid the supplier's invoices for these adjustment. In Court, Del Monte said that there was a fixed formula used to calculate those adjustments and, as a result, the adjustments could be included in the transaction value.

The Federal Circuit agreed with Customs and Border Protection that the arrangement constituted a formula. According to the Court, a formula must be clear and definite. In this case, there was no written contract, formal policy or other "hallmark" of a formal agreement with the processor. Based on those facts, there was not enough evidence of a formula to overcome the presumption that Customs should disregard post-importation decreases in the price actually paid for merchandise.

1 comment:

Lowell DeFrance said...

I love this one because they cite a classification case from 1915.