The Federal Circuit’s recent decision in Meyer Corporation, U.S. v. United States sheds light on several significant issues in customs law and the valuation of imported goods, with broader implications for how courts interpret evidentiary burdens and transaction pricing in a related-party context. While the case primarily involved tariff assessments rather than patent law, it touches on principles relevant to intellectual property valuation and cross-border transactions.

Background of the Case

Meyer Corporation, U.S. sought to rely on a “first-sale” price to determine the dutiable value of imported cookware. The cookware was manufactured in Thailand and China, sold to related-party distributors in Macau and Hong Kong, and then imported to the U.S. Customs and Border Protection (CBP) rejected Meyer’s request to use the first-sale price and instead assessed duties based on the second-sale price.

Following a prior Federal Circuit ruling that found the Court of International Trade (CIT) had misapplied precedent, the case was remanded for reconsideration. However, the CIT again ruled against Meyer, citing a lack of financial documentation from the company’s parent, Meyer Holdings. The Federal Circuit has now vacated that ruling, finding errors in the application of evidentiary presumptions.

Key Legal Issues Addressed

1. The Burden of Proof in Related-Party Transactions

A core issue in the case was whether Meyer had sufficiently demonstrated that the first-sale price was a valid transaction value under U.S. customs law. Under 19 U.S.C. § 1401a(b)(2)(B), a transaction between related parties can serve as the basis for customs valuation if it meets one of two tests:

• The price reflects normal pricing practices of the industry (Normal Pricing Practices Test).
• The price covers all costs plus a reasonable profit (All Costs Plus Profit Test).

The CIT imposed an adverse inference against Meyer due to the company’s failure to provide financial records of its parent company. The Federal Circuit criticized this approach, holding that the trial court improperly speculated that the missing records would have disproved Meyer’s claim without considering the available evidence.

2. The Interpretation of “All Costs Plus Profit” and the Definition of “Firm”

Meyer also challenged CBP’s interpretation of 19 C.F.R. § 152.103(l)(1)(iii), which requires proof that the price ensures recovery of all costs plus a profit equivalent to the firm’s overall profitability. The government had argued that “firm” should be interpreted to mean the parent company, while Meyer contended that it referred only to the seller in the related-party transaction.

The Federal Circuit declined to rule on the proper interpretation of “firm,” as the trial court’s decision was not based on that definition. However, the issue remains unresolved and could be litigated in future cases involving similar customs valuation disputes.

3. The Role of Non-Market Economy Concerns in Customs Valuation

The trial court originally denied Meyer’s first-sale price argument by reasoning that non-market influences (due to Chinese manufacturing) distorted the transaction value. The Federal Circuit had previously ruled that such reasoning was improper under U.S. customs law, which only requires that the related-party relationship not influence the price.

On remand, the CIT attempted to reformulate its reasoning but still relied on the absence of financial records to reject Meyer’s claim. The Federal Circuit again vacated the decision, reaffirming that speculation about non-market influences is insufficient grounds to reject a first-sale transaction value.

Implications for Patent and Intellectual Property Law

Although this case centers on customs valuation rather than patent law, it has broader implications for intellectual property and cross-border licensing arrangements:

• Valuation of IP Transactions: The court’s analysis of related-party transactions is relevant to companies that transfer patented technology or intellectual property between subsidiaries. The evidentiary burden for demonstrating arm’s-length pricing in these transactions may be influenced by similar legal principles.
• Regulatory Compliance for Global IP Holders: Firms engaged in licensing or technology transfer should take note of the court’s emphasis on proper documentation. Ensuring that records of pricing methodologies and cost structures are maintained can help mitigate risks in customs and tax audits.
• Potential Precedent for Future Trade Cases: The decision reinforces the importance of adhering to statutory and regulatory definitions rather than introducing judicially created presumptions, which could impact how courts approach licensing and patent valuation in import-export scenarios.

Conclusion

The Federal Circuit’s decision in Meyer Corporation, U.S. v. United States underscores the necessity of applying proper evidentiary standards in customs valuation cases. By rejecting the CIT’s reliance on speculative adverse inferences, the court reaffirmed the principle that valuation decisions must be grounded in record evidence rather than assumptions about missing documentation.

For businesses engaged in international trade, particularly those dealing with intellectual property or patented technology, this ruling highlights the importance of maintaining clear, well-documented transaction records to support customs and tax positions. As the case returns to the CIT for further proceedings, it will be important to see how the trial court applies the Federal Circuit’s guidance in evaluating the validity of the first-sale price under U.S. customs law.

By Charles Gideon Korrell