US Tells CAFC Sales From Canadian Warehouse to US Customers Were for Export to US
The U.S. told the U.S. Court of Appeals for the Federal Circuit on June 10 that the Court of International Trade correctly found that sales between Canada-based Midwest-CBK and its U.S. customers met the requirement of being sold "for exportation into the United States" and thus were properly liquidated using transaction value with a 75.75% "uplift" to the goods' valuation. Goods are meant for export to the U.S. when they are "clearly destined for the United States at the time of the sale," which the goods at issue were, the government said (Midwest-CBK v. U.S., Fed. Cir. # 24-1142).
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Midwest-CBK explained at CIT and now at the Federal Circuit that it had been based in Minnesota until it was bought by Canadian investors that moved its merchandise into a Canadian warehouse (see 2205200032). After that, Midwest-CBK would buy goods from foreign suppliers who would then ship them to Canada. Then, when an order from a U.S. customer was made, the goods would be shipped via third-party overland truck to the U.S.
Nevertheless, the company said its sales are domestic, arguing that the use of the term "free on board" shows that the sales were domestic. The trade court noted that "free on board" is a method of shipment where goods are delivered at a designated location at which legal title and risk passes from seller to buyer.
The government argued that "these shipping terms are not dispositive of the question. If they were, an importer could effectively circumvent the parameters of 19 U.S.C. § 1401a by selecting a particular method of shipment, which is not how Congress intended the valuation statute to operate."
In addition, the U.S. railed against Midwest-CBK's statutory interpretation of Section 1401a, which is the provision governing the appraisal of goods for customs purposes. This statute says goods are to be appraised as the "price actually paid or payable for the merchandise when sold for exportation to the United States." The company said the law requires an international sale of goods and that its sale of goods was between U.S. entities.
The government claimed that the law "does not require an international sale to apply the transaction value methodology," invoking the Federal Circuit's 1999 ruling VWP of America v. United States. While the VWP court said sales between a Canadian manufacturer and its U.S. subsidiary were sales for export to the U.S., the court also said sales between a U.S. distributor and its domestic buyers could give an alternative basis for transaction value.
CIT properly said that the facts of this case satisfied the statutory requirement, the brief said. "The merchandise was located in Canada at the time when the order was placed by the U.S. customer. Midwest then labeled the package for delivery to the U.S. customer who contracted to pay -- and did pay -- an agreed price for that merchandise. Midwest then exported the merchandise from Canada to the U.S. customer in the United States."