Slip Op. 12 - 131
UNITED STATES COURT OF INTERNATIONAL TRADE
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DEL MONTE CORPORATION, :
Plaintiff,:
v. : Court No. 07-00109
UNITED STATES, :
Defendant.:
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Opinion & Order
[Upon classification and valuation of
pouched tunafish products, summary
judgment for the defendant.]
Decided: October 12, 2012
Baker & McKenzie LLP (William D. Outman, II) for the
plaintiff.
Stuart F. Delery, Acting Assistant Attorney General; Barbara
S. Williams, Attorney in Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (Alexander Vanderweide); and Office of the Assistant Chief
Counsel, International Trade Litigation, U.S. Customs and Border
Protection (Yelena Slepak), of counsel, for the defendant.
AQUILINO, Senior Judge: Plaintiff’s two-count complaint
contests classification by U.S. Customs and Border Protection
(“CBP”) of fillets or strips of tunafish handpacked in Thailand in
microwaveable pouches to which “flavorant media or ‘sauces’” were
added before sealing for export to the United States sub nom.
Albacore Lemon & Cracked Pepper, Yellowfin Lightly Seasoned, and
Court No. 07-00109 Page 2
Teriyaki. The second count complains that CBP incorrectly valued
the entries underlying this action.
I
Defendant’s answer, while admitting the court’s subject-
matter jurisdiction pursuant to 28 U.S.C. §1581(a), takes issue as
to each count. Indeed, the defendant has now interposed a motion
for summary judgment on both. And, consistent with the mandate of
USCIT Rule 56(h)(1), annexed to its motion is a separate, short and
concise statement of the material facts as to which it contends
there is no genuine issue to be tried, to wit:
1. The imported merchandise . . . is identified on
the invoices as “light meat tuna fillets - lightly
seasoned (pouch) ‘Starkist’ brand” (lightly seasoned tuna
pouch) and “albacore tuna fillets - lemon & cracked
pepper (pouch) ‘Starkist’ brand” (lemon and pepper tuna
pouch). . . .
2. The albacore lemon and pepper tuna pouch
“consists of large strips or fillets of tuna in a yellow-
colored sauce consisting of water, sunflower oil,
distilled white vinegar, modified food starch, sugar,
salt, citric acid, guar gum, cracked black pepper and
flavorants including lemon pepper seasoning and lemon
flavor.” . . .
3. The yellowfin lightly seasoned tuna pouch
“consists of tuna strips or fillets in a sauce consisting
of water, sunflower oil, fresh garlic, salt, xantham gum,
vegetable broth and parsley.” . . .
4. In the lemon and pepper tuna pouch, the
albacore tuna accounts for 80% of the weight of the pouch
contents, the sunflower oil 2.48% of the weight. In the
Court No. 07-00109 Page 3
lightly seasoned tuna pouch, the yellowfin tuna accounts
for 80% of the weight of the pouch contents, the
sunflower oil .62% of the weight. . . .
5. In the lemon and pepper tuna pouch, the
sunflower oil acts as a dispersant for the lemon
flavoring, so that the flavoring is filtered evenly
throughout the pouch. In the lightly seasoned tuna
pouch, the sunflower oil acts as an emulsification, a
flavor-enhancer, and as mouth-feel or coating. . . .
6. In both tuna pouch varieties, the tuna is
placed in the pouch, then the sauce is added. The tuna
is not prepared or cooked in oil, but is processed
separately from the sauce. Only the sauce contains oil.
. . .
7. Prior to importation, Del Monte Foods Corp.
(Del Monte) and Chotiwat Manufacturing Co. Ltd.
(Chotiwat), the manufacturer and packer of the tuna
pouches, agreed upon the following terms: (1) $1.67
conversion cost per case of the finished product and (2)
Chotiwat would recover 40% of the total tuna for use.
. . .
8. Between March and June, 2005, Chotiwat
submitted invoices to Del Monte, unilaterally changing
the agreed-upon terms to the following: (1) approximately
$3-$3.50 conversion cost per case and (2) Chotiwat could
only recover 10% of the total tuna for use. . . .
9. After importation and following nearly ten (10)
months of negotiations with Chotiwat over the conversion
cost price and tuna recovery percentage, Del Monte and
Chotiwat agreed to the following terms: (1) approximately
$1.85 or $1.87 conversion cost per case and (2) 40%
recovery of the amount of the tuna. . . .
10. Chotiwat reimbursed Del Monte approximately
$1.5 million.
Citations omitted.
Court No. 07-00109 Page 4
Plaintiff’s response to this statement admits paragraphs
1, 2, 3, and 6. It further:
4. Admits, but wishes to clarify that the Lemon
and Pepper pouches include a sauce or marinade that is
64.7% water and 2.48% sunflower oil and the Lightly
Seasoned Tuna Fillets™ pouches include a sauce or
marinade that is 90.6% water and 0.62% sunflower oil.
5. Admits, but avers that the primary purpose for
the addition of sunflower oil to the water-based sauces
or marinades included in both varieties of Tuna Fillets™
is to serve as a dispersant.
* * *
7. Admits in part, but disagrees with the
defendant’s charactization that the plaintiff and
Chotiwat . . . agreed on specific “terms,” and avers that
(i) the plaintiff and Chotiwat agreed to utilize Cost
Sheets that included all elements to be factored into the
establishment of transaction values for the Tuna
Fillets™; (ii) the $1.67 conversion cost represented
Chotiwat’s estimate of the per case Processing Fee to be
incurred by plaintiff; (iii) the parties jointly agreed
that Chotiwat would be able to recover 40% of purchased
tuna, either in the production of the Tuna Fillets™ or
otherwise; and (iv) in submitting commercial invoices to
plaintiff, Chotiwat unilaterally increased the estimated
processing fees above actual costs and allocated all fish
costs to the Tuna Fillets™ project rather than charging
for fish recovery actually used, both actions being
contrary to those required under the Cost Sheets. . . .
8. Denies, based on deposition testimony . . .
that Chotiwat’s unilateral action changed what the
defendant has characterized as the “agreed-upon terms”
but, rather, grossly inflated its estimated Processing
Fee and incorrectly computed the estimated fish costs
allocable to the Tuna Fillets™ in issue.
9. Denies that Chotiwat unilaterally changed the
“agreed-upon terms” . . . and avers that, after
Court No. 07-00109 Page 5
importation and following nearly ten (10) months of
negotiations, Chotiwat acknowledged that it (i) had
grossly overstated its estimated Processing Costs, as
based on the Cost Sheets; (ii) had thus overcharged the
plaintiff in contravention of the Cost Sheets; and (iii)
was contractually obligated to make restitution to the
plaintiff of the monies incorrectly assessed in
contravention of the Cost Sheets.
10. Admits that Chotiwat restored . . . the
$1,544,104.17 in monies it had overcharged plaintiff
through its incorrect and highly inflated use of fish
cost estimates, denies that this was a “reimbursement”
since this restitution was in no sense of the term a
“repayment for expense or loss incurred” by the plaintiff
and avers . . . that the actions taken by Chotiwat were
in complete derogation of the Cost Sheets and a flagrant
attempt to restructure the underlying transactions
contrary to the Cost[] Sheets which had been agreed upon
as controlling and were in effect prior to exportation.
Citations omitted.
A
If the foregoing are the salient facts of this matter,
after due deliberation engendered by the parties’ papers filed in
support of and opposition to its disposition via summary judgment,
this court cannot and therefore does not conclude that a trial
within the meaning of USCIT Rule 56 and teaching of Celotex Corp.
v. Catrett, 477 U.S. 317 (1986), and Anderson v. Liberty Lobby,
Inc., 477 U.S. 242 (1986), and their progeny is necessary. The
evidence already part of the record herein is sufficient basis to
resolve the two counts of plaintiff’s complaint as a matter of law.
With regard to classification, its counsel state that the
Court No. 07-00109 Page 6
packing medium in the . . . Tuna Fillets™ is
predominately water. The sole question before the Court
is whether the addition of any amount of oil to water in
the formulation of an added sauce or flavoring mandates
that the product be classified in oil. The addition of
sunflower oil, broth and flavorings to water serves a
utilitarian function unrelated to packing. Thus, it is
a stretch beyond reason to treat the Tuna Fillets™ as
though “packed in oil.” When properly understood, the
U.S. Note should not be interpreted as transforming the
Tuna Fillets™ products in issue into a fish packed “in
oil.”
Plaintiff’s Brief in Opposition to Defendant’s Motion for Summary
Judgment, pp. 10-11 (emphasis in original).
As for its second count, the plaintiff represents that
understanding the Cost Sheet is the key to understanding
how and why value is an issue in this case. In this
regard, the Court need only focus on the two line items
on the Cost Sheet that represented the parties’ best
“estimates” as to likely cost.
Id. at 27. And the plaintiff confirms that much of what it would
establish through the testimony of three witnesses in open court is
already part of defendant’s motion via transcripts of their
depositions labelled exhibits C, J, and K. See id. at 20.
II
Also attached to that motion as exhibit F is a copy of
CBP ruling letter HQ 967515 (March 21, 2005), which issued in
Court No. 07-00109 Page 7
response to a request that plaintiff’s merchandise be classified
under subheading 1604.14.22 of the Harmonized Tariff Schedule of
the United States (“HTSUS”) (“Tunas . . . In airtight containers:
. . . Not in oil: . . . 6%”) or subheading 1604.14.30 (“Tunas . . .
In airtight containers . . . Not in oil . . . Other . . . 12.5%”).
To the extent plaintiff’s pouches contain any oil, CBP
denied its request.1 The ruling recited Additional U.S. Note 1 to
HTSUS Chapter 16:
. . . [T]he term “in oil” means packed in oil or fat, or
in added oil or fat and other substances, whether such
oil or fat was introduced at the time of packing or prior
thereto.
Underscoring in original. And it gave heed to the decision of the
U.S. Court of Customs Appeals in Strohmeyer & Arpe Co. v. United
States, 5 Ct.Cust.App. 527 (1915), T.D. 35175, affirming the Board
of U.S. General Appraisers with regard to fish prepared by boiling
in oil, after which the oil was drained off before packing with
tomato sauce in tin cans. Governing paragraph 216 of the Tariff
Act of 1913 referred to “Fish . . . packed in oil or in oil and
other substances”, with the evidence in that matter showing some
1
The agency did rule that, since plaintiff’s packing of its
Teriyaki tunafish contains no oil, those pouches could enter at the
preferred ad valorem duty rate(s), the statutory difference
depending upon fulfillment of the applicable tariff rate quota.
See Defendant’s Exhibit F, p. 4.
Court No. 07-00109 Page 8
5.7 percent residual oil in the sealed sauce. Whereupon the Board
held it
immaterial how the vegetable oil became present in the
tins; that if, as a matter of fact, the substance in
which the fish were found in the tins as packed consisted
of oil and other substances, this is sufficient to bring
it within the first provision of the paragraph.
5 Ct.Cust.App. at 528. In affirming, the court of appeals stated
that the tariff was not directed at the method of application of
the oil, rather at “any case in which oil is part of the substance
in which the fish is found packed when offered for importation.”
Id. While recognizing that the percentages of oil in the goods now
at bar are less than that in Strohmeyer, CBP does not find that
case distinguishable:
. . . [I]t is not relevant whether the oil is added
solely for packing purposes or added for flavoring
purposes. The presence of oil in the medium in which the
fish is found packed[] is sufficient to describe the fish
as “packed in oil.”
Defendant’s Exhibit F, p. 3.
Not satisfied with this ruling, the importer requested
and received CBP reconsideration. See Defendant’s Exhibit G (HQ
967742 (Nov. 22, 2005)). Specified as reasons therefor were that
(1) CBP’s interpretation of Additional U.S. Note 1 to HTSUS Chapter
16 failed to consider the legislative history involved, (2) HQ
Court No. 07-00109 Page 9
967515 disregarded regulations of the U.S. Food and Drug
Administration (“USFDA”), and (3) HQ 967515 is “wholly lacking in
meaningful purpose”. Id. at 2. None of these arguments caused
Headquarters to reverse or revise that ruling letter.
With regard to the first point, the agency considers the
language of Additional U.S. Note 1, supra, to be clear, thereby
forestalling any resort to legislative history, citing C.J. Tower
& Sons v. United States, 41 CCPA 195, C.A.D. 550 (1954), and
Continental Mfg. Co. v. United States, 82 Cust.Ct. 187 (1979). See
id. at 2-3. Secondly, HQ 967742 cites the opinion of this court in
Bestfoods v. United States, 28 CIT 1053, 1058, 342 F.Supp.2d 1312,
1316 (2004), to the effect that USFDA standards of identity are not
controlling for tariff classification purposes and also points out
that the arguably apposite regulations of that agency developed
well after the tariff standard controlling herein. See id. at 4.
Finally, that ruling letter of reconsideration states that the
importer’s concerns regarding “meaningful purpose”
are best remedied through legislation. CBP is not
empowered to set duty rates, only to apply them according
to the law.
Id. HQ 967515 was thereupon affirmed.
Court No. 07-00109 Page 10
A
Of course, the posture of the court is no different than
that of CBP vis-à-vis an act of Congress. When legislation is
clear on its face, neither an administrative agency nor the
judiciary is at liberty to rewrite it, or to construe it in a
manner arguably more desirable.
The nature of the merchandise at bar is evident: none of
plaintiff’s tunafish is genuinely packed in oil as a matter of
either simple sense or scientific analysis. Indeed, the defendant
admits as much with regard to the Teriyaki pouches. But the other
brands do contain some oil, and the defendant points to a century
of tariff enforcement to the effect that “in oil” signifies any
amount of such substance. And no amount of cogent, contrary
reasoning of the kind plaintiff’s counsel now present2 dispells
this phenomenon judicially. While the quantum of residual
“visible” oil apparently found in Strohmeyer (5.7 percent) was
greater than in any of plaintiff’s goods herein, there is no
indication that particular amount was of moment to any of the three
U.S. General Appraisers or to any of the five judges revisiting the
matter in the court of appeals. Nor do plaintiff’s papers point to
a contrary case in court since then.
2
The plaintiff has interposed a motion for leave to file a
sur-reply in this action that can be, and it hereby is, granted.
Court No. 07-00109 Page 11
With regard to regulations of the USFDA, this court is
not persuaded to digress now from its opinion in Bestfoods v.
United States, supra, and the cases relied on therein. Ergo, CBP’s
classification of certain of plaintiff’s pouches of tunafish under
HTSUS subheading 1604.14.10 (2005) at a duty rate of 35 percent ad
valorem should stand.3
3
Counsel for the plaintiff have attached to their thorough
papers in opposition to defendant’s motion for summary judgment a
copy of U.S. Customs Service ruling letter NY H88884 (March 26,
2002) that four pouched Tuna Creations would be classified upon
entry under either HTSUS subheading 1604.14.2040 or subheading
1604.14.3040. According to that letter, plaintiff’s exhibit 15,
absorbed within the tuna flesh in two of the pouches was 5 percent
sunflower oil, with that in a third possessed of 2 percent of that
substance. The letter proceeded to state:
. . . Samples of these products were found to consist of
small chunks and flakes of flavored tuna fish meat. The
pouches contained only tuna meat pieces, colored slightly
by the marinade, but with no apparent packing medium,--
i.e., the pouches contained only pieces of tuna, which
had absorbed any marinade, and which were not packed in
any accompanying medium, such as, for example, in water,
in oil or in sauce.
Plaintiff’s Exhibit 15, first page.
Even if this court were to accept plaintiff’s premise that
NY H88884 is at odds with HQ 967515 now at issue herein, it could
not and therefore would not conclude that the first ruling trumps
the latter. Moreover, as just recited, the former did not find its
fish “packed in” any medium.
As for the argument posited at page 12 of plaintiff’s brief in
opposition to summary judgment that,
(footnote continued)
Court No. 07-00109 Page 12
III
The Tariff Act of 1930, as amended, 19 U.S.C. §1401a-
(b)(1), provides that the transaction value of imported merchandise
is the price actually paid or payable when sold for exportation to
the United States. The statute further provides:
Any rebate of, or other decrease in, the price
actually paid or payable that is made or otherwise
effected between the buyer and seller after the date of
the importation of the merchandise into the United States
shall be disregarded in determining the transaction value
under paragraph (1).
19 U.S.C. §1401a(b)(4)(B).
The plaintiff would have CBP (and now the court) ignore
this mandate based upon the post-importation dealings between it
and Chotiwat Manufacturing Co. Ltd. outlined above.4 Suffice it to
[i]nasmuch as the sunflower oil included in the StarKist®
Tuna Creations™ pouched tuna serves the same purpose as,
albeit in greater quantities than, the sunflower oil
present in any of the Tuna Fillets™ products, it is
important that the Court hear first hand from the Customs
attorneys involved in the issuance of the Rulings
involving the Tuna Fillets™ products before the Court on
exactly how this strange result can occur[,]
the court hardly requires a trial for such purpose.
4
Part of plaintiff’s opposition to summary judgment as a
matter of procedure is that its three putative witnesses to those
dealings could at trial somehow add to that already part of the
papers before the court via defendant’s deposition transcripts
labelled exhibits C, J, and K and pages 19-30 of discussion thereon
in plaintiff’s brief.
Court No. 07-00109 Page 13
state that the papers filed herein adequately describe those
dealings, but they do not cite a single court opinion that would
persuade the undersigned to conclude that CBP acted contrary to the
foregoing statute in this matter of valuation.
IV
In view of the foregoing, defendant’s motion must be
granted, with summary judgment entered accordingly.
So ordered.
Decided: New York, New York
October 12, 2012
/s/ Thomas J. Aquilino, Jr.
Senior Judge