Court Opinion

ID: 820079
Source: CourtListenerOpinion
Date Created: 2013-02-10 19:35:51.719034+00
Date Added: 2024-06-11T15:12:06.817979
License: Public Domain

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.:
- - - - - - - - - - - - - - - - - -x

                            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