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Appeals Court Upholds Classification of Tuna in Pouches

Wednesday, September 18, 2013
Sandler, Travis & Rosenberg Trade Report

The Court of Appeals for the Federal Circuit ruled Sept. 16 in Del Monte Corporation v. U.S. that U.S. Customs and Border Protection properly classified certain tuna in pouches as tuna packed in oil under HTSUS 1604.14.10. The CAFC also upheld CBP’s appraisal of these goods based on the price Del Monte paid its supplier at the time of importation, without adjusting for approximately $1.5 million that Del Monte later received from its supplier after negotiations over the accuracy of the amount originally paid.

The merchandise at issue consists of tuna fillets or strips in a sauce, packed in a sealed microwaveable pouch. The tuna is not cooked or prepared in oil and is processed separately from the sauce, which is added after the tuna is placed into the pouch. For two of the three varieties at issue, the sauce contains small amounts of sunflower oil.

The court points out that Additional U.S. Note 1 to HTSUS Chapter 16 makes clear that for fish products in which the only oil is added as part of a liquid substance introduced at the time of packing, the goods are considered “in oil” even if the liquid substance does not consist entirely of oil. This note also sets no minimum threshold for the amount of oil that must be present. Because it is undisputed in this case that a sauce containing some oil is added to the pouch, the court states, “that is sufficient to describe” the two varieties at issue as tuna packed in oil.

The CAFC further rejects Del Monte’s argument that it had agreed to a formula with its supplier pursuant to which actual and estimated costs would be reconciled after importation and that this formula should have been considered in determining transaction value, as allowed by 19 CFR 152.103(a)(1). The court points out that for such recognition to “avoid swallowing the otherwise-strong statutory prohibition on using payments post-dating importation to alter the tariffs owed” under 19 USC 1401a(b)(4)(B), an agreed-upon, pre-importation formula must be clear and definite. In this case, however, “there was no written contract, formal policy, or other hallmarks of a formal agreement … setting out a ‘formula’ to be applied.”

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