Del Monte Can’t Alter Tuna Pouches’ ‘In Oil’ Duty Tariff Category ff

Source: Law 360

The U.S. Court of International Trade on Friday nixed Del Monte Corp.’s challenge to the classification of its flavored microwavable tuna pouches as “tuna in oil,” even though the products merely contain traces of oil to disperse flavoring agents.   

Senior Judge Thomas J. Aquilino Jr. granted summary judgment to the government on Del Monte’s claim that the pouches containing fillets or strips of tuna to which flavor sauces were added  — which were packed in Thailand and marketed in the U.S. under the Starkist brand as Albacore Lemon & Cracked Pepper and Yellowfin Lightly Seasoned — should be characterized as “tuna, not in oil,” as well as on a claim that the product had not been properly valued by Customs & Border Protection.

In rejecting the company’s tariff classification challenge, Judge Aquilino acknowledged that the product contained minimal amounts of oil, but he said that under a 1915 precedent from the U.S. Court of Customs Appeals fish packed in oil and other substances counted as packed in oil under the Tariff Act. That the pouches had less oil in them than the product considered in that case made no difference, the judge said.    

“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,” Judge Aquilino said. “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,” he said. “And no amount of cogent, contrary reasoning of the kind plaintiff’s counsel now present dispels this phenomenon judicially.”

Del Monte’s attorney, William D. Outman II of Baker & McKenzie LLP, told Law360 that they hoped the tuna not being packed in oil as a matter of common sense would decide the issue, but that “this 106 year-old decision has been in our way from day one and is still in our way according to Judge Aquilino.” Outman said that while his view on the classification issue differed from Judge Aquilino’s, it was clear that the judge had considered the arguments on both sides.

“The more troubling aspect of the decision is that on the the value side it essentially holds that any adjustment in value is not permitted, and that’s not the case," Outman said.

Del Monte argued that Customs had incorrectly valued the products based on preliminary invoices that had been created under an agreement between Del Monte and Thai fish packing company Chotiwat Manufacturing Co. Ltd., which provided that the price would be adjusted based on Chotiwat’s recovery of usable raw tuna that could be put to alternate uses.

When the estimates included in the preliminary invoices were reconciled with actual costs, Chotiwat restored $1.5 million in overcharges to Del Monte, and Customs should have valued the product at the amount Del Monte ultimately paid, the company argued.

But Judge Aquilino accepted the government’s argument that the $1.5 million was a rebate and that as such the Tariff Act  does not require Customs to take it into account.

The judge therefore handed the government a win on that claim as well.

A Department of Justice spokesman was not immediately available for comment on Friday.

Del Monte is represented by William D. Outman II of Baker & McKenzie LLP.

The case is Del Monte Corp. v. United States, case number 1:07-cv-00109, in the U.S. Court of International Trade.