Zuniga v. United States

Refractarios Monterrey, S.A. (Refractarios) (plaintiff) produced kiln furniture in Mexico using raw materials from the United States. Specifically, Refractarios added dry clay and talc from the United States to water and dispersing agents to make casting slip, which was then placed into molds, dried, and fired in kilns. When Refractarios and F. F. Zuniga (plaintiff) sought to import the furniture into the United States, the United States Customs Service (Customs) (defendant) said that the furniture was dutiable at a rate of 7.5 percent. Refractarios and Zuniga asserted that the furniture should be duty free under the General System of Preferences (GSP). Under the GSP’s origin rules, a product from a beneficiary developing country, like Mexico, was eligible for duty-free entry into the United States only if the total cost or value of the materials and production in Mexico was at least 35 percent of the product’s appraised value. Refractarios and Zuniga could not meet that 35 percent threshold unless the United States-based raw materials were treated as materials originating from Mexico. Refractarios and Zuniga argued that the dry clay and talc from the United States had been substantially transformed into a new and different article of commerce (i.e., the casting slip) during the manufacturing process and thus could be treated as materials produced in Mexico. Customs rejected that argument and denied duty-free status. In proceedings before the Court of International Trade, Refractarios and Zuniga asserted that making casting slip from dry ingredients required significant experience. Refractarios also presented testimony and evidence suggesting that casting slip could be sold in the market. However, other evidence indicated that casting slip could not be sold at competitive prices and could lead to the disclosure of the seller’s confidential information. The court upheld Customs’ determination, concluding that the dry clay and talc had not been substantially transformed into a new and different article of commerce. Refractarios and Zuniga appealed.