Saturday, August 26, 2006

Festive Articles

Over the years, Customs and the courts have struggled with what constitutes a festive article for classification purposes. If merchandise is closely associated with a holiday, it might be a festive article and, therefore, duty free. So, that sweater you are importing at a high rate of duty might be much more profitable if you embroider it with a turkey carrying a musket and wearing a pilgrim's hat.

Usually, one would think that it would not be so hard to make this determination. There is a simple reason why there are no items bearing images of snowy evergreens, Santa, candy canes, snowflakes, or reindeer in my house. As much as some people may argue that these symbols are devoid of religious meaning, everyone knows they are Christmas decorations. I don't have them in my house for the same reason you likely do not have a menorah or dreidel.

If I were a litigating a festive articles case involving Christmas goods, I'd call a rabbi to the stand, show him or her the merchandise, and ask "Would you ever have this in your house?" If the answer is negative, it is a festive article. Same goes for decorated eggs, chocolate bunnies, and chicks. Don't try and deny it, they are Easter symbols.

The Court of International recently looked at this issue again in Michael Simon Design, Inc. v. United States. The merchandise was apparel that the plaintiff wanted classified as festive articles in Chapter 95 of the tariff schedule. Because the merchandise is utilitarian rather than strictly decorative, Customs wanted it classified as wearing apparel in Chapter 61 or 62. One of Customs' main points was that in 2003, after this merchandise was entered, the WCO amended the Explanatory Notes to make clear that apparel is not included in the definition of "festive articles."

To be a festive article, merchandise needs to do the following:
  1. Be closely associated with a festive occasion,
  2. Used or displayed principally during that festive occasion, and
  3. Have a physical appearance so closely associated with the festive occasion that displaying it at other times would be aberrant.

The Court, via Judge Barzilay, quickly rejected Customs' reliance on the revised Explanatory Notes. The reason for this is that the revised section of the Notes is inconsistent with prior decisions of the Court of Appeals for the Federal Circuit (specifically Park B. Smith and Midwest of Cannon Falls) . The Notes are not binding on the Court; decisions of the Federal Circuit are. Thus, the Court followed the Federal Circuit precedent and permitted utilitarian apparel to be classified as festive articles.

The Court then looked at the sixteen styles at issue. For all but one, it found the design to meet the criteria for being festive articles. Most were pretty obvious including nativity scenes, jack-o-lanterns, devils, spiders, ghosts, and bats. I'm not sure what festive occasion involves angels, but I also did not see the actual design. Maybe the angel was sitting on top of a lighted evergreen. Customs won on a black cat motif on the grounds that the particular images are not so intrinsically linked to Halloween that wearing them at other times of the year would be aberrant.

The Court went on to apply the notes to Section XI that exclude articles of Chapter 95 from headings 6110 and 6202. And, the Court found no applicable exclusion in the notes covering Chapter 95. Thus, Judge Barzilay held that all but one of the styles is festive.

A couple side notes on this case. First, it was a Barnes/Richardson case. Congratulations go to Alan Goggins.

More substantively, Judge Barlizay's deference analysis bothers me. She gets to the right result but, I think, the phrasing is wrong. As I understand the law, every Customs decision is entitled to Skidmore deference. In other words, it is not like Chevron where the Court must first find ambiguity for deference to attach to the regulation or decision. The question under Mead and Skidmore is more limited--how persuasive is the decision? If it is unpersuasive, applying Skidmore deference, the Court need not follow it. But, under Skidmore, if the decision is logical, consistent with other decisions, and generally has the indicia of persuasiveness, it is entitled to greater deference. Either way, Skidmore deference has attached. This distinction may have no practical significance, but it seems meaningful to me.

4 comments:

RP said...

First of all, nice blog!!

Second, based on this decision, do you know if Customs will file an appeal to the Fed Cir for review. It seems last time I heard about this issue Customs was "limiting" application of the results of both these referenced cases (Park B Smith & I can't recall the other one).

Also, it seems the CIT took the position that the exceptions to the EN 95.05 based on the "utilatarian" issue was ignored. How will this be applied in the future since the 2007 tariff I believe specifically includes chapter notes limiting the application of festive articles for apparel and others (i.e. utilitarian items)?

Keep it up...it's nice to read about the Customs law world.

Larry F. said...

It's nice to get comments, thanks.

You are correct, the 2007 HTS will include a note excluding utilitarian articles from Chapter 95. This will make festive apparel much harder if not impossible to classify there. It will also make it harder to classify sports-specific technical clothing as sports equipment, but the limit on both types of merchandise will need to be explored.

On a side note, RP, drop me an e-mail and let me who you are as I have at the moment only a theory.

rp said...

Hi Larry:

How do I drop you an e-mail? Is your email address posted in your blog?

Larry F. said...

Sorry. I updated to the new Blogger beta and it apparently changed my profile. For the record, you can reach me at ridingcircuits@earthlink.net. Also, now if you click, View My Profile, you will get the option to send me an e-mail.