Tuesday, June 16, 2009
Questions Predominate in HTSUS Classification
Value Vinyls, Inc. is an interesting classification case in that it all turns on the meaning of one word. As Groucho might say, it's a simple word you hear every day (well maybe not every day). The word in question is "predominate." Specifically, item 3921.90.11 of the Harmonized Tariff Schedule of the United states covers products "with textile components in which man-made fibers predominate by weight over any other single textile fiber." The problem for the Court of Appeals for the Federal Circuit is that the merchandise contains only man-made fibers.
Can man-made fibers predominate in a sea of man-made fibers? Is there a majority where there is no minority?
A split Federal Circuit held that there is. The Court focused much of its attention on the conversion from the old TSUS to the current HTSUS. Apparently, the corresponding TSUS provision (355.81) included products made wholly of man-made fibers. The TSUS provision covered articles that were "wholly or in chief value" of man-made fibers. Because the TSUS language expressly covered products wholly of artificial fibers, the corresponding HTSUS language requiring that "man-made fibers predominate" should have the same meaning absent express Congressional intent to the contrary. Given that the transition from the TSUS to the HTSUS was supposed to be revenue neutral, the CAFC affirmed the CIT and said that a material that is wholly of man-made fibers is also predominately of man-made fibers.
To get to that conclusion, the Federal Circuit had to discuss an older Court of Intrernational Trade Case called Semperit Indistrial Products (1994). Semperit dealt with similar language in 4010.91.15 relating to conveyor belting. In Semperit, Judge Carman said "defendant's contention that the subheading's provisions for 'situations where other textile fibers may be present with man-made fibers does not mean that articles in which only man-made fibers are present are precluded' fails to embrace the comparison implicit in the term 'predominate' between two or more parts." The CIT concluded that the plain meaning of predominate required two or more materials for comparison.
No judge of the Court of International Trade is bound by a decision of another judge. Also, a CIT decision does not bind the Court of Appeals. So, there is nothing wrong with the result in Value Vinyls. Reasonable minds can disagree.
Which brings me to the reasonable mind of one Robert W. Gettleman, U.S. District Judge of my own Northern District of Illinois. He sat by designation on this case and filed a dissent. First, I need to say to Judge Gettleman, welcome to my world. I bet your clerks were not too excited about having to wade through not just the HTSUS but also the TSUS and the conversion documents.
Judge Gettleman appears to have come at the decision with something of an outsider's perspective. He seemed less concerned with the conversion from the the TSUS to the HTSUS or with rate neutrality. He focused on the language in the disputed provision. Specifically, he wrote that "The plain meaning of 'predominate' is unambiguous. It necessarily 'contemplates a hierarchy between two or more elements' and 'incorporates a comparison between two or more entities and a determination that one of the entities outweighs the other.'" The internal quotations come from Judge Carman in Semperit. He went on to note that "The change in language from 'wholly or in chief value' in the TSUS, to 'predominate by weight' in the HTSUS evidences intent by Congress to change the meaning of the subheadings, not just the method of measuring the goods as the majority suggests."
This is one of those cases in which reasonable people can come to reasonable but inconsistent conclusions. Personally, I'm not confident that the sentence, "Bowling balls are the balls used predominately in bowling," makes a lot of sense. What I mean is "Bowling balls are the only balls used in bowling." [Note to family in New England: Candlepin is still bowling and the balls are still bowling balls. Also, my grandfather is in the Hall of Fame. How about that?] But from a legal standpoint, there is a real question as to what Congress intended.
So what are importers to do? The practical effect of the CAFC decision may be to effectively overrule Semperit even though the Court distinguished, rather than overruled it. Importers looking for clarity and predictability will look to the Court of Appeals for guidance. However, Judge Carman's decision in Semperit remains in place. So, if your issue is four-square covered by Semperit, think hard about standing your ground. What is left of Semperit is an issue for reasonable minds to sort out in a later case.