Thursday, June 11, 2009

Sometimes, it's Just a Screw

I started my career in as a customs lawyer under the old Tariff Schedule of the United States, before anything was Harmonized. Under the TSUS, it was a common and legally sound argument that merchandise could not be classified in a heading if it was "more than" what that heading describes. So, a screw that had been hollowed out and had holes drilled in it to allow oil to flow through it would probably not be a screw, because it was "more than" a screw.

In the Harmonized Tariff Schedule era, the more than argument has been replaced by various aspects of the General Rules of Interpretation. Rather than say that this merchandise is more than a screw, today we would say that "screw" only partly describes the article so we need to look to whether it has the essential character of a screw.

And that is the situation Honda of America found itself in at the Court of International Trade. The merchandise involved was oil bolts, which are essentially the merchandise I described above. The competing provisions were in Heading 7318 as screws or bolts and in Chapter 87 as auto parts.

The Court's analysis started with Section XV, Note 2(a) which defines screws, bolts, and similar articles of iron or steel as "parts of general use." Further, Section XVII includes a note saying that "parts" as used in that section does not apply to parts of general use. So, if the oil bolt is classifiable in 7318, it is excluded from Chapter 87.

The Court looked to the Explanatory Notes, the relevant Customs and Border Protection Ruling, and an Informed Compliance Publication to reach a definition of screw as meaning (essentially) an externally threaded fastener that must be torqued by its head. Apparently, the oil bolts at issue fit that description and are, therefore, screws of 7318.

Honda had a good argument based on a number of prior rulings that appeared to be inconsistent with this classification. Most important was a ruling on a brake cable that was cut to size and had end fittings making it apparently ready for use in assembly. Those cables, were classified in 8709 as parts despite being parts of general use of 7312. The reason for that, according to Customs, was an amendment to the Explanatory Notes that specified, based on a decision of the World Customs Organization, that such cables were auto parts. There being no corresponding amendment for oil bolts, the Court found the prior ruling to be unpersuasive.

Thus, because the screws--despite being specialized--are still externally threaded fasteners that need to be torqued from the head, they are screws and nothing more.

1 comment:

Anonymous said...

It seems that the Court got this one right.