Sunday, February 21, 2010
A Case of Note
LeMans Corp. v. United States
At what point does specialized clothing become sports equipment? I thought this question was decided in a Federal Circuit case involving Bauer-Nike ice hockey pants back in 2004. Apparently, I was wrong about that.
This case involves clothing designed exclusively for use while engaged in "power riding sports." The clothing included protective padding, was made of moisture wicking fabric, and designed to fit comfortably while roaring around a dirt track at high speeds. Customs classified the merchandise in Chapters 61 and 62 depending on the specific article involved. The importer sought classification in Chapter 95 as sports equipment.
The Court initially found that the motocross garments (sweaters, jackets, ) are all classifiable in Chapters 61 and 62 based upon General Rule of Interpretation 1 to the HTSUS. That analysis seems clear enough. The interesting question is whether the merchandise is also classifiable in Chapter 95.
LeMans' argument is that the goods are described by Heading 9506. As a result, GRI 3(a) requires the application of the relative specificity test. Because sports equipment is a more specific description, it should prevail over the less specific apparel classifications. The Court did not accept this argument.
According to the Court, "equipment" is necessary, useful, or appropriate to a specific activity. The Court appears to agree that the apparel is useful and appropriate for motocross racing. Nevertheless, it looked to the Explanatory Notes for clarification as to the meaning of "sports equipment." In the EN, the Court found a long list of equipment from snow skis to tennis rackets and from hockey sticks to fencing foils. The closest thing to this merchandise was various kinds of protect pads and guards. Thus, the Court concluded that apparel was not intended to be included in Chapter 95.
But what does that say about the Bauer Nike hockey pants? Well, I think there are two interesting points here. First, the Court of International Trade says that the Bauer Nike decision did not intend to offer a definitive definition of the term "equipment." Consequently, the CIT looked at it fresh and in light of the Explanatory Notes. Given the Court of Appeals' recent curt decision in Outer Circle Products, I suspect we will hear from the CAFC on that point. Next, I found it interesting that the CIT cited subsequent Customs rulings as consistent with its decision. Those rulings should be in accord with the Court's decisions, not the other way around. Based on all this, the Court affirmed Customs' classification on the grounds of GRI 1 without regard to GRI 3.
The Court is correct that whenever GRI 1 is sufficient to classify merchandise, the analysis stops there. What I wonder about is when it becomes necessary and appropriate to open the Explanatory Notes. I know Customs says that the ENs should always be consulted. But, in this case, I would have applied the reasoning from the Federal Circuit, found the meaning of "equipment" to be clear and applicable to the merchandise. At that point, I would have been in a GRI 3(a) situation. By turning to the ENs early, the Court found a gloss on the meaning of "equipment" that might not otherwise be there. I don't know whether that is appropriate given that the HTSUS is the statutory language. But, I also know that I am in the minority on this point.