CAFC Reverses storeWALL
As the post title might suggest, the Federal Circuit has reversed the Court of International Trade decision in storeWall v. United States. My previous discussion of this case is here.
You may recall that this case involves the tariff classification of home storage systems. Specifically, the imported merchandise was specially designed mounting hooks (called tabs) and wall panels. The panels can accept all sorts of storage accessories from baskets and shelves to simple hooks. If you are having trouble picturing this, visit the plaintiff's web site here.
The Court of International Trade held that the products were possibly "unit furniture" or parts thereof of heading 9403 based upon the dictionary definitions of the words "unit" and "furniture." According to the Explanatory Notes, unit furniture is designed "to be hung, to be fixed to the wall or to stand one on the other or side by side, for holding various objects or articles . . . ." With respect to parts of unit furniture, the Explanatory Notes also state that the term expressly excludes coat, hat, and similar racks and other similar articles. Based on this (and more) information, the CIT held that a complete storeWALL system might be classifiable as furniture. But, if the complete unit consisted only of the wall panel and hooks or pegs (similar to coat racks), then it was excluded from classification as furniture in 9403. Because the merchandise was not always used to make "furniture," the Court reasoned that it was not prima facie classifiable in 9403. Consequently, the CIT classified the merchandise in Chapter 39 as articles of plastic.
The first issue on appeal was the application of the "rack exception" from the Explanatory Notes. Generally, I am not a big fan of the Explanatory Notes when the tariff language is clear. And, the Federal Circuit has usually said that the Explanatory Notes cannot be used to introduce a limitation into the tariff heading that is not present in the text. Thus, I figured the the rack exception was about the be deflated. I was wrong about that.
Rather, the Federal Circuit held that the CIT properly consulted various sources to determine the common and commercial meaning of "unit furniture." These sources included dictionaries and other sources. Similarly, the CIT was correct in consulting the non-binding Explanatory Notes. The Federal Circuit characterized the Explanatory Notes as "clearly relevant guidance" but added the important caveat "where a tariff term is ambiguous." OK, I can live with that. The Court also reiterated its decision in Airflow Tech. in which it said that "When the language of the tariff provision is unambiguous and the Explanatory Notes contradictory, we do not afford the Explanatory Notes any weight." [Note: that is not a direct quote, but the meaning is correct.] Since the rack exclusion does not contradict the tariff language, the CIT was correct to rely on it.
But, the Federal Circuit did disagree with the CIT regarding the classification of a storeWALL system consisting entirely of hooks. The CIT felt that that as imported the merchandise did not have a fixed function. The Federal Circuit, on the other hand, considered this flexibility to be indicative of the flexible nature of "unit furniture," which is intended to be assembled in various ways to suit the consumer's needs. Even if a particular installation of a storeWALL consisted solely of hooks, it is still capable of accepting shelves and brackets. A simple coat rack does not have that flexibility. Thus, the merchandise was properly classifiable as parts of unit furniture in 9403.
There is an interesting concurring opinion in which Judge Dyk argues that the tariff provision at issue is a use provision. The heading and subheading language does not expressly indicate that it is a use provision, but Judge Dyk finds evidence for that in the relevant legal notes and Explanatory Notes which define "unit furniture" based on how it is used. As a result, Judge Dyk would analyze this case under U.S. Additional Note 1(a) and classify the goods based on their principal use. According to the Judge, there is evidence to support a finding that the principal use is as unit furniture. Thus, he gets to the same place, though in a possibly more textually consistent way.
You may recall that this case involves the tariff classification of home storage systems. Specifically, the imported merchandise was specially designed mounting hooks (called tabs) and wall panels. The panels can accept all sorts of storage accessories from baskets and shelves to simple hooks. If you are having trouble picturing this, visit the plaintiff's web site here.
The Court of International Trade held that the products were possibly "unit furniture" or parts thereof of heading 9403 based upon the dictionary definitions of the words "unit" and "furniture." According to the Explanatory Notes, unit furniture is designed "to be hung, to be fixed to the wall or to stand one on the other or side by side, for holding various objects or articles . . . ." With respect to parts of unit furniture, the Explanatory Notes also state that the term expressly excludes coat, hat, and similar racks and other similar articles. Based on this (and more) information, the CIT held that a complete storeWALL system might be classifiable as furniture. But, if the complete unit consisted only of the wall panel and hooks or pegs (similar to coat racks), then it was excluded from classification as furniture in 9403. Because the merchandise was not always used to make "furniture," the Court reasoned that it was not prima facie classifiable in 9403. Consequently, the CIT classified the merchandise in Chapter 39 as articles of plastic.
The first issue on appeal was the application of the "rack exception" from the Explanatory Notes. Generally, I am not a big fan of the Explanatory Notes when the tariff language is clear. And, the Federal Circuit has usually said that the Explanatory Notes cannot be used to introduce a limitation into the tariff heading that is not present in the text. Thus, I figured the the rack exception was about the be deflated. I was wrong about that.
Rather, the Federal Circuit held that the CIT properly consulted various sources to determine the common and commercial meaning of "unit furniture." These sources included dictionaries and other sources. Similarly, the CIT was correct in consulting the non-binding Explanatory Notes. The Federal Circuit characterized the Explanatory Notes as "clearly relevant guidance" but added the important caveat "where a tariff term is ambiguous." OK, I can live with that. The Court also reiterated its decision in Airflow Tech. in which it said that "When the language of the tariff provision is unambiguous and the Explanatory Notes contradictory, we do not afford the Explanatory Notes any weight." [Note: that is not a direct quote, but the meaning is correct.] Since the rack exclusion does not contradict the tariff language, the CIT was correct to rely on it.
But, the Federal Circuit did disagree with the CIT regarding the classification of a storeWALL system consisting entirely of hooks. The CIT felt that that as imported the merchandise did not have a fixed function. The Federal Circuit, on the other hand, considered this flexibility to be indicative of the flexible nature of "unit furniture," which is intended to be assembled in various ways to suit the consumer's needs. Even if a particular installation of a storeWALL consisted solely of hooks, it is still capable of accepting shelves and brackets. A simple coat rack does not have that flexibility. Thus, the merchandise was properly classifiable as parts of unit furniture in 9403.
There is an interesting concurring opinion in which Judge Dyk argues that the tariff provision at issue is a use provision. The heading and subheading language does not expressly indicate that it is a use provision, but Judge Dyk finds evidence for that in the relevant legal notes and Explanatory Notes which define "unit furniture" based on how it is used. As a result, Judge Dyk would analyze this case under U.S. Additional Note 1(a) and classify the goods based on their principal use. According to the Judge, there is evidence to support a finding that the principal use is as unit furniture. Thus, he gets to the same place, though in a possibly more textually consistent way.
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