Thursday, June 16, 2011

Revenge of the TSUS: "More Than" Rides Again

The Court of Appeals for the Federal Circuit has decided the appeal in Camelbak Products LLC v. United States. And, in this case, the Camelbak is the winner. You may recall we discussed this case earlier here. In that post, my main gripe was that the Court of International Trade did not perform much of an analysis of whether the combined backpack/hydration system was a composite good for tariff purposes. It turns out that I was basically right, though the Court of Appeals went further than I thought it might.

This is a very interesting opinion. The Federal Circuit first had to deal with the question of whether the Court of International Trade was correct that the backpack/hydration system falls within the scope of the eo nomine provisions for travel, sports, and similar bags in HTSUS heading 4202. If it does, then the goods are classifiable there pursuant to GRI 1. On the other hand, there is also an eo nomine provision for beverage bags.

In deciding whether Customs and Border Protection had properly classified the Camelbak products, the Court noted that an eo nomine provision does not include products that is more limited or more diverse in function provided that difference is significant. In that case, the identity of the article has changed. This comes from a 1996 case involving Casio and is slightly at odds with the maxim that an eo nomine provision covers all forms of the article. But, if you think about it, all it does is recognize that if you add enough features to a backpack, it might eventually become something else, which seems reasonable.

In making the determination of whether something falls within an eo nomine provision, the CAFC found several factors relevant. These factors include:


  1. The design of the subject article
  2. The use or function of the article
  3. How the subject articles are regarded in commerce
  4. Whether the additional component is a substantial part of the whole
Applying these factors, the Court found that the Camelbak products possess features that are substantially in excess of backpacks. Further, the hydration components are of different design from the backpack and provide a different function.On this point, the Court was influenced by testimony from a Camelbak employee that hydration is their primary focus as a business.

Based on this analysis, the Court found that the imported merchandise was not simply backpacks with the added feature of beverage storage. Rather, it is composite goods requiring an analysis under GRI 3(b) to determine whether the essential character is imparted by the backpack or the beverage bag. Because there is a dispute as to whether the bags are insulated (which is an element of the beverage bag classification), the CAFC sent the case back tot he CIT for further action.

There is a strong dissent in this case, which is always interesting. The dissent is not convinced by the marketing literature or by the differential in price from traditional backpacks. The dissent also uses the nice analogy of the hypothetical night safety backpack that incorporates a flashlight. Importantly, the dissent seems to concede that at some point adding features to an eo nomine article will remove it from that description, but the dissenting judge (Bryson) does  not think that line has been crossed here.

Personally, I think this is a good decision. I think it allows people to articulate what we often feel when looking at advanced versions of products. At some point, the advanced product is really something else. In the old days, we said it was legally "more than" the eo nomine description. In the era of the HTSUS, Customs and Border Protection tells us that is not a proper analysis. But, take an MP3 player as an example. They used to be single purpose devices with no external display. Over time, they added a simple LCD character display, often with a clock. Then, the display became color and was big enough to play display album art. At that point, the device was still primarily an MP3 player for listening to music. But, it was also a clock and probably could display photos. Next, the units were able to play video. OK, is it still primarily a machine for reproducing music or has the video superceded the music? Did video kill the MP3 player? There are rulings on this for iPods and Customs and Border Protection says, Yes. Adding video changed the classification. OK, that is an iPod (or Zune). What about when the Zune (or iPod) started being able to run applications? Is it still a video player or is it more than a video player? I think that depends on the answer to a lot of questions. But, for our purposes, the analysis is the point, not the answer. And, the Court's analysis in Camelbak, I think, might make the "more than" analysis more useful going forward.

And, yes I give equal time to the Zune because I have one and think it is a great device and better client software. Yes, I am aware of all the buzz about killing the brand in favor of some XBox-centric ecosystem. That doesn't make it a bad device. In fact, if you look at the UI on Windows Phone 7 and the hints of what is coming in Windows 8, it sure looks like Zune is taking over Microsoft rather than going away.

1 comment:

Anonymous said...

Keen observation re: "more than." Both backpacks and beverage bags are eo nomine provisions, including all forms of the articles. I agree with the Court's reasoning except that the same analysis applies equally to beverage bags. If the Camelbaks are improved backpacks as the Government argues, they are equally improved beverage bags. Hence, GRI 3b.