Monday, October 13, 2014

Ruling of the Week 12: Coffee Canada Style

This really more of a case review than a ruling in that it comes from the Canadian International Trade Tribunal, which is not Canada Border Services Agency and is clearly not U.S. Customs and Border Protection. But, it is an interesting issue and Canadian customs law has a slightly exotic air about it. So, here we go, eh.

There are a growing number of coffee artisans and coffee snobs. I find myself among the latter as I make excellent but highly inefficient cups of coffee in my AeroPress contraption. I also spend too much time and money at Intelligensia Millennium Park where I occasionally purchase an individually prepared, single cup filtered, lovingly agitated, and perfectly heated cup of exotic coffee. It is delivered with a small carafe of the remainder for your refill. On the espresso side, the macchiato is a work of art and perfectly paired with a glass of sparkling water. If it is morning, the buckwheat scone is a delightful addition. But, I digress and leave myself open to well earned ridicule.

The legal question here is whether espresso machines that grind beans and pump hot steam are coffee makers for purposes of tariff classification. That raises the difficult question of whether espresso is coffee, which was apparently a matter of much debate in the CITT.

The case is Philips Electronics v. President of the CBSA. The classification issue is whether an espresso machine should be classified as a coffee maker under HS Heading 8516.71.10 or as an other electro-mechanical domestic appliance of 8509.80.90. The product is the Talea Giro Plus, which is a pretty impressive looking machine.

The unit is clearly a domestic appliance. It also contains a number of electro-mechanical features including a bean grinder, pump, and a gearbox of some kind. Both of the relevant classifications are in Chapter 85. According to the Explanatory Notes to 8509, machines of that heading are to be classified based on their principal function, even if there are two or more complementary functions. The Explanatory Notes to Heading 8516 list electro-thermic machines including coffee makers as included in that Heading.

Philips argued that the espresso machines are both electro-mechanical and electro-thermic. As such, they are prima facie classifiable in both headings. From there, Philips argued that the espresso machines are not just coffee makers and are more specifically described as electro-mechanical appliances because their principal function is making espresso, not coffee. (If you just said, "What's the difference?" you need to spend more time and money on your coffee products.) Philips also made an essential character argument that the grinder and pump are what provide the essential character to this appliance and differentiate it from a simple Mr. Coffee.

CBSA, as you might imagine, had a different view. It argued that heating the water was the principal function, making these machines fall within Heading 8516 as electro-thermic appliances. In the alternative, CBSA argued that the essential character is imparted by the electro-thermic components of the composite machine.

What to do? First, go get yourself a cup of Joe.

The problem here is that the espresso machine is a functional unit or composite good but it is also a finished thing. This is not a situation where some mad genius of marketing as created a chimera of two largely unrelated things like my dream of a microwave corn popper that is also a streaming media player. This is different. It is an espresso machine that includes a pump and grinder as part of its design to fulfill its purpose of making espresso. According to the Explanatory Notes to Section XVI, that is a case where the classification of the composite good or functional unit does not depend on essential character. If it did, the absurd result might be classifying a complete item as one of several competing components even though there is a perfectly good heading for the complete item. That should be avoided.

According to the CITT, espresso is defined as coffee made by forcing steam through ground coffee beans and as strong, concentrated coffee. Even the business documents Philips produced refer to the quality of the coffee the machine can produce. Based on this and oral testimony, the Tribunal found that espresso is a form of coffee. That means that the machines at issue can make coffee. The fact that a typical coffee machine cannot produce espresso, did not save the day for Philips.

Thus, these machines, which make espresso, are classifiable as coffee makers. Let the hipster waling begin.


Anonymous said...

Just a brief note to let you know you have readers in Africa who enjoy your musings on coffee and more, as well as your views on tariff classifications. Kind regards, FA Amrein

Anonymous said...

Just a brief note to let you know you have readers in Africa who enjoy your musings on coffee and more, as well as your views on tariff classifications. Kind regards, FA Amrein