Friday, July 25, 2014

Ruling of the Week: The Minkomatic

Maybe this will be a continuing feature, maybe not. Either way, it is not at all unusual for me to see rulings that I find amusing for one reason or another. And, in almost all cases, I know that it is not amusing to the people involved who consider the product involved to be their job. So, I issue a blanket apology to anyone I might offend.

Today, I was amused to see a ruling on the Minkomatic 660 and 670 feeder trucks. You can find out everything you ever wanted to know about self-propelled vehicles designed to deliver feed to livestock in pens here.

The issue presented to Customs and Border Protection was whether the Minkomatic truck is classifiable as a vehicle of Chapter 87 or as agricultural machinery of Chapter 84. Because it is equally equipped for mink feeding, Customs determined that it is not principally used for transport. That took it out of Chapter 87. Customs then also determined that mink husbandry is an agricultural exercise. That puts the Minkomatic is 8436, without leaving GRI 1.

Why is that amusing? "Minkomatic," that's why.

Tuesday, July 15, 2014

What's a Protest?

A protest is a very important document. When an importer lodges a protest with Customs and Border Protection, the importer is telling CBP that it disagrees with a decision Customs made when liquidating an entry. Absent a protest, the liquidation becomes final and is not subject to challenge. If the importer files a protest and CBP denied it, the importer can go to the Court of International Trade to challenge the denial. In many cases, if there is no valid protest, there is no way to get into court.

To be valid, a protest has to be timely. Today, that means 180 days from the date of liquidation. That was not always the case. The protest period used to be 90 days. The transition from 90 to 180 days was not smooth and that seems to be the underlying problem in Puerto Rico Towing & Barge Co. v. United States, a recent decision of the Court of International Trade.

The case involves an effort to protest the collection of duties on ship repairs performed on a U.S. flag vessel while it was in the Dominican Republic. The value of the repairs is subject to a duty of 50% , but can be reduced by the value added from beneficiary developing countries under the Caribbean Basin Economic Recovery Act.

In this case, the importer was apparently working with CBP personnel at the relevant port to prove up the amount of the CBERA offset. Customs denied the claim and the importer sent at least two letters in which it requested relief. One of those letters said it was trying to avoid filing a detailed protest within the 180 day limit.

It turns out that this entry was subject to the old 90-day protest period because it was made prior to December 18, 2004. So, the eventual protest was late.

That raises the question of whether the letters, which were within the 90-day period might be construed to be protests. On this, the Court of International Trade has traditionally been pretty generous. Many cases have said that any correspondence that informs the Port Director of the challenged decision is sufficient to constitute a protest. But, that is not always the case.

The Court will not find a protest simply because it can surmise from all of the surrounding circumstances that the importer intended to protest a liquidation. Further, there are detailed regulations specifying the content of a protest. While the Court did not expressly hang its proverbial judicial hat on the regulation, it is clear that the regulation must have some impact on judging whether a correspondence counts as a protest.

More important, in this particular case, the correspondence indicated that the importer working with Customs to avoid filing a protest. Taken literally, that means neither of the letters was intended as a protest. This is a logical conclusion. But, there is another hand in play: Customs knew the importer disagreed with the assessment and on what grounds. In prior years, that might have been enough to get into Court. But, that was not the case here.

Take that result as a learning moment. To co-opt a common aphorism in Chicago, "Protest early and often." And, when you do protest, use the official form or electronic equivalent. It will make your life easier. Remember that the 180-day period applies to current entries and cannot be extended. On the 181st day, you are stuck with the liquidation.

Thursday, July 10, 2014

Dependable Classifications

When we last left Dependable Packaging Solutions, Inc. v. U.S., the Court of International Trade agreed with U.S. Customs and Border Protection that certain inexpensive bud vases were properly classified as "glassware of a kind used for . . . indoor decoration or similar purposes" (Heading 7013) rather than as "carboys, bottles . . . and other containers, of glass, of a kind used for the conveyance or packing of goods" (Heading 7010). Dependable appealed to the Court of Appeals for the Federal Circuit, which has now rendered its judgment.

The interesting issue Dependable raised on appeal has to do with the Explanatory Notes. [Note from Larry: Dear Thomson Reuters and Boskage, you're welcome.] The Explanatory Notes are not binding on Customs or the Court. Nevertheless, because they represent the views of the folks who wrote the Harmonized Tariff, they are deemed to be relevant and persuasive authority on the meaning of a tariff term. In this case, the Explanatory Notes specifically state that vases are examples of products included in Heading 7013. The CIT then determined that the products at issue are "vases" and, therefore, classified in 7013.

But, Dependable points out, the word "vase" does not appear in Heading 7010 and, therefore, the definition of vase is irrelevant to determining the scope of that heading. The issue, according to Dependable, is whether the goods are "containers," which they most certainly are. Nevertheless, based on commercial documents and statements at the hearing, the Court concluded that they are also vases.

That left the Court with having to decide between 7010 and 7013, both of which are use provisions. Thus, the question boils down to finding the principal use of the class or kind of products similar to these vases. If the single most common use in the U.S. is not for the conveyance or packing of the goods, then the vases cannot be classified in 7010.

To determine principal use, the Court applied the so-called Carborundum factors . . . .

Sorry, I nodded off.

At this point, you and I can both lose interest in this case. The remainder is a close approximation of the analysis performed by the Court of International Trade. You should review the prior post for a summary of that analysis.

That said, I think this case and the prior R.T. Foods decision are notable for the clarity and detail of the classification analysis they contain. The common denominator may be that both were authored by Circuit Judge Wallach who came to the Federal Circuit after a stint as a Judge of the Court of International Trade, where he clearly learned a thing or two about classification. This case is a good teaching example of how principal use works and how importers should think about classifications based on use. So, the decision is worth reading despite my giving it short coverage here.

Finally, what the heck is a carboy? According to Bing, its a large bottle for corrosive liquids. Apparently, they are also commonly used in home brewing. Stuff like that is part of why being a customs lawyer is interesting. Who else but dealers in sulfuric acid, hipsters and product classifiers would know that?

Sunday, July 06, 2014

Catching Up

I am behind on my blogging. As I have said in the past, that usually happens when I am busy at work, which is a good thing. So, to play a little catch up, I am going to combine several recent cases in this single post.

Tempura Tempest

First up, the Federal Circuit ruled on the classification of tempura in a case called R.T. Foods, Inc. v. United States. We discussed the Court of International Trade decision here. The government asserted that cut, flour dusted, fried, and flash frozen vegetables are classified in HTSUS 2004.90.85, which covers "Other vegetables prepared or preserved otherwise than by vinegar or acetic acid, frozen, other than products of heading 2006: Other vegetables and mixtures of vegetables: Other: Other, including mixtures." According to R.T. Foods, the products are classifiable in HTSUS 2106.90.99, which provides for "Food preparations not elsewhere specified or included: Other: Other: Other: Frozen." The latter classification is entitled to duty-free entry from Thailand. So, this comes down to whether the prepared tempura is "elsewhere specified or included." If it falls into Heading 2004, it is elsewhere specified and cannot be in Heading 2106.

The Court of Appeals noted that Heading 2004 describes the products by name and is, therefore, an eo nomine provision encompassing all forms of the named item (i.e., all forms of vegetables prepared other than with vinegar, frozen, etc.). On the other hand, Heading 2106 is a basket provision, which is inherently not very specific.

R.T.'s main argument was that its product is substantially different from the simple prepared vegetables of Heading 2004. These were mixtures of different vegetable and, in the case of one product, were formed into attractive bird's nest forms. Based on the combination of components, R.T. also argued that the products are more properly treated as ready-to-eat meals and that they have a use distinct from simple prepared vegetables.

None of this was persuasive enough. In what I will call the decisive utterance of this case, the Court of Appeals for the Federal Circuit held that:
R.T. has not identified a feature or component of the subject merchandise that so substantially transforms the vegetables so as to remove them from the eo nomine provision. Furthermore, R.T. has not shown how tempura battering and frying does not fall within the eo nomine provision’s specification that the frozen vegetables be “prepared or preserved otherwise than by vinegar or acetic acid.” Absent such a substantial transformation, it is clear the merchandise falls within the scope of heading 2004.
Try as it might,  R.T. was unable to overcome the conclusion reached by Customs and Border Protection and the Court of International Trade that the goods are fully described by Heading 2004. As a result, the decision of the CIT was affirmed.

International Custom Products

When we last left International Custom Products, it was fighting for its day in court despite not being able to pay the duties Customs and Border Protection alleges it owes for allegedly misclassifying "white sauce base" to avoid the application of a dairy quota. The Court of International Trade previously dismissed the case for failing to state a cause of action on which relief can be granted, because paying all the duties owed is a statutory requirement to secure judicial review.

ICP has now asked the Court of International Trade to reconsider that prior decision or to amend its prior judgment on the theory that the requirement to deposit duties is, as applied here, an unconstitutional violation of due process. Unfortunately, this has all been fully briefed and rejected by the CIT in the previous case.

Even more unfortunately, the Court of Appeals for the Federal Circuit has also held that the Notices of Action rate advancing these entries, which are the sole basis on which ICP is deemed to owe this enormous amount of money, were invalid and void. In other words, ICP has won its case on the merits. It should not actually owe this money. But, because of the statutory requirement, ICP must pay the money to make that legal conclusion apply to the remaining entries. That is an absurdity that the Department of Justice and Customs should recognize and address outside of the context of a law suit. Why? Because it is actually the right thing to do.

On the other hand, and this is an important consideration, the long litigation history of this dispute leads one to read between the lines that ICP may not be exactly an innocent party. Clearly, only the parties and their counsel know for sure. But, from the outside, something stinks here. It is just not clear from which side the odor is emanating.

Pop Quiz

What is this thing?
If you said that it is a pair of pliers or a pair of locking pliers, you would be properly using the English language. Unfortunately, a prior decision of the Court of International Trade has moved Customs and Border Protection to hold that locking pliers are actually wrenches. Why? Because the locking mechanism facilitates "wrenching" a bolt or similar item and that fact is acknowledged in the relevant industrial standards. This is actually an issue on which I worked, so I will leave it at that.