Monday, September 18, 2017

The Great Bulb Debate

Our next case to discuss in The Gerson Company v. United States, which involves the tariff classification of artificial candles in the form of tea lights and candles. These are “artificial” because rather than being consumable candles with a wick that burns, they are translucent plastic or wax with a battery that powers an LED that simulates the appearance of a burning wick. You have probably seen these at a million restaurants that drop the tea lights into decorative holders on the table to create artificial ambiance.

Customs classified these items in Heading 9405, which covers lamps and lighting fittings including search lights and spotlights, and parts thereof, not specified elsewhere. The importer’s primary argument was that the faux candles are classifiable in Heading 8543 as electrical machines and apparatus, having individual functions, not specified or included elsewhere in Chapter 85. Specifically, the importer claimed the correct classification was as electric luminescent lamps. Plaintiff had three alternative classifications all in Chapter 85. 8541 covers, among other things, light emitting diodes.

On its face, this is an odd situation in which there are two tariff provisions that appear describe the same merchandise. These candles are “lamps” in that they are devices the principle purpose of which is to provide illumination, albeit minimally. They might also be electric luminescent lamps.
Getting to the bottom of this requires a pretty detailed analysis of the tariff language. [As an aside, the tariff does not get to electric luminescent lamps until below the heading level, which means it is not a comparable provision. But, it does indicate an intention that some lamps belong in 8543.]

Regarding Chapter 94, “light fittings” are designed to be attached to another surface, such as a wall. These are not that. If they are in Chapter 94, they are “lamps.” According to Chapter 94, Note 1(f), Chapter 94 does not cover lamps of Chapter 85.

So, are these “lamps” of Chapter 85?

The Court rejected classifying these items as LEDs or semiconductor devices of Chapter 85 because it determined that the complete faux candles as a whole are not described as the discrete constituent components. This used to be called a “more than” analysis, but under the HTSUS that terminology has fallen out of use.

Regarding 8543 (“Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter . . . .”), the “lamps” provided elsewhere in Chapter 85, including lighting for motor vehicles, flashlights, electrical signaling equipment, and incandescent lamps, are distinct from the faux candles. With the exception of flashlights and similar product, all of these items are components intended to be used as parts of a larger device.

The Court concluded that the “lamps” of Chapter 85 are components or otherwise intended to be used in conjunction with other devices. Lamps of Chapter 94, to the contrary, are independent and fully functional stand-alone devices. The flashlights of Chapter 85 are an inexplicable exception. Further, reading Chapter 85 to cover all electric lamps, which is the logical consequence of plaintiff’s argument, leaves Chapter 94 to cover only lamps powered by kerosene, alcohol, whale oil, and other non-electrical means. That must be wrong given that the Explanatory Notes to Chapter 94 note that it covers lamps and lighting fittings using any source of light, including electricity.

So, what gives with Chapter 85?

The bottom line here is that this problem is uniquely American in nature. The Harmonized System is an international nomenclature that occasionally sneaks in an Anglicism. In this case, the Explanatory Notes make it clear that Chapter 85 covers electrical goods not generally used independently, but used as components, for example “lamps.” Given the normal American connotation that lamps sit on desks, side tables, and floors as complete items, this is difficult to parse. Unless, you read “lamps” in the European (and also engineering sense) of “bulb.”

Looking at it through this lens, the Court concluded that Chapter 85 lamps are components, often “bulbs” and similar devices while Chapter 94 lamps are complete devices in the American sense of the word.  This leaves the flashlight as the inexplicable problem child. Perhaps, if we called them “torches,” this would be easier to sort out. [Actually, it wouldn’t, but I wanted to say that anyway.]

Based on this analysis, the complete battery-operated faux candles are classifiable in 9405 as lamps. I gather that if imported separately, the LED’s would not be Chapter 94 lamps. They would be electroluminescent lamps, meaning “bulbs.” That’s confusing. In the end, the Court of International Trade classified these items in 9405.40.80 as other electric lamps.

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