Docket Clearing

As the 2009 winds down, the Court of International Trade appears to be clearing its collective desk.

Storewall, LLC v. United States involves the classification of wall panels used as store display systems. The panels are made of plastic and affix to a wall via a plastic locator tab. The panels are grooved to accept shelves, baskets, and other display items. The importer claims that the merchandise is classifiable as furniture in Heading 9403, while Customs asserts that the correct classification is as articles of plastic in Heading 3926.

The problem for the plaintiff is that Chapter 94 Note 2 defines furniture as something designed to be placed on the floor or ground. The display systems mount on a wall. But, the note contains an exception for items designed "to be hung, to be fixed to the wall or to stand one on the other." That exception is intended to cover "cupboards, bookcases, other shelved furniture and unit furniture." The wall-mounted panels are clearly not cupboards or bookcases. Thus, the question is whether they are unit furniture, which is not defined in the HTSUS.

The Explanatory Notes provide some guidance in that they state that unit furniture is for holding various objects or articles such as books, crockery, kitchen utensils, etc. The ENs also state that 9403 does not cover coat, hat, and similar racks. Further, "unit" is defined in this context as a piece of furniture that can be fitted with other pieces to form larger systems. Think of modular bookshelves at Ikea and you'll be on the right track.

Having teed this up legally, the Court faced a factual problem. It is possible that as imported a complete store display system might qualify as unit furniture. To do that, it would have to be something other than a coat or hat rack or similar rack. If the system is ultimately used with pegs rather than shelves or baskets, therefore, it would not qualify as unit furniture. Thus, the specific configuration at the time of importation is determinative. In this case, according to the Court, at the time of importation, the goods were not unit furniture but generic articles capable of multiple configurations. Apparently, because the completed article is not necessarily unit furniture, the components could not be classified as parts thereof.

That said, the merchandise was found to be prima facie classifiable as other articles of plastics in Heading 3926.

The decision raises a question for the plaintiff. What would the Court have said had each wall panel been imported with the hardware necessary to mount shelves? It seems the conclusion might have been 9403. Given that, is it commercially feasible to configure the importations as unit furniture even if the ultimate use is as something else? That bit of tariff engineering depends on the cost of separately shipping the other components and of either returning or scrapping the shelves. But, it is something to consider.

Arko Foods Int'l v. United States is also a classification case. This one involved mellorine, which is apparently an ice cream alternative made with non-butter fats; although in this case, the ingredients in mellorine included milk powder and whey. Some varieties might also include cheese a or whole milk powder. Customs classified the mellorine in Heading 2105 as ice cream or another edible ice. Plaintiff asserts that the proper classification is as composite articles having the essential character of prepared fruit or other food preparations.

The Court's analysis begins with a conclusion: mellorine is classifiable in 2105 as an "other edible ice." It just is. This is one of those things that is not really worth arguing about. It is a frozen dessert similar to sherbet. Since the application of GRI 1 leads to that conclusion, the argument concerning GRI 3(b) and composite goods must fail. Classification stops when a GRI produces an answer; it is inappropriate to move on to later GRIs.

The hard part is the proper tariff item with Heading 2105. That question turns on whether the mellorine is an article of milk or cream for purposes of Additional U.S. Note 1 to Chapter 4. The reason this is interesting is that there are several Customs rulings on what constitutes a beverage having an appreciable amount of milk. In those rulings, Customs drew the line at 5%. Customs argued that those rulings are entitled to deference by the Court in deciding whether the mellorine is an article of milk or cream. The Court, however, rejected that argument on the basis that the present question does not involve a beverage and the relevant note asks whether mellorine is an article of milk or cream not whether it contains an appreciable amount of milk. That strikes me as entirely correct and the right thing to do. It is always easier to side with the government and say that deference made you do it. Pointing out that a ruling lacks a reasoned analysis and addresses a somewhat different question is tougher because you know it creates an opportunity for appeal.

Rather than apply the 5% rule, the Court looked to an earlier Court of International Decision for a test. Under Wilsey Foods, the Court looks to whether milk or cream is the essential ingredient, the ingredient of chief value, and the preponderant ingredient. In addition, the Court looks to whether the product is considered a dairy product in the relevant industry. In this case, the Court found that milk or cream were neither essential nor predominant ingredients. Also, neither constituted the chief value of the mellorine. But, there was testimony that mellorine is considered a dairy product in the industry. This testimony, however, was held to be of limited value on the specific question. Consequently, the Court found the mellorine to be something other than an article of milk or cream and, therefore, classifiable in 2105.00.50.

That leaves only one important question: Where exactly can I get my hands on some of this stuff? It comes in exciting flavors including purple yam, Quezo Real (with cheese!), and durian. Seriously, these sound like food products I want to try.