A Case of Note

LeMans Corp. v. United States

At what point does specialized clothing become sports equipment? I thought this question was decided in a Federal Circuit case involving Bauer-Nike ice hockey pants back in 2004. Apparently, I was wrong about that.

This case involves clothing designed exclusively for use while engaged in "power riding sports." The clothing included protective padding, was made of moisture wicking fabric, and designed to fit comfortably while roaring around a dirt track at high speeds. Customs classified the merchandise in Chapters 61 and 62 depending on the specific article involved. The importer sought classification in Chapter 95 as sports equipment.

The Court initially found that the motocross garments (sweaters, jackets, ) are all classifiable in Chapters 61 and 62 based upon General Rule of Interpretation 1 to the HTSUS. That analysis seems clear enough. The interesting question is whether the merchandise is also classifiable in Chapter 95.

LeMans' argument is that the goods are described by Heading 9506. As a result, GRI 3(a) requires the application of the relative specificity test. Because sports equipment is a more specific description, it should prevail over the less specific apparel classifications. The Court did not accept this argument.

According to the Court, "equipment" is necessary, useful, or appropriate to a specific activity. The Court appears to agree that the apparel is useful and appropriate for motocross racing. Nevertheless, it looked to the Explanatory Notes for clarification as to the meaning of "sports equipment." In the EN, the Court found a long list of equipment from snow skis to tennis rackets and from hockey sticks to fencing foils. The closest thing to this merchandise was various kinds of protect pads and guards. Thus, the Court concluded that apparel was not intended to be included in Chapter 95.

But what does that say about the Bauer Nike hockey pants? Well, I think there are two interesting points here. First, the Court of International Trade says that the Bauer Nike decision did not intend to offer a definitive definition of the term "equipment." Consequently, the CIT looked at it fresh and in light of the Explanatory Notes. Given the Court of Appeals' recent curt decision in Outer Circle Products, I suspect we will hear from the CAFC on that point. Next, I found it interesting that the CIT cited subsequent Customs rulings as consistent with its decision. Those rulings should be in accord with the Court's decisions, not the other way around. Based on all this, the Court affirmed Customs' classification on the grounds of GRI 1 without regard to GRI 3.

The Court is correct that whenever GRI 1 is sufficient to classify merchandise, the analysis stops there. What I wonder about is when it becomes necessary and appropriate to open the Explanatory Notes. I know Customs says that the ENs should always be consulted. But, in this case, I would have applied the reasoning from the Federal Circuit, found the meaning of "equipment" to be clear and applicable to the merchandise. At that point, I would have been in a GRI 3(a) situation. By turning to the ENs early, the Court found a gloss on the meaning of "equipment" that might not otherwise be there. I don't know whether that is appropriate given that the HTSUS is the statutory language. But, I also know that I am in the minority on this point.

Comments

Anonymous said…
I agree with you.

So unless the EN lists the specific type of equipment, then it is not considered equipment? Are the EN's supposed to be that exhaustive? Something about that doesn't seem logical.
Feb 22, 2010, 4:39:00 PM
Anonymous said…
I agree that the statute should control but the ENs have become a crutch that is relied upon by CBP and the courts in making classification decisions. As the ENs have become so important in classification, I expect to see more companies focus their efforts on modifications of the ENs to win classification disputes. Maybe we should forget the HTSUS and just use the ENs!
Feb 24, 2010, 8:18:00 AM
Anonymous said…
Larry -

I wonder if counsel for LeMans asked the Court if its members would wear the subject apparel if they were going out for a stroll, going shopping, to the theatre, etc. The BEST argument here seems to be one of use, and the apparel in question is clearly intended solely for sports use, ergo "sporting equipment." Far from the first time Customs and the courts have gotten something wrong.

Your faithful Customs retiree.
Feb 25, 2010, 5:14:00 PM
Anonymous said…
Bauer was wrong. Hockey pants are no less pants just because they are worn to play hockey, and they certainly are not required to play hockey, even if dedicated for that use.
Feb 26, 2010, 8:58:00 PM
Anonymous said…
The EN should certainly be given legal weight; from a CHB standpoint, it is an invaluable reference, and I think the IS's feel the same way. I would also concur that the list of equipment presented in the EN does not warrant inclusion of apparel, in and of itself. I do not know the basics of the hockey pants case, but I would look at the same issue in light of football pants. They are clearly, to any reasonable person, football equipment. They have no other use whatsover, due to the size and the pouches for the various pads. Therefore, I would say, if CBP has consistently classified such as garments, then I would say that motocross apparel, which may or may not be so specific to the sport as football pants, should be classified likewise. Same goes for classifying as sports equipment; the only caveat I would make is that the construction of the apparel would have to be extremely specific - if the pants were identical to the football pants for example, yes, classifiy as equipment, but the shirts, probably not - people wear football jerseys all the time, so I don't think you could genuinely say that jerseys are strictly limited to use as "equipment" in any case.

Now if I can just get an importer to pay attention to CBP position on classification of aluminum cases.
Mar 5, 2010, 8:29:00 PM
Larry said…
I agree with the position that apparel that is both specifically dedicated to a sport and also not likely to be worn except in connection with the sport should be classified as sports equipment. I think that is the teaching of Bauer. I expect the plaintiffs in this case to appeal. I believe the Federal Circuit is trending away from reliance on the Explanatory Notes while the CIT seems to be trending toward greater reliance. The conflict (if it is not a figment of my imagination) is interesting to watch.
Mar 6, 2010, 9:44:00 AM
Post a Comment

Popular posts from this blog

Ruling of the Week 2015.8: Old Jersey and Pitcairn Island

Image
For today's ROTW, I set out looking for a ruling dealing with some far off and preferably warm location. Turns out that, with the exception of coastwise transit issues, there are no Customs and Border Protection rulings involving Pitcairn Island or any of several Pacific Ocean microstates including Tuvalu , Niue , and Kiribati . Pitcairn Island What I did find is an interesting question about the country of origin marking for products of the Bailiwick of Jersey Island, Channel Islands. The ruling is HQ 561938 (Mar. 18, 2002). For those of you who may not know, Jersey is an island off the coast of Normandy, France. It is an independent international actor and not part of the U.K. although the U.K. is responsible for its defense and external relations. Also, the Queen is the Head of State in her capacity as "the Crown in Right of Jersey." It is, according to the U.S. Department of State, a " Crown Dependency " along with the Isle of Man and the Bailiwick o...
Read more

CAFC Decision in Double Invoicing Case

The Federal Circuit has issued a decision on the merits in United States v. Inn Foods, Inc.  There had been a previous decision on jurisdiction, which was followed by a trial at the Court of International Trade and then this appeal on the substance. The initial issue is whether Inn Foods' invoicing practice amounts to fraud.  Inn Foods had been receiving an invoice from growers in Mexico that had a relatively low sales prices on it.  Subsequent to entry, Inn Foods created a second invoice at something more similar to market value, retaining the original invoice number, and paid at that higher amount.   Superficially, this looks like a standard-issue double-invoicing scheme.  But, in the age of reconciliation, is it really more like a provisional pricing mechanism?  It might have been possible to make that argument had Inn Foods adjusted its entries accordingly.  It didn't and the loss of revenue was approximately $624,000.  Based on testimony and evidence indicating both knowl...
Read more

Ninestar and UFLPA Exhaustion

Image
Exhaustion is a key doctrine in administrative law. When applicable, it requires that a party unhappy with an agency’s determination complete the administrative appeal process before turning to the courts for judicial review. Requiring exhaustion typically promotes judicial efficiency by ensuring that disputes are resolved at the agency and, if they are not, that there is a complete record of the agency process. Exhaustion also ensures that the judiciary respects the executive agencies and their expertise.  There are, on the other hand, times when the courts will find that exhaustion is not necessary or appropriate. Such is the case in  Ninestar Corporation et al. v. United States  et al., a decision of the U.S. Court of International Trade.  Ninestar is also interesting because it is one of the first cases in the CIT involving the Uyghur Forced Labor Prevention Act, known as UFLPA. In my hiatus from active blogging, I missed the rise of UFLPA as a major compliance t...
Read more