Changes in Latitude, On Me
This case has to do with the proper tariff classification of glass bottles imported empty. In the U.S., the bottles were combined with other merchandise to form a scented oil diffuser kit. U.S. Customs and Border Protection classified the bottles in HTSUS item 7013.99.50 as glassware for indoor decoration. That resulted in a still rate of duty of 30%. Plaintiff believes that the correct classification is in 7010.90.50 as bottles for the conveyance of oils, which has a rate of duty of free. Note that both of these provisions are principal use provisions. Consequently, it is the use of the class or kind of merchandise that controls the classification, not the use of the actual imported merchandise.
According to the plaintiff, these bottles are used to convey the scented oil to the ultimate consumer and that it is the oil that the consumer is purchasing. Defendant, on the contrary, argued that the bottles are an attractive decorative item similar to a vase.
To sort this out, the Court of International Trade applied the so-called Carborundum factors to determine the class or kind to which the bottles belong. That means that this post will have at least seven more paragraphs, which is not what I had hoped.
1. General Physical Characteristics of the Merchandise
Yes, the bottle is attractive and decorative. On the other hand, it has a stopper that is designed to prevent the fragrance oil from leaking out of the bottle. Further, the bottle's shape facilitates inserting those cattail-like reeds used to suck up the oil. On this point, the Court tilted toward conveyance.
2. Expectations of the Ultimate Purchaser
The bottle is only sold to consumers as part of a kit with oil and reeds. While it is attractive, the expert testimony that consumers would keep and refill the bottle was not sufficiently probative to make a finding. Further, the bottles are a small portion of the value of the kit (about $0.50 out of $18), indicating to the Court that the consumer expects to be purchasing a defuser kit and to discard the bottle.
3. Channels of Trade
The bottles are imported empty and are not offered for sale to retail customers in their imported form. Thus, the channel of trade is distinct from the channel for vases and decorative items.
4. Environment of Sale
Defuser kits are advertised and sold to retail end users. The bottles are not sold, advertised, or displayed separately by retailers. That makes them unlike vases.
5. Use in the Same Manner as Merchandise That Defines the Class
There was limited evidence that the bottles are reused. That means that there was also limited evidence of their decorative use being predominant. In other words, the main use appears to be holding oil in defuser kits. Thus, this factor also points in the direction of bottles for the conveyance of oils.
6. Economic Practicality of So Using the Imported Merchandise
The cost of the bottle is apparently so low that is does not make economic sense for the importer to offer refills of oil and defuser sticks. This factor also tilts in favor of 7010.
7. Recognition in the Trade of this Use
The last Carborundum factor is the recognition of the use in the trade. There was not a lot of evidence on this point.
Following that review, the Court of International Trade noted that its own examination of the bottles indicated that their features are consistent with bottles for the conveyance of materials. The primary consideration in this part seems to have been the presence of a stopper designed for use with defuser reeds.
The last bit of the case is interesting. The Department of Justice asserted that the ruling Customs and Border Protection issued to the importer is entitled to judicial deference under a Supreme Court decision called Skidmore. What Skidmore says is that this sort of decision (which was not subject to public notice and comment) is entitled to deference consistent with its degree of persuasiveness. Thus, I always wonder why the judges don't say "Yes, it get's Skidmore deference" and move on to the question of how much deference. Instead, the Court seems to look at the ruling and make the binary decision of whether it is persuasive enough to be entitled to deference. That is an analytical question that I think matters, but probably not very much.
In this case, the Court was not impressed with Customs and Border Protection's comparison of the bottles to jars and its application of the relevant Explanatory Notes. Consequently, it held that the ruling was not so thorough or logical to warrant deference.
All of which adds up to a win for the plaintiff.
Now, before I blow out my flip flops, where are my limes and my tequila? [That makes six.]