The Revenge of GRK Screws
Abraham Lincoln is reported to have asked, "How many legs does a dog have if you call his tail a leg?" He answered his own question. "Four. Saying that a tail is a leg doesn't make it a leg." This is an important legal principle in customs law. How you describe a product at the time of entry does not control the classification. You can't import pickles, call them baseballs and expect Customs to agree. My own corollary to Lincoln's question is this: "What do you call a bowling trophy if you use it as a hammer?" The answer is, a broken bowling trophy.
This all matters because the correct name, (as opposed to a fraudulent name) of an item is often a potent indicator of its tariff classification. Many tariff provisions in the Harmonized Tariff Schedule of the United States are so-called eo nomine provisions. Eo nomine is legal Latin for "Under that name; by that appellation." It comes from the expression "Perinde ac si eo nomine tibi tradita fuisset,"meaning "just as if it had been delivered to you by that name." At least that is what my trusty Black's Law Dictionary says. If the item is properly described by the name provided in the tariff, then it is classified there, unless some part of the legal text excludes it.
Other tariff items depend on the use of the item for classification. For example, HTSUS Heading 8704 covers "motor vehicles for the transport of goods." That means that vehicles will only be classified there if they are used to transport goods, as opposed to people. Note that this is not an eo nomine headings; 8704 does not say "Trucks." Instead, it covers any motor vehicle for the transport of goods whether it is a truck, van, lorry, dumper, or tanker. As long as the item is both a motor vehicle and for the transport of goods, it goes in 8704.
The Harmonized Tariff Schedule of the United States recognizes this distinction between eo nomine and use provisions. According to Additional U.S. Rule of Interpretation 1(a),
The question is, can we, when classifying something in an eo nomine provision, treat the use of the item as evidence of it being properly described? In other words, if we are classifying knives, should Customs and Border Protection and the Court of International Trade consider evidence that the item is used for cutting? That may seem like a ridiculous question. The non-trade nerds of the world would say, "Of course. If no one ever uses a cucumber to cut, it should not be treated as if it were a knife." But, the trade nerds have long believed the answer to be different. We believed that classifying an item in an eo nomine term like "knife" depended only on the physical characteristics of the thing and not on its use, principal or otherwise. We would ask: Can it be held in the hand? Is there a blade? Is the blade sharp? If so, it is a knife, even if it is is such a poor example of a knife that it might only ever be used as a doorstop.
The Federal Circuit decision in GRK Canada changed that. You can read about the prior litigation in my three previous posts on this issue. Start here. Now, the law is that when the eo nomine description of an item suggests a particular use, the Court of International Trade, and presumably Customs, may consider how an item is used to help define the meaning of a tariff term (a question of statutory interpretation). They may also consider evidence of use when classifying the the article (a question of fact). The CIT had initially refused to take use into consideration when classifying items described as "wood screws." The Federal Circuit reversed and remanded. The CIT has issued its revised decision.
The CIT decision begins with a detailed analysis of what the Federal Circuit seems to require in the post-GRK environment. There are open questions. The one I previously raised, which is raised again, is whether an eo nomine classification that suggests a specific use is, in fact, "controlled by" use such that Additional U.S. Rule of Interpretation 1(a) is applicable. If that is the case, then many nominally eo nomine headings have just been converted to use provisions. Nothing in the Federal Circuit decision answered that question.
Next, the Court spent considerable time defining "wood screws" and "self-tapping screws" based on the tariff language, Explanatory Notes, and normally lexicographical sources. According to the Court, neither term is "controlled by use," meaning that AUSRI 1(a) is not implicated and the question is not the principal use of these screws. Use is, however, "implicated."
The Court concluded that a "wood screw" is a screw intended to be used and able to produce its own thread in wood. A "self-tapping screw" is a screw made of hardened material, intended to be used and able to cut its own thread through non-fibrous material." Neither definition is "controlled by use." Further, nothing in the Explanatory Notes indicates that classification turns on the manner of use. On the contrary, the texts indicate that the classification of screws is controlled by their physical characteristics such as the nature of the point, thread, and whether they are made of hardened materials. There is, however, a suggestion that wood screws will be used in wood. Similarly, "self-tapping" screws will likely be used "for tapping." There is no authority for the proposition that self-tapping screws will only be used in non-fibrous materials.
Having taken all of that into consideration, the Court differentiated between wood screws and self-tapping screws on the basis of whether they are made of hardened steel meeting the minimum torsional strength requirements sufficient to cut their own mating threads in non-fibrous materials. It is apparently undisputed that this describes the screws at issue. It is also undisputed that the screws are intended for fastening non-fibrous materials to other materials. That the screws can be used in wood does not preclude their classification as self-tapping screws. Consequently, the screws remain classified in 7318.14.10 as self-tapping screws, in exactly the same place the plaintiff first asserted in 2009.
So what does this mean for compliance pros? Good question.
At a minimum, it means that when classifying items in an eo nomine classification that suggests a use, we now need to ask whether the description is "controlled by use." If so, you are dealing with a use provision and must apply AUSRI 1(a) to classify the article based on principal use. It is not clear how this determination will be made, though the CIT opinion in this case provides a thorough example to follow.
If the classification is not controlled by use but the eo nomine description suggests a use, compliance professionals should confirm that there is evidence of real and intended use consistent with that name. For example, if you are classifying "locks," be sure that the marketing and design history indicates an intention to use the item to secure an area or object (i.e., as a lock). Next, ask whether there is evidence of contrary use. It will be an unusual case in which the evidence of use is inconsistent with the intended use. But, evidence of use consistent with the intended use supports your classification. All of that might go into a protest.
This is complicated, but it might be more theoretical than practical. The result in this case did not change as a result of the analysis of use. It may be that the original reversal and remand back to the CIT was more about process than about substance. Unfortunately, we won't know the overall impact until more cases make their way through the CIT and Federal Circuit.
This all matters because the correct name, (as opposed to a fraudulent name) of an item is often a potent indicator of its tariff classification. Many tariff provisions in the Harmonized Tariff Schedule of the United States are so-called eo nomine provisions. Eo nomine is legal Latin for "Under that name; by that appellation." It comes from the expression "Perinde ac si eo nomine tibi tradita fuisset,"meaning "just as if it had been delivered to you by that name." At least that is what my trusty Black's Law Dictionary says. If the item is properly described by the name provided in the tariff, then it is classified there, unless some part of the legal text excludes it.
Other tariff items depend on the use of the item for classification. For example, HTSUS Heading 8704 covers "motor vehicles for the transport of goods." That means that vehicles will only be classified there if they are used to transport goods, as opposed to people. Note that this is not an eo nomine headings; 8704 does not say "Trucks." Instead, it covers any motor vehicle for the transport of goods whether it is a truck, van, lorry, dumper, or tanker. As long as the item is both a motor vehicle and for the transport of goods, it goes in 8704.
The Harmonized Tariff Schedule of the United States recognizes this distinction between eo nomine and use provisions. According to Additional U.S. Rule of Interpretation 1(a),
In the absence of special language or context which otherwise requires--
(a) a tariff classification controlled by use (other than actual use) is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use;When a tariff classification is controlled by use, we look to evidence of principal use. When it is not, we apply the legal text and notes to classify the item according to its description (modified as necessary by the legal notes to the tariff).
The question is, can we, when classifying something in an eo nomine provision, treat the use of the item as evidence of it being properly described? In other words, if we are classifying knives, should Customs and Border Protection and the Court of International Trade consider evidence that the item is used for cutting? That may seem like a ridiculous question. The non-trade nerds of the world would say, "Of course. If no one ever uses a cucumber to cut, it should not be treated as if it were a knife." But, the trade nerds have long believed the answer to be different. We believed that classifying an item in an eo nomine term like "knife" depended only on the physical characteristics of the thing and not on its use, principal or otherwise. We would ask: Can it be held in the hand? Is there a blade? Is the blade sharp? If so, it is a knife, even if it is is such a poor example of a knife that it might only ever be used as a doorstop.
The Federal Circuit decision in GRK Canada changed that. You can read about the prior litigation in my three previous posts on this issue. Start here. Now, the law is that when the eo nomine description of an item suggests a particular use, the Court of International Trade, and presumably Customs, may consider how an item is used to help define the meaning of a tariff term (a question of statutory interpretation). They may also consider evidence of use when classifying the the article (a question of fact). The CIT had initially refused to take use into consideration when classifying items described as "wood screws." The Federal Circuit reversed and remanded. The CIT has issued its revised decision.
Next, the Court spent considerable time defining "wood screws" and "self-tapping screws" based on the tariff language, Explanatory Notes, and normally lexicographical sources. According to the Court, neither term is "controlled by use," meaning that AUSRI 1(a) is not implicated and the question is not the principal use of these screws. Use is, however, "implicated."
The Court concluded that a "wood screw" is a screw intended to be used and able to produce its own thread in wood. A "self-tapping screw" is a screw made of hardened material, intended to be used and able to cut its own thread through non-fibrous material." Neither definition is "controlled by use." Further, nothing in the Explanatory Notes indicates that classification turns on the manner of use. On the contrary, the texts indicate that the classification of screws is controlled by their physical characteristics such as the nature of the point, thread, and whether they are made of hardened materials. There is, however, a suggestion that wood screws will be used in wood. Similarly, "self-tapping" screws will likely be used "for tapping." There is no authority for the proposition that self-tapping screws will only be used in non-fibrous materials.
Having taken all of that into consideration, the Court differentiated between wood screws and self-tapping screws on the basis of whether they are made of hardened steel meeting the minimum torsional strength requirements sufficient to cut their own mating threads in non-fibrous materials. It is apparently undisputed that this describes the screws at issue. It is also undisputed that the screws are intended for fastening non-fibrous materials to other materials. That the screws can be used in wood does not preclude their classification as self-tapping screws. Consequently, the screws remain classified in 7318.14.10 as self-tapping screws, in exactly the same place the plaintiff first asserted in 2009.
So what does this mean for compliance pros? Good question.
At a minimum, it means that when classifying items in an eo nomine classification that suggests a use, we now need to ask whether the description is "controlled by use." If so, you are dealing with a use provision and must apply AUSRI 1(a) to classify the article based on principal use. It is not clear how this determination will be made, though the CIT opinion in this case provides a thorough example to follow.
If the classification is not controlled by use but the eo nomine description suggests a use, compliance professionals should confirm that there is evidence of real and intended use consistent with that name. For example, if you are classifying "locks," be sure that the marketing and design history indicates an intention to use the item to secure an area or object (i.e., as a lock). Next, ask whether there is evidence of contrary use. It will be an unusual case in which the evidence of use is inconsistent with the intended use. But, evidence of use consistent with the intended use supports your classification. All of that might go into a protest.
This is complicated, but it might be more theoretical than practical. The result in this case did not change as a result of the analysis of use. It may be that the original reversal and remand back to the CIT was more about process than about substance. Unfortunately, we won't know the overall impact until more cases make their way through the CIT and Federal Circuit.
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