Ruling of the Week 2016.20: Bottle Toppers

Ruling of the Week? Who am I kidding? This is number 20 in my 2016 rulings of the week series, not number 43 as it should be. I'll either try to step it up next year or come up with a more truthful name for the series.

Today's ruling is HQ H264771 (Jul. 28, 2016) in which Customs trods over ground I thought was well settled and reaches the conclusion opposite from what I might have done. Let's see how that happened. It's a close call, so reasonable minds might differ on this one.

The merchandise in question is plastic "SippaTop" bottle toppers. These are plastic, spill-proof, reusable, tops for juice bottles. They are in the form of popular licensed characters and are, therefore, marketed as collectible. According to the company, they give young children more independence and parents more peace of mind, which I take to mean that they don't spill and that keeps everyone happy.

The importer entered these in 3923.50.00 as plastic lids, stoppers, caps or closures. Customs liquidated accordingly. The importer then protested the liquidation, asserting that the bottle toppers are best classified in 9503.00.00 as toys. Customs denied the protest in this ruling.

If you have been around customs classification for a while, you may be experiencing deja vu. The Court of International Trade looked at similar merchandise in a case called Minnetonka Brands back in 2000. That case involved plastic bottles and caps in the shape of various characters, including Cookie Monster and Big Bird. The bottles were accurate representations of the characters with appropriate shapes and colors. Although the caps were removable, according to the Court, "none of the limbs are moveable." (See page 3.) That part will be important later. Finally, the Court noted that when looking at the complete set, it was not immediately obvious that the plastic item was a bottle and cap rather than a plastic model of the character. That is also important.

Together, the bottle and cap were sold filled with bubble bath solution, but the items were imported empty. Testimony presented to the Court stated that the bottles were designed to add "toy or play value" to the company's product line. Regarding the "heads," the Court found that they do not enhance the ability of the bottle to contain bubble bath and do not add to the utility of the overall package.

The CIT held that a "toy" is designed for amusement or diversion, rather than practical utility. Furthermore, it held that Heading 9503 is a use provision requiring evidence that the class or kind of merchandise to which the imported item belong is principally used as a toy. The Court concluded:
the court finds the subject merchandise to be of the class or kind of merchandise whose principal use is amusement, diversion or play, rather than the conveyance or packaging of goods.  The unique physical characteristics of the merchandise, the design and marketing of the merchandise as items of amusement (rather than as bubble bath containers), the anthropomorphic nature of the merchandise, the expectation of the ultimate purchasers that these objects will be used for play, the regular use of the merchandise by children for amusement purposes, the fact that the merchandise does not compete with (and sells at a large premium to) bubble bath in flat plastic bottles, and other facts revealed at trial, support this conclusion.  Accordingly, Plaintiff has rebutted the presumption of correctness (28 U.S.C. § 2639(a) (1994)) that attaches to Custom's classification.

Why the different result?

Here, Customs found that whatever the amusement value of the SippaTops, that value was outweighed by their utility as spill-proof bottle tops. CBP seems to have been taken by marketing copy that indicates the use of the SippaTops would encourage children to drink healthy beverages, which is a matter of practical utility rather than amusement.

Customs cited its prior rulings on similar merchandise. Specifically, in HQ 966633 (Mar. 18, 2005), Customs analyzed plastic bottle toppers as composite goods consisting of a plastic lid and molded character. That makes sense. Using that analysis, Customs held that the plastic lid provided the essential character and that the decorative topper was incidental to the lid. Thus, it was classified in 3923 rather than as a toy of 9503. Customs noted other similar rulings in which it found that bottle toppers lacked value in "manipulative play" as compared to their utilitarian value. Here, Customs did not treat these as composite goods and did not venture beyond GRI 1.

All of that makes sense. The problem I have is that it is not consistent with the Minnetonka decision. Customs distinguished Minnetonka on the grounds that the merchandise there was full bottles, not just toppers. Customs also says that the bottles in Minnetonka had moveable limbs. That does not appear to be correct based on the Minnetonka decision. Moveable limbs would obviously add "play value," which is something future tariff engineers should keep in mind.

I think that Minnetonka turned on the fact that the bottles were designed to be distinguishable from normal, utilitarian, flat bottles that simply hold bubble bath. The bubble bath character bottles did not compete with bubble bath in basic bottles and sold at a premium. They had anthropomorphic designs intended ad amusement and encourage play. Because the bottles had no moveable limbs, that play must have been limited in nature. I image a child in the tub holding the bottle like a crude a puppet, making up imaginative scenes. What I think is key in Minnetonka and is missed here is that if the importer wanted a bottle cap, it could have purchased one without the time and expense of designing three-dimensional characters, paying licensing fees, etc. Why would it go to that time or expense? Not to make a better bottle cap. If anything, the addition of the plastic head detracts from the utility of the bottle cap functioning as a bottle cap. The importer made a bottle cap that appeals to children as an article of amusement or diversion.

The SippaTops are not full bottles and cannot be mistaken for full-bodied representation of the characters. They are clearly bottle tops, which are plastic lids. But, at least to me, diversion is a pretty low threshold. The Michelangelo Teenage Mutant Ninja Turtle SippaTop seen above is designed, marketed, and no doubt functions as a diversion for children. By replacing a normal bottle top, with an entertaining and diverting one, parents can encourage kids to drink. That is useful, but not so useful, at least to my mind, to outweigh the diversion value of the item.

That said, this is a admittedly a close call. At some point, a bottle cap is a bottle cap. If this were a normal bottle cap simple painted with an eye-catching design, would it be a toy? No. But, that is not where we are. What we have are three dimensional, plastic forms that can be collected, traded, and (when the XBox is unavailable) treated like puppets. That strikes me as a toy of Heading 9503.


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