How the Sausage Casing is Made
Continuing my effort to catch up on 2017 customs decision from the Court of International Trade, we come to Kalle USA, Inc. v. United States. For lots of reasons, I am going to treat this carefully. First and foremost, this is a case litigated by my law firm. As far as I know, this is not final, and I will not say anything about the matter that is not consistent with the position we advanced in the CIT. On top of that, I have a case pending before the Court that raises similar issues. Therefore, this post is just the facts and just the conclusions of law.
Kalle imports lay-flat tubes that are layers of plastic and textile materials. The long edge of the tube is sealed with glue. These tubes are used as casings for sausages and sometimes cheese. There are two versions of the casing at issue. For the majority of the merchandise, the textile is about 140 micrometers compared to 20 micrometers for the plastic. The textile value is € 0.96/165 cm compared to € 0.73/165 cm for the plastic. The textile allows the casing to transmit dyes and aromas to the encased food. The textile remains visible in the finished product and provides strength and shape. The plastic prevents moisture loss by filling the spaces between textile fibers.
Kalle believes the merchandise should be classified as a plastic tube of Heading 3917. The United States believes that the correct classification is in Heading 6307 as an other made up article.
According to the Court, this case can be resolved under General Rule of Interpretation 1 by an application of the relative Section and Chapter Notes, without recourse to essential character or relative specificity under GRI 3.
There are a lot of notes in play here. Most important is that Chapter 39, Note 1 states that “plastics” does not apply to textile materials of Section XI. Consistent with that, Chapter 39, Note 2(p) excludes from that chapter, goods of Section XI including textiles and textile articles. So, if the casings are textile articles of Section XI, they are excluded from Chapter 39.
Looking to Section XI, we find Note 1(h), which excludes, among other things, woven, knitted, or crocheted fabrics impregnated, coated, covered, or laminated with plastics, or articles thereof, of Chapter 39. However, because this note only applies to materials “of chapter 39,” the Court looked to the notes applicable to Chapters 56 and 59 for guidance on distinguishing between articles of Chapter 39 and those of Section XI. If, according to the Court, Section Note 1(h) were intended to be all encompassing, the clarifying notes of Chapter 56 and 59 would not be necessary. Given that they exist, they must have some meanings. Further, these notes are referenced in the Explanatory Notes as a means of distinguishing products of Chapter 39. Thus, the Court applied these notes to define products of Chapter 39, which would be excluded from Section XI.
Having determined the analytical approach, the Court turned to the question raised by these notes: is the textile material “completely embedded, impregnated, coated, covered or laminated with plastic?” If so, it is a plastic of Chapter 39 and excluded from Section XI.
On this question, the parties had different interpretations of the legal standard. Kalle argued that the plastic layer on one side of the textile embeds or coats the textile material. The Court, looking to dictionary definitions, disagreed. The Court held that to qualify for this exclusion from Section XI, the plastic must be on both sides of the textile, not just one.
That was pretty much it for Kalle. To clean up the loose ends, the Court also noted that gluing the two sides of the tube constitutes assembly sufficient to qualify the product as a made up article. The Court also found that the textile was present in the plastic as more than merely reinforcing material. The textile added desirable functional characteristics.
Taken all together, this GRI 1 analysis lead the Court of International Trade to conclude that the combined plastic and textile sausage/cheese casing is best classifiable in Heading 6307 as an other made up article.
Kalle imports lay-flat tubes that are layers of plastic and textile materials. The long edge of the tube is sealed with glue. These tubes are used as casings for sausages and sometimes cheese. There are two versions of the casing at issue. For the majority of the merchandise, the textile is about 140 micrometers compared to 20 micrometers for the plastic. The textile value is € 0.96/165 cm compared to € 0.73/165 cm for the plastic. The textile allows the casing to transmit dyes and aromas to the encased food. The textile remains visible in the finished product and provides strength and shape. The plastic prevents moisture loss by filling the spaces between textile fibers.
Kalle believes the merchandise should be classified as a plastic tube of Heading 3917. The United States believes that the correct classification is in Heading 6307 as an other made up article.
According to the Court, this case can be resolved under General Rule of Interpretation 1 by an application of the relative Section and Chapter Notes, without recourse to essential character or relative specificity under GRI 3.
There are a lot of notes in play here. Most important is that Chapter 39, Note 1 states that “plastics” does not apply to textile materials of Section XI. Consistent with that, Chapter 39, Note 2(p) excludes from that chapter, goods of Section XI including textiles and textile articles. So, if the casings are textile articles of Section XI, they are excluded from Chapter 39.
Looking to Section XI, we find Note 1(h), which excludes, among other things, woven, knitted, or crocheted fabrics impregnated, coated, covered, or laminated with plastics, or articles thereof, of Chapter 39. However, because this note only applies to materials “of chapter 39,” the Court looked to the notes applicable to Chapters 56 and 59 for guidance on distinguishing between articles of Chapter 39 and those of Section XI. If, according to the Court, Section Note 1(h) were intended to be all encompassing, the clarifying notes of Chapter 56 and 59 would not be necessary. Given that they exist, they must have some meanings. Further, these notes are referenced in the Explanatory Notes as a means of distinguishing products of Chapter 39. Thus, the Court applied these notes to define products of Chapter 39, which would be excluded from Section XI.
Having determined the analytical approach, the Court turned to the question raised by these notes: is the textile material “completely embedded, impregnated, coated, covered or laminated with plastic?” If so, it is a plastic of Chapter 39 and excluded from Section XI.
On this question, the parties had different interpretations of the legal standard. Kalle argued that the plastic layer on one side of the textile embeds or coats the textile material. The Court, looking to dictionary definitions, disagreed. The Court held that to qualify for this exclusion from Section XI, the plastic must be on both sides of the textile, not just one.
That was pretty much it for Kalle. To clean up the loose ends, the Court also noted that gluing the two sides of the tube constitutes assembly sufficient to qualify the product as a made up article. The Court also found that the textile was present in the plastic as more than merely reinforcing material. The textile added desirable functional characteristics.
Taken all together, this GRI 1 analysis lead the Court of International Trade to conclude that the combined plastic and textile sausage/cheese casing is best classifiable in Heading 6307 as an other made up article.
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