Lamenting Litigation

Sometimes, a seemingly simple proposition is not easy to prove in federal court. Such is the case with the tariff classification of Ziploc bags.

First, a note to intellectual property lawyers. Ziploc is a registered trademark of SC Johnson & Sons. I am not using it as a generic description. Rather, it is the actual product at issue in the Court of International decision SC Johnson & Sons v. United States. I am not going to say "brand" or insert a registered trademark symbol ® throughout my text. Let's just all agree that when I say "Ziploc" I mean plastic bags that are products of SC Johnson & Sons.

On its face, one would expect that the classification of these common items under the Harmonized Tariff Schedule of the United States would be a relatively straight-forward proposition. In fact, I am surprised there is a controversy at all.

There are two potential HTSUS heading. Heading 3923 covers: "Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics." Ziploc bags are arguably articles for packing goods such as sandwiches, potato chips, and other items tucked into a sack lunch. The also have many other hand uses. Personally, I put my phone, drivers license, and a $20 bill in a Ziploc or similar bag and stick it in my jersey pocket every time I go for a bike ride. Ziploc and similar bags are also handy for non-TSA Pre-Check packing of 3-ounce liquids. In all cases, I am packing some item or items and conveying them from one place to another. Even if I just us a Ziploc bag to collect loose change (as I do), I am arguably packing those things away for later use.

Heading 3924 covers: "Tableware, kitchenware, other household articles and hygienic or toilet articles, of plastics." Ziploc bags reside in the same drawer of my kitchen where you would find aluminum foil and plastic wrap. These bags find many uses in the kitchen including storage of otherwise loose items in the refrigerator, freezer, and pantry. 

Based on my experience and understanding of the English language, both of these headings describe the article. The question is which is the legally correct classification.

Usually, when there are two headings that both prima facie describe an article, the resolution is fairly easy. In that circumstance, General Rule of Interpretation 3(a) tells us that the most specific description is the one that prevails. The more specific description is generally understood to be the one that has conditions that are harder to satisfy or that covers the fewer number of items. 

This case, however, has an added complexity. While Heading 3924 is a list of items described by name (e.g., tableware and kitchenware), Heading 3923 is a description of items by use (e.g., articles for the conveyance or packing of goods). Thus, to decide whether there really are two headings applicable, the Court of International Trade had to determine whether Ziploc bags are used is a manner consistent with the articles of Heading 3923. If the bags are not of the class or kind of articles that are most commonly used in a manner consistent with the heading description, then they are not classifiable in both headings and the rule of relative specificity is inapplicable.

Classifying a product on the basis of use is, unfortunately, no simple task. The law is such that the Court of International Trade is to review seven factors that indicate use:

[1] use in the same manner as merchandise which defines the class; [2] the general physical characteristics of the merchandise; [3] the economic practicality of so using the import; [4] the expectation of the ultimate purchasers; [5] the channels of trade in which the merchandise moves; [6] the environment of the sale, such as accompanying accessories and the manner in which the merchandise is advertised and displayed; and [7] the recognition in the trade of this use.
Doing that, requires evidence, not just legal arguments about the scope and meaning of the headings. In this case, the Court concluded that it did not have enough evidence to perform a use analysis and, therefore, ordered that the case be tried.

So, we have no conclusion on the classification of Ziploc bags.

Is this the right or a good result? Honestly, I am concerned that setting this case down for a trial is going to make what is likely already an expensive case even more expensive and time consuming. Is there another way to get to the right result, whatever that may be?

There is a legal "rule of thumb" that a classification based on use is more specific than an eo nomine classification naming the item. If that rule is followed, then the goods should be classified in 3923, the use provision. See, e.g., Totes, Inc. v. United States. The problem with that is that GRI 3(a) says there is only a question of relative specificity if the two headings are equally applicable. It seems that can only be the case after we know that the item is classifiable in the use provision. So that does not really help at this stage. This may explain why the Court did not reach a conclusion.

Rather than a trial, the Court could also have held open the motions for summary judgment and asked for additional briefing on the open questions of fact. The Court acknowledged that it has information concerning the physical characteristics of the bags, actual consumer use of the bags, and consumer expectation of the bags. What is missing? Is there, for instance, deposition testimony on channels of trade or acceptance in the trade of this use? If not, perhaps a short period of limited discovery on the specific open questions followed by new briefs would help resolve the matter. There is nothing wrong with a trial, but the actual recitation of testimony in front of a judge in open court may be more than is needed to get this one done and in the books.

This is something I think about a lot. Customs classification cases are too expensive and often too complicated to be economically justifiable. A lot of this has to do with discovery and trial preparation that is rarely dispositive of the case. More often than not, the case turns on the interpretation and scope of the headings rather than the nature of the imported item. In those cases, no amount of deposition testimony, marketing literature, or internal Customs memoranda will change how the judge reads the statute.

This is not one of those cases that turns on a question of law. The Court is saying that it lacks evidence for facts specifically necessary to perform the required analysis. I get that. Still, how hard should it be to classify a Ziploc bag? Essentially every American knows what they are and how they are used. Is it going to be necessary for SC Johnson to hire a pollster to design a rigorous poll to determine consumer expectations regarding Ziploc bag usage? It seems to me, and this is just me opining rather than a statement of law, that the rules and procedure are making this more complicated and expensive than is should be. Maybe not every classification brought to the Court needs to be a full-blown federal case.

Years ago, the practice at the Customs Court was to place every denied protest on the Court's docket. Judges would periodically show up at ports and, when requested, review the protest decisions in open court. It is my understanding that there was no discovery and little to prepare. I imagine the practice was much like traffic court is today. I think I am feeling nostalgic for a practice I never actually knew.


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