Tariff Classification: The Locked Inside Edition
In a previous chapter, the Court of International Trade classified keyed door knob assemblies in Heading 8301 as locks. Read about that opinion here. The Court of Appeals for the Federal Circuit took a different approach and held that the merchandise is a composite good consisting of a lock of Heading 8301 and knobs, which are base metal mountings or fittings of Heading 8302. Read about that here. The correct classification of the whole assembly, therefore, depends on the element that imparts the essential character. See General Rule of Interpretation 3(b).
Determining essential character requires that the Court make findings of fact, which is not something that Courts of Appeals ever want to do. Consequently, this case is back at the Court of International Trade. It landed with Judge Reif, who continues his welcome practice of adding some literary color to the controversy. In this case, he likens the classification to Alice's adventure down the rabbit hole.
The Court took multiple sources into consideration to reach a decision on essential character. First, it looked at commercial and industrial standards. This might be less about essential character than determining common and commercial meaning, but that is a quibble. The issue came down whether the standards clearly state that entrance hardware like these knobsets are locks. There was conflicting evidence about whether the presence of a "dead locking latch bolt," which the imported merchandise contain, is indicative of a lock. In the end, the Court found that the relevant standards and the presence of the dead locking lack bolt did not favor one tariff heading over the other.
Marketing literature can be important to determining essential character because it indicates what the seller thinks is most important about the product and how that product is presented to customers. Here, the United States argued that Home Depot marketed these products as "locks." Home Depot's web site referred to these items as "keyed entry knobs." By comparison, interior door knobs without keys were described as "privacy knobs" and "privacy knobsets." In other parts of the website, the products were described as "keyed locks." Finally, the product packaging was also ambiguous as to the essential character.
The Court also looked at the installation instructions, which refer to the merchandise as "locks" and also as "knobsets." This was also true of the instructions for interior knobsets. Customer buying guides identify the merchandise as both "door locks" and as "door knobs."
After a side trip to the Federal Rules of Evidence, the Court admitted into evidence over a hearsay objection a secret internal document that could not be well described while maintaining its confidential status. In the end, the Court found this document to weigh in favor of the keyed lock providing the essential character.
Moving on to the quantitative elements of essential character, the Court looked to the weight, value, and surface area of the visible components. The components themselves contribute to different functions. The exterior knob, key cylinder, and keys contribute to the locking mechanism of Heading 8301. The interior knob assembly, strike plate, and latch bolt assembly do not and are indicative of Heading 8302. It turns out that these collections of components have approximately the same value, weight, and surface area, which may indicate why we seem to be heading down a proverbial rabbit hole.
Moving further down the hole, the Court considered the components values and weight compared to interior knobsets, which are not actually at issue in the case. From this comparison, the Court found only limited indication that the knob components comprise the essential character.
Next, the Court looked to function. This is where we get down to brass tacks. The plaintiff's argument is that the primary function of this merchandise is to latch the door closed and provide a mechanism to open it by turning the knob. According to the plaintiff, the lock is incidental and optional.
Defendant, on the other hand, points to the importance of the lock and key. Defendant noted that the consumer pays extra (albeit only about a dollar) for the keyed lock mechanism. This strikes me as important. When thinking about essential character, I often ask "Why did the consumer choose this item over another?" Thinking about exterior doors, the lock is critically important to me and maybe to most consumers who rely on the door and lock for household security. There is no interior door in my house that has a keyed lock, though several have the basic thumb-button privacy lock. The lock, it seems to me, distinguishes this product in a way that makes the weight and value of components less important. But my own experience as a consumer is not evidence, was not before the Court, and does not matter one whit.
Based on all of that analysis (which is 50 pages in length, you are welcome), the Court finds the most important function of these sets is provided by the knobs and not the locks. As a result, the proper classification is in HTSUS Heading 8302 as a base metal mounting or fitting.
Depending on how you look at things, that result may be curiouser and curiouser.
Classification can be a strange enterprise. Those of us who do it spend a lot of time and effort trying to align facts with detailed tariff language while staying within the General Rules of Interpretation. That process can be a rabbit hole. It can also be described, possibly not in a nice way, as "talmudic." Faus Group Inc. v. United States, 581 F.3d 1369, 1371 (Fed. Cir. 2009).
It might make us all a bit mad.
"But I don’t want to go among mad people," Alice remarked.
"Oh, you can’t help that," said the Cat: "we’re all mad here. I’m mad. You’re mad."
"How do you know I’m mad?" said Alice.
"You must be," said the Cat, "or you wouldn’t have come here.”
Alice in Wonderland