CIT: Tools of Trade Are Not for Sale

This is the last post covering cases from 2021. I can't say I am sad about seeing the end of 2021. Thank you all for reading my posts here and following me on Twitter. Here’s hoping all of you have a happy, safe, and professionally satisfying new year. 

The case of the day is Porsche Motorsport North America, Inc. v. United States, in which the plaintiff sought to secure duty-free entry for certain merchandise under HTSUS item 9801.00.85, which covers “[p]rofessional books, implements, instruments, and tools of trade, occupation, or employment, when returned to the United States after having been exported for use temporarily abroad, if imported by or for the account of the person who exported such items.”

The items in question were vehicle parts exported from the U.S. to Canada by Porsche in a trailer to be stationed at Porsche team racing events in Canada. According to Porsche, it exported the trailer to "promote the Porsche brand" by providing parts to participants in the races. Notably, the participants would repair their own vehicles after purchasing parts from the Porsche trailer; it does not appear that Porsche employees were doing any mechanical work. 

When the trailer returned to the United States, minus the parts sold in Canada and plus additional parts "replenished" from German, Porsche asserted that the previously exported parts were entitled to duty-free entry under 9801.00.85. Customs disagreed and assessed duties, fees, and interest of $122,605. Porsche unsuccessfully protests and ended up in the Court of International Trade. Customs did not assess duty on the "workshop tool inventory" contained in the trailer, which was a collection of tools available for use by the racing teams.

After an allusion to the customs-law aspects of Bizet's Carmen, the Court unpacked the text of item 9801.00.85. Specifically, the Court noted the phrase "of trade, occupation, or employment" is not grammatically "tethered" to "books, implements, or instruments." In other words, "tools of trade, occupation, or employment" stands as its own category in this tariff item. 

I can see that, but it raises some questions. Note, for example, that there is no semicolon in this item, which is the normal means by which the HTSUS separates categories of merchandise in a single heading or item. Heading 4202, for example covers two distinct groups of products. First, trunks, suitcases, and similar containers. Second, travel bags and other items of leather or of other specified materials. There is a semicolon dividing these categories. In 9801.00.85, it seems that the "and" between professional books etc. on the one hand and tools of trade on the other hand is performing the function of the semicolon. That supports the Court's reading that "tools of trade, occupation, or employment" stands on its own, distinct from "[p]rofessional books, implements, instruments."

But the construction remains odd. If "professional books, implements, instruments" is a distinct category, we would expect there to be an "and" inserted in the list before "instruments." There would also be no need for the comma following "instruments," as that would be the end of the first list. That editing would make the item read: “Professional books, implements, and instruments and tools of trade, occupation, or employment, when returned to the United States after having been exported for use temporarily abroad, if imported by or for the account of the person who exported such items.”

Another question addressed by the Court is the impact of the word "professional." Specifically, whether it modifies only "books" or also "implements" and "instruments." Porsche argued for the more limited reading. The Court invoked the "series-qualifier canon" to hold that "professional" modifies all three terms. 

To determine whether the inventory parts constitute professional books or implements, the Court considered the meaning of "professional" in the context of Porsche's business, which is to sell automobiles (including race cars), parts, and tools. A "profession," on the other hand is technically work that requires special training, including those that require a formal qualification. If I recall from law school, the traditional professions include doctors, lawyers, academics, and clergy. No doubt engineers, architects and others fall into the professions. But, according to the Court, the practice of selling cars and parts is not a "profession" within the meaning of the HTSUS item.

Here, Porsche sent the parts to Canada to sell them. Given the conclusion that sales is not a profession, then the merchandise cannot be professional implements or instruments. Moreover, those terms apply to technical and precise goods. Here, the merchandise included not particularly precision items such as brake fluid, o-rings, and clamps. Thus, Porsche appears to be lacking a profession as well as instruments and implements.

But a "trade, occupation, or employment" need not be a profession and "tools of trade," etc. are also included under 9801.00.85. Here, the problem for Porsche is not whether being an automotive mechanic is a "trade," it undoubtedly is a "skilled manual occupation" requiring training. The problem is that mechanics generally do not sell their tools. By their very nature, tradespeople rely on their tools to practice their trades. 

More directly, the fact that the Porsche inventory of parts was offered for sale indicates that the exports were not "for use temporarily abroad." That's the nub of the problem. Useful examples of where 9801.00.85 applies include the old-fashioned medical bag, surveyors' kits, and toolkits for mechanics. In all these cases, and similar situations, the tools are exported to allow someone to provide professional services (e.g., medical treatment) or to perform some skilled trade (e.g., fixing a vehicle) abroad. After the services are performed, the professional implements or tools of trade are returned to the U.S. 

Tariff provisions offering exceptions from duty are construed strictly. Thus, importers making claims under 9801.00.85 and similar provisions may be required to prove up all of the required elements. In this case, the Court found the goods were not professional implements, tools of trade, or other of the items specified in the tariff item. The Court therefore, entered judgment in favor of the United States and dismissed the case.