Excavating Tariff Classifications

A common error in tariff classification is to assume that some doodad used in or with a machine is necessarily classified as part of that machine. That is not always the case, which is why it is important to check the "relative" Chapter and Section Notes. For example, Section XVI, Note 2(a) states, that "Parts which are goods included in any of the headings of chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings . . . ." That means, for example, that a valve of Heading 8481 will usually be classified as a valve without regard to the machine into which it is assembled. The heading for the valve prevails over, for example, 8431, which covers "Parts suitable for use solely or principally with the machinery of headings 8425 to 8430." The latter including goods of Heading 8429, meaning "Self-propelled bulldozers, angledozers, graders, levelers, scrapers, mechanical shovels, excavators, shovel loaders, tamping machines and road rollers," which is really the topic of this post.

In Norca Engineered Products, LLC v. United States, the Court of International Trade classified cast-iron counterweights for self-propelled mini excavators. There was no dispute that the mini excavators are machines of Heading 8429. Moreover, the weights, which are used on the excavators to prevent them from rolling over are classifiable as parts of the machines classifiable in Heading 843. That means the weights are classifiable in subheading 8431.49 as "other" parts of these machines and then in 8431.49.90 as "other parts." 

Typically, that would resolve the case. Legally, tariff classification is complete at the 8-digit level. The additional two-digit statistical suffix is often (but not always) a compliance afterthought because the suffix does not usually impact duties, taxes, and fees. These, however, are not typical days in customs law as the Section 301 duties imposed on products from China continue to raise issues. Here, the statistical suffix controls whether the merchandise is within the scope of an exclusion from Section 301 duties.

If the counterweights are parts of "backhoes," they are classifiable in 8431.49.9044 and not excluded from Section 301 duties. If, as plaintiff contends, the counterweights are parts of "other machines" of 8429, they are excluded from Section 301. That means the resolution turns on the nature of the finished machines, which are Doosan Bobcat mini excavators.


Source: Product Brochures - Bobcat Company

So, when is a backhoe a backhoe? According to the United States, a backhoe is a mechanical excavator that has a bucket and an arm the extends and excavates by drawing the bucket back toward the power unit. That seems to describe the product based on the picture. But Norca pointed to a number of commercial sources including John Deere, Caterpillar, and CASE Construction Equipment to show that the commercial understanding of backhoe is distinct from an excavator. 

Normally, the Court interprets the HTSUS consistent with the common and commercial meaning and those are presumed to be the same. If one side argues that a more specific commercial meaning is intended to prevail over the common meaning, that party has to meet a higher burden. Norca tried to do that with evidence of the commercial understanding that backhoes do not have the ability to rotate through 360 degrees, which these machines can do. 

The Court did not buy this argument because, according to the decision, the HTSUS provides for backhoes with 360-degree rotation. This follows because HTSUS subheading 8429.51 covers excavators of the front-loading type. Subheading 8429.52 covers non-front-loading excavators and segregates them into two distinct groups: those that can rotate 360 degrees and those that cannot. That group is then further broken down into backhoes, shovels, clamshells and draglines. Of those, the only possible classification is "backhoes," which means Norca's assertion that backhoes cannot rotate is incorrect.

Given that the machine in question is a backhoe, the counterweights are parts of backhoes of 8429, they are classified in 8431.49.9044, making them subject to the Section 301 duties.


Comments

Post a Comment

Popular posts from this blog

CAFC Decision in Double Invoicing Case

The Federal Circuit has issued a decision on the merits in United States v. Inn Foods, Inc.  There had been a previous decision on jurisdiction, which was followed by a trial at the Court of International Trade and then this appeal on the substance. The initial issue is whether Inn Foods' invoicing practice amounts to fraud.  Inn Foods had been receiving an invoice from growers in Mexico that had a relatively low sales prices on it.  Subsequent to entry, Inn Foods created a second invoice at something more similar to market value, retaining the original invoice number, and paid at that higher amount.   Superficially, this looks like a standard-issue double-invoicing scheme.  But, in the age of reconciliation, is it really more like a provisional pricing mechanism?  It might have been possible to make that argument had Inn Foods adjusted its entries accordingly.  It didn't and the loss of revenue was approximately $624,000.  Based on testimony and evidence indicating both knowl
Read more

Target on Finality

Image
In the last post , about the Federal Circuit’s very important decision on due process and allegations of evasion of antidumping duties, I made a snarky, offhand comment that the government believes “liquidation is magic.” That was in the context of the government arguing that Customs’ liquidation of entries mooted an appeal, thereby taking away the importer’s right to further judicial review. I said that knowing full well that I still needed to write this post summarizing Target Corp. v. United States in which Target made what I want to be a valid and righteous argument that Customs’ improper liquidation of entries at a favorable rate of antidumping duty prevents the Court of International Trade from ordering Customs to collect the legally applicable duties. But it turns out that while liquidation is an important legal step, in at least one unusual circumstance it is not sufficiently powerful to overcome the full force of an Article III court. Understanding this case requires a lot
Read more

CAFC: EAPA Process Really Does Violate Due Process

Image
Hot on the heels of my complaining about how the EAPA law and process is stacked against importers, the Court of Appeals for the Federal Circuit has issued an important decision that will have a major impact on how those cases work. If you are unfamiliar with evasion cases under the Enforce and Protect Act and how Customs and Border Protection handles them, go back and look at these two posts: Part 1 , Part 2. Royal Brush Manufacturing, Inc. v. United States , is the decision in an evasion case against Royal Brush involving pencils allegedly transshipped from China through the Philippines. Customs determined that there was evasion of an antidumping duty order based in part on evidence that was not disclosed to Royal. Specifically, Customs sent a representative to the facility in the Philippines to photograph the interior and provide a report. Customs refused to disclose all the photographs to Royal. Moreover, CBP's report concluded that the facility did not have sufficient capacit
Read more