HTSUS Snippets and Fragments

 For the most part, the Harmonized Tariff Schedule of the United States has an internal logic and consistent format that eases navigation. Most of us who work with the HTSUS can easily communicate about Sections, Chapters, Headings, and Subheadings. There is, however, the occasional need to talk about the fragments of text that are neither subheadings, nor tariff items, nor statistical breakouts. They are the un-numbered lines. Take, for example, 8504.90, the subheading for parts of electrical transformers and similar products. 

8504.90 is the subheading. The first tariff item below the subheading is 8504.90.20 covering printed circuit assemblies that fit within the scope of the un-numbered language between 8504.90 ("Parts") and 8504.90.20 ("Printed circuit assemblies"). There are two more of these un-numbered subdivisions below 8504.90.41.

Normally, this oddity would not merit any discussion. For classification purposes, it is pretty clear that these un-numbered snippets of text limit and define the scope of what follows indented below. That is not controversial. 

However, the legal impact of those un-numbered categories did merit discussion from the Court of International Trade in Spirit Aerosystems, Inc. v. United States, which is a drawback case. "Drawback" is the procedure of requesting a refund of duties paid on previously imported merchandise because it has been destroyed or exported from the United States. There are many variations on this involving, for example, goods used in manufacturing and goods exported without having been used. Under "substitution drawback," claimants are permitted to match duty-paid imports to other exports or destroyed merchandise provide the goods are sufficiently similar.

Normally, exported or destroyed merchandise is eligible to be substituted for unused merchandise drawback purposes when it falls within the same 8-digit subheading as required by statute (19 USC 1313(j)(2)(A)). However, this rule does not apply where the 8-digit tariff item begins with "other," unless the imported merchandise and the exported or destroyed merchandise are classified in the same 10-digit statistical number. 

The "statistical reporting numbers" in the example above are the 00, 10, and 30. This level of detail has traditionally been used for economic analysis and reporting, with no impact on duty. However, they have become increasingly relevant as, for example, Section 301 duties may vary at the 10-digit level. 

In this case, Spirit imported aircraft parts under tariff item/statistical reporting number 8803.30.0030. The item 8803.30.00 covers, "Other parts of airplanes or helicopters." That "Other" means the exception to the 8-digit rule applied. Below that is the un-numbered line "For use in civil aircraft." Indented below that are two statistical breakouts at 15, "For use by the Department of Defense or the United States Coast Guard," and 30, "Other."

Here is how it looks (in the 2020 version relevant to this case):


Customs denied Spirit's drawback claims because 8803.30.00 starts with "Other" and Spirit did not prove that the exported or destroyed merchandise was in the same 10-digit breakout as the imported merchandise. Spirit argued that the "For use in civil aircraft" snippet, which the Court refers to as "numerically unaligned text," is the 10-digit level that covers statistical breakouts 15 and 30. This makes perfect sense when you look at the HTSUS above and see that the breakout at 60 for "Other" is at the same level as the numerically unaligned text.

If the indents mean anything, that text is the 10-digit level and the lines at the indented level below are within the unaligned text. Right?

Despite the elegance of this simple argument, the Court was not convinced. According to the Court, the plain meaning of the drawback statute is that the 10-digit level is the text adjacent to the statistical suffix, regardless of its level of indent. That means civil aircraft parts for use by the DOD or Coast Guard are not interchangeable with "Other" parts for use in civil aircraft. 

As a result, the Court granted summary judgment to the United States, ending the case (at least at this level).

 

Comments

Post a Comment

Popular posts from this blog

Ruling of the Week 2015.8: Old Jersey and Pitcairn Island

Image
For today's ROTW, I set out looking for a ruling dealing with some far off and preferably warm location. Turns out that, with the exception of coastwise transit issues, there are no Customs and Border Protection rulings involving Pitcairn Island or any of several Pacific Ocean microstates including Tuvalu , Niue , and Kiribati . Pitcairn Island What I did find is an interesting question about the country of origin marking for products of the Bailiwick of Jersey Island, Channel Islands. The ruling is HQ 561938 (Mar. 18, 2002). For those of you who may not know, Jersey is an island off the coast of Normandy, France. It is an independent international actor and not part of the U.K. although the U.K. is responsible for its defense and external relations. Also, the Queen is the Head of State in her capacity as "the Crown in Right of Jersey." It is, according to the U.S. Department of State, a " Crown Dependency " along with the Isle of Man and the Bailiwick o...
Read more

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

Ninestar and UFLPA Exhaustion

Image
Exhaustion is a key doctrine in administrative law. When applicable, it requires that a party unhappy with an agency’s determination complete the administrative appeal process before turning to the courts for judicial review. Requiring exhaustion typically promotes judicial efficiency by ensuring that disputes are resolved at the agency and, if they are not, that there is a complete record of the agency process. Exhaustion also ensures that the judiciary respects the executive agencies and their expertise.  There are, on the other hand, times when the courts will find that exhaustion is not necessary or appropriate. Such is the case in  Ninestar Corporation et al. v. United States  et al., a decision of the U.S. Court of International Trade.  Ninestar is also interesting because it is one of the first cases in the CIT involving the Uyghur Forced Labor Prevention Act, known as UFLPA. In my hiatus from active blogging, I missed the rise of UFLPA as a major compliance t...
Read more