Tradewind Farms, Inc. v. United States

Slip Op. 07-62

UNITED STATES COURT OF INTERNATIONAL TRADE

:

TRADEWIND FARMS, INC., :

:

Plaintiff, :

: Before: Richard K. Eaton, Judge

v. :

: Court No. 04-00642

UNITED STATES, :

:

Defendant. :

:

OPINION

[Plaintiff’s motion for summary judgment denied. Defendant’s

cross-motion for summary judgment granted. Case dismissed.]

Dated: April 30, 2007

Hume & Associates, PC (Robert T. Hume and Akil A. Vohra), for

plaintiff.

Peter D. Keisler, Assistant Attorney General; Barbara S.

Williams, Attorney-in-Charge, International Trade Field Office,

Commercial Litigation Branch, Civil Division, United States

Department of Justice (Edward F. Kenny); Beth C. Brotman, Office

of the Assistant Chief Counsel, International Trade Litigation,

United States Customs and Border Protection, of counsel, for

defendant.

Eaton, Judge: This matter is before the court on plaintiff

Tradewind Farms, Inc.’s (“Tradewind”) motion for summary judgment

and the cross-motion for summary judgment of defendant the United

States on behalf of the Bureau of Customs and Border Protection

(“Customs”). Each motion is made pursuant to USCIT Rule 56.

Court No. 04-00642 Page 2

By its motion, plaintiff seeks judgment, as a matter of law,

that Customs has erroneously classified its merchandise under

subheading 3923.10.00 of the Harmonized Tariff Schedule of the

United States (“HTSUS”)1 as “[a]rticles for the conveyance or

packing of goods, of plastics; stoppers, lids, caps and other

closures, of plastics: [b]oxes, cases, crates and similar

articles,” subject to a 3% tariff ad valorem. Plaintiff asserts

that classification of its merchandise is proper under the duty-

free HTSUS actual use subheading 9817.00.50 as “implements to be

used for agricultural or horticultural purposes.”2 See Mem. P. &

A. Supp. Pl.’s Mot. Summ. J. 1 (“Pl.’s Mem.”).

By its cross-motion, the United States seeks a judgment

sustaining Customs’s classification of the merchandise. See

Def.’s Mem. Opp’n Pl.’s Mot. Summ. J. & Supp. Def.’s Cross-Mot.

Summ. J. 8 (“Def.’s Mem.”).

1

All citations to the HTSUS refer to the 2003 version.

2

Plaintiff’s complaint initially sought the review of

two denied protests, numbers 2704-04-100587 and 2704-04-102812.

At oral argument, counsel for plaintiff represented that it would

no longer pursue the challenge to protest number 2704-04-100587

for merchandise entered between March 18, 2003, and April 15,

2003. See Pl.’s Mem. Resp. Ct.’s Order (Dec. 5, 2006)

(confirming, in writing, that plaintiff no longer sought review

of Customs’s denial of protest number 2704-04-100587). Thus, all

that remains to be decided is plaintiff’s challenge to the denial

of its September 29, 2004, protest number 2704-04-102812.

Court No. 04-00642 Page 3

Jurisdiction lies pursuant to 28 U.S.C. § 1581(a) (2000).

Because the court finds that plaintiff failed to satisfy the

notice of intended use requirements found in HTSUS Chapter 98 and

Customs’s regulations, it denies plaintiff’s motion for summary

judgment. Additionally, the court finds that the KIT 2000 is

properly classified under HTSUS 3923.10.00; grants defendant’s

cross-motion for summary judgment; and dismisses this case.

BACKGROUND

The following facts are not in dispute. Plaintiff is an

importer of the “Model Kit 2000” (“KIT 2000”), which is a “clear

polyethylene teraphalate . . . clamshell container manufactured

with strategically placed vents, weighing 78 grams and measuring

280mm x 184mm x 130mm” imported from Italy. Pl.’s Mem. 2; see

also Def.’s Resp. Pl.’s Statement Material Facts Not in Issue 2

(“DRPF”). A clamshell container “is a container whose top or lid

is attached on one side so that the user can fill the device and

when completed, can flip the top to seal the device.” Pl.’s

Statement Material Facts Not in Dispute 1 (“PSMF”); DRPF 2.

In April and July of 2001, plaintiff self-classified and

entered shipments of the KIT 2000 under HTSUS 9817.00.50 as

implements used for an agricultural or horticultural purpose.

See Pl.’s Mem. 17; Def.’s Mem. 24 n.12. These entries are not

Court No. 04-00642 Page 4

the subject of this action. Customs disputed plaintiff’s 2001

self-classification and found that the KIT 2000 was properly

classified as an article for the conveyance or packing of goods

under HTSUS 3923.10.00. See NY Ruling I89645 (Jan. 6, 2003).

Plaintiff then filed requests with Customs, seeking

reconsideration of its ruling. Each request resulted in a

written denial. See NY Ruling J83824 (May 7, 2003); see also HQ

966955 (Sept. 15, 2004).

Plaintiff continued to import the KIT 2000, with the subject

entries being made at the port of Los Angeles, California on

September 29, 2003. See Summons of Dec. 14, 2004. The entry

documents reveal that plaintiff self-classified the September 29,

2003, entries as articles for the conveyance or packing of goods

under HTSUS 3923.10.00. See Def.’s Mem., Ex. 8. In keeping with

plaintiff’s self-classification, Customs, on August 13, 2004,

liquidated the merchandise at the 3% ad valorem tariff rate. See

Summons of Dec. 14, 2004.

Plaintiff timely filed a protest pursuant to 19 U.S.C.

§ 1514(a) (2000) on September 29, 2004. See Summons of Dec. 14,

2004. Customs denied plaintiff’s protest on November 16, 2004.

See id.

The sole substantive dispute in this case is whether the KIT

2000 is actually used for an agricultural or horticultural

Court No. 04-00642 Page 5

purpose and thus may be classified under HTSUS 9817.00.50. The

primary procedural question is whether plaintiff has demonstrated

that it complied with the law and regulations relating to notice

of the intended use of the merchandise.

STANDARD OF REVIEW

Under USCIT Rule 56(c), granting summary judgment is proper

“if the pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that

the moving party is entitled to a judgment as a matter of law.”

USCIT R. 56(c). “Once it is clear there are no material facts in

dispute, a case is proper for summary adjudication.” AMKO Int’l,

Inc. v. United States, 22 CIT 1094, 1096, 33 F. Supp. 2d 1104,

1107 (1998). As this cases hinges on a pure question of law,

summary judgment is appropriate.

DISCUSSION

I. Agricultural Actual Use Provision - HTSUS 9817.00.50

A. Relevant Law

“The proper classification of merchandise entering the

United States is directed by the General Rules of Interpretation

(“GRIs”) of the HTSUS and the Additional United States Rules of

Court No. 04-00642 Page 6

Interpretation [(“AUSRI”)].”3 Orlando Food Corp. v. United

States, 140 F.3d 1437, 1439 (Fed. Cir. 1998). Under the GRIs:

Classification of goods in the tariff

schedule shall be governed by the following

principles:

1. The table of contents, alphabetical

index, and titles of sections, chapters

and sub-chapters are provided for ease

of reference only; for legal purposes,

classification shall be determined

according to the terms of the headings

and any relative section or chapter

notes . . . .

GRI 1. In other words, GRI 1 requires the court to “first

construe[] the language of the heading, and any section or

chapter notes in question, to determine whether the product at

issue is classifiable under the heading.” Orlando Food Corp.,

140 F.3d at 1440.

Plaintiff’s proposed HTSUS subheading is an actual use

provision, as it contains the phrase “to be used for.” See

Clarendon Mktg., Inc. v. United States, 144 F.3d 1464, 1467 (Fed.

Cir. 1998) (“The inclusion in this definition of the words ‘to be

used for’ makes classification under the . . . subheading

dependent upon the actual use of the merchandise . . . .”)

(citation omitted). This subheading is listed under Chapter 98

3

The Preface to the 15th Edition of the HTSUS states

that the GRIs and the AUSRIs are part of the schedule’s legal

text.

Court No. 04-00642 Page 7

of the HTSUS entitled “Special Classification Provisions.”

Pursuant to U.S. Note 1 of HTSUS Chapter 98:

1. The provisions of this chapter are not

subject to the rules of relative

specificity in general rule of

interpretation 3(a). Any article which

is described in any provision in this

chapter is classifiable in said

provision if the conditions and

requirements thereof and of any

applicable regulations are met.

HTSUS Ch. 98, U.S. Note 1 (emphasis added). In other words, if

merchandise is actually used for one of the enumerated purposes,

it will be classified under Chapter 98 no matter what its

classification would otherwise be, provided that certain

procedural requirements are met.

Because plaintiff’s desired classification is controlled by

the actual use of its merchandise, reference is made to AUSRI

1(b). This rule governs the interpretation of HTSUS subheadings

controlled by actual use, and states:

1. In the absence of special language or

context which otherwise requires . . .

(b) a tariff classification

controlled by the actual use to

which the imported goods are

put in the United States is

satisfied only if such use is

intended at the time of

importation, the goods are so

used and proof thereof is

furnished within 3 years after

the date the goods are entered.

Court No. 04-00642 Page 8

AUSRI 1(b) (emphasis added). Thus, if it hopes to succeed,

plaintiff must establish that it has satisfied the additional

requirements articulated in AUSRI 1(b), particularly the

requirement that the actual use is intended at the time of

importation.

By its regulations, Customs, in accordance with AUSRI 1(b),

provides for a three-part test:

When the tariff classification of any article

is controlled by its actual use in the United

States, three conditions must be met in order

to qualify for free entry or a lower rate of

duty unless the language of the particular

subheading of the [HTSUS] applicable to the

merchandise specifies other conditions. The

conditions are that:

(a) Such use is intended at the

time of importation.

(b) The article is so used.

(c) Proof of use is furnished

within 3 years after the date the

article is entered or withdrawn

from warehouse for consumption.

19 C.F.R. § 10.133 (2003). Again, of importance here is the

requirement that the intention to use the merchandise for a

particular purpose be present at the time of entry.

By regulation, Customs has set out the procedures with which

an importer must comply in order to demonstrate the intended use

of its merchandise. Pursuant to the regulation, an importer

Court No. 04-00642 Page 9

must, at the time of entry:

fil[e] with the entry for consumption or for

warehouse a declaration as to the intended

use of the merchandise, or . . . enter[]4 the

proper subheading of an actual use provision

of the [HTSUS] and the reduced or free rate

of duty on the entry form. Entry made under

an actual use provision of the HTSUS may be

construed as a declaration that the

merchandise is entered to be used for the

purpose stated in the HTSUS, provided that

the port director is satisfied the

merchandise will be so used. However, the

port director shall require a written

declaration to be filed if he is not

satisfied that merchandise entered under an

actual use provision will be used for the

purposes stated in the HTSUS.

19 C.F.R. § 10.134. Thus, under this regulation it is not

sufficient that an importer intend a particular use for its

merchandise, it must demonstrate that intention at the time of

entry by following specific procedures.

B. Compliance with Actual Use Regulations

Plaintiff contends that its protest of Customs’s

classification decision regarding the KIT 2000 satisfied the

requirements of the actual use regulations set forth in 19 C.F.R.

4

It is worth noting that the regulation is in the

alternative. Thus, if plaintiff believed that, because of

Customs’s ruling letter, it was required to self-classify its

merchandise under HTSUS 3923.10.00, it could still have complied

with the regulation by filing a declaration of intended use at

the time of importation.

Court No. 04-00642 Page 10

§§ 10.131–.138. See Pl.’s Mem. Resp. Def.’s Cross-Mot. Summ. J.

8 (“Tradewind Farms has always intended that the entries should

properly be entered under 9817.00.50 and has demonstrated this

through its protests . . . .”). Tradewind takes this position

even though it is undisputed that: (1) it did not file a

declaration of intended use when it entered the subject

merchandise under HTSUS 3923.10.00 as “[a]rticles for the

conveyance or packing of goods, of plastics; stoppers, lids, caps

and other closures, of plastics: [b]oxes, cases, crates and

similar articles”; and (2) it did not enter the KIT 2000 under an

actual use provision. See Pl.’s Mem. 17–18; Def.’s Mem. 23–24.

In other words, plaintiff insists that, while it neither

filed a declaration of intended use nor entered its merchandise

under an actual use provision, its protest of Customs’s

classification of its merchandise evidenced its intention to

actually use the KIT 2000 for an agricultural or horticultural

purpose. Therefore, plaintiff appears to ask the court to find

that Customs erred by refusing to acknowledge the protest as

satisfying the declaration of intended use requirement contained

within 19 C.F.R. § 10.134.5

5

Plaintiff, however, makes no claim that the regulations

are an invalid interpretation of the HTSUS.

Court No. 04-00642 Page 11

Defendant maintains that plaintiff failed to satisfy 19

C.F.R. § 10.134 because it “classified the merchandise comprising

the entries listed in the summons for this matter, under HTSUS

Chapter 39 (Plastics and Articles Thereof) and not pursuant to

any actual use provision.” Def.’s Mem. 23–24 (footnote &

emphasis omitted). As a result, Customs argues that plaintiff

was required to file “with each entry at issue in this case a

declaration of intended use of the merchandise,” and did not do

so. Def.’s Mem. 24. Put another way, Customs claims that

plaintiff’s failure to file a declaration of intended use or to

enter its merchandise under the agricultural actual use provision

“is clearly fatal to its claim.” Def.’s Mem. 12.

When faced with a challenge to the interpretation of a

regulation, “[a]s a general rule, [the court] must defer to an

agency’s interpretations of the regulations it promulgates, as

long as . . . the agency’s interpretation is neither plainly

erroneous nor inconsistent with the regulation.” Gose v. U.S.

Postal Serv., 451 F.3d 831, 836 (Fed. Cir. 2006); see also Auer

v. Robbins, 519 U.S. 452, 461 (1997). That is, the court “must

defer to [Customs’s] interpretation unless an ‘alternative

reading is compelled by the regulation’s plain language or by

other indications of [Customs’s] intent at the time of the

regulation’s promulgation.’” Thomas Jefferson Univ. v. Shalala,

Court No. 04-00642 Page 12

512 U.S. 504, 512 (1994) (quoting Gardebring v. Jenkins, 485 U.S.

415, 430 (1988)).

The court cannot find in the language of the regulations any

indication that Customs intended that the filing of a protest

could be substituted for the specific notice procedures contained

therein. Nor can it elsewhere find any indication that such was

Customs’s intent. Under the regulations, an importer may satisfy

the requirement of notice of intended use in one of two ways:

first, by filing a separate declaration of intent with the agency

at the time it imports its merchandise; or second, the importer

may enter its merchandise pursuant to the actual provision.6

6

Even the second option, however, may result in the port

director requesting a written declaration. See J.E. Bernard &

Co., Inc. v. United States, 80 Cust. Ct. 111, 122 (1978). The

Customs Court in J.E. Bernard & Co. held than an importer may be

required to provide a written declaration of intended use even

absent a port director’s request. See J.E. Bernard & Co., 80

Cust. Ct. at 122. In that case, the importer entered its goods

under an actual use provision of the Tariff Schedule of the

United States (“TSUS”), the predecessor statute to the HTSUS.

Customs denied entry to the goods under the importer’s proposed

provision. The importer presented its entry documents containing

Customs’s denial of entry as evidence that it made known its

intent of actual use at the time the merchandise was entered.

Finding that evidence insufficient, the Customs Court stated:

[T]he entry . . . does have a rejected entry

attached to the entry papers indicating

plaintiff’s intent to have the merchandise

entered duty free . . . . However,

regulation 10.134 explicitly states that the

district director shall require a written

(continued...)

Court No. 04-00642 Page 13

Whichever option an importer chooses, the action must be made at

the time of entry. Thus, it is clear from the text of the

regulations that: (1) Customs intended that there be two forms of

notice of the intention to use merchandise for the purpose set

forth in plaintiff’s proffered HTSUS subheading; and (2) that

this actual notice be given at the time of importation.

It therefore cannot be found that plaintiff’s protest

satisfied the regulations. Here, the importer did not enter the

KIT 2000 under an actual use provision or make a written

declaration. Thus, plaintiff performed neither of the specific

acts set out in the regulation. In addition, the law and the

regulations make clear that the importer must have the intention

6

(...continued)

declaration of intent to be filed if he is

not satisfied that merchandise entered under

an actual provision will be used for the

purposes stated in the tariff schedules.

Since the district director apparently

rejected the entry under [the actual use

provision], it was incumbent upon plaintiff

to file a written declaration of intent

pursuant to regulation 10.134. And since

plaintiff failed to file such a declaration,

Customs again was not required to suspend

liquidation.

Id. The Customs Court analyzed the sufficiency of the importer’s

notice in accordance with the 1971 version of 19 C.F.R. § 10.134.

See id. at 121. The 1971 regulation is virtually identical to

the 2003 version, the only difference being Customs’s reference

to the then-in-force tariff schedule.

Court No. 04-00642 Page 14

to use its merchandise for a particular actual use at the time of

entry. A protest filed one year after entry is simply not

evidence of the presence of the necessary intention at the time

of entry.

As a result, because plaintiff has failed to satisfy the

threshold procedural requirement for classification of its

merchandise under HTSUS 9817.00.50, the court denies its motion

for summary judgment.7

II. Proper Classification Under HTSUS 3923.10.00

Having found that plaintiff did not follow the procedures

that would allow classification of its merchandise under HTSUS

9817.00.50., the court now turns to Customs’s classification of

the merchandise under HTSUS 3923.10.00 as “[a]rticles for the

conveyance or packing of goods, of plastics . . .: [b]oxes,

cases, crates and similar articles.” Customs’s classification is

entitled to a statutory presumption of correctness. See 28

U.S.C. § 2639(a)(1). As a result, for the court to grant an

importer’s request to classify its merchandise under a different

HTSUS subheading than that prescribed by Customs, the importer

7

Because plaintiff failed to comply with the actual use

regulations, the court declines to address the question of

whether the KIT 2000 serves an agricultural or horticultural

purpose.

Court No. 04-00642 Page 15

must satisfy its “burden of proving that the [government’s]

classification is incorrect.” Jarvis Clark Co. v. United States,

733 F.2d 873, 876 (Fed. Cir. 1984). Here, plaintiff has not

satisfied that burden of proof. In addition, Tradewind does not

dispute that, if its merchandise is not entitled to

classification under the actual use provision, HTSUS 3923.10.00

is the proper classification for the KIT 2000. See Pl.’s Resp.

DRPF 3 (“Admits that the primary classification for the imported

clamshell merchandise also known as the KIT 2000 is 3923.10.00

HTSUS . . . .”). As a result, the court sustains Customs’s

classification and grants defendant’s cross-motion for summary

judgment.

CONCLUSION

Based on the foregoing, the court denies plaintiff’s motion

for summary judgment; grants defendant’s cross-motion for summary

judgment; and dismisses this case. Judgment shall be entered

accordingly.

/s/Richard K. Eaton

Richard K. Eaton

Dated: April 30, 2007

New York, New York

UNITED STATES COURT OF INTERNATIONAL TRADE

:

TRADEWIND FARMS, INC., :

:

Plaintiff, :

: Before: Richard K. Eaton, Judge

v. :

: Court No. 04-00642

UNITED STATES, :

:

Defendant. :

:

JUDGMENT

This case having been duly submitted for decision; and the

court, after due deliberation, having rendered a decision herein;

Now therefore, in conformity with said decision, it is hereby

ORDERED that plaintiff’s motion for summary judgment is

denied;

ORDERED that defendant’s motion for summary judgment is

granted; and it is further hereby

ORDERED that this case is dismissed.

/s/Richard K. Eaton

Richard K. Eaton

Dated: April 30, 2007

New York, New York