United States Court of Appeals for the Federal Circuit
05-1482
CUMMINS INCORPORATED
(formerly known as Cummins Engine Company),
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
Lawrence M. Friedman, Barnes, Richardson & Colburn, of Chicago, Illinois,
argued for plaintiff-appellant. With him on the brief were David G. Forgue and Ilya A.
Bakke.
Barbara S. Williams, Attorney in Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, United States Department of Justice, of
New York, New York, argued for defendant-appellee. With her on the brief were Peter D.
Keisler, Assistant Attorney General, and David M. Cohen, Director, of Washington, DC.
Of counsel on the brief was Beth C. Brotman, Office of Assistant Chief Counsel,
International Trade Litigation, United States Customs and Border Protection, of New
York, New York.
Appealed from: United States Court of International Trade
Judge Donald C. Pogue
United States Court of Appeals for the Federal Circuit
05-1482
CUMMINS INCORPORATED
(formerly known as Cummins Engine Company),
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
__________________________
DECIDED: July 17, 2006
__________________________
Before NEWMAN, MAYER, and RADER, Circuit Judges.
MAYER, Circuit Judge.
Cummins Inc. appeals the United States Court of International Trade’s grant of
summary judgment, which held that the crankshafts imported by Cummins into the
United States did not originate in Mexico and were not entitled to preferential treatment
under the North American Free Trade Agreement (“NAFTA”). Cummins Inc. v. United
States,
377 F. Supp. 2d 1365 (Ct. Int’l Trade 2005). We affirm.
Background
Under the United States’ tariff laws, products that “originate in the territory of a
NAFTA party” are entitled to preferential duty treatment. General Note 12(a)(ii),
Harmonized Tariff Schedule of the United States (“HTSUS”); see also
19 U.S.C. § 3332
(2000). One way a product may so originate is if it is “transformed in the territory” of a
NAFTA party. General Notes 12(b)(i)–(iv), HTSUS. One manner in which a good can
be transformed, as is relevant to this case, is by undergoing a “change in tariff
classification” “to subheading 8483.10 from any other heading.” General Notes
12(b)(ii)(A),12(t)/84.243(A), HTSUS. Here, Cummins contends that the crankshafts it
imports into the United States undergo such a tariff shift in Mexico from heading 7224 to
subheading 8483.10.30, and are thereby entitled to preferential duty treatment.
The facts surrounding the production of the crankshafts are undisputed.
Production begins in Brazil, where Krupp Metalurgica Campo Limpo creates a forging
having the general shape of a crankshaft. This forging is created from a closed-die
forging process, which involves forging alloy steel between matrices. After forging, the
excess material that was squeezed out of the matrices, called “flash,” is removed by a
process called trimming. The trimming is done on a separate machine within
approximately ten seconds of the forging press operation. Because the process of
trimming can distort the forging, the forging is then coined. Coining involves applying
pressure to the forging, which is still hot and malleable, in a closed die. After coining,
the forging is subjected to shot blasting. Shot blasting uses abrasive particles to strike
the surface of the forging to remove dirt and oxide from its surface. The forging is then
cooled, and its ends are milled so that it can be securely clamped into machines in
Mexico for final machining operations. The last manufacturing process performed in
Brazil is mass centering, in which the forging’s center of balance is determined and
locator center points are machined into each end.
After these processes are performed in Brazil, the forging is imported into Mexico
by Cummins de Mexico, S.A. (“CUMMSA”), a wholly owned subsidiary of Cummins. As
05-1482 2
imported, the forging has the general shape of, but cannot yet function as, a crankshaft.
After importation into Mexico, CUMMSA performs at least fourteen different steps on the
forging that cover over 95% of its surface area resulting in a useable crankshaft, which
Cummins imports into the United States. It is undisputed that the crankshaft imported
into the United States is classifiable under subheading 8483.10.30 of the HTSUS, which
covers “[t]ransmission shafts (including camshafts and crankshafts) and cranks . . . .”
The Court of International Trade addressed nearly identical facts in an earlier
case involving the same crankshafts. Cummins Engine Co. v. United States,
83 F.
Supp. 2d 1366 (Ct. Int’l Trade 1999) (“Cummins I”). The crankshaft manufacturing
process there was nearly identical to the one here, except that a grease pocket was
milled into the forging in Brazil. The court held that machining the grease pocket in
Brazil precluded classification under heading 7224 upon importation in Mexico, because
it was further working the product beyond roughly shaping it by forging.
After Cummins I, Cummins filed for an amended advance ruling letter from the
United States Customs and Border Protection (“Customs”), based on the grease pocket
being machined in Mexico instead of Brazil. Despite the change in the manufacturing
process, Customs determined that the crankshafts did not originate in Mexico.
Crankshafts Processed in Mexico from Forgings of Brazilian Origin; Originating Goods
Under NAFTA, Ruling 964019 (Dec. 13, 2000). Prior to issuing its decision, Customs
submitted the question to the World Customs Organization (“WCO”), which issued a
classification opinion, approved by the member states 31 to 1, determining that the
proper classification of the forgings imported into Mexico was under heading 8483, not
heading 7224. Classification of Certain Forgings for Crank Shafts, Doc. No. NC0317E1
05-1482 3
(Oct. 10, 2000), available at Amendments to the Compendium of Classification Opinions
Arising from the Classification of Certain Forgings for Crank Shafts in Subheading
8483.10, Doc. No. NC0379E1 at 3 (March 8, 2001). However, Customs did not
expressly rely upon the WCO decision in denying Cummins preferential treatment.
In response to Customs’ advance letter ruling, Cummins filed an action in the
Court of International Trade under
28 U.S.C. § 1581(h).1 While that action was
pending, Cummins imported into the United States a test shipment of three finished
crankshafts marked as originating in Mexico, which Customs classified under
subheading 8483.10.30, HTSUS. Cummins protested this classification, arguing that
the proper classification was (MX)8483.10.30.2 After protesting Customs’ classification
of the test shipment, Cummins filed an action under
28 U.S.C. § 1581(a). The trial court
consolidated the two actions, but later found the section 1581(h) action moot in light of
the one under section 1581(a).
The court determined on summary judgment that the articles imported into
Mexico were properly classified under subheading 8483.10.30, not heading 7224, and
accordingly did not undergo a tariff shift and were not entitled to preferential treatment
under NAFTA. Cummins appeals the trial court’s grant of summary judgment, and we
have jurisdiction under
28 U.S.C. § 1295(a)(5).
1
Under
28 U.S.C. § 1581(h), the Court of International Trade may review
pre-importation Customs’ rulings if the party commencing the action demonstrates that
“he would be irreparably harmed unless given an opportunity to obtain judicial review
prior to such importation.”
2
The prefix “MX” signifies that the article is a product of Mexico, and is
accorded preferential treatment pursuant to NAFTA.
05-1482 4
Discussion
We review the trial court’s grant of summary judgment on tariff classifications de
novo. Gen. Elec. Co. – Med. Sys. Group v. United States,
273 F.3d 1070, 1071 (Fed.
Cir. 2001) (citation omitted). A classification decision involves two underlying steps:
determining the proper meaning of the tariff provisions, which is a question of law; and
then determining which heading the disputed goods fall within, which is a question of
fact. Universal Elecs. v. United States,
112 F.3d 488, 491 (Fed. Cir. 1997) (citing Intel
Sing., Ltd. v. United States,
83 F.3d 1416, 1417-18 (Fed. Cir. 1996)). However, when
the nature of the merchandise is undisputed, as it is here, the classification issue
collapses entirely into a question of law. Gen. Elec. Co.,
273 F.3d at 1071 (citing
Bausch & Lomb, Inc. v. United States,
148 F.3d 1363, 1366 (Fed. Cir. 1998)). Although
our review is de novo, we accord deference to a Customs’ classification ruling in
proportion to its “power to persuade” under the principles of Skidmore v. Swift & Co.,
323 U.S. 134 (1944). United States v. Mead Corp.,
533 U.S. 218 (2001); Mead Corp. v.
United States,
283 F.3d 1342, 1345-46 (Fed. Cir. 2002) (citations omitted). In addition,
“Customs’ relative expertise in administering the tariff statute often lends further
persuasiveness to a classification ruling, entitling the ruling to a greater measure of
deference.” Mead Corp.,
283 F.3d at 1346.
It is undisputed that the crankshafts imported into the United States are properly
classified under subheading 8483.10.30. The disputed issue is whether the crankshafts
undergo a tariff shift in Mexico. That is, do the crankshafts enter Mexico under a
different tariff heading than they leave Mexico? The trial court concluded that the
crankshafts do not undergo a tariff shift as they are classified under subheading
05-1482 5
8483.10.30 upon import into and export out of Mexico. Cummins contends that this
classification was error, and the proper classification of the product upon import into
Mexico is under heading 7224, which covers “[o]ther alloy steel in ingots or other
primary forms; semifinished products of other alloy steel.”
“The General Rules of Interpretation (GRI) govern the classification of goods
within the HTSUS.” Hewlett-Packard Co. v. United States,
189 F.3d 1346, 1348 (Fed.
Cir. 1999). Under GRI 1, the classification “shall be determined according to the terms
of the headings and any relevant section or chapter notes.” As noted above, Cummins
contends that the goods imported into Mexico are properly classified as “semifinished
products of other alloy steel” under heading 7224. Chapter 72’s notes expressly define
“semifinished,” in pertinent part, as “products of solid section, which have not been
further worked than . . . roughly shaped by forging, including blanks for angles, shapes
or sections.” Chapter 72, Note 1(ij), HTSUS. Thus, if the product imported into Mexico
has been further worked beyond being roughly shaped by forging, it does not fall within
heading 7224. The parties dispute the meaning of the term “further worked.”
Cummins relies on Additional U.S. Note 2 to Chapter 72, which defines “further
worked” as subjecting the product to one of several expressly listed surface treatments.3
3
Additional U.S. Note 2 to Chapter 72, HTSUS provides:
For the purposes of this chapter, unless the context
provides otherwise, the term “further worked” refers to
products subjected to any of the following surface
treatments: polishing and burnishing; artificial
oxidation; chemical surface treatments such are [sic]
phosphatizing, oxalating and borating; coating with
metal; coating with nonmetallic substances (e.g.,
enameling, varnishing, lacquering, painting, coating
with plastics materials); or cladding.
(first emphasis added).
05-1482 6
It is undisputed that none of these surface treatments are performed in Brazil, and
Cummins contends that so long as none of these specific operations are performed
prior to importation into Mexico, the product has not been “further worked.” The trial
court rejected this argument in Cummins I, and we do so now.
The definition of “further worked” in Chapter 72 is expressly inapplicable where
“the context provides otherwise.” Here, to read the term “further worked” as referring to
only these specific treatments would lead to a nonsensical result. In particular, this
definition would render the phrase “than . . . roughly shaped by forging” meaningless
and contravene the well-established principle that a statute should be construed “if at all
possible, to give effect and meaning to all the terms.” Bausch,
148 F.3d at 1367.
Absent an applicable express definition or contrary legislative intent, we must
construe the term “further worked” “according to [its] common and commercial
meanings, which are presumed to be the same.” Carl Zeiss, Inc. v. United States,
195
F.3d 1375, 1379 (Fed. Cir. 1999) (citing Simod Am. Corp. v. United States,
872 F.2d
1572, 1576 (Fed. Cir. 1989)). Here, the plain meaning of “further worked,” when read in
context, means working the product beyond the point of roughly shaping it by forging.
The trial court, relying in part on Winter-Wolff, Inc. v. United States,
996 F. Supp. 1258,
1265 (Ct. Int’l Trade 1998) (construing “further worked” in the context of subheading
7607.11.30), defined “further worked” more precisely as “to form, fashion, or shape an
existing product to a greater extent.” We agree that this definition is suitable in the
context before us.
Here, the product was forged and then trimmed, coined, shot blasted, milled, and
mass centered in Brazil. Cummins suggests that these are steps within the “forging
05-1482 7
process.” However, the relevant language is not “further worked beyond the forging
process” but “further worked than roughly shaped by forging.” The government cites
evidence that the act of forging is understood in the industry as being distinct from the
additional operations performed by Cummins in Brazil. In particular, the Forging
Handbook provides that trimming occurs “[u]pon completion of the forging operation.”
Forging Handbook Forging Industry Association, Forging Handbook 153 (Thomas G.
Byrer 1985). This handbook also describes coining as a “finishing operation.” Id. at
155; see also Product Design Guide for Forging 110, 140 (Forging Indus. Assoc.)
(describing coining as a “finishing operation” to improve dimensional accuracy and
expressly defining it as a “post-forging” process). Significantly, Cummins agreed that
trimming (and hence every step thereafter) takes place “after forging.” Moreover, milling
the ends of the forging product is outside of the forging process and constitutes working
the product beyond roughly shaping it by forging, namely forming, fashioning, or
shaping it to a greater extent. Thus, the product imported into Mexico from Brazil
cannot be classified under heading 7224.
Although the Explanatory Notes to the HTSUS are not controlling, see, e.g.,
Rocknel Fastener, Inc. v. United States,
267 F.3d 1354, 1360 (Fed. Cir. 2001),
Cummins relies on them in arguing that the goods imported into Mexico are only rough
forgings. In particular, Cummins relies upon an Explanatory Note to heading 72.07,
which applies mutatis mutandis to heading 7224.4 Based on this note, Cummins
4
The Explanatory Note to heading 7207 provides the following discussion
under the caption “pieces roughly shaped by forging”:
These are semi-finished products of rough appearance and
large dimensional tolerances, produced from blocks or ingots
by the action of power hammers or forging presses. They
05-1482 8
contends that the product imported into Mexico requires considerable further shaping,
and has therefore only been roughly shaped by forging without being further worked in
Brazil. As noted above, however, the evidence supports that “forging” is a discrete
process from the additional steps performed in Brazil, and the forged product was
further worked in Brazil.
We agree with the trial court that the forging is properly classified under heading
8483 upon importation into Mexico. GRI 2(a) provides that “[a]ny reference in a heading
to an article shall be taken to include a reference to that article incomplete or unfinished,
provided that, as entered, the incomplete or unfinished article has the essential
character of the complete or finished article.” GRI 2(a), HTSUS. In addition, the
Explanatory Notes to GRI 2(a) provide that this rule applies “to blanks unless these are
specified in a particular heading. The term ‘blank’ means an article, not ready for direct
use, having the approximate shape or outline of the finished article or part, and which
can only be used, other than in exceptional circumstances, for completion into the
finished article . . . .” Explanatory Note II to GRI 2(a). Here, the product imported into
Mexico had the general shape of a crankshaft and was intended for use only in
may take the form of crude recognisable shapes in order that
the final article can be fabricated without excessive waste,
but the heading covers only those pieces which require
considerable further shaping in the forge, press, lathe, etc.
The heading would, for example, cover an ingot roughly
hammered into the shape of a flattened zig-zag and
requiring further shaping to produce a marine crankshaft, but
would not cover a crankshaft forging ready for final
machining. The heading similarly excludes drop forgings and
pressing produced by forging between matrices since the
articles produced by these operations are ready for final
machining.
Explanatory Note to Heading 72.07 (emphasis in original).
05-1482 9
producing a finished crankshaft. In fact, certain operations done in Brazil, such as
milling the forgings’ ends, were done solely to simplify the operations in Mexico in
completing the crankshaft. As such, the forged product imported into Mexico was
properly classified under subheading 8483.10.30. Accordingly, it did not undergo a tariff
shift and was not entitled to preferential treatment under NAFTA when imported into the
United States.
Finally, Cummins contends that the trial court erred by improperly relying upon
the WCO classification opinion. While such an opinion is not given deference by United
States courts, it can be consulted for its persuasive value, if any. Cf. Sanchez-Llamas
v. Oregon, 548 U.S. ___, Nos. 04-10566, 05-51, slip op. at 17-21 (June 28, 2006)
(rejecting the argument that U.S. courts are obligated to comply with interpretations of
the Vienna Convention by the International Court of Justice (“ICJ”)); Corus Staal BV v.
Dep’t of Commerce,
395 F.3d 1343, 1349 (Fed. Cir. 2005) (observing that World Trade
Organization decisions are accorded no deference); Timken Co. v. United States,
354
F.3d 1334, 1343-44 (Fed. Cir. 2004). The Supreme Court has rejected any notion of
deference or obligation to a foreign tribunal’s decisions. In so doing, it observed, “If
treaties are to be given effect as federal law under our legal system, determining their
meaning as a matter of federal law ‘is emphatically the province and duty of the judicial
department,’ . . . .” Sanchez-Llamas, slip op. at 19 (quoting Marbury v. Madison,
1
Cranch 137, 177 (1803)). Like the ICJ’s interpretation of the treaty terms in Sanchez-
Llamas, the WCO opinion is not binding and is entitled, at most, to “respectful
consideration.”
Id. It is not a proxy for independent analysis.
05-1482 10
Here, the court accorded no deference to either the WCO opinion or the
categorization by Mexico’s Customs authority. Instead, it independently construed
“further worked,” based solely on the tariff terms and the principles set forth in the GRIs,
and consulted the WCO opinion and Mexican categorization only as persuasive
authority. The court properly construed the statutory terms as they are written. See
Corus Staal,
395 F.3d at 1349; cf. Suramerica de Aleaciones Laminadas, C.A. v. United
States,
966 F.2d 660, 668 (Fed. Cir. 1992) (“While we acknowledge Congress’s interest
in complying with U.S. responsibilities under the GATT, we are bound not by what we
think Congress should or perhaps wanted to do, but by what Congress in fact did.”).
Conclusion
Accordingly, the judgment of the United States Court of International Trade is
affirmed.
AFFIRMED
05-1482 11
