Alcan Food Packaging (Shelbyville) v. United States

United States Court of Appeals
for the Federal Circuit
______________________
ALCAN FOOD PACKAGING (Shelbyville),
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2014-1003
______________________
Appeal from the United States Court of International
Trade in No. 09-CV-0095, Senior Judge Judith M. Barzi-
lay.
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Decided: November 18, 2014
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WILLIAM RANDOLPH RUCKER, Drinker Biddle & Reath
LLP, of Chicago, Illinois, argued for plaintiff-appellant.
AIMEE LEE, International Trade Field Office, Com-
mercial Litigation Branch, Civil Division, United States
Department of Justice, of New York, New York, argued
for defendant-appellee. With her on the brief were
STUART F. DELERY, Assistant Attorney General, JEANNE
E. DAVIDSON, Director, and AMY M. RUBIN, Acting Assis-
tant Director, International Trade Field Office. Of coun-
sel on the brief was PAULA SMITH, Office of Assistant
2 ALCAN FOOD PACKAGING v. US
Chief Counsel, United States Customs and Border Protec-
tion, of New York, New York.
______________________
Before PROST, Chief Judge, DYK and TARANTO, Circuit
Judges.
TARANTO, Circuit Judge.
This case involves a dispute over whether a flexible
multilayer sheet, composed of several plastic layers
encasing a single aluminum layer, should be classified
under (a) a plastics heading or (b) an aluminum-foil
heading of the Harmonized Tariff Schedule of the United
States (HTSUS). The Court of International Trade classi-
fied the product, called Flexalcon, under HTSUS subhead-
ing 3921.90.40—“Other plates, sheets, film, foil and strip,
of plastics: Other: flexible.” Alcan Food Packaging (Shel-
byville) v. United States, 929 F. Supp. 2d 1338, 1351 (Ct.
Int’l Trade 2013). We affirm, concluding that Flexalcon
comes within that heading and that the competing alumi-
num-foil heading defers to the applicable plastics heading.
BACKGROUND
In 2005 and 2006, Alcan Food Packaging (Shelbyville)
imported Flexalcon, an aluminum-plastic laminate foil
made to be used for food packaging with stringent shelf-
life requirements, such as packaging for the United States
military’s Meals Ready to Eat (MREs). The Flexalcon at
issue is a flat, multi-layer material that comes in two
configurations: a four-layer material for the base of a
package and a three-layer material for the lid. Each
configuration has a thin layer of aluminum foil sand-
wiched between layers of plastic.
The aluminum layer serves an important barrier
function. It substantially prevents the penetration of
light, water vapor, oxygen, and other harmful contami-
nants that would degrade the packaging’s food contents.
ALCAN FOOD PACKAGING v. US 3
J.A. 750, 757. The plastic too serves important functions.
It gives the packaging tensile strength during production,
processing, and in the final product. See J.A. 591–92. It
increases heat resistance so that the packaging can
withstand the sterilization and sealing processes. Id. It
allows the package to be hermetically sealed to protect the
food within. Id. And it substantially prevents cracking,
piercing, and pinhole formation in expected use—all
common problems with thin aluminum foils like the foil
used in Flexalcon. J.A. 318–19, 618. All of these proper-
ties, both those imparted by aluminum and those due to
plastic, are important for meeting the military’s require-
ments for flexible food packaging. J.A. 759–79.
When Alcan imported the Flexalcon at issue, it listed
the material as classifiable under HTSUS subheading
7607.20.50. That heading carries no duty rate and covers
“[a]luminum foil (whether or not printed, or backed with
paper, paperboard, plastics or similar backing materials)
of a thickness (excluding any backing) not exceeding
0.2 mm: Backed: Other.” The Bureau of Customs and
Border Protection subsequently notified Alcan that it had
reclassified the imports of Flexalcon under HTSUS sub-
heading 3921.90.40. That heading has a 4.2% duty rate
and covers “[o]ther plates, sheets, film, foil and strip, of
plastics: Other: Flexible.” Alcan protested under 19
U.S.C. §§ 1514–1515. After the protests were denied,
Alcan filed suit in the Court of International Trade under
28 U.S.C. § 1581(a), arguing for classification under
subheading 7607.20.50.
On July 25, 2013, the Court of International Trade
upheld the classification on cross-motions for summary
judgment. The dispute was and is entirely over HTSUS
headings 3921 and 7607, not over subheadings within
those headings. The court held that heading 3921 sup-
plies the proper classification.
4 ALCAN FOOD PACKAGING v. US
The court concluded that both headings cover some
composites of plastic and aluminum. Alcan, 929 F. Supp.
2d at 1346–48. Drawing from the accompanying chapter
and explanatory notes, the court held that such compo-
sites could be classified under heading 3921 “provided
they retain their essential character as articles of plas-
tics,” id. at 1346, and under 7607 “provided that they do
not . . . assume the character of articles or products of
other headings,” id. at 1347. The court therefore analyzed
Flexalcon to determine its “essential character,” examin-
ing “ ‘the nature of the material or component, its bulk,
quantity, weight [and] value, [and] the role of a constitu-
ent material in relation to the use of the goods.’ ” Id. at
1348 (quoting Explanatory Note to General Rule of Inter-
pretation 3(b)). It found that “the plastic layers predomi-
nate in terms of ‘bulk, quantity, weight [and] value.’ ” Id.
at 1349. And with respect to the relationship between
constituent materials and Flexalcon’s intended use, the
court ruled that “both materials (plastic film and alumi-
num foil) are indispensable to the functioning of Flexal-
con.” Id. Based on that analysis, the court ultimately
concluded that “Flexalcon does retain the character of
plastic and does not assume the character of aluminum
foil.” Id. at 1350 (“[T]he plastic layers provide the con-
stituent materials that permit military field rations to be
distributed in the form of soft, lightweight packages.”)
Accordingly, the court held that Flexalcon was properly
classified under heading 3921 (specifically, under HTSUS
subheading 3921.90.40). Id. at 1352.
Alcan timely appealed, arguing that Flexalcon is
backed aluminum foil as described in heading 7607, that
aluminum gives Flexalcon its essential character, and
that heading 7607 therefore is the proper classification.
This court has jurisdiction under 28 U.S.C. § 1295(a)(5).
ALCAN FOOD PACKAGING v. US 5
DISCUSSION
We review de novo the Court of International Trade’s
decision to grant summary judgment. StoreWALL, LLC v.
United States, 644 F.3d 1358, 1361 (Fed. Cir. 2011).
Classifying goods under the HTSUS is a two-step process:
ascertaining the meaning of heading terms; determining
whether the imported merchandise comes within those
terms. Id. at 1361–62. The first step presents an issue of
law we decide de novo, the second an issue of fact subject
to review for clear error. Id. at 1362. The “essential
character” of merchandise is a fact-intensive issue. See
Home Depot U.S.A., Inc. v. United States, 491 F.3d 1334,
1337 (Fed. Cir. 2007); Better Home Plastics Corp. v.
United States, 119 F.3d 969, 971–72 (Fed. Cir. 1997).
“The HTSUS scheme is organized by headings, each of
which has one or more subheadings; the headings set
forth general categories of merchandise, and the subhead-
ings provide a more particularized segregation of the
goods within each category.” Wilton Indus., Inc. v. United
States, 741 F.3d 1263, 1266 (Fed. Cir. 2013). “The classi-
fication of merchandise under the HTSUS is governed by
the principles set forth in the GRIs [(General Rules of
Interpretation)] and the Additional U.S. Rules of Inter-
pretation.” Id. We apply the GRIs in numerical order; if
a particular rule resolves the classification issue, we do
not look to subsequent rules. CamelBak Prods., LLC v.
United States, 649 F.3d 1361, 1364 (Fed. Cir. 2011).
GRI 1 says, in relevant part, that “classification shall
be determined according to the terms of the headings and
any relative section or chapter notes.” When GRI 1 does
not resolve the issue of “classification of goods consisting
of more than one material or substance,” GRI 2(b) re-
quires application of “the principles of rule 3.” Rule 3
states three rules for composite goods that prima facie fit
within multiple headings: first, the heading that more
specifically describes the goods applies, GRI 3(a); second,
6 ALCAN FOOD PACKAGING v. US
if no heading is more specific, then the goods are “classi-
fied as if they consisted of the material or component
which gives them their essential character,” GRI 3(b);
third, if the first two options fail to decide the issue, the
goods are classified under the applicable heading that
occurs last in numerical order, GRI 3(c).
This case involves the composite material Flexalcon,
which is made of laminated layers of aluminum and
plastic. The initial question, following GRI 1, is whether
Flexalcon is classifiable according to the headings and
notes under either heading 3921 or 7607. Concluding
that this heading analysis resolves the issue, we do not go
on to the GRI 3 analysis.
Heading 3921 covers “[o]ther plates, sheets, film, foil
and strip, of plastics.” This use of “other” refers to, and
thus gathers meaning from, what comes before. Heading
3920 reaches “[o]ther plates, sheets, film, foil and strip, of
plastics, noncellular and not reinforced, laminated, sup-
ported or similarly combined with other materials.” The
implication is that heading 3921 covers relevant “other”
plastic goods excluded from 3920 by the phrase after
“plastics”—that is, it covers plastic goods that either are
cellular or are “reinforced, laminated, supported or simi-
larly combined with other materials.”
Note 10 to Chapter 39, which is part of the statute, see
19 U.S.C. § 1202, makes clear that such multi-material
goods may not be “further worked”: it says that 3920 and
3921 cover the specified plastic goods “whether or not
printed or otherwise surface-worked, uncut or cut into
rectangles (including squares) but not further worked.”
But given that the combined heading language of 3920
and 3921 itself makes clear that 3921 includes plastics
laminated with other materials, lamination cannot consti-
tute further working. See Alcan, 929 F. Supp. 2d at 1350–
51. And Alcan points to nothing but lamination as the
ALCAN FOOD PACKAGING v. US 7
alleged further working. The “further working” provision
is therefore inapplicable here.
The General Explanatory Note to Chapter 39 provides
additional confirmation that heading 3921 covers plastics
laminated with aluminum foil. We have said that such
explanatory notes, though not enacted by Congress, “are
‘generally indicative’ of the proper interpretation of a
tariff provision,” and we have “credited the unambiguous
text of relevant explanatory notes absent persuasive
reasons to disregard it.” Drygel, Inc. v. United States, 541
F.3d 1129, 1134 (Fed. Cir. 2008) (quoting Degussa Corp. v.
United States, 508 F.3d 1044, 1047 (Fed. Cir. 2007)).
Here, the relevant explanatory note to Chapter 39 states
that the chapter includes “[p]lates, sheets, etc., of plastics,
separated by a layer of another material such as metal
foil” as long as such goods “retain the essential character
of plastics.” (Emphasis added.)
The Court of International Trade in this case carefully
analyzed Flexalcon to determine its “essential character.”
Alcan, 929 F. Supp. 2d at 1348–50. It found that plastic
predominates in Flexalcon according to traditional
measures like bulk, quantity, weight, and value. Id. at
1349. It found that plastic and aluminum are both indis-
pensable to Flexalcon’s use in food packaging. Id. It
determined that plastic gives Flexalcon its strength and
flexibility, qualities that define Flexalcon as a product.
Id. at 1350. On those bases, the court found that “Flexal-
con does retain the essential character of plastic.” Id.; see
id. at 1348. We find no error in those determinations, and
Alcan has not objected to resolution of the issues on
summary judgment, without a trial.
For all of the foregoing reasons, Flexalcon comes with-
in heading 3921 as properly understood.
Our conclusion is not altered by heading 7607, which
covers “[a]luminum foil (whether or not printed or backed
with paper, paperboard, plastics or similar backing mate-
8 ALCAN FOOD PACKAGING v. US
rials) of a thickness (excluding any backing) not exceeding
0.2 mm.” Note 1(d) to Chapter 76, which is part of the
statute, provides a two-part clarification, stating that
heading 7607 “appl[ies], inter alia, to plates, sheets, strip
and foil with patterns . . . and [1] to such products which
have been perforated, corrugated, polished or coated, [2]
provided that they do not thereby assume the character of
articles or products of other headings.” (Bracketed num-
bers added.) The first part of that clarification is rein-
forced by the (nonstatutory) General Explanatory Note to
Chapter 76: that note incorporates part of the General
Explanatory Note to Chapter 72 (covering iron and steel
products), which explains that “finished products may be
subjected to further finishing treatments,” including
“coating with ceramics or plastics” and “[l]amination.”
But the second part of the clarification, limiting the first,
is critical here: it says that heading 7607 covers the
specified composite products “provided that they do not
thereby assume the character of articles or products of
other headings.” That is a priority rule, giving priority to
another heading that covers the composite product.
That rule decides the dispute here. Alcan affirmative-
ly relies on Chapter Note 1(d) to bolster its argument for
heading 7607 coverage of aluminum laminated with
plastic, and it therefore acknowledges, as it must, that
Chapter Note 1(d) limits coverage of such products under
heading 7607 to goods that do not assume the character of
products of another heading. Alcan Opening Br. 12.1
1 Alcan Opening Br. 12 (“Heading 7607 covers all
forms of aluminum foil, even improved forms (e.g., coated,
backed, or laminated), so long as the foil does not assume
the character of articles or products of other headings.
See Chapter 76, Note 1(d).”); id. at 21–22 (“Here, the
applicable section and chapter notes direct classification
of the Flexalcon under Heading 7607 pursuant to GRI 1.
ALCAN FOOD PACKAGING v. US 9
Once we have concluded that heading 3921 applies to
Flexalcon, we must find heading 7607 inapplicable. Even
if heading 7607 otherwise applied, Note 1(d) establishes
that the composite product is outside heading 7607 when
it assumes the character of an article covered by another
heading—in this case, heading 3921.
Alcan argues that Flexalcon comes within heading
7607 because it is aluminum foil “backed” with plastic.
But even if “backing” is broad enough to include foils
laminated with plastic on both sides, the argument does
not help Alcan. It does nothing to avoid Note 1(d)’s priori-
ty rule, which applies to products that otherwise come
within heading 7607, including those “backed with . . .
plastics.” As noted, Alcan concedes that Note 1(d) applies
to products, like Flexalcon, that are coated, laminated, or
backed. Because Flexalcon assumes the character of
plastic goods in heading 3921, Note 1(d) requires its
classification under that heading. And once heading 3921
applies, Alcan does not dispute the choice of subheadings.
CONCLUSION
For the foregoing reasons, we affirm the judgment of
the Court of International Trade.
AFFIRMED
Specifically, HTSUS Chapter 76 Note 1(d) clarifies that
this heading applies to foil products which have been
further processed, ‘provided that they do not thereby
assume the character of articles or products of other
headings.’ ”).