Grk Canada, Ltd. v. United States

United States Court of Appeals
for the Federal Circuit
______________________
GRK CANADA, LTD.,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
______________________
2013-1255
______________________
Appeal from the United States Court of International
Trade in No. 09-CV-0390, Senior Judge Judith M. Barzi-
lay.
______________________
ON PETITION FOR REHEARING EN BANC
______________________
CRAIG E. ZIEGLER, Montgomery, McCracken, Walker
& Rhoads, LLP, of Philadelphia, Pennsylvania, filed a
petition for rehearing en banc for plaintiff-appellee.
JASON M. KENNER, Trial Attorney, International
Trade Field Office, Commercial Litigation Branch, Civil
Division, United States Department of Justice, of New
York, New York, filed a response for defendant-appellant.
With him on the response were JOYCE R. BRANDA, Acting
Assistant Attorney General, JEANNE E. DAVIDSON, Direc-
tor, and AMY M. RUBIN, Assistant Director. Of counsel on
the response was BETH C. BROTMAN, Office of the Assis-
2 GRK CANADA, LTD. v. US
tant Chief Counsel, International Trade Litigation, Unit-
ed States Bureau of Customs and Border Protection, of
New York, New York.
______________________
Before PROST, Chief Judge, NEWMAN, LOURIE,
CLEVENGER, 1 DYK, MOORE, O’MALLEY, REYNA, WALLACH,
TARANTO, and CHEN, Circuit Judges. 2
NEWMAN, Circuit Judge, dissents from the denial of
the petition for rehearing en banc without opinion.
REYNA, Circuit Judge, with whom WALLACH, Circuit
Judge, joins, dissents from the denial of the petition for
rehearing en banc.
WALLACH, Circuit Judge, with whom REYNA, Circuit
Judge, joins, dissents from the denial of the petition for
rehearing en banc.
PER CURIAM.
ORDER
A petition for rehearing en banc was filed by plaintiff-
appellee GRK Canada, Ltd., and a response thereto was
invited by the court and filed by defendant-appellant
United States. The petition was first referred as a peti-
tion for rehearing to the panel that heard the appeal, and
thereafter, the petition for rehearing en banc was referred
to the circuit judges who are authorized to request a poll
of whether to rehear the appeal en banc. A poll was
requested, taken, and failed.
Upon consideration thereof,
IT IS ORDERED THAT:
(1) The petition for panel rehearing is denied.
(2) The petition for rehearing en banc is denied.
GRK CANADA, LTD. V. US 3
(3) The mandate of the court will issue on December
15, 2014.
FOR THE COURT
December 8, 2014 /s/ Daniel E. O’Toole
Date Daniel E. O’Toole
Clerk of Court
1 Circuit Judge Clevenger participated only in the
decision on the petition for panel rehearing.
2 Circuit Judge Hughes did not participate.
United States Court of Appeals
for the Federal Circuit
______________________
GRK CANADA, LTD.,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
______________________
2013-1255
______________________
Appeal from the United States Court of International
Trade in No. 09-CV-0390, Senior Judge Judith M. Barzi-
lay.
______________________
REYNA, Circuit Judge, with whom WALLACH, Circuit
Judge, joins, dissenting from the denial of the petition for
rehearing en banc.
For the reasons set forth in GRK Canada, LTD. v.
U.S., 761 F.3d 1354, 1361–66 (Fed. Cir. 2014) (Reyna, J.,
dissenting), I respectfully dissent from this Court’s denial
of the petition for rehearing en banc.
United States Court of Appeals
for the Federal Circuit
______________________
GRK CANADA, LTD.,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
______________________
2013-1255
______________________
Appeal from the United States Court of International
Trade in No. 09-CV-00390, Senior Judge Judith M. Barzi-
lay.
______________________
WALLACH, Circuit Judge, with whom REYNA, Circuit
Judge, joins, dissenting from the denial of the petition for
rehearing en banc.
This court has consistently analyzed the headings of
the Harmonized Tariff Schedule of the United States
(“HTSUS”) by first determining whether the heading is
defined by name or by use, and then applying the corre-
sponding classification analysis. This analysis is required
not only by our case law, but by the HTSUS itself, a
statutory enactment that contains contrasting interpreta-
tive frameworks for each type of heading. Indeed, classi-
fication is governed by the General Rules of
Interpretation (“GRI”) and the Additional United States
Rules of Interpretation (“ARI”), which are part of the
2 GRK CANADA, LTD. v. US
HTSUS statute. BenQ Am. Corp. v. United States, 646
F.3d 1371, 1376 (Fed. Cir. 2011).
The majority opinion in GRK Canada, Ltd. v. United
States (GRK II), 761 F.3d 1354 (Fed. Cir. 2014), imper-
missibly departs from this required framework by incor-
porating elements of a use analysis into its analysis of an
eo nomine heading without providing a justification why
an exception should be made in this case. In doing so, the
majority opinion creates a conflict within our classifica-
tion cases and confuses what should be a pronounced
distinction between eo nomine and use headings. For
these reasons, this case should be reconsidered en banc. I
respectfully dissent from this court’s contrary ruling.
I.
The two distinct types of headings in the HTSUS, eo
nomine and use provisions, require different analyses.
Compare Kahrs Int’l, Inc. v. United States, 713 F.3d 640(Fed. Cir. 2013) (eo nomine analysis), with Aromont USA,
Inc. v. United States, 671 F.3d 1310 (Fed. Cir. 2012)
(principle use analysis). This court “consider[s] a HTSUS
heading or subheading an eo nomine provision when it
describes an article by a specific name.” CamelBak
Prods., LLC v. United States, 649 F.3d 1361, 1364 (Fed.
Cir. 2011); see also Black’s Law Dictionary 265 (9th ed.
2009) (The term “eo nomine” means “by or in that
name.”).
In an eo nomine analysis, the court first construes the
headings at issue as a matter of law by enumerating and
defining each named element of the headings; the court
then moves to the second classification step, a factual
inquiry, to determine whether the subject merchandise
fulfills each element of a properly-construed heading. See,
e.g., R.T. Foods, Inc. v. United States, 757 F.3d 1349 (Fed.
Cir. 2014); Link Snacks, Inc. v. United States, 742 F.3d
962 (Fed. Cir. 2014). By contrast, the ARIs govern classi-
fication of imported merchandise under use headings. In
GRK CANADA, LTD. v. US 3
a use analysis, the court first construes the headings at
issue by defining the uses of the goods described by the
heading as directed by ARI 1(a) for principal use headings
or by ARI 1(b) for actual use headings. For principal use
headings, the court then determines the principal use of
the subject merchandise by analyzing the goods using the
so-called Carborundum factors to determine whether they
fall within one of the headings. See, e.g., Aromont, 671
F.3d at 1313–14 (citing United States v. Carborundum
Co., 536 F.2d 373, 377 (CCPA 1976)).
Mindful of these distinctions, consideration of use in
an eo nomine analysis is an exception, and, indeed, a very
limited one. See Kahrs, 713 F.3d at 646 (Fed. Cir. 2013)
(“[W]e should not read a use limitation into an eo nomine
provision unless the name itself inherently suggests a
type of use.”) (emphasis added); see also Carl Zeiss, Inc. v.
United States, 195 F.3d 1375, 1379 (Fed. Cir. 1999) (“[A]
use limitation should not be read into an eo nomine provi-
sion unless the name itself inherently suggests a type of
use.”) (emphasis added).
Nonetheless, the majority opinion appears to question
our longstanding definition of eo nomine provisions when
it attributes the following quotation to the United States
Court of International Trade’s (“CIT”) opinion under
review: “[The CIT] noted that the subheadings were eo
nomine provisions and that, as such, they described ‘an
article by a specific name, not by use.’” GRK II, 761 F.3d
at 1356 (quoting GRK Can., Ltd. v. United States (GRK I),
884 F. Supp. 2d 1340, 1345 (Ct. Int’l Trade 2013)) (em-
phasis in original). However, the majority opinion fails to
acknowledge the CIT was directly and accurately quoting
this court’s case law. See GRK I, 884 F. Supp. 2d at 1345
(“The subheadings are eo nomine provisions, or more
simply, provisions ‘that describe[ ] an article by a specific
name, not by use.’”) (quoting Aromont, 671 F.3d at 1312)
(citing CamelBak, 649 F.3d at 1364). The CIT’s charac-
terization reflects how our cases define eo nomine provi-
4 GRK CANADA, LTD. v. US
sions—by distinguishing them from use provisions. See,
e.g., Aromont, 671 F.3d at 1312 (“[T]his heading is an eo
nomine provision, that is, a provision that describes an
article by a specific name, not by use.”) (emphasis added);
BASF Corp. v. United States, 497 F.3d 1309, 1315 (Fed.
Cir. 2007) (same); Carl Zeiss, 195 F.3d at 1379 (same).
Further, the majority opinion makes the following un-
settling declaration:
[U]se of subject articles may, under certain cir-
cumstances, be considered in tariff classification
according to eo nomine provisions. This may oc-
cur at the stage of establishing the proper mean-
ing of a designation when a provision’s name
“inherently suggests a type of use.” Or, once tariff
terms have been defined, it may be the case that
the use of subject articles defines an articles’ iden-
tity when determining whether it fits within the
classification’s scope.
GRK II, 761 F.3d at 1359 (quoting Carl Zeiss, 195 F.3d at
1379). Not only is this more permissive rule contrary to
our case law, it also blurs the distinction between the
legal question of what the subheadings cover—a pure
question of law analyzed in a vacuum without regard to
the particular merchandise involved in the case—and the
factual second step of determining whether the goods fall
within that properly-construed heading.
More troubling is the majority opinion’s explicit en-
dorsement of a use analysis and adoption of the ARIs in
the context of an eo nomine heading:
[U]se may be considered as part of the definition
of eo nomine provisions, where, even if the eo nom-
ine provision describes goods with respect to their
names, the name itself may “inherently suggest[ ]
a type of use.” . . . Classification of subject articles
may then need to reach the [ARIs], which distin-
GRK CANADA, LTD. v. US 5
guish the treatment of articles based on whether
tariff classifications are controlled by principal or
actual use.
Id. (quoting Carl Zeiss, 195 F.3d at 1379) & n.2. Any
suggestion that the ARIs may need to be reached in the
context of an eo nomine analysis is foreign to our classifi-
cation case law, and conflicts with the clear statutory
language of the ARIs. See, e.g., Dependable Packaging
Solutions, Inc. v. United States, 757 F.3d 1374, 1378 (Fed.
Cir. 2014) (“All the relevant HTSUS headings in this case
are principal use provisions, which are governed by ARI
1(a).”); Aromont, 671 F.3d at 1312 (“Principal use provi-
sions are governed by ARI 1(a).”); see also ARI 1(a) (“[A]
tariff classification controlled by use . . . is to be deter-
mined in accordance with the use in the United States at,
or immediately prior to, the date of importation, of goods
of that class or kind to which the imported goods belong,
and the controlling use is the principal use.”) (emphasis
added); ARI 1(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.”).
In addition, the majority opinion repeatedly refer-
ences “intended use,” “predominant use,” and “primary
use” within the context of its eo nomine analysis. GRK II,
761 F.3d at 1358–60. This exemplifies the rampant
confusion among actual use, intended use, and principal
use. These are terms of art governed by the ARIs, and are
not synonymous or interchangeable. Existing confusion
should be left to cases involving use provisions, and not be
allowed to infiltrate our eo nomine cases. See Aromont,
671 F.3d 1310, 1313 (discussing the differences between
principal use and actual use).
6 GRK CANADA, LTD. v. US
II.
In support of its holding that use plays a proper role
in the eo nomine analysis, the majority opinion relies
heavily on the Court of Customs and Patent Appeals’
(“CCPA”) 1959 decision in United States v. Quon Quon
Co., 46 CCPA 70 (1959), ignoring this court’s contempo-
rary classification cases, such as Link Snacks, 742 F.3d
962, Kahrs, 713 F.3d 640, BASF, 497 F.3d 1309, et al.
Although the majority opinion acknowledges that “Quon
Quon is a case determined under the old [Tariff Schedule
of the United States (‘TSUS’)] that has now been replaced
by the HTSUS,” GRK II, 761 F.3d at 1358, the opinion
fails to recognize the crucial point that the statutory
interpretative framework required by the contemporary
HTSUS, namely, the GRIs and the ARIs, did not govern
interpretations of TSUS. While this court has acknowl-
edged that “TSUS cases may be instructive in interpret-
ing identical language in the HTSUS,” JVC Co. of Am.,
Div. of US JVC Corp. v. United States, 234 F.3d 1348,
1355 (Fed. Cir. 2000) (emphases added), such cases are
not helpful in defining an interpretative framework that
did not exist under the TSUS. Not only are the GRIs and
ARIs part of the HTSUS statute, this court has made
clear they govern the classification of merchandise.
BenQ, 646 F.3d at 1376.
The majority opinion’s characterization of Quon Quon
and similar TSUS cases is also not entirely accurate. The
opinion states: “In TSUS cases, courts had considered the
use of articles in interpreting eo nomine provisions.” GRK
II, 761 F.3d at 1356. No citation is given for this proposi-
tion because even under the TSUS it was uncommon for
use to be considered in the eo nomine analysis. In Quon
Quon, for example, the CCPA took issue with the Gov-
ernment’s argument that “since the merchandise comes
within the meaning of [an eo nomine] term, its actual use
is immaterial.” Quon Quon, 46 CCPA at 72 (emphasis
added). The court found “no support in [other TSUS]
GRK CANADA, LTD. v. US 7
cases for the allegation that use is immaterial because the
designation is eo nomine.” Id. In support, the CCPA
identified three out of “numerous cases” cited by the
Government where “use [was] an important factor in
determining classification though an eo nomine designa-
tion [was] involved.” Id. Thus, beyond its inapplicability
to this case, Quon Quon stands only for the narrow propo-
sition that, as a limited exception, use can sometimes be
considered in the eo nomine analysis. In this way, the
CIT’s conclusion that it “cannot support this instance of
reading use into an eo nomine tariff provision under the
HTSUS,” GRK, 884 F. Supp. 2d at 1353 (emphasis added),
does not conflict with Quon Quon; it recognizes that use
may be an appropriate consideration in other instances.
III.
To be sure, there are limited circumstances where this
court has considered use in the eo nomine analysis, such
as those described in CamelBak, a unique case among our
classification cases that has led to some confusion as to
the role of use in the eo nomine analysis. In CamelBak,
this court acknowledged that an eo nomine provision
“‘include[s] all forms of the named article[,]’ even im-
proved forms.” CamelBak, 649 F.3d at 1365 (quoting Carl
Zeiss, 195 F.3d at 1379). Nonetheless, the court articulat-
ed a test to determine when an additional component or
function of an article, otherwise named by an eo nomine
provision, so significantly transforms the article that it is
no longer prima facie classifiable under the eo nomine
heading. Thus, CamelBak describes the exceptional case
where a good that was classifiable in an eo nomine head-
ing undergoes “a change in identity [that] removes [the]
article from an eo nomine provision.” Id. at 1367; id. at
1369 (“[T]he hydration component of the subject articles is
not merely incidental to the cargo component but, instead,
provides the articles with a unique identity and use that
removes them from the scope of the eo nomine backpack
provision.”). To aid in this inquiry, CamelBak went on to
8 GRK CANADA, LTD. v. US
identify “several analytical tools or factors [used] to assess
whether the subject articles are beyond the reach of [an]
eo nomine . . . provision,” which include the design, use,
and function of the subject articles. Id. at 1367. Yet,
CamelBak’s discussion of “use/function” and “design” was
in the context of this significant transformation test, and
this discussion cannot be read to obscure the difference
between eo nomine and use provisions. Id. at 1367–68.
Thus, consideration of use in the eo nomine analysis
is a narrow exception that has rarely been used by this
court. 1 Indeed, if an eo nomine heading did “inherently
suggest[] a type of use,” it would be proper to convert it to
a use provision. See StoreWALL, LLC v. United States,
644 F.3d 1358, 1365–67 (Fed. Cir. 2011) (Dyk, J., concur-
1 In addition to Quon Quon and CamelBak, the ma-
jority opinion finds support for its position from one other
case: Len-Ron Mfg. Co., Inc. v. United States, 334 F.3d
1304, 1311 (Fed. Cir. 2003), a sui generis case in which
this court may have applied an exception; it is unclear.
This court affirmed the CIT’s proper construction of the eo
nomine heading “vanity case,” but added a clarification
that reads like a use limitation: “In affirming the [CIT’s]
conclusion that ‘vanity case’ means ‘a small handbag or
case used to hold cosmetics,’ however, we clarify that for a
handbag or case to be classified as a vanity case, contain-
ing, carrying, or organizing cosmetics must be its predom-
inant use, rather than simply one possible use.” Id.Thus, despite undertaking an eo nomine analysis, the
court in this instance relied on an analysis used only for
use headings. Indeed, in support of its analysis, the court
cited Sports Graphics, Inc. v. United States, 24 F.3d 1390,
1393–94 (Fed. Cir. 1994). Not only was Sports Graphics a
case involving a use provision, the heading at issue was a
“chief use” provision of the TSUS. “Chief use” headings
no longer exist in the HTSUS.
GRK CANADA, LTD. v. US 9
ring). Therefore, if, as the majority holds, the subhead-
ings at issue are truly defined by use, the majority should
have reconsidered the parties’ legal stipulation that the
relevant subheadings are eo nomine. A narrower holding
that, although the subheadings appear to be eo nomine,
they are as a matter of law use provision governed by the
use analysis, would have avoided disruption of our well-
settled precedent.
IV.
Cognizant of these issues, in its Petition for Rehearing
En Banc, GRK recognizes that “the majority decision of
the panel improperly—and contrary to well-established
and longstanding precedent of this Court—introduced an
‘intended use’ analysis into the analytical framework for
construing eo nomine classifications, which is only appro-
priate for those classifications that are defined by how
they are used.” Pet. at 2. It also recognizes “[t]he majori-
ty decision is directly contrary to numerous precedents of
this Court” and “[b]y requiring considerations of ‘use’ even
with eo nomine provisions, it unnecessarily blurs (if not
erases entirely) the well-established, and crucial, distinc-
tion between eo nomine provisions and ‘use’ provisions—
each of which employs, according to this Court’s prece-
dents, a different analytical framework.” Id. at 11.
In an attempt to downplay the importance of the dis-
tinction between use and eo nomine provisions, the Gov-
ernment suggests that “GRK’s petition confuses the Panel
Majority’s discussion of intended use with the term of art
‘principal use.’” Resp. at 2. Furthermore, it states, “GRK
and the Panel Dissent misconstrue the Panel Majority’s
Opinion. Although the Panel Majority referred to ‘the
material that screws are principally intended to pass
through,’ and used the phrase ‘principal intended use’
. . . , the Panel Majority did not direct the trial court to
undertake a principal use analysis.” Id. at 4 (citations
omitted).
10 GRK CANADA, LTD. v. US
The Government’s argument ignores the majority
opinion’s explicit statement endorsing a use analysis. See
GRK II, 761 F.3d at 1359 (“[U]se may be considered as
part of the definition of eo nomine provisions . . . . Classi-
fication of subject articles may then need to reach the
[ARIs], which distinguish the treatment of articles based
on whether tariff classifications are controlled by princi-
pal or actual use.”). This explicit directive that the ARIs,
which are unquestionably used only in the use analysis,
may be reached, refutes the Government’s argument that
“the Panel Majority did not order the trial court to con-
duct a principal use analysis on remand. It in no way
directed the trial court to apply ARI 1(a).” Resp. at 5.
V.
A final concern with the majority opinion is that it is
unclear whether the correct analysis was performed or
whether the correct standard of review was applied. It is
well-established that classification decisions involve a
two-step analysis: (1) ascertaining “the proper meaning of
the tariff provisions, which is a question of law reviewed
de novo”; and (2) determining “whether merchandise falls
within a particular heading, which is a question of fact we
review only for clear error.” Lemans Corp. v. United
States, 660 F.3d 1311, 1315 (Fed. Cir. 2011) (citing Cum-
mins Inc. v. United States, 454 F.3d 1361, 1363 (Fed. Cir.
2006)). It is also well-settled that when “the nature of the
merchandise is undisputed, the inquiry collapses into a
question of law we review de novo.” Id. While the majori-
ty opinion correctly articulates the two-step process, it is
unclear whether “the nature of the merchandise is undis-
puted” in this case, and, if so, whether only a question of
law remains.
Instead, the opinion describes at length the CIT’s
analysis, both in the background and the analysis sec-
tions, and notes the errors the CIT made in its decision.
But this court does not review classification decisions for
GRK CANADA, LTD. v. US 11
error; rather, it performs a de novo review. In this way,
the majority opinion fails to answer the legal question of
the proper construction of the competing subheadings.
This court has “an independent responsibility to decide
the legal issue of the proper meaning and scope of HTSUS
terms.” Link Snacks, 742 F.3d at 965. Although unclear,
it may be that the majority disagrees with the CIT’s
construction of the competing subheadings. The opinion,
however, offers no answer, as a matter of law, on their
proper construction, other than that the use of the subject
merchandise involved in this case should have a bearing
on the legal construction of the subheadings.
In addition to failing to fulfill its responsibility to de-
termine the proper meaning of the competing subhead-
ings, the majority opinion does not identify the governing
GRI for this case. It faults the CIT for sequentially pro-
ceeding through the GRIs, as required by our case law,
and then “end[ing] up at the rarely used ‘tie-breaker’ step
of GRI 3(c).” GRK II, 761 F.3d at 1360. However, it is
unclear which GRI the majority believes should apply.
That vital question, this court must answer.
As to the majority opinion’s disposition, it does not
specify whether remand is warranted because (1) there
are genuine disputes of material fact precluding summary
judgment, such that the CIT erred in granting summary
judgment and the case should be remanded for trial; (2)
there was legal error in the construction of the subhead-
ings; and/or (3) there was clear error in the factual find-
ings. The grounds for vacation must be specified if we are
to provide any guidance on the issues involved in this
case.
VI.
It is evident that this is indeed “‘a challenging case.’”
GRK II, 761 F.3d at 1356 (quoting GRK I, 884 F. Supp. 2d
at 1345). In disagreeing with the CIT’s ultimate classifi-
cation conclusion, however, the opinion undermines our
12 GRK CANADA, LTD. v. US
case law requiring a distinction between use and eo
nomine provisions without articulating whether an excep-
tion applies in this case, or whether the subheadings at
issue should be properly reclassified as use provisions at
the beginning of the analysis.
Because the majority opinion upends a once-clear ana-
lytical framework and will breed confusion in future
cases, the concerns raised are “of exceptional importance”
and “en banc consideration is necessary to secure or
maintain uniformity of the court’s decisions.” See Fed. R.
App. P. 35(a). Therefore, I respectfully dissent from the
court’s refusal to reconsider this case en banc.