Wilton Industries, Inc. v. United States

Slip Op. 12-125
UNITED STATES COURT OF INTERNATIONAL TRADE
WILTON INDUSTRIES, INC.,
Plaintiff,
Before: Gregory W. Carman, Judge
v.
Court No. 10-00066
UNITED STATES,
Defendant.
[Plaintiff’s motion for summary judgment is denied and Defendant’s cross motion for summary
judgment is granted.]
Maria E. Celis, John M. Peterson, and Richard F. O’Neill, Neville Peterson LLP, of New
York, NY, for Plaintiff.
Beverly A. Farrell, Trial Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice, of Washington, DC, for Defendant. On the briefs were
Tony West, Assistant Attorney General, Barbara S. Williams, Attorney in Charge,
International Trade Field Office, United States Department of Justice, and Yelena Slepak,
Of Counsel, Office of the Assistant Chief Counsel, International Trade Litigation, United
States Customs and Border Protection.
September 27, 2012
OPINION
CARMAN , JUDGE: This matter is before the Court on a Motion for Summary Judgment
by Plaintiff Wilton Industries, Inc. (“Plaintiff” or “Wilton”) and a Cross Motion for
Summary Judgment by Defendant United States (“Defendant” or “Customs”). The
Court No. 10-00066 Page 2
parties dispute the correct tariff classification of decorative punches, imported by
Plaintiff. For the reasons set forth below, Plaintiff’s motion is denied, and Defendant’s
cross motion is granted.
FACTUAL BACKGROUND
Plaintiff is an importer of the subject merchandise, decorative punches from
Taiwan. Pl.’s Statement of Material Facts as to Which No Genuine Issue Exists (“Pl.’s
Facts”) ¶¶ 1-3; Def.’s Resp. to Pl.’s Statement of Material Facts as to Which No Genuine
Issue Exists (“Def.’s Resp. Facts”) ¶ 1; Def.’s Statement of Material Facts as to Which No
Genuine Issue Exists (“Def.’s Facts”) ¶ 5; Pl.’s Resp to Def.’s Statement of Material Facts
as to Which No Genuine Issue Exists (“Pl.’s Resp. Facts”) ¶ 5. The subject merchandise
was imported into the Port of Los Angeles, California, between July 7 and October 25,
2008. Pl.’s Facts ¶3; Def.’s Resp. Facts ¶3; Def.’s Facts ¶4; Pl.s’ Resp. Facts ¶4.
The parties do not dispute the nature and identity of the imported articles, which
are all the brand “Stampin’ Up!” punches that cut shapes or designs out of or in paper
and that come in a variety of shapes and sizes. Def.’s Facts ¶ 5; Pl.’s Resp. Facts ¶ 5;
Def.’s Mem. of Law in Opp’n to Pl.’s Mot. for Summ. J. and in Supp. of Def.’s Cross-
Mot. for Summ. J. (“Def.’s Cross Mot.”) at 3. Each of the punches is capable of making a
hole of an intended shape or trimming the edge or corner of the paper with a decorative
design. Pl.’s Facts ¶ 2; Def.’s Resp. Facts ¶ 2. Subject punches are used in scrap booking
Court No. 10-00066 Page 3
and craft projects involving the creation or decoration of invitations, cards, and other
decorative items. Pl.’s Facts ¶ 1; Def.’s Resp. Facts ¶ 1. There are twelve entries that
encompass thirty-nine models of punches at issue in this case. Def.’s Cross Mot.,
Attach. A.
After filing this action, Plaintiff provided Customs twenty representative samples
of punches, referred to as “Twenty Punches” by the parties, to reconsider the
classification of the subject merchandise. Def.’s Cross Mot. at 2. These Twenty Punches,
however, are not the imported articles in this case. Def.’s Facts at ¶¶ 6-7; Decl. of Kathy
Campanelli, National Import Specialist, Customs (“NIS Decl.”) at ¶ 5. Nevertheless,
Customs used the Twenty Punches and compared them with images of the imported
articles to determination classification. NIS Decl. at ¶ 11; Def.’s Cross Mot. at 11-12.
Customs agreed to classify twenty-three models of the punches under Plaintiff’s
proposed classification of Subheading 8441.10.00, HTSUS, which is duty free,6 “in an
effort to resolve this action.” Def.’s Supplemental Mem. of Law in Further Supp. of
Def.’s Cross-Mot. for Summ. J. (“Def.’s Suppl. Br.”) at 2. For the remaining sixteen
punches, however, Customs maintained that the proper classification is under
6
Subheading 8441.10.00, HTSUS, provides:
8441 Other machinery for making up paper pulp, paper or paperboard,
including cutting machines of all kinds, and parts thereof:
8441.10.00 Cutting machines
Court No. 10-00066 Page 4
Subheading 8203.40.60, HTSUS, with 3.3% duty margin7 because these remaining
punches “are intended for use when held in the hand.” Def.’s Cross Mot. at 3.
Because it was unclear exactly how many of the subject punches were actually in
dispute and how the parties came to agreement for those not in dispute, the Court
requested an in-person conference, held on July 19, 2012, to clarify the subject
merchandise in this case. The Court also requested that the parties file physical samples
of all the subject merchandise. In response, the parties explained that there are thirty-
nine punches at issue but that there are only sixteen punches in dispute for the Court to
decide.8 Plaintiff stated that Defendant requested physical “samples or items similar to
the merchandise” for only nine of the subject punches. Resp. Letter to Ct. from Pl., ECF
No. 46. Plaintiff managed to produce thirty-seven of the thirty-nine subject punches,9
7
Subheading 8203.40.60, HTSUS, provides:
8203 Files, rasps, pliers (including cutting pliers), pincers, tweezers,
metal cutting shears, pipe cutters, bolt cutters, perforating punches
and similar handtools, and base metal parts thereof.
...
8203.40.60 Other (including parts).
8
The parties jointly submitted a stipulation to the agreed upon classification for
the twenty-three punches not in dispute. Stipulation, ECF No. 62.
9
Plaintiff submitted a table of the subject merchandise and attached a sample
number to each of the thirty-nine punches at issue for ease of reference. Pl.’s Letter
Explaining Sample Numbers and Designations, ECF No. 54. In this table, Plaintiff
Court No. 10-00066 Page 5
despite the fact that many of the models have been discontinued. The two missing
punches are one corner punch (#11) that is in dispute and one large punch that is not in
dispute (#16). Plaintiff provided images and a narrative description for the missing
punches which the Court deems sufficient to determination classification. The parties
broke down the subject punches according to size: small, medium and large.10 The
following table provides the breakdown of the different sizes of punches plus the two
that do not fit into the size breakdown, a corner punch and a scallop-edged punch:
Small M edium Large Other
Total Punches 8 6 23 1 corner
1 scallop-edged
In Dispute 8 6 1 1 corner
Not in Dispute -- -- 22 1 scallop-edged
The parties have also jointly submitted a narrative description of each of the subject
punches, along with component and base plate breakdowns, as requested by the Court.
acknowledged that four of the punches in dispute (#23, #24, #36, and #37) that were
provided to the Court are “not the actual article but substantially similar.” Parties Joint
Submission of Spreadsheets of Disputed Paper Punches, ECF No. 62-1. The differences
are as follows: #23 is missing the “Stampin’ up” logo; #24 is the European version; #36 is
gray instead of black and is missing the “Stampin’ up” logo; and #37 is made for the
retailer and not retained in Wilton’s system. Pl.’s Letter Explaining Sample Numbers
and Designations, ECF No. 54. Defendant has not disputed the similarity of the
provided punches and therefore the Court accepts the substantially similar punches as
subject punches.
10
Two of the punches do not fit into the size breakdown: #31 (not in dispute) and
#11 (in dispute and not provided to the Court). Parties Joint Submission of
Spreadsheets of Disputed and Non-Disputed Paper Punches, ECF Nos. 62-1, 62-2.
Court No. 10-00066 Page 6
Parties Joint Submission of Spreadsheets of Disputed and Non-Disputed Paper Punches,
ECF Nos. 62-1, 62-2. For all the subject punches, regardless of size or shape, the
component breakdown is essentially the same: the die components comprise
approximately 75% of the total weight of each subject punch, while the housing,
bottom, handle and springs comprise the balance of the weight. Because the weight and
materials ratio are substantially similar for all the punches, the Court analyzes the
various punches as one subject merchandise.
JURISDICTION AND STANDARD OF REVIEW
The Court has jurisdiction pursuant to 28 U.S.C. § 1581(a) (2006). Summary
judgment is appropriate when the record shows that “there is no genuine issue as to
any material fact and that the movant is entitled to judgment as a matter of law.”
USCIT R. 56(c).
Although Customs usually enjoys a statutory presumption of correctness in its
classification decisions, this does not apply to pure issues of law in a summary
judgment motion before this Court. Universal Elec. Inc. v. United States, 112 F.3d 488, 492
(Fed. Cir. 1997). This Court “does not defer to Customs’ decisions because it has been
tasked by Congress to conduct a de novo review, and to determine the correct
classification based on the record made before it.” Universal Elec., 112 F.3d at 493; see 28
U.S.C. § 2640(a). Ultimately, this Court's “duty is to find the correct result, by whatever
Court No. 10-00066 Page 7
procedure is best suited to the case at hand.” Jarvis Clark Co. v. United States, 733 F.2d
873, 878 (Fed. Cir. 1984) (emphasis in original).
Resolution of a disputed classification entails a two-step process: (1) ascertaining
the proper meaning of specific terms in the relevant tariff provisions; and (2)
determining whether the merchandise at issue comes within the description of such
terms as properly construed. Pillowtex Corp. v. United States, 171 F.3d 1370, 1373 (Fed.
Cir. 1999). When “the nature of the merchandise is undisputed, . . . the classification
issue collapses entirely into a question of law.” Cummins Inc. v. United States, 454 F.3d
1361, 1363 (Fed. Cir. 2006) (citations omitted).
DISCUSSION
The Court acknowledges the parties’ good faith attempt to come to agreement
regarding the classification of the subject merchandise. However, under Jarvis Clark,
supra, the Court is charged with the duty to find the correct classification for all the
entries in the case. Therefore, the Court looks at all of the subject merchandise before it,
including the punches that the parties present as not in dispute.11
I. Proposed Classifications
11
The Court commends the parties’ good faith attempt to come to an agreement,
and reluctantly disregards the stipulation of agreed classification for twenty-three of the
subject punches. Defendant explained that it merely agreed to Plaintiff’s classification
“in an effort to resolve this action,” not because Customs believes that is the correct
classification. Def.’s Suppl. Br. at 2.
Court No. 10-00066 Page 8
Plaintiff contended that Customs “has repeatedly misclassified its paper
punching product as a matter of law. [Plaintiff] submits that the punches are properly
classified as ‘cutting machines’ under HTS 8441.10.00 and entitled to receive [sic] duty-
free treatment.” Pl.’s Mem. of Points and Authorities in Supp. of Pl.’s Mot. for Summ. J.
(Pl.’s Mot.) at 2. Plaintiff asserted that the subject punches are machines because “they
transfer energy from the user to the device wherein a set of dies forms a cutting edge.”
Id. at 12. In support of its contention that subject punches are machines, Plaintiff
submitted the testimony of mechanical engineer, Dr. P.R. Frise, as an expert. Id. at 12;
Affirm. of Dr. Peter R. Frise; Ex. A-D to Pl.’s Mot. After reviewing the Twenty Punches
provided by Plaintiff, Dr. Frise advised that those punches are indeed machines because
they “utilize a lever, an inclined plane, and an axle to transmit forces and perform
work.” Id. at 12. However, Plaintiff’s proffered testimony from its expert is inapposite
for two reasons: (1) Dr. Frise advised on punches that are not at issue in this case, Def.’s
Facts ¶ 6; and (2) Defendant conceded that based on its common meaning, a punch itself
is a machine,” Def.’s Cross Mot. at 4. Further, Defendant stated that the “articles of [its
proposed] Heading 8203” are “also machines, if only simple machines.” Def.’s Reply
Mem. of Law in Opp’n to Pl.’s Mot. for Summ. J. and in Further Supp. of Def.’s Cross-
Mot. for Summ. J. (“Def.’s Opp’n”) at 6.
Defendant contended, however, that the subject punches “are properly
Court No. 10-00066 Page 9
classifiable in subheading 8203.40.60 because they are described eo nomine12 by this
subheading and are excluded by Exclusionary Note 1(k) to Section XVI13 from
classification in subheading 8441.10.00.” Def.’s Cross Mot. at 8.
II. GRI Analysis
Classification of merchandise is governed by the General Rules of Interpretation
(“GRIs”). Avenues in Leather, Inc. v. United States, 423 F.3d 1326, 1333 (Fed. Cir. 2005).
The GRIs direct “the proper classification of all merchandise and are applied in
numerical order.” Carl Zeiss, Inc. v. United States, 195 F.3d 1375, 1379 (Fed. Cir. 1999).
The Court may not consult any subsequent GRI unless the proper classification cannot
be determined by reference to GRI 1. Mita Copystar Am. v. United States, 160 F. 3d 710,
712 (Fed. Cir. 1998). According to GRI 1, “classification shall be determined according
to the terms of the headings and any relative section or chapter notes[.]” Parties agree
that the classification determination may be made under GRI 1, but each party submits
a different heading as the correct classification.
12
Eo nomine means an item is “identified by name.” Len-Ron Mfg. Co., Inc. v.
United States, 334 F.3d 1304, 1308 (Fed. Cir. 2003).
13
Exclusionary Note 1(k) to Section XVI, which includes Chapter 84, instructs, in
relevant part:
Notes
1. This section does not cover:
...
(k) Articles of chapter 82 or 83.
Court No. 10-00066 Page 10
Defendant asserted that the “proper classification of the ‘punches’ may be
determined through Rule 1” of the GRI. Def.’s Opp’n at 2. Upon entry, Customs
classified the subject punches under Heading 8203, HTSUS. Customs claimed the
subject merchandise falls squarely under “perforating punches” which is an
enumerated article under Heading 8203, HTSUS. The terms perforating and punch are
not explicitly defined within the HTSUS, and in such circumstances, “[t]ariff terms are
construed in accordance with their common or popular meaning.” Medline Indus., Inc.
v. United States, 62 F.3d 1407, 1409 (1995). The Court
may rely upon its own understanding of terms used, and may consult
standard lexiographic and scientific authorities to determine the common
meaning of a tariff term.
Mita Copystar Am. v. United States, 21 F.3d 1079, 82 (Fed. Cir. 1994)).
Accordingly, the Court consulted Webster’s Dictionary for the common
meanings of the terms “perforating” and “punch.” The first definition for “perforate” in
Webster’s Dictionary is “to make a hole through: pierce, puncture.” Webster’s Third
New International Dictionary 1678 (1981). The relevant definition for “punch” as a noun
is “1.b: a device or machine for performing the operations of a hand punch: . . . (1): a
hand-operated device for cutting holes or notches in paper or cardboard.” Id. 1678.
Read together, the common meaning for perforating punch is a hand-operated device
for cutting or making holes in or through paper or cardboard. The Court finds that the
Court No. 10-00066 Page 11
subject punches fall squarely under this common definition of perforating punch.
Hence, the Court agrees with Customs that the subject merchandise is described
by the exemplar “perforating punches” listed eo nominee under Heading 8203, HTSUS.14
This Court must “consider 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) (citation omitted). The Court notes that the
exemplar “perforating punches” is coupled with the exemplar “similar handtools,”
separated from the other articles by commas, which indicates that handtools modify
punches. Customs argued that this construction means that “classification in Heading
8203 is limited to those punches that are designed to operate best when used in a hand-
held fashion.” Def.’s Opp’n at 7. But Plaintiff countered that the punches are “not
specifically intended or designed to be used as a handtool.” Pl.’s Opp’n at 13.
Upon review of the term “handtool” in Webster’s Dictionary, one is directed to
14
Plaintiff conceded that HTSUS Heading 8203 “covers a wide range of tools” but
then asserted that this heading “contains no language specifically, or even remotely,
describing the merchandise at issue . . . . Not only are paper punches entirely different
from files, rasps, pliers, and the other exemplars in this subheading, they also perform
entirely different functions.” Pl.’s Mot. at 14. Plaintiff’s assertion is specious. HTSUS
Heading 8203 does indeed cover a wide range of tools, all with different functions, with
the common thread of these tools is that they are all worked by the hand. This common
thread applies to the subject punches. Also, Plaintiff selectively quotes the tariff,
leaving out the phrase “perforating punches,” which undermines Plaintiff’s assertion
that Heading 8203 contains “no language” describing the subject merchandise at issue.
Court No. 10-00066 Page 12
the first definition under “tool,” which reads: “1 a : an instrument . . . used or worked
by hand.” Webster’s Third New International Dictionary 1028, 2408. The Court applies
this definition and finds that handtools do not have to be intended or designed to be
operated wholly in the hand, but rather they need only be worked by hand. Therefore,
the Court rejects Customs’ “operates best test”15 because applying the common meaning
of the term handtool does not require that a tool or machine be operated wholly in the
hand. The subject punches—whether they are used in the hand, as Defendant asserts,
or whether they are used against a flat surface, as Plaintiff asserts—need to be operated
with at least one hand, if not two hands, so they are handtools according to the common
meaning of the term. The Court finds that subject punches prima facie fall under
Heading 8203 as a perforating punch.
Next the Court considers Plaintiff’s proposed HTSUS Heading 8441, which
provides for “[o]ther machinery for making up paper pulp, paper or paperboard,
including cutting machines of all kinds.” Plaintiff asserted that the subject punches are
cutting machines. Customs conceded that the subject punches are simple machines but
15
Customs apparently used two different tests to determine the classification of
the subject punches: “designed to be hand-held when using them” and “operated better
when . . . placed on a desk or table.” Def.’s Cross Mot. at 11-12. Confusion surrounds
these tests, and in any case, the GRIs do not contemplate using such tests to determine
classification. Furthermore, Customs apparently conducted these tests on only nine of
the actual physical samples. Given these facts, the Court determines classification
without regard to these Customs tests.
Court No. 10-00066 Page 13
postulated that “the simplicity of the features and the purpose for [the subject punches’]
use simply do not rise to the dignity of a machine contemplated by Heading 8441.”
Def.’s Suppl. Br. at 7. Customs purported that the machine contemplated by Heading
8441 applies only to “more complex” machines, not “simple machines” such as the
subject punches. Id. at 3. The Court notes that Heading 8441 does not contemplate such
a distinction between simple and non-simple machines.
Plaintiff claimed Heading 8441, HTSUS, as the correct classification based upon
the description “cutting machines of all kinds.” However, Plaintiff again selectively
quotes the tariff, leaving out the key language “other machinery for making up paper
pulp, paper or paperboard, including . . . .” Reviewing and parsing this heading in its
entirety, the Court finds that subject merchandise cannot fall under Heading 8441,
HTSUS, unless it is a cutting machine “for making up paper pulp, paper or
paperboard.” Upon a plain reading of the language in the heading, the phrase
“including cutting machines of all kinds” is subordinate to all that comes before the
word “including.” This is the only grammatically correct construal of a phrase that is
set apart by commas and begins with the word “including.” See, e.g., Bausch & Lomb,
Inc. v. United States, 148 F.3d 1363 (Fed. Cir. 1998) (discussing the canon of construction
expressio unius est exclusio alterius—“the expression of one is the exclusion of
others”—when a phrase starts with the word “including”). Heading 8441 is not a
Court No. 10-00066 Page 14
cutting machine provision; it is a paper production machine provision, specifically “for
making up paper pulp, paper or paperboard.” While paper production machines may
be cutting machines, not all cutting machines are paper production machines. Such is
the instant case: while subject punches may be described as cutting machines, they are
not paper production machines. The Court finds that subject punches do not fall under
Heading 8441, because they are not cutting machines for making up paper pulp, paper
or paperboard.
Plaintiff asserted the opposite argument to that of Customs; Heading 8203 is not
applicable because perforating punches in this tariff heading are meant for industrial
uses. In support of its claim, Plaintiff provided an industrial definition of the term
perforating punch. Pl.’s Supplemental Mem. of Points and Authorities in Supp. of Pl.’s
Mot. for Summ. J. (“Pl.’s Suppl. Br.”) at 6–10. The Court reiterates that headings are
afforded their common meaning, not a meaning that is a term of art particular to an
industry. Therefore, the Court finds Plaintiff’s offering of an industrial definition of
perforating punch unavailing.
Assuming arguendo that the subject punches prima facie fell within Heading 8441
based upon the cutting machine language, Section Note 1(k) would still exclude
consideration of this heading. Along with the terms of the headings, “any relevant
section or chapter notes” must be considered because chapter and section notes “are not
Court No. 10-00066 Page 15
optional interpretative rules, but are statutory law, codified at 19 U.S.C. § 1202.”
Avenues in Leather, 423 F.3d at 1333 (quotation omitted). The Section Notes for Section
XVI of the HTSUS, which includes Chapter 84, specifically excludes “[a]rticles of
chapter 82 and 83" from classification under Section XVI. Section Note 1(k) to Section
XVI. Customs argued that the proper reading of Section VXI, Note 1(k) excludes
classification in Heading 8441. Def.’s Cross Mot. at 12. The Court agrees. Applying the
Avenues in Leather analysis regarding exclusionary notes, if the decorative punches are
classifiable under chapter 82, then they cannot be classified under chapter 84. See
Avenues in Leather, 423 F.3d at 1333-34; see also Container Store v. United States, 35 CIT __,
800 F. Supp. 2d 1329, 1335 (2011) (applying the Avenues in Leather analysis for
exclusionary notes under Section XV).16 Therefore, even if the subject punches would
have been prima facie classifiable as cutting machines under Heading 8441, Section Note
1(k) would have applied and Chapter 84 would be excluded from consideration.
The Court finally examines the applicable heading for the proper subheading.
Upon review of the subheadings under Heading 8203, the Court finds that the proper
subheading is the basket provision of “[o]ther.” Therefore, the Court holds the correct
16
The Court combed the HTSUS for other possible headings for the decorative
punches but did not find a heading more descriptive. The Court also reviewed
Customs Ruling Letters and discovered that Customs had previously classified similar
decorative punches under various tariffs. The Court considered these classifications but
decided that Subheading 8203.40.60, HTSUS, is the correct classification.
Court No. 10-00066 Page 16
tariff classification for the subject punches is 8203.40.60, HTSUS.
CONCLUSION
Because there is no dispute between the parties as to the nature of the
merchandise involved in this case, and the only issues to be resolved are legal, the case
is ripe for disposal at the summary judgment stage. See, e.g., Value Vinyls, Inc. v. United
States, 31 CIT 173, 175, 2007 WL 273839 at *2 (2007) (citing Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 247-49 (1986).)
Because this Court affirms Defendant’s preferred tariff classification of
8203.40.60, HTSUS, Plaintiff’s Motion for Summary Judgement is denied and
Defendant’s Cross Motion for Summary Judgment is granted. Judgment will enter
accordingly.
/s/ Gregory W. Carman
Gregory W. Carman, Judge
Dated: September 27, 2012
New York, New York
ERRATA
Wilton Industries, Inc. v. United States, Court No. 10-00066, Slip Op. 12-125, dated
September 27, 2012.
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January 15, 2013