United States Court of International Trade

Court Granted Summary Judgment in Plaintiff’s Favor

In LDA Incorporado v. United States, Court No. 12-349, Slip Op. 15-64 (June 19, 2015), the court granted judgment in plaintiff’s favor finding that Customs failed to follow Commerce’s scope order.  LDA “is a Puerto Rican corporation located in Guaynabo, Puerto Rico. Plaintiff is an importer and reseller of electrical infrastructure products, including galvanized electrical rigid steel conduit, for use in the construction industries. Plaintiff represents foreign manufacturers in the local Puerto Rico market. LDA’s “customers are electrical material distributors that operate in both Puerto Rico and the United States.”

On July 22, 2008, the U.S. Department of Commerce (“Commerce”) issued antidumping and countervailing duty orders covering circular welded carbon quality steel pipe from the People’s Republic of China.” See Circular Welded Carbon Quality Steel Pipe from the People’s Republic of China, 73 Fed. Reg. 42,545 (Dep’t Commerce July 22, 2008) (notice of amended final affirmative countervailing duty determination and notice of countervailing duty order) (“CVD Order”); Circular Welded Carbon Quality Steel Pipe from the People’s Republic of China, 73 Fed. Reg. 42,547 (Dep’t Commerce July 22, 2008) (notice of antidumping duty order) (“ADD Order”) (collectively “the Orders”)). “The express language of the AD and CVD orders specifically excluded ‘finished electrical conduit’ from their scope.” Id.

Here the court reviewed de novo of whether Customs erred either in its factual analysis of the merchandise or in its decision to apply the Orders, as written by Commerce, to the merchandise. The Orders specifically excluded finished electrical conduit, and here there was undisputed evidence showing that Plaintiff’s merchandise was “finished electrical conduit.”  Customs initially made a pure factual mistake in its determination that the merchandise was not internally galvanized. Ultimately, while Customs acknowledged that Plaintiff’s goods were in fact internally galvanized, Customs included the goods within the scope of the Orders because it believed that finished electrical conduit had to be internally coated with a non-conducting liner. The court held that “Customs’ belief was in error,” and that the “misapplication of the order by Customs [was] properly the subject of a protest under 19 U.S.C. § 1514(a)(2).”  Slip Op., pg. 19.  While defendant raised the argument that the scope was unclear as to the terms “finished electrical conduit,” the court found such an argument unreasonable where Customs would then be guilty of interpreting the Orders, by noting that to be in scope the conduit must be internally coated with a non-conducting liner. Such interpretation was not a role for Customs but for Commerce. Given that the parties agree that the subject electrical conduit was indeed finished, Customs erred when it determined the subject merchandise to be in scope of the Orders. The court ordered reliquidation of the subject entry with refund of antidumping and countervailing duties. 

Distinguishing Mugs from Cups Classified under Heading 6912

In G.G. Marck Associates, Inc. v. United States, Court No. 08-306, Slip Op. 15-62 (June 17, 2015) plaintiff filed a lawsuit challenging the classification of ninety-one cups and mugs imported by plaintiff between August 3, 2006 and September 18, 2006. Plaintiff commenced this lawsuit after its timely-filed protest was denied by Customs and the assessed duties were paid. At liquidation, Customs classified all of the merchandise under Heading 6912 of the HTSUS (“Ceramic tableware, kitchenware, other household articles and toilet articles, other than of porcelain or china”).  Customs, however, classified merchandise it found to be “mugs” under subheading 6912.00.44 as “Mugs and other steins” at 10 percent ad valorem, and those items it found to be “cups” under subheading 6912.00.48 as “Other” at 9.8 percent ad valorem. For the reasons set forth below, defendant’s motion for summary judgment is granted, in part, and plaintiff’s motion for summary judgment is granted, in part, and the court finds that (1) five articles are properly classified under Harmonized Tariff Schedule of the United States (“HTSUS”) subheading 6912.00.39, as “Ceramic tableware, kitchenware, other household articles and toilet articles, other than of porcelain or china” that are “Available in specified sets,” (2) fifty-eight articles are properly classified under HTSUS subheading 6912.00.44, “Mugs and other steins,” and (3) twenty-eight articles are properly classified under HTSUS subheading 6912.00.48, “Other.”

The main issue in this case was whether the subject ceramicware are mugs under HTSUS 6912.00.44.  HTSUS subheading 6912.00.44 covers “Mugs and other steins,” and subheading 6912.00.48 applies to “Other.” The court found that subheading 6912.00.44, “Mugs and other steins,” is an eo nomine provision because it describes the merchandise by name citing United States v. Nat’l Silver Co., 59 CCPA 64, 65, 66, 455 F.2d 593, 594, 595 (1972).  The National Silver court found that, under the TSUS, a “mug” was “either straight-sided or barrel-shaped, measuring about the same across the top as across the bottom, having a flat bottom, heavier than a cup, and not used with a saucer.” Id. at 66, 455 F.2d at 595 (citing Ross Prods., Inc. v. United States, 46 Cust. Ct. 158, 163, C.D. 1976 (1958)). In comparison, a “cup,” the Court held, “designat[es] a bowl-shaped drinking vessel commonly set on a saucer and used for the service of hot liquids.” Id. at 67, 455 F.2d at 595 (citing Ross Prods., Inc. v. United States, 46 Cust. Ct. 8, 12, C.D. 2226 (1961)). The National Silver Court relied on several dictionary definitions regarding the definitions of a cup and mug.  For instance, the dictionary provided that a “mug” is “a drinking cup usu[ally] of metal or earthenware and usu[ally] cylindrical with no lip but with a handle.” According to dictionary definitions, the “common form of a cup (e.g. a tea-cup or coffee-cup) has no stem; but the larger and more ornamental forms (e.g. a wine-cup or chalice) may have a stem and foot, as also a lid or cover; in such case cup is sometimes applied specifically to the concave part that receives the liquid.” Thus, for classification purposes under the HTSUS, unless properly classified elsewhere, articles found to be “either straight-sided or barrel shaped, measuring about the same across the top as across the bottom, having a flat bottom, heavier than a cup, and not used with a saucer,” are properly classified as “Mugs and other steins” under subheading 6912.00.44, and articles found to be “bowl-shaped drinking vessel[s] commonly set on a saucer and used for the service of hot liquids,” are not mugs and are thus properly classified under subheading 6912.00.48, “Other.” 

Plaintiff insists that, while if sold separately, its mugs and cups would not properly be classified under HTSUS 6912.00.44 (“Mugs and other steins”) and 6912.00.48 (“Other”) respectively, because they are offered for sale and sold with other ceramic items in the same pattern and thus as sets, they are properly classified under HTSUS subheading 6912.00.39. As has been noted, this subheading covers “Other: Available in specified sets: In any pattern for which the aggregate value of the articles listed in additional U.S. note 6(b) of this chapter is over $38.” The statutory language in U.S. Note 6(a) explains that “available in specified sets” embraces plates, cups, saucers and other articles principally used for preparing, serving or storing food or beverages . . . which are sold or offered for sale in the same pattern, but no article is classifiable as being ‘available in specified sets’ unless it is of a pattern in which at least the articles listed below in (b) of this note are sold or offered for sale. U.S. Note 6(a) (emphasis added).

The court held that only five mugs and cups found to be available as part of Cancun sets were classifiable under 6912.00.39, because (1) the articles sold in the cobalt or light blue color, identified by Marck under the “Cancun” trademark, are in the same pattern and (2) each of the items necessary to constitute a set under U.S. Note 6(b) are offered for sale in the same cobalt blue color.  As the court noted, subheading 6912.00.39 requires that articles classified thereunder be (1) “tableware, kitchenware, other household articles and toilet articles, other than of porcelain or china,” (2) ceramic, and (3) “in the same pattern,” and it also requires that (4) the specified set contain each of the articles listed in U.S. Note 6(b), which (5) must have an aggregate value greater than $38.00. See U.S. Note 6(a), (b). The record established, however, that the “Cancun” trademark dinnerware items imported by plaintiff that are made of ceramic and satisfy the specifications of U.S. Note 6(b), and as a whole, are valued at over $38.00, only constitute a “set” under the statute in two colors: cobalt blue and light blue.

The court found that Congress intended that subheading 6912.00.39 cover only those items that (1) coordinate in shape, color, and decoration, and (2) were designed to be used as a set. The court, after conducting its own examination of this evidence with respect to the uncontested and contested articles claimed by plaintiff’s experts to each coordinate and complement one another in design characteristics (i.e., shape, color, and decoration), found that eighty-six of the contested cups and mugs did not coordinate in shape, color, and decoration with those items advertised under the “Cancun” trademark and thus are not “in the same pattern,” to be classified as a set.  Thus, the rest were classified as cups and mugs under HTSUS Subheadings 6912.00.44 and 6912.00.48.

Court Granted Default Judgment

In United States v. NYCC 1959, Inc., Court No. 14-45, Slip Op. 15-65 (June 19, 2015), the court granted default judgment in plaintiff’s favor.  Because the government’s well-pleaded complaint and supporting evidence adequately establish the defaulting defendant’s liability for a grossly negligent violation of Section 592 as a matter of law, plaintiff’s motion for a default judgment is granted. Additionally, because the government’s claim is for a civil penalty amount within the statutory limit for such violations, judgment shall be entered for the plaintiff accordingly.   The merchandise NYCC attempted to enter – candles from China wholly composed of petroleum wax – was covered by an antidumping duty order.  Because the false entry information was material to Customs’ evaluation of NYCC’s duty liability for the attempted entry, the government’s factual allegations, deemed admitted by the defaulting Defendant, establish that NYCC attempted to enter merchandise into the commerce of the United States by means of information that was both material and false. In the absence of any defense by the Defendant, these factual allegations are sufficient to establish NYCC’s liability under Section 592 for a monetary penalty based on negligence.

The Court Denied Motions for Judgment on the Agency Record

In Husteel Company, Ltd. v. United States, Court No. 13-243, Slip Op. 15-66 (June 23, 2015), the court affirmed the final results of the United States Department of Commerce (“Commerce”).  Before the court were two motions for judgment on the agency record pursuant to USCIT Rule 56.2. Plaintiff Husteel Co., Ltd. (“Husteel”), a Korean producer and exporter of subject merchandise, claimed the Final Results were affected by errors that were present in a version of the database of its home market sales that Husteel submitted to Commerce. According to Husteel, Commerce was required, but refused, to issue amended final results based on a corrected version of the home-market-sales database that Husteel had submitted during the review, despite Husteel’s bringing the errors to the Department’s attention in “ministerial error comments” submitted after publication of the Final Results in accordance with the Department’s regulations. Consolidated Plaintiff Wheatland Tube, Co. claimed that Commerce unlawfully failed to respond to a notice of supplemental authority Wheatland filed with Commerce during the administrative review that pertained to the Department’s decision not to apply a “targeted dumping” analysis to Husteel during the review. Wheatland also claimed that Commerce, when calculating Husteel’s margin, failed to correct erroneous weight conversion factors affecting the comparison between Husteel’s home market and U.S. sales.

As for Husteel’s arguments regarding amending final results based upon a corrected home market sales database – neither the statute, in 19 U.S.C. § 1675(h), nor the implementing regulations, in 19 C.F.R. § 351.224, require Commerce to take corrective action in response to every ministerial error allegation. Nor was Commerce invariably required to take corrective action where a ministerial error was shown to affect the published decision. Moreover, Husteel failed to raise this argument regarding the corrected January 9, 2013 database in its case brief, and thus waived the issue. The court held that Commerce did not exceed its discretion in not taking corrective action.

As for Wheatland’s arguments regarding the Notice of Supplemental Authority, the court held that Wheatland was unable to show either that the development it described in the Notice of Supplemental Authority constituted a change in law or that Commerce was under any obligation to respond specifically to Wheatland’s submission. Moreover, Commerce explained in the Decision Memorandum its decision to determine a margin for Husteel on the average-to-average basis. Finally, having rejected Wheatland’s contentions that the conversion factors were unreliable and an attempt by Husteel to manipulate the dumping margin, Commerce reasonably declined to accept Wheatland’s argument that it should employ a method that did not involve a conversion of sales data and cost data to the same unit of measurement for product weight.

Court Granted Motion for Reconsideration

In Meridian Products, LLC v. United States, Court No. 13-18, Slip Op. 15-67 (June 23, 2015),  the plaintiff Meridian Products LLC (“Meridian”), a U.S. importer, moved for reconsideration of the court’s decision in Meridian Products, LLC v. United States, 38 CIT ___, 37 F. Supp. 3d 1342 (2014) (“Meridian III”). This case concerned a scope ruling under the antidumping and countervailing duty orders (“Orders”) on aluminum extrusions from the People’s Republic of China (“PRC”), on the plaintiff’s imported refrigerator/freezer trim kits (“Trim Kits”) from the PRC. Plaintiff asked for reconsideration of the exhaustion question that decided in Meridian III, arguing that it “had no opportunity” to raise before the agency the issue here, that exhaustion of administrative remedies was a useless formality, and that the issue is “a pure question of law” not requiring further factual development. The defendant United States asked the court to uphold Meridian III, countering that the plaintiff fails to identify any factual or legal error in the prior decision on the exhaustion question.  After considering the plaintiff’s motion, the court reconsidered its prior decision, vacated judgment, and remanded the case back to Commerce again for application of the proper definition of the “finished goods kit” exclusion, in compliance with the language of those Orders, and for redetermination of whether the Trim Kits fall within the scope of those Orders.

After a second remand regarding whether the Trim Kits fall within the scope of the Orders, Commerce drafted a remand decision, which found that an “exception to the ‘finished goods kit’ exclusion” exists, to wit that “an imported product will not be considered a ‘finished goods kit’ . . . merely by including fasteners such as screws, bolts, etc. in the packaging with an aluminum extrusions product”, that a product may not consist entirely of aluminum extrusions and be excluded as a “finished goods kit”, and that the plaintiff’s Trim Kits, which consist entirely of subject aluminum extrusions, fasteners, and “extraneous” materials, do not satisfy the “finished goods kit” exclusion to the Orders.  The court found this reading of the scope unreasonable.  The specific governing language of the Orders unambiguously lists the requirements a kit must meet in order to be excluded from the scope as a “finished goods kit”. The kit must be (1) an unassembled combination of parts that (2) includes at the time of importation all of the necessary parts to fully assemble a final finished good, with no further finishing or fabrication (such as cutting or punching), and (3) be capable of assembly “as is” into a finished product.  There is no qualification that the parts are precluded if they are made entirely of aluminum extrusions.  The court stated, the “exclusionary language does not bar an unassembled “combination of parts” consisting solely of aluminum extrusions, or aluminum extrusions, “fasteners”, and “extraneous materials” from qualifying for the exclusion if the combination includes all of the parts necessary for forming a complete finished good.” Slip Op, pg. 13.  The court, therefore, concluded that Commerce’s interpretation in the Second Remand has impermissibly expanded the scope language by placing a restriction on the “finished goods kit” exclusion that is not supported by the plain language of the scope of the Orders.

Moreover, according to the court, parties are generally required to exhaust administrative remedies to aid Commerce in interpretation, but just as determining the proper reading of a statute presents a “pure” legal question that can be addressed despite a party’s failure to raise such an argument in the proceedings before Commerce, the language of the scope itself can present a “pure” question of law – whether plaintiff’s goods fall within an exclusion to the scope of the Orders. Thus, Meridian’s arguments on the “finished goods kit” exclusion in the scope language, and the merits of Meridian’s claim, were addressed despite its failure to forcefully raise the arguments in the proceedings before Commerce.  Given these findings, the court vacated a prior decision, and once again remanded Commerce’s remand determination. 

Equal Access to Justice Act Fees Awarded in Part

In International Customs Products v. United States, Court No. 07-318, Slip Op. 15-68 (June 24, 2014), plaintiff International Customs Products, Inc. (“ICP”) applied for fees and expenses under Equal Access to Justice Act.  The ICP cases involved a Ruling Letter, classifying ICP’s white sauce under a Harmonized Tariff Schedule (“HTSUS”) heading for “[s]auces and preparations therefor.” CBP issued the requested ruling in 1999 finding in plaintiff’s favor.   However, on April 18, 2005, CBP abruptly changed course, issuing a Notice of Action that reclassified 87 already imported shipments of ICP’s white sauce under an HTSUS provision for “[b]utter and . . . dairy spreads,” at a tariff rate approximately 2400% higher than the rate provided in the Ruling Letter. The Ruling Letter indicated that “action has been taken” to rate-advance the relevant entries, and mandated that “all shipments of this product must be classified” under the butter and dairy spread tariff provision in the future. In 2007, CBP liquidated those 11 entries pursuant to the rate given in the 2005 Notice of Action, and ICP subsequently protested the liquidation by paying penalties as to a single entry and initiating this suit. See Int’l Custom Prods. v. United States, 32 CIT 302, 304-05, 549 F. Supp. 2d 1384, 1388-89 (2008) (“ICP II”). This case was tried in 2012 and resulted in a judgment for Plaintiff on the grounds that the Ruling Letter was improperly revoked by the Notice of Action and that the white sauce at issue was therefore liquidated at the wrong tariff rate. The Court also found that ICP obtained the Ruling Letter without materially misrepresenting the nature of white sauce, and that the white sauce import underlying this case conformed to the description of the product given in the Ruling Letter.  The judgment was upheld on appeal, International Custom Products v. United States, 748 F.3d 1182 (Fed. Cir. 2014) (“ICP IV”), after which this application for fees followed.

To award fees and expenses, the Court must find that (1) the party seeking the award was the prevailing party, (2) the position of the United States was not substantially justified, (3) special circumstances do not make an award unjust, and (4) the application for fees is timely and supported by an itemized accounting. 

While the government agreed that ICP prevailed in the action, it opposed ICP’s fee application.  The government argued that it was substantially justified in taking the position that the Ruling Letter did not cover the entry, since the claim survived a summary judgment motion, evidence at trial showed white sauce was being used in a manner different than the Ruling Letter classification, and that white sauce was not commercially recognized as a sauce and dressing base.  Defendant also alleged that plaintiff misrepresented the uses of the white sauce, as ICP did not provide in its ruling request, all the uses for the white sauce– even though ICP did indicate that it was used as a base for sauces and dressings.  The court held that the position of the United States was not substantially justified, where issuing the Notice of Action had the effect of reclassifying ICP’s white sauce at a vastly increased duty rate ran counter to CBP’s binding Ruling Letter.  CBP was fully conscious that doing so could run afoul of the limitations in 19 U.S.C. § 1625(c), which require notice and comment before revoking a ruling letter. In issuing the Notice of Action, CBP not only knew that it was effectively revoking the Ruling Letter, but it unreasonably ignored the requirement that a ruling letter governs liquidations until revoked. Although the government, for a time, insisted that the Ruling Letter did not apply to the white sauce entries, the laboratory reports contradicted the government’s position.  Moreover, the court held that ICP did not materially misrepresent the uses of the sauce, where there was testimony that the government did not conduct a class or kind of analysis, and failed to define the principal uses required for the applicable subheading.  According to the court, the record showed that the government tried to avoid the revocation of ruling procedures and used the Notices of Action and rate advances to circumvent the process.

While the court granted fees in excess of the statutory $125 per hour where specialized skills in customs laws are necessary and limited, the court reduced the fees assessed in the application by 33% as some entries of fees were inappropriate, such as work for motions where the court did not find jurisdiction, and work for the EAJA application, which did not require special Customs law skills.  Thus the court granted the EAJA application in part.