UNITED STATES COURT OF INTERNATIONAL TRADE

Slip Op. 23-68

Before the Court in ME Global, Inc. v. United States, Court No. 19-179, Slip. Op. 23-68 (May 2, 2023) were the cross-motions for summary judgment of plaintiff and defendant concerning the proper classification of heat-treated forged steel rods from the People’s Republic of China (“China”), entered by Plaintiff on August 4, 2018. The heat-treated forged steel rods at issued are used to crush ore in mining and mineral extraction operations. As a result of manufacturing in China, the subject steel rods are comprised of a hard outer surface of martensite and a softer inner core of pearlite. The hardness of the outer martensite layer makes the rods suitable for breaking down ore and mineral structures, while the softness of the inner pearlite core provides ductility, which prevents the bars from breaking while being used in the mill. At the time of entry Customs classified the rods under HTSUS subheading 7228.30.80, HTSUS as “Other bars and rods, not further worked than hot-rolled, hot-drawn or extruded . . . Other,” which is subject to a Section national security tariff of 25% ad valorem. Plaintiff filed a protest of Customs’ classification of its steel rods, arguing that the subject rods do not fall within the scope of HTSUS heading 7228 because they have assumed the character of goods classified under HTSUS chapter 73, heading 7326, subheading 7326.11.00, covering “[o]ther articles of iron or steel: [f]orged or stamped, but not further worked: . . . [g]rinding balls and similar articles for mills,” which is not subject to a Section 232 tariff. The Government now argues, differently than its liquidation determination, that the rods should be classified under HTSUS chapter 72, heading 7228, subheading 7228.40.00, as “[o]ther bars and rods, not further worked than forged,” subject to the same amount of total duties. For the following reasons, the Court granted the Government’s motion for summary judgment and denied plaintiff’s motion.

“The General Rules of Interpretation (“GRIs”) govern classifications of imported goods under the HTSUS and are applied in numerical order.” Id. at 6. “Most classification disputes are resolved by the application of GRI 1.” Id. at 7. “Under GRI 1, the court determines the appropriate classification of merchandise ‘according to the terms of the headings and any relative section or chapter notes.’” Id. at 7. First the Court noted “the scope of HTSUS headings 7228 and 7326 cannot be expanded by reference to their respective subheadings, and that the subject rods’ ‘use’ as grinding rods is irrelevant to their classification.” Id. at 19. The Court noted that “HTSUS heading 7228 is an eo nomine provision covering ‘[o]ther bars and rods of other alloy steel.’” Id. at 23.The Court ultimately determined that “the subject rods satisfy the controlling HTSUS chapter 72 notes that define ‘[o]ther bars and rods of other alloy steel.’ Thus, pursuant to a GRI 1 analysis, the rods are classifiable under HTSUS heading 7228 because they are specifically described by the terms of HTSUS heading 7228.’” Id. The Court noted that “Plaintiff’s proposed heading HTSUS 7326— is a ‘basket provision’ … and that ‘”[c]lassification of imported merchandise in a basket provision is only appropriate if there is no tariff category that covers the merchandise more specifically.’” Id. at 24. Ultimately, the Court held that because “the court has determined that the rods are specifically covered by HTSUS heading 7228 … it follows that they cannot also be classified under HTSUS heading 7326—a basket provision.” Id. at 25. As such, the Court granted the Government’s motion for summary judgment and denied plaintiff’s motion.