U.S. Court of Appeals for the Federal Circuit, Gerson Co. v. United States

Import: Customs: Duty rate (Customs): HTSUS interpretation: General Rules of Interpretation (“GRIs”) of the HTSUS: Additional U.S. Rules of Interpretation of the HTSUS: HS (Customs): HS’ Explanatory Notes (EN):

The Gerson Company appeals a decision of the United States Court of International Trade (“Trade Court”) granting summary judgment in favor of the government. See Gerson Co. v. United States, 254 F. Supp. 3d 1271 (Ct. Int’l Trade 2017). In that decision, the court classified Gerson’s imported light-emitting diode (“LED”) candles under subheading 9405.40.80 of the Harmonized Tariff Schedule of the United States (“HTSUS”)—which covers certain “lamps . . . not elsewhere specified or included”— rather than under subheading 8543.70.70—which covers “electrical machines and apparatus,” including “electric luminescent lamps.” We agree with the Trade Court’s classification, and, accordingly, affirm.

Gerson’s imported merchandise consists of finished decorative candle and tea light lamps made of plastic and/or wax. The lamps are designed to resemble ordinary candles, such as votive, pillar, taper, or tea light candles. Unlike ordinary candles, however—which generate light by using a wick to vaporize wax—Gerson’s candles use battery-operated LEDs. Gerson does not dispute that its candles serve both decorative and illuminative functions.

Between January and October 2009, Gerson imported twenty-seven entries of its candles through the Port of Kansas City, Missouri. U.S. Customs and Border Protection (“Customs”) liquidated the merchandise under HTSUS subheading 9405.40.80, which imposes a duty rate of 3.9% ad valorem.

That provision reads:

9405 Lamps and lighting fittings including searchlights and spotlights and parts thereof, not elsewhere specified or included; illuminated signs, illuminated nameplates and the like, having a permanently fixed light source, and parts thereof not elsewhere specified or included:

40 Other electric lamps and lighting fittings:

80 Other………………………..……….3.9%

Gerson objected to Customs’ classification in four administrative protests, arguing that its candles should have been classified under subheading 8543.70.70, which imposes a duty rate of 2% ad valorem.

That provision reads:

8543 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof:

70 Other machines and apparatus:

70 Electric luminescent lamps………..2%

Customs denied each of Gerson’s protests, leading Gerson to file suit in the Trade Court.

(We cite here to the 2009 version of the HTSUS in effect when Gerson imported the merchandise at issue.)

The court observed that it is at least “plausible” to read heading 8543 as covering Gerson’s candles to the extent they qualify as “electrical machines and apparatus.” But the court rejected that reading as impermissibly expanding the scope of heading 8543 and unduly narrowing the scope of heading 9405. The court also determined that such a reading would be inconsistent with the World Customs Organization’s Harmonized Commodity Description and Coding System (“HS”) Explanatory Notes (“ENs”), which suggest that chapter 94 is reserved for finished household lamps like Gerson’s candles, while chapter 85 is reserved for unfinished lamps used in conjunction with other electrical devices. The court therefore classified the candles under subheading 9405.40.80.

Gerson timely appealed. We have jurisdiction under 28 U.S.C. § 1295(a)(5).

(…) The proper classification of merchandise entering the United States is governed by the General Rules of Interpretation (‘GRIs’) of the HTSUS and the Additional United States Rules of Interpretation.

(…) We therefore begin, as we must, “with the language of the headings.” Orlando Food Corp. v. United States, 140 F.3d 1437, 1440 (Fed. Cir. 1998).

(…) As the Trade Court observed, the term “electrical machines and apparatus” recited in heading 8543 “is not free of ambiguity” standing alone. Gerson, 254 F. Supp. 3d at 1277. On the one hand, it is “plausible” to read heading 8543 broadly as encompassing Gerson’s candles, at least in a “hyper-technical sense,” because the candles use electricity to operate and therefore arguably qualify as “electrical machines and apparatus.” Id. at 1276–77. On the other hand, the terms “machine” and “apparatus” generally connote equipment designed specifically to carry out a particular function. See Webster’s New World College Dictionary 67 (4th ed. 2009). Those terms would seem not to cover Gerson’s candles, which are decorative articles that also serve an illuminative function.

(…) When so read, the HTSUS makes clear that Gerson’s candles belong in heading 9405 rather than in heading 8543. If one were to read heading 8543 as covering Gerson’s candles, it would cover every electric lamp, because all such lamps use electricity to generate light. And, by operation of Note 1(f), such lamps could not be classified under heading 9405. In other words, heading 9405 would be constrained to only non-electric lamps. That reading, as the Trade Court noted, “would impose a specific, and drastic, limitation on the scope of heading 9405, HTSUS that the article description for that heading does not express or suggest.” Gerson, 254 F. Supp. 3d at 1278.

(…) Unlike the HTSUS section and chapter notes— such as chapter 94’s Note 1(f)—the ENs “are not legally binding or dispositive, but they may be consulted for guidance and are generally indicative of the proper interpretation of the various HTSUS provisions.” BenQ Am. Corp. v. United States, 646 F.3d 1371, 1376 (Fed. Cir. 2011). We cite here to the 2007 version of the ENs that were in effect when Gerson imported its merchandise.

(…) The World Customs Organization’s Explanatory Notes, which accompany each chapter of the HTSUS.

(…) Chapter 85’s ENs, by contrast, state that chapter 85 includes “certain electrical goods not generally used independently, but designed to play a particular role as components, in electrical equipment,” including “electrical filament or discharge lamps.” EN 85(A)(6); HS Hdg. 85.39. These ENs therefore suggest that chapter 85 was intended to include at least unfinished lamps that are used in conjunction with other electrical equipment. As the Trade Court found, Gerson’s candles more closely resemble the lamps described in chapter 94 than they do the lamps described in chapter 85. Gerson, 254 F. Supp. 3d at 1277.

(…) Gerson’s and its amici’s “bottom-up” analysis—which begins with a subheading and proceeds upward through the headings—is backwards. Classification under the GRIs must take a “top-down” approach, beginning, “as it must, with the language of the headings,” and ending with the language of the subheadings.

(…) In particular, under GRI 1, a court must first determine whether the merchandise is correctly classified under a particular heading of the HTSUS. See Otter Prods., 834 F.3d at 1375 (“According to GRI 1, the HTSUS headings and section or chapter notes govern the classification of a product.”); BenQ, 646 F.3d at 1376 (“When determining the correct classification for merchandise, a court first construes the language of the headings in question, in light of any related section or chapter notes.”); see also Orlando Food, 140 F.3d at 1440 (“When determining which heading is the more specific, and hence the more appropriate for classification, a court should compare only the language of the headings and not the language of the subheadings.”). “Only after determining that a product is classifiable under the heading should the court look to the subheadings to find the correct classification for the merchandise.” Orlando Food, 140 F.3d at 1440; see LeMans, 660 F.3d at 1316 (“We are first to look to headings, then subheadings, to determine the proper classification”).

(…) Headings “are to be evaluated without reference to their subheadings, which cannot be used to expand the scope of their respective headings.” R.T. Foods, Inc. v. United States, 757 F.3d 1349, 1353 (Fed. Cir. 2014).

(U.S. Court of Appeals for the Federal Circuit, August 6, 2018, Gerson Co. v. United States, Docket 18-1011, Precedential, Circuit Judge O’Malley)

Classification contestée d’un produit importé, application et interprétation du HTSUS, référence au HS et à ses notes explicatives.

Manière de lire et analyser le HTSUS (depuis les titres en direction des paragraphes, et non l’inverse), ses règles générales d’interprétation et ses règles d’interprétation additionnelles.