Second Nature Designs Ltd. v. United States

660 F.Supp.3d 1352

SECOND NATURE DESIGNS LTD., Plaintiff, v. UNITED STATES, Defendant.

Slip Op. 23-139 Court No. 17-00271

United States Court of International Trade

September 21, 2023

John M. Peterson, and Patrick B. Klein, Neville Peterson LLP, of New York, N.Y., argued for Plaintiff Second Nature Designs Ltd.

Brandon A. Kennedy, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, N.Y., argued for Defendant United States. With him on the briefs were Brian M. Boynton, Principal Deputy Assistant Attorney General, Patricia M. McCarthy, Director, Justin R. Miller, Attorney-In-Charge. Of counsel on the brief was Alexandra Khrebtukova, Office of the Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection of New York, N.Y.

OPINION

Katzmann, Judge:

Before the court are cross-motions for summary judgment. Plaintiff Second Nature Designs Ltd. ("Second Nature") contests the denial of protests challenging the United States Customs and Border Protection's ("Customs") classification decision of imports containing various decorative items of plant parts ("subject merchandise"). Customs classified the subject merchandise under subheading 0604.90.60 of the Harmonized Tariff Schedule of the United States ("HTSUS"),¹ carrying a duty rate of 7 percent ad valorem. Second Nature argues that the proper classification is subheading 0604.90.30, HTSUS, a duty-free provision. Defendant the United States ("the Government") contends that in addition to Customs's original classification for certain categories of the subject merchandise, other headings of HTSUS provide the correct classification for other categories.

For the reasons established herein, the court agrees with Second Nature's preferred classifications for certain categories of the subject merchandise involving dried items and curled items. For certain other categories, the court agrees with the Government's preferred classification regarding certain styles of merchandise constituting artificial flowers or fruit. The court further finds that factual issues persist as to the remainder of the categories, precluding the grant of summary judgment. Accordingly, the court grants in part and denies in part both Plaintiff's Motion for Summary Judgment and Defendant's Cross-Motion for Summary Judgment.

BACKGROUND

The court first sets out the overarching legal, factual, and procedural background necessary to contextualize the various classification claims brought forth by Second Nature and the Government. The court will further develop such backgrounds as relevant and necessary in the forthcoming discussion.

I. Legal Background

The HTSUS governs the classification of merchandise imported into the United States. See Wilton Indus., Inc. v. United States, 741 F.3d 1263, 1266 (Fed. Cir. 2013). The HTSUS sets out the tariff rates and statistical categories using a series of nested chapters, headings, and subheadings. In general, the HTSUS's primary headings describe broad categories of merchandise, while its subheadings provide a particularized division of the goods within each category. The HTSUS "shall be considered to be statutory provisions of law for all purposes." 19 U.S.C. § 3004(c)(1). Proper classification is governed by the General Rules of Interpretation ("GRIs") of the HTSUS as well as the Additional U.S. Rules of Interpretation. See Roche Vitamins, Inc. v. United States, 772 F.3d 728, 730 (Fed. Cir. 2014) (citing Orlando Food Corp. v. United States, 140 F.3d 1437, 1439 (Fed. Cir. 1998)).

Judicial review of classification decisions involves two steps. First, the court determines the proper meaning of the terms used in the HTSUS provision, which is a question of law. See Link Snacks, Inc. v. United States, 742 F.3d 962, 965 (Fed. Cir. 2014) (citing Warner-Lambert Co. v. United States, 407 F.3d 1207, 1209 (Fed. Cir. 2005)). Second, the court determines whether the subject merchandise falls within the description of those terms, which is a question of fact. See id. (citing Orlando Food, 140 F.3d at 1489). The key factual issue is the nature of the merchandise. See Bausch & Lomb, Inc. v. United States, 148 F.3d 1363, 1365 (Fed. Cir. 1998) ("[S]ummary judgment is appropriate when there is no genuine dispute as to the underlying factual issue of exactly what the merchandise is.").

The court applies the GRIs in numerical order beginning with GRI 1; the court will reach subsequent GRIs only if analysis under the preceding GRI does not yield proper classification of the subject merchandise. See Link Snacks, 742 F.3d at 965; see also Carl Zeiss, Inc. v. United States, 195 F.3d 1375, 1379 (Fed. Cir. 1999). "The HTSUS is designed so that most classification questions can be answered by GRI 1...." Telebrands Corp. v. United States, 36 C.I.T. 1231, 1235, 865 F. Supp. 2d 1277, 1280 (2012), aff'd, 522 F. App'x 915 (Fed. Cir. 2013). Therefore, "a court first construes the language of the heading, and any section or chapter notes in question." Orlando Food, 140 F.3d at 1440. Once imported merchandise is determined to be classifiable under a particular heading, a court must then look to the subheadings to find the correct classification of the merchandise in question. Id. Only after "exhausting the terms of the subheadings and related [chapter] notes would one turn to GRI 3 to choose between two or more potentially applicable subheadings." Telebrands, 36 C.I.T. at 1236, 865 F. Supp. 2d at 1281.

GRI 2 provides that the classification of "goods consisting of more than one material or substance" shall be determined according to the principles of GRI 3. GRI 2, HTSUS. Under GRI 3(a), goods are classified into "[t]he heading which provides the most specific description"; but if multiple headings "each refer to part only of the materials or substances contained in [a mixed good]," the headings are regarded as equally specific and the court moves to GRI 3(b) by classifying the good according to the material that gives the good its "essential character." GRI 3, HTSUS. If no essential character can be found, then the good is classified pursuant to GRI 3(c) "under the heading which occurs last in numerical order among those which equally merit consideration." Id. After using the GRIs to determine the correct heading, the court determines the correct HTSUS subheading using GRI 6, which directs that GRIs 1 through 5 be reapplied at the subheading level. GRI 6, HTSUS. "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.

HTSUS terms are "construed according to their common and commercial meanings, which are presumed to be the same." Carl Zeiss, 195 F.3d at 1379 (citing Simod Am. Corp. v. United States, 872 F.2d 1572, 1576 (Fed. Cir. 1989)). The court defines HTSUS tariff terms by relying on its own understanding of the terms and "consult[ing] lexicographic and scientific authorities, dictionaries, and other reliable information sources." Id. at 1379. For additional direction on construing HTSUS provisions, the court may also consult the Harmonized Commodity Description and Coding System's Explanatory Notes ("Explanatory Notes" or "ENs"). See Store-WALL, LLC v. United States, 644 F.3d 1358, 1363 (Fed. Cir. 2011). Although the "Explanatory Notes are not legally binding," they "may be consulted for guidance and are generally indicative of the proper interpretation of a tariff provision." Roche Vitamins, 772 F.3d at 731.

II. Procedural Background

From August 26, 2015, to November 13, 2015, Second Nature filed nine entries regarding the subject merchandise with the port of Detroit, Michigan. Joint Rule 56.3 Stmt. of Material Facts as to Which There Are No Genuine Issues to Be Tried ¶ 2, Jan. 28, 2022, ECF No. 91-1 ("Joint SOF"). From July 9, 2015, to December 26, 2016, Second Nature filed 140 entries of the subject merchandise with the port of Buffalo, New York. Id. Customs classified the merchandise under subheading 0604.90.60, HTSUS, which covers: "Foliage, branches and other parts of plants, without flowers or flower buds, and grasses, mosses and lichens, being goods of a kind suitable for bouquets or for ornamental purposes, fresh, dried, dyed, bleached, impregnated or otherwise prepared: Other: Other." Joint SOF ¶ 4.

Second Nature timely filed eleven protests between February 23, 2016, and June 29, 2017, with the Port Directors of Customs at the Port of Buffalo, New York, and the Port of Detroit, Michigan. Compl. ¶ 11, Dec. 21, 2017, ECF No. 7; Am. Answer ¶ 11, Aug. 24, 2022, ECF No. 114. These protests contested the classification, rate, and amount of duty assessed in liquidation, pursuant to 19 U.S.C. § 1514(a)(2).² Compl. ¶ 11; Am. Answer ¶ 11. Specifically, Second Nature argued that the entries should have instead been classified under subheading 0604.90.30, HTSUS, which covers: "Foliage, branches and other parts of plants, without flowers or flower buds, and grasses, mosses and lichens, being goods of a kind suitable for bouquets or for ornamental purposes, fresh, dried, dyed, bleached, impregnated or otherwise prepared: Other: dried or bleached." Compl. ¶ 11; Am. Answer ¶ 11.

On May 8, 2017, Customs issued Headquarters Ruling Letter H279097, again confirming the 0604.90.60 classification for the further worked dried or bleached botanicals. Joint Mot. at 5; Compl. ¶ 12; Am. Answer ¶ 12. As support, Customs cited rulings where it had considered numerous other botanical products and found that dried natural goods which were decorated beyond bleaching or drying were classified under 0604.90.60. Id. Between May 19, 2017, and October 30, 2017, Customs denied certain protests underlying this action. Compl. ¶ 13; Am. Answer ¶ 13.

Following the denial of its protests, Plaintiff timely filed suit on November 17, 2017, contesting Customs's classification and alleging that the...