SGI, Inc. v. U.S.

• Decision Date: 05 September 1997
• Docket Number: No. 96-1272,96-1272
• Citation: 122 F.3d 1468
• Parties: SGI, INCORPORATED, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1468

122 F.3d 1468

19 ITRD 1520

SGI, INCORPORATED, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.

No. 96-1272.

United States Court of Appeals, Federal Circuit.

Sept. 5, 1997.

Ralph H. Sheppard, Meeks & Sheppard, New York City, argued for plaintiff-appellant. With him on brief were Jeffrey A. Meeks and Lisa Levaggi Borter.

Barbara M. Epstein, Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, International Trade Field Office, New York City, argued for defendant-appellee. With her on the brief were Frank W. Hunger, Assistant Attorney General and David M. Cohen, Director, Department of Justice, Washington, DC. Also with her on the brief was Joseph I. Liebman, Attorney in Charge, International Trade Field Office, New York City. Of counsel on the brief was Karen P. Binder, Assistant Chief Counsel, International Trade Field Office, New York City.

Steven P. Florsheim, Grunfeld, Desiderio, Lebowitz & Silverman LLP, New York City, for amicus curiae Arrow Trading.

Before RICH, NEWMAN, and PLAGER, Circuit Judges.

RICH, Circuit Judge.

SGI Incorporated (SGI) appeals from a decision of the United States Court of International Trade rendered on cross motions for summary judgment in which the Court of International Trade classified SGI'S portable soft-sided vinyl coolers under subheading 4202.92.90 of the Harmonized Tariff Schedule of the United States (HTSUS), which carries a 20% ad valorem tax. We reverse.

BACKGROUND

SGI imports "Chill" coolers from Taiwan, China, and Hong Kong. It is undisputed that the "Chill" coolers at issue are portable soft-sided vinyl insulated coolers with handles or straps used for storage of food or beverages, for maintaining a cold temperature over time, and for carrying such coolers from place to place. The coolers' insulative properties are similar to both hard and soft-sided coolers, and the coolers' insulative material consists of a polyethylene closed cell foam approximately one half inch thick between an outer and inner vinyl shell surrounding the storage compartment of the cooler. Plastic is the component material of chief value.

The Court of International Trade also found that the coolers at issue in this case were identical to the coolers at issue in Sports Graphics, Inc. v. United States, 24 F.3d 1390 (Fed.Cir.1994), decided under the Tariff Schedules of the United States (TSUS) which preceded the HTSUS. The Court of International Trade found that:

In Sports Graphics, Customs had classified plaintiff's coolers as "Other" articles of "luggage" under item 706.62, TSUS, pursuant to the definitional Headnotes 2(a)(i) and (ii) of Schedule 7, Part 1, Subpart D. Plaintiff claimed, and the CIT agreed, that the merchandise was not ejusdem generis with the TSUS luggage exemplars because "the chief use of the Chill cooler, as with the general class of 'coolers,' is to maintain food and beverages at a desired temperature over a period of time." Such a use is a storage function. Accordingly, the coolers were properly dutiable under item 772.15, TSUS, as "articles chiefly used for preparing, serving, or storing food or beverages. Other." On appeal, the CAFC affirmed, holding with respect to ejusdem generis:

The trial court concluded that when determining the classification of the merchandise at issue here, under a proper analysis, the focus should be on whether food or beverage is involved. We agree. In focussing on whether food or beverage is involved, it is clear that the merchandise has a different purpose, the storage of food or beverage, which precludes the merchandise from being SGI, Inc. v. United States, 917 F.Supp. 822, 825-26 (Ct. Int'l Trade 1996) (citations omitted) (quoting Sports Graphics, 24 F.3d at 1393).

ejusdem generis with the exemplars listed in headnotes 2(a)(i) and 2(a)(ii) of the luggage provision.

The United States Customs Service (Customs), however, classified the coolers under Heading 4202 of HTSUS that is comparable to the "luggage" provision of the TSUS, which was rejected by the Federal Circuit as an improper classification in Sports Graphics. Customs classified the coolers under subheading 4202.92.45, HTSUS, covering travel, sports and similar bags with an outer surface of textile materials, with a schedule duty rate of 20% ad valorem tax. The Court of International Trade found Customs' classification inapplicable and classified the coolers under an alternative classification suggested by Customs, subheading 4202.92.90, covering items similar to the exemplar containers in Heading 4202, which also carries an ad valorem tax of 20%. SGI, 917 F.Supp. at 833.

In classifying the coolers, the Court of International Trade held that the reasoning in Sports Graphics did not apply to exclude the coolers from classification under Heading 4202, HTSUS, for several reasons. The Court of International Trade found that Heading 4202 is expressly broader than the TSUS luggage provisions under which Sports Graphics was decided. For instance, it included "an expanded and diversified list of exemplar containers, such as shopping bags, holsters, musical instruments cases, map cases, toiletry bags, sports bags, tool bags, jewelry boxes, etc." SGI, 917 F.Supp. at 827. The Court of International Trade also found that no provision existed under the HTSUS containing the relevant language of item 772.15 (or 772.16), TSUS, i.e. articles chiefly used for preparing, serving, or storing food or beverages, found to be the proper classification for the coolers in Sports Graphics. Id.

The Court of International Trade applied the reasoning in Totes, Inc. v. United States, 69 F.3d 495, 498 (Fed.Cir.1995), which found that the criterion for being ejusdem generis with the eo nomine articles set forth under Heading 4202, based on the essential characteristics or purposes that unite the exemplar articles, is whether the merchandise to be classified is designed to "organize, store, protect and carry various items." The Court of International Trade said:

Indeed, the expanded panoply of enumerated containers described in Heading 4202, designed to protect, store, and carry wide-ranging products, and some serving the purpose of storing certain consumable products, including pouches and cases for cigarettes and tobacco, leaves little doubt that storage of food in coolers is not a "different purpose" than that served by the Heading 4202 exemplars.

Thus, for application of ejusdem generis to Heading 4202, it is the exemplar containers' purpose or use for storage, transportation, protection, etc. that is relevant, and not whether the contents stored and/or carried by the exemplar containers are food or beverages. Although most of the Heading 4202 exemplar containers are not specifically designed and constructed for storage of food or beverages to maintain a cold temperature over time, precise functional equivalence to, or commercial interchangeability with, particular exemplars enumerated in the Heading is plainly not required by the term "similar" or the rule of ejusdem generis.

SGI, 917 F.Supp. at 828 (citation omitted). The Court of International Trade found, based on this reasoning, that the coolers were properly classified under Heading 4202.

The Court of International Trade, however, refused to affirm Customs' classification of the coolers under 4202.92.45, HTSUS, encompassing "Travel, sports and similar bags," saying:

Because the coolers are not "designed for carrying clothing and other personal effects during travel," like backpacks and shopping bags, it does not follow ipso facto that the coolers do not possess the essential SGI, 917 F.Supp. at 831.

common characteristics that unite all of the exemplar containers in Heading 4202. As the Court has found that the coolers are ejusdem generis with the exemplar containers in Heading 4202, they are classifiable as "similar containers" within the purview of subheading 4202.92.90, HTSUS, a less specific subheading than subheading 4202.92.45.

DISCUSSION

Whether an imported item has been properly classified involves a two step analysis:

(1) ascertaining the proper meaning of specific terms in the tariff provision; and

(2) determining whether the merchandise at issue comes within the description of such terms as properly construed.

Sports Graphics, 24 F.3d at 1391. Determining the proper meaning of terms is a question of law that we review de novo, while determining whether the item fits within such meaning is a question of fact that we review for clear error. Id.; Marcel Watch Co. v. United States, 11 F.3d 1054, 1056 (Fed.Cir.1993). The parties filed cross-motions for summary judgment and agree that there are no disputed issues of material fact. Therefore, the sole issue is a matter of properly interpreting the pertinent sections of the HTSUS. See Rollerblade, Inc. v. United States, 112 F.3d 481, 483 (Fed.Cir.1997) ("[N]one of the pertinent characteristics of the merchandise is in dispute, and thus the sole issue is a matter of properly interpreting the classification term at issue -footware- to determine whether the scope of that term is broad enough to encompass the...