United States v. New York Merchandise Co.

• Decision Date: 17 December 1970
• Docket Number: C.A.D. 1004.,No. 5357,5357
• Citation: 58 CCPA 53,435 F.2d 1315
• Parties: The UNITED STATES, Appellant, v. NEW YORK MERCHANDISE CO., Inc., Appellee.
• Court: U.S. Court of Customs and Patent Appeals (CCPA)

58 CCPA 53, 435 F.2d 1315 (1970)

The UNITED STATES, Appellant, v. NEW YORK MERCHANDISE CO., Inc., Appellee.

No. 5357, C.A.D. 1004.

United States Court of Customs and Patent Appeals.

December 17, 1970.

William D. Ruckelshaus, Asst. Atty. Gen., Alan S. Rosenthal, James C. Hair, Jr., Washington, D. C., for the United States.

Stein & Shostak, Los Angeles, Cal., attorneys of record, for appellee; S. Richard Shostak, Los Angeles, Cal., of counsel.

Before RICH, ALMOND, BALDWIN, and LANE, Judges, and McMANUS, Judge, Northern District of Iowa, sitting by designation.

BALDWIN, Judge.

The government appeals from the decision and judgment of the United States Customs Court, First Division,¹ sustaining the protest of New York Merchandise Co. to the classification and resulting assessment of customs duty on certain goods invoiced as "6 Transistor Stuffed Animal Radios: Poodle."

The imported merchandise can be described as stuffed, plush-covered poodle dogs, about 12 inches in overall length, each containing, in a concealed, zippered compartment, a battery-powered transistor radio which is operated by control knobs protruding out from the nose and chest parts of the stuffed animal.

The Collector of Customs classified the articles under item 737.30 of the Tariff Schedules of the United States (TSUS) as stuffed toy figures of animate objects and assessed duty at 18 per cent ad valorem. In the court below, appellee claimed that the proper classification was under item 685.22 TSUS, as radios, dutiable at 12½% or, alternatively, under item 688.40, as electrical articles, not specially provided for, dutiable at 11½%. The government also asserted an alternative classification, arguing that, if the original classification were held to be incorrect, the imported articles should be held classifiable as toys under item 737.90 TSUS, to be dutied at 35%.² The Customs Court sustained the importer's protest and held the articles to be properly classifiable as radios.

Before the Customs Court, the importer submitted six exhibits, one of which was a representative sample of the imported merchandise, and took the testimony of three witnesses. Beyond what was elicited on cross-examination of appellee's witnesses, the government submitted no evidence. We summarize the facts thought by the lower court to have been established by the record as follows:

1. The radio portions of the imported articles constitute the component of chief value of the overall article.

2. Between 1965 and 1966, more than 140,000 of these articles were imported and sold through gift shops or department stores, where they were displayed on counters with radios and other electric articles and were advertised and sold as "novelty radios".

3. The federal excise tax applicable to radios was paid upon sale of the imported articles.

4. The wholesale price for the imported articles is approximately three times that of comparable stuffed animals sold by the importer as toys for children.

5. While having an essentially similar appearance to such stuffed animals sold as toys, the imported articles have a plush pile which is longer than that of such toy stuffed animals and which has a tendency to fall off.

On the basis of all the aforestated facts but manifestly relying heavily on the sample, itself, as evidence, the Customs Court first found the imported articles to be more than stuffed toy figures of animate objects. In doing so, the court applied the following "tests", which were suggested in Novelty Import Co. v. United States, 58 Cust.Ct. 59, C. D. 2889 (1967):

The questions to be asked in determining whether or not a particular import is "more than" a figure or image of an animate object are these: Whether or not the inanimate portion is integrated with the animate portion; whether or not the inanimate portion is a substantial or incidental part of the whole product; and whether or not the component animate and inanimate parts are essential to the toy article and what it purports to be.

The court thereafter went on to hold that New York Merchandise Company had established that the importations are not toys but rather are "novelty radios" and thus, eo nomine, within the broad provision for radio broadcasting and receiving apparatus. It further concluded, in response to the importer's alternative claim, that the presence of the radio within a stuffed animal exterior does not require that the articles be regarded as more than radios. Based on these determinations, the Customs Court sustained the importer's protest.³

Our review of the opinion below has satisfied us that the considerations employed by the court in deciding that the imported articles were more than stuffed toy figures of animate objects were apposite, and we agree with that initial determination. Compare Cragstan Corp. v. United States, 51 CCPA 27, C.A.D. 832 (1963). The government does not seriously dispute this holding. The principal point of contention on appeal here is with the treatment by the Customs Court of the presumption of correctness attaching to the administrative decision protested.

As a result of its decision that the imported articles were more than figures of animate objects, the Customs Court concluded that the goods were legally precluded from the classification provision originally adopted by the Customs Bureau and that the presumption of correctness to be afforded that classification was thus overcome. In response to the government's alternate classification proposal, i. e., that the imported articles were properly classifiable as toys, the court first held that the presumption of correctness did not attach to "any other classification, even under another provision in the same tariff paragraph" (citing United States v. White Sulphur Springs Co., 21 CCPA 203, 205, T.D. 46728 (1933)), and then went on to declare:

Absent the presumption of correctness of the classification of the imported merchandise, defendant had the burden of showing by competent proof that the merchandise was chiefly used for the amusement of children or adults. Defendant having failed to offer any evidence whatever concerning the use of the merchandise, it manifestly has not sustained its burden of proof.

The government contends that the Customs Court was in error in holding the presumption to have been overcome before it had determined that the importer had not only proved that the original classification was wrong but also that its asserted classification was correct. It is urged that the court's holding that the articles in question were incorrectly classified went only to the fact that they were more than "figures of animate objects." The finding of the Collector that the articles were "toys" as well as "figures of animate objects", a finding which the government argues was necessarily implicit in the initial classification, must therefore still be accorded the presumption of correctness. For this reason, the government asserts that the lower court was wrong in placing on it the burden of proving that the article's chief use was for amusement,⁴ and that that burden should have remained (in a negative sense, of course) with the importer. The court's holding on this point, it is urged, had the effect of sharply reducing the burden of proof actually resting on the importer, improperly shifting part of that burden to the government and thereby fatally...