Avecia, Inc. v. U.S., Slip Op. 06-184. Court No. 05-00183.

• Decision Date: 19 December 2006
• Docket Number: Slip Op. 06-184. Court No. 05-00183.
• Parties: AVECIA, INC., Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. Court of International Trade

469 F.Supp.2d 1269

AVECIA, INC., Plaintiff, v. UNITED STATES of America, Defendant.

Slip Op. 06-184. Court No. 05-00183.

United States Court of International Trade.

December 19, 2006.

Buchanan Ingersoll PC (Steven R. Bizar, Jill W. Rogers), Philadelphia, PA, Crowell & Moring LLP (Alexander Schaefer), Washington, DC, for Plaintiff.

Peter D. Keisler, Assistant Attorney General, Barbara S. Williams, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division United States Department of Justice (Saul Davis); Office of Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection (Beth C. Brotman), of counsel, for the defendant.

OPINION

MUSGRAVE, Judge.

Following a bench trial on whether imported ink-jet ink concentrates consisting of chromophores in deionized water should be classified for customs duty purposes under the Harmonized Tariff Schedule of the United States ("HTSUS") as "synthetic organic coloring material," specifically "dyes," of heading 3204, or "printing inks" of heading 3215, the Court concludes that the products are correctly classifiable under heading 3215.

Procedural Background

This proceeding resolves a lengthy dispute between the plaintiff Avecia, Inc.¹ and the defendant United States involving the defendant's agency, U.S. Customs and Border Protection or its predecessor(s) ("Customs"), over the proper tariff classification of Avecia's ink-jet ink liquids. As with other ink-jet ink classifications that Avecia has been protesting, the matter of this dispute was imported from Avecia's related manufacturing facility at Grangemouth, Scotland in 2003. See Pretrial Order, Schedule C ("POSC") at ¶ 15.

Previously, in 1998, Avecia submitted to Customs protest number 1101-98-100179 on the proper classification of "Pro-Jet Fast Yellow 2" ("FY2"). Avecia argued that FY2 should be classified as a printing ink of heading 3215, HTSUS, and not as a dye (i.e., synthetic organic coloring material) of heading 3204, HTSUS. See id. at ¶ 5 (April 28, 2006). In the spring of 2000, Customs approved the protest and memorialized the approval in HQ 962365,² reclassifying Pro-Jet Fast Yellow 2 under heading 3215. See id. at ¶ 6; Pl.'s Ex. 22 at 14. After that approval, Avecia sought to apply Customs's analysis to other ink-jet inks by filing protests on entries that Customs had classified as dyes. Customs denied the protests, and Avecia timely contested the protest denials in two actions before this court, USCIT Nos. 03-00001 and 03-00197, filed in December 2002 and April 2003, respectively. Id. at ¶ 9; Compl. & Answer I ¶ 24; Compl. & Answer II ¶ 24.

During that period, on January 2, 2003, Customs published and invited comment on its "Proposed Revocation of Ruling Letters and Treatment Relating to Tariff Classification of an Ink[-] Jet Color Preparation." POSC at ¶ 10. The literal terms of 19 U.S.C. § 1625(c) meant that the period for submitting comments thereon was open until February 3, 2003, after which Customs was required to "take action" on any "decision to modify or revoke" the previous ruling favoring Avecia within 30 days after the close of the comment period. 19 U.S.C. § 1625(c). Cf. Harmon Dep. Tr. 80:15-82:8. Customs did not publish its general notice of revocation and ruling number HQ 966063 relating to the tariff classification of FY2 in the Customs Bulletin until June 25, 2003. See POSC at ¶ 11. The notice and ruling concluded that FY2 is classified under subheading 3204.14.30. Id.

In July 2003, Avecia, through counsel, sent a letter to Customs asserting that Customs's notice of revocation, which had been sent to Avecia's counsel on June 13, 2003, was "ineffective." Id. at ¶ 12. Some five months later, on February 25, 2004, the parties resolved Avecia's first judicial challenges, USCIT Nos. 03-00001 and 03-00197, by entering into two stipulated judgments on agreed statements of facts. See id. at ¶ 14 (Customs noting its position that the stipulations were solely procedural and not substantive).

Avecia then sought to contest other year 2003 entries including the ink-jet inks at issue. Customs had classified the liquids under heading 3204 "synthetic organic coloring matter ... dyes" under the HTSUS. Avecia tendered the duties claimed by Customs on the subject matter at the time of entry, and Customs liquidated the entries from November 14, 2003 through August 20, 2004, as entered. Id. at ¶ 18. Avecia timely protested the classifications, again arguing that the merchandise should be classified as "printing inks" under heading 3215. Id. at ¶ 19. During June and October 2004, Customs denied each of Avecia's protests as to the subject products. Id. at ¶ 20. Plaintiff then filed a summons on September 27, 2004 and initiated case No. 04-00489, and a summons on March 1, 2005 covering the other protests involved in this action. Id. at ¶ 21.

The protests cover entries of "Pro-Jet Cyan 1 Stage RO Feed," "Pro-Jet Cyan 1 Special Liquid Feed," "Pro-Jet Black 287 Liquid Feed," "Pro-Jet Yellow 1 Liquid Feed," "Pro-Jet Cyan 854 Liquid Feed," "Pro-Jet Black 661 Liquid Feed," and "Pro-Jet Black HS Stage." Id. at ¶ 15. With the exception of Pro-Jet Black HS Stage, Customs `considered the liquids "direct dyes" and classified them either under heading 3204.14.30 ("other ... products described in additional U.S. note 3 to section VI"), which bore a duty rate of 7.4% ad valorem, or under heading 3204.14.50 ("other ... other"), which bore a duty rate of 7.8% ad valorem. Customs considered Pro-Jet Black HS Stage, covered by entry number 916-1076747-6, a "reactive dye" and classified the liquid under heading 3204.16.30 ("other ... products described in additional U.S. note 3 to section VI"), which bore a duty rate of 7.4% ad valorem. See id. at ¶ 16; Ans. at ¶ 32. The parties do not dispute the value of the merchandise declared on the subject entries as set forth in the relevant protests. POSC at ¶ 17.

The parties severed for stipulation certain entries having dates of entry prior to August 24, 2003, when the FY2 ruling was belatedly revoked. See Order of 4/28/06 (granting motion to sever). The parties agreed that products entered before August 24, 2003 are classifiable under heading 3215.19.0060 or under heading 3215.11.0060 at a duty rate of 1.8% ad valorem pursuant to Customs's April 2000 ruling approving Avecia's protest as to the classification of its FY2 product. Def.'s Supp. Resp. to Interrogs. ¶ 10. Ten 2003 entries continue to be contested. See Pl.'s Exs. 21 & 22; see also Compl. & Answer I ¶ 36; Compl. & Answer II ¶ 37.

Jurisdiction

28 U.S.C. § 1581(a) confers exclusive jurisdiction in this Court on the denial of a customs classification protest.

Findings

Introduction

Avecia traces its direct roots back to Imperial Chemical Industries PLC, a U.K. dye manufacturer formed in 1926. See R 259:8-11, 260:21-22. Its witnesses therefore testified to familiarity with both dye and ink-jet ink development and manufacture. The advent of ink-jet ink printing technology prompted Avecia to concentrate on ink-jet manufacture, and the relative newness of this technology appears to have precipitated this dispute over the classification of its imports.

To discuss its products at trial, Avecia introduced the testimony of Mr. Craig Johnston, Avecia's process technology and toll manufacturing manager, Dr. Ilesh Bidd, Avecia's research and technology director and corporate representative, Prof. Peter Gregory, whose working life was devoted to the research department of Avecia and is now retired, and Dr. Harold Freeman, a professor of dye chemistry at North Carolina State University and Avecia's expert witness. Their collective testimony, together with Avecia's exhibits, addressed distinctions between Avecia's products, dyes, inks, ink-jet inks, and Avecia's role in the evolution of the latter. Dr. Bidd also demonstrated that the products are capable of printing in their condition as imported, using an Epson C62 printer and standard' Epson photo paper, and he opined that the print "looks great." The Court determined the success of the demonstration R 326:15-343:9, 343:24-25. See Pl.'s Ex. 95. The government asked for and received a sample of the product used in the demonstration, and, after testing same, confirmed that it was identical to the products here in dispute and did not contain additives. R 828:20-829:10.

The government introduced the testimony of Harvey Kuperstein, who is the National Import Specialist responsible for, inter alia, the classification of imported dyes under heading 3204. R 766:6-767:24, 790:23-791:2, 794:24-795:3. Although Mr. Kuperstein is not responsible for the classification of inks under heading 3215, he stated he is familiar with heading 3215 classification and represented that he has "a layman's ability to fathom this kind of technology." R 799:3-7.

The parties also introduced various exhibits at times throughout the trial. In addition, the parties introduced the deposition testimony of Deborah Walsh, the National Import Specialist responsible for heading 3215 during the relevant period of importation, Myles Harmon, the director of the Commercial and Trade Facilitation Division of Customs and Customs's corporate representative as to procedural issues related to classification, Mr. Kuperstein, and Dr. Bidd, all of which the Court admitted. R 763:17-764:8, 764:18-20.

Pigment — and Dye-Based Inks; Ink-Jet Printing; Description of the Imports

All inks contain a colorant. The two organic types of colorants are pigments and dyes. R 487:3-488:22. Pigments are insoluble; in this matter, dyes refer to the dyes that are soluble in an organic solvent such as water. R 43:5-18, 276:13-25, 452:2-24, 487:3-488:22, 695:7-17.

Traditional printing inks consist of a dispersion of a pigment, such as lampblack, in a solution containing a binder which acts to adhere the pigment component to a substrate normally comprised of a hydrophilic...