733 F.2d 873 (Fed. Cir. 1984), 83-1106, Jarvis Clark Co. v. United States

Docket Nº:Appeal No. 83-1106.
Citation:733 F.2d 873
Party Name:JARVIS CLARK CO., Plaintiff/Appellant, v. UNITED STATES, Defendant/Appellee.
Case Date:May 02, 1984
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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733 F.2d 873 (Fed. Cir. 1984)

JARVIS CLARK CO., Plaintiff/Appellant,

v.

UNITED STATES, Defendant/Appellee.

Appeal No. 83-1106.

United States Court of Appeals, Federal Circuit

May 2, 1984

Rehearing Denied July 17, 1984.

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Edward N. Glad, Los Angeles, Cal., for appellant.

Michael P. Maxwell, New York City, for appellee. With him on brief were J. Paul McGrath, Asst. Atty. Gen., David M. Cohen, Washington, D.C., Director and Joseph I. Liebman, New York City, Atty. in Charge, International Trade Field Office.

Before KASHIWA and SMITH, Circuit Judges, and WISDOM [*], Senior Circuit Judge.

WISDOM, Senior Circuit Judge.

We consider here the proper judicial procedure for resolving an importer's complaint that the Customs Service has improperly classified its merchandise. We hold that the Court of International Trade is required to decide the correctness not only of the importer's proposed classification but of the government's classification as well. Because the trial court did not do so, we reverse and remand.

I.

This case requires the Court to grope for the proper words for describing an imported product which does not readily fit into the importer's proposed classification or the government's classification of the merchandise.

The items at issue in this case are tippler hoppers. These are mining cars used to haul and dump ores and wastes from underground mines. The cars run on narrow-gauge rails, have no brakes, and are not self-propelled. 1 When the plaintiff, Jarvis Clark Co., imported tippler hoppers from South Africa between May 1980 and February

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1981, it created a problem in legal semantics for the Customs Service. The Service classified the tippler hoppers under item 690.15 of the Tariff Schedules of the United States (TSUS), as "Railroad and railway rolling stock: Passenger, baggage, mail, freight and other cars, not self-propelled", and assessed a duty of 18 percent. The plaintiff had difficulty in thinking of its imported product as railway rolling stock and sued in the Court of International Trade, alleging that the tippler hoppers should have been classified under TSUS item 664.08, which covers "Mechanical shovels, coal-cutters, excavators, scrapers, bulldozers, and other excavating, levelling, boring, and extracting machinery, all the foregoing, whether stationary or mobile, for earth, minerals, or ores: pile drivers; snow plows, not self-propelled; all the foregoing and parts thereof: ... Other." The duty for item 664.08 is 4.4 or 4.7 percent, depending on the date of importation.

On cross-motions for summary judgment, the trial court held in favor of the government. Jarvis Clark Co. v. United States, 566 F.Supp. 344 (C.I.T.1983). The court did not consider the correctness of the government's classification. Instead, it found the plaintiff's proposed classification incorrect and concluded, "Plaintiff has failed to overcome the classification of customs under Item 690.15."

The court found item 664.08 inappropriate for two reasons. First, it examined heading 84.23 of the Brussels Nomenclature, 2 the heading corresponding to TSUS item 664.08. Heading 84.23 covers

"Excavating, levelling, tamping, boring and extracting machinery, stationary or mobile, for earth, minerals or ores (for example, mechanical shovels, coal-cutters, excavators, scrapers, levellers, and bulldozers); pile-drivers; snow-ploughs, not self-propelled (including snow-plough attachments)."

The explanatory notes state,

"This heading covers machinery, other than agricultural machinery (heading 84.24) for 'attacking' the earth's crust (e.g.,: for cutting and breaking down rock, earth, coal, etc.; earth excavation, digging, drilling, etc.), or for preparing or compacting the terrain (e.g., scraping, levelling, grading, tamping or rolling). It also includes pile-drivers, snow-plough attachments and non-self-propelled snow-ploughs."

4 Explanatory Notes 1237. Because tippler hoppers are not used for "attacking the earth's crust", but rather for carrying materials out of the mine after the materials have been severed from the earth, the court concluded that item 664.08 is inapplicable.

The court also relied on TSUS Schedule 6, Part 4, Subpart B, Headnote 1(i). This headnote provides,

"This subpart does not cover--

(i) cranes and other machines mounted on vehicles, on vessels or other floating structures, or on other transport equipment (see part 6 of this schedule)...."

The Explanatory Notes to the Brussels Nomenclature, heading 84.23, similarly provide that

"Excavating, etc., machines are classified in heading 86.06 if they are mounted on wagons or trucks, of a kind suitable for

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coupling into a train running on a railway network of any gauge.... On the other hand, excavating, etc. machines mounted on trucks or platforms not meeting the specifications of true railway rolling stock remain classified in [heading 84.23]."

4 Explanatory Notes 1237. 3

The plaintiff argues that a tippler hopper is not "a machine mounted on a vehicle", because it has only one moving part. The court found, however, that if this were true, item 664.08 would be inapplicable because that item covers only "machines". The court did not address the plaintiff's argument that a tippler hopper is a "machine" but not a "machine mounted on a vehicle".

II.

A presumption of correctness attaches to a classification by the Customs Service, and the importer 4 has the burden of proving that the classification is incorrect. 28 U.S.C. Sec. 2639(a)(1) (Supp. V 1981); E.R. Hawthorne & Co. v. United States, 730 F.2d 1490 (Fed.Cir.1984); United States v. H.M. Young Associates, Inc., 505 F.2d 721, 724 (C.C.P.A.1974). To give effect to this presumption the courts have long imposed a "dual burden" of proof: the importer must prove not only that the government's classification is incorrect but also that the importer's proposed classification is correct. E.g., United States v. A. Johnson & Co., 588 F.2d 297, 301 (C.C.P.A.1978); United States v. New York Merchandise Co., 435 F.2d 1315, 1318 (C.C.P.A.1970); United States v. Danker & Marston, 2 Ct.Cust.App. 462, 464 (1912); Tiffany v. United States, 105 F. 766, 767 (S.D.N.Y.1901). The rule apparently arose out of the formalities of pleading: an importer could prevail in a protest only if it pleaded the proper alternative classification, and the importer carried the burden of proving the facts pleaded. Arthur v. Unkart, 96 U.S. 118, 122-23, 24 L.Ed. 768, 770 (1878); Fisk v. Seeberger, 38 F. 718, 719-20 (N.D.Ill.1889). The purpose of this rule was to ensure that the government could consider the alternative and ascertain facts sufficient to accept or refute it. Davies v. Arthur, 96 U.S. 148, 151-52, 24 L.Ed. 758, 759 (1878); Bliven v. United States, 1 Ct.Cust.App. 205, 208 (1911). The dual burden has also been explained as necessary to "the orderly administration of customs law". New York Merchandise Co., 435 F.2d at 1318. The tariff schedules are so structured that many articles could fall under several different classifications, while others do not fit any classification perfectly; the decision of the Customs Service was considered correct until the importer pointed to a better classification.

The dual burden can, however, lead to unfair results, since it requires the court to affirm an incorrect government decision when the importer has failed to establish a correct alternative. When the Customs Service is unable to determine where an item belongs in the tariff schedules, it is anomalous to demand that the importer provide the correct answer. Moreover, the stability of the customs laws may be better served by a requirement that the Court of International Trade determine the correct classification for an item--rather than affirming an incorrect result because the importer's alternative is wrong--so that all future importers will know what the correct classification is. The desire for "uniform and consistent interpretation and application" of the customs laws is central to customs policy. H.Rep. No. 1235, 96th Cong., 2d Sess. 29, reprinted in 1980 U.S.Code Cong. & Ad.News 3729, 3741 [House Report], quoting Chief Judge Re. Waste is

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avoided and the goals of the tariff laws are best promoted when importers know with some certainty how their imports will be classified and taxed before they import the goods. 5

When Congress created the Court of International Trade in 1980, it granted that court the power to order certain remedies previously unavailable to the Customs Court. The Customs Courts Act of 1980 provides,

"(b) If the Court of International Trade is unable to determine the correct decision on the basis of the evidence presented in any civil action, the court may order a retrial or rehearing for all purposes, or may order such further administrative or adjudicative procedures as the court considers necessary to enable it to reach the correct decision."

28 U.S.C. Sec. 2643(b) (Supp. V 1981). The legislative history demonstrates that the principal purpose of this provision was to alleviate the unfairness of the dual burden of proof. The House Report states:

"Subsection (b) is a new provision that empowers the Court of International Trade to remand the civil action before it for further judicial or administrative proceedings. In granting this remand power to the court, the Committee intends that the remand power be coextensive with that of a federal district court. In addition, this subsection authorizes the court to order a retrial or rehearing to permit the parties to introduce additional evidence.

"Subsection (b) has particular impact on civil actions brought pursuant to section 515 or 516 of the Tariff Act of 1930. Under existing law, for example, in a civil...

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