Montgomery Ward & Co., Inc. v. United States

• Decision Date: 27 June 1974
• Docket Number: Customs Appeal No. 74-7.
• Citation: 499 F.2d 1283
• Parties: MONTGOMERY WARD & CO., INC., Appellant, v. The UNITED STATES, Appellee.
• Court: U.S. Court of Customs and Patent Appeals (CCPA)

499 F.2d 1283 (1974)

MONTGOMERY WARD & CO., INC., Appellant, v. The UNITED STATES, Appellee.

Customs Appeal No. 74-7.

United States Court of Customs and Patent Appeals.

June 27, 1974.

Ralph A. Mantynband, Chicago, Ill., attorney of record, for appellant. Arvey, Hodes & Mantynband, Chicago, Ill., of counsel.

Irving Jaffe, Acting Asst. Atty. Gen., Andrew P. Vance, Chief, Customs Section, Edward S. Rudofsky, Dept. of Justice, Civil Division, Customs Section, New York City, for the United States.

Before MARKEY, Chief Judge, and RICH, BALDWIN, LANE and MILLER, Judges.

RICH, Judge.

This appeal is from the decision and judgment of the United States Customs Court, 70 Cust.Ct. 193, C.D. 4430, 362 F.Supp. 560 (1973), which dismissed an action challenging the classification of certain portions of an electronic organ as an electronic musical instrument, "Other," under TSUS 725.47 and claiming classification under TSUS 726.80 as "Musical instrument parts not specially provided for." We reverse.

The four articles imported were: (1) a bass foot pedal assembly; (2) a keyboard chassis assembly; (3) an amplifier and expansion pedal assembly; and (4) a reverberation unit. These components, or subassemblies, were imported together. They are sometimes hereinafter referred to as Exhibits 1, 2, 3, and 4.

The competing provisions of the Tariff Schedules are:

General Interpretative Rule 10(h):

Unless the context requires otherwise, a tariff description for an article covers such article, whether assembled or not assembled, and whether finished or not finished.

Schedule 7, Part 3, Subpart A

Subpart A headnotes:

2. For the purposes of this subpart —

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(c) the term "electronic musical instruments" embraces all musical instruments in which the sound is generated electrically, and conventional-type instruments not suitable for playing without electrical amplification, but the term does not include conventional-type instruments, fitted with electrical pickup and amplifying devices, when the instrument is suitable for playing without such amplification.

3. The provisions of this subpart for string, wind, and percussion musical instruments include such instruments whether or not fitted with electrical pickup and amplifying devices. Such devices, however, are separately classifiable from the musical instrument with which imported unless such devices are, or are designed and intended to be, fitted into or housed in the instrument itself.

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Electronic musical instruments

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725.47 Other ............ 17% ad val.

Schedule 7, Part 3, Subpart B

Subpart B headnote:

1. This subpart does not cover electrical pickup or amplifying devices or other articles which are provided for in part 5 of schedule 6 or part 2 of schedule 7.

* * * * * *

726.80 Musical instrument parts not specially provided for .. 11.5% ad val.

The imported components, when assembled with other parts furnished in this country, became the Montgomery Ward & Co. electronic organ, Model 8931. Montgomery Ward imported the components, sold them to a company named Wellcor, Wellcor manufactured complete organs therewith, and sold them to Montgomery Ward, which sells them to the public.

The Customs Court opined that if the imported articles had been imported separately, or if less than all four of them had been imported together, the importations would "very likely" have been classifiable under Item 726.80 as parts of an electronic musical instrument. It deemed the question to be whether the unassembled imported components "were sufficiently complete to constitute, in their entirety, an article in the class of `electronic musical instruments'."

The Customs Court found, and it is not disputed, that Wellcor assembled the imported components into a cabinet or case of American manufacture, with a loudspeaker (transducer) of American manufacture, using miscellaneous hardware of American manufacture. The evidence shows that the value of the imported parts was 47.10% of the production cost of the organ and that the parts manufactured in the United States plus various other cost items including a profit were 52.90% of the cost. Notwithstanding the lower court's finding that cost items other than the cost of the imported components "represent more than 50 percent of what it costs to produce the electronic organ model No. 8931 for sale at retail," and a further finding that "when assembled, the imported articles are unable to generate an audible musical sound without a loudspeaker," it held the imported components to constitute an electronic musical instrument under item 725.47.

OPINION

This being a classification case we are not limited to review of questions of law and can consider whether the lower court's findings of fact conform to the weight of the evidence. Appellee urges that there is "substantial evidence" to support the Customs Court's findings and, indeed, there is. But we also find there is even more substantial evidence to support appellant's contentions on critical questions of fact. We do not agree with appellee's suggestion that we are bound to accept the Customs Court's findings of fact whenever there is substantial supporting evidence, and we will not do so when they are clearly contrary to the weight of the evidence.

The first consideration in this case is whether the importation falls into the category of "Electronic musical instruments," which item 725.47 specifies. Headnote 2(c), above, defines this term as embracing "all musical instruments in which the sound is generated electrically." It is not disputed here that the importation ends up in an "electronic organ," Model 8931. Neither is it disputed that in that organ sound is generated electrically. It is also undisputed that two major parts of the Model 8931 organ as marketed are not among the imports, namely, the cabinet and the loudspeaker. The issue, therefore, reduces to a question of whether the importations, consisting of four major electromechanical organ subassemblies, constitute a musical instrument in an unassembled condition, namely, an organ. It is to that question that we now turn.

The Government's case for the affirmative is built entirely on a courtroom demonstration put on by its two witnesses and their testimony. One of the witnesses, John Ogle, with three or four years of experience as an organ repairman, took three of the four imported subassemblies or components, omitting the reverberation unit, and made the intended electrical connections between them. He then testified that, if "plugged in and played," "electronic vibrations" would be present but that they would not be audible unless a loudspeaker was added to the assembly. Government counsel then had Ogle connect a loudspeaker and plug in the assembly. The Government then called its second witness, Dennis Halasz, a freshman music student at the University of Illinois, who said he had played electronic organs like the Model 8931, which was also in the courtroom, and he improvised "Blues in G minor" on the hooked-up plugged-in assembly of the imported parts with added speaker. It has been said that "music hath charms," and this demonstration appears to have had a siren-song effect at the trial stage.

After Mr. Ogle testified that the components of an electronic organ are tone generators, keying systems, voicing systems, amplifying systems, and a speaker, he testified further on direct examination, in effect, that an electronic organ without a speaker is still an electronic organ. This, of course, is the ultimate legal question in this case, and the testimony was that of a repairman with no knowledge of customs law. On cross-examination Mr. Ogle testified as follows:

By Mr. Mantynband:

Q. Without this speaker, Exhibit No. 5, can the four parts over there make music as an electronic musical instrument (indicating)? A. You won\'t hear any sound.

Q. Can they make music? A. You won\'t hear it.

Q. They can\'t make music, can they? A. Not if you are considering hearing.

Q. Is there any other form of music other than hearing? A. That\'s up to you; I don\'t know.

Q. Do you know of any other form besides hearing? A. No.

Q. That\'s the only form of music there is, that which you can hear? A. Yes.

Q. Music you can\'t hear isn\'t music, is it? A. You can\'t hear it.

Q. Well, it\'s not music, is it? A. I suppose not.

Along similar lines, Mr. Ogle testified that with the four imported subassemblies you have an electronic organ, even without the cabinet because "You've got all the basic elements for an electronic organ on the table." (Emphasis added.) On cross-examination, Mr. Ogle testified:

Q. Now, you testified that you were able to exercise a judgment as to whether Exhibits 1, 2, 3, and 4 were or were not an organ as they stand on the court\'s exhibit table. A. Yes.

Q. Do you recall that testimony? A. Yes.

Q. Will you tell us what you have had to do, in your entire life, with the manufacturing of an organ? A. None.

Q. I cannot hear you. A. I said, "None."

Appellant's witness Wilkerson, Montgomery Ward's musical instrument buyer, a professional musician without formal electronics education, testified, inter alia, that he could not sell the imported components "as an organ," that one of the most important influences on the musical qualities of an organ is the cabinet and speaker design, that the speaker used in Model 8931 is of American manufacture, that the speaker is the only part of the organ that generates sound (which seems more than a little obvious), that the imported components, as imported, are not a musical instrument, that before the importation can be functional as an organ "There would have to be additional parts and wiring and a cabinet and a speaker," and that without the cabinet and the speaker "there is no sound; there is no organ."

Appellant's witness Gene Morez was the director of engineering at Electronic Sound Corporation which built Model 8931 organs until that operation was transferred to a...