Well Luck Co. v. United States

• Decision Date: 11 April 2018
• Docket Number: 2017-1816
• Parties: WELL LUCK COMPANY, INC., Plaintiff-Appellant v. UNITED STATES, Defendant-Appellee
• Court: U.S. Court of Appeals — Federal Circuit

887 F.3d 1106

WELL LUCK COMPANY, INC., Plaintiff-Appellant

v.UNITED STATES, Defendant-Appellee

2017-1816

United States Court of Appeals, Federal Circuit.

Decided: April 11, 2018

Luis Fernando Arandia, Jr., and Robert T. Givens, Givens & Johnston, PLLC, Houston, TX, argued for plaintiff-appellant.

Alexander J. Vanderweide, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice, New York, NY, argued for defendant-appellee. Also represented by Chad A. Readler, Jeanne E. Davidson, Amy M. Rubin; Sheryl French, Office of the Assistant Chief Counsel, United States Bureau of Customs and Border Protection, United States Department of Homeland Security, New York, NY.

Before Reyna, Wallach, and Hughes, Circuit Judges.

Wallach, Circuit Judge.

This appeal concerns the proper classification of certain in-shell sunflower seeds for snacking imported by Appellant Well Luck Company, Inc. ("Well Luck"). U.S. Customs and Border Protection ("Customs") classified the subject merchandise under Harmonized Tariff Schedule of the United States ("HTSUS") Subheading 2008.19.90.¹ Before the U.S. Court of International Trade ("CIT"), Well Luck and Appellee United States ("the Government") filed cross-motions for summary judgment, with Well Luck challenging Customs' classification and arguing that Customs should have classified the subject merchandise under HTSUS Subheading 1206.00.00. The CIT denied Well Luck's Cross-Motion and, instead, granted the United States' Cross-Motion, determining that Customs properly classified the subject merchandise under HTSUS Subheading 2008.19.90. See Well Luck Co. v. United States , 208 F.Supp.3d 1364, 1367 (Ct. Int'l Trade 2017) ; see also J.A. 22 (Judgment).

Well Luck appeals. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5) (2012). We affirm.

BACKGROUND

The subject merchandise "consists of three varieties of wet-cooked and/or roasted, salted, flavored, and/or unflavored sunflower seeds in unbroken shells: All Natural Flavor, Spiced Flavor, and Coconut Flavor." Well Luck , 208 F.Supp.3d at 1367 (internal quotation marks and citations omitted).² The sunflower seeds in each flavor "are of the common sunflower, Helianthus annuus , and the seeds used by [Well Luck] are used, as is, for human consumption and not for the extraction of edible or industrial oils or fats." Id. at 1368 (citations omitted). After initial processing and selection "for quality, size, and purity," the sunflower seeds "are then further processed by being heated in an oven to 302 degrees Fahrenheit ... for approximately [sixty-five] minutes," and "[s]alt is added to the seeds during this heating process." Id. (citations omitted). Finally, the sunflower seeds "are then cooled, and those in unbroken shells are packaged into finished product bags sold for consumption and [then] imported." Id. (citations omitted). The subject merchandise "is not fungible or interchangeable with" any of the following: (1) "raw sunflower seeds"; (2) sunflower seeds that "only undergo heat treatment" to preserve them, "to inactivate antinutritional factors," or "to facilitate their use"; or (3) sunflower seeds that "are not roasted, salted[,] and flavored." Id. (internal quotation marks and citations omitted).

Customs classified the subject merchandise under HTSUS Subheading 2008.19.90 at a duty rate of 17.9% ad valorem . Id. at 1367. HTSUS Subheading 2008.19.90 covers "[f]ruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included: [n]uts, peanuts (ground-nuts) and other seeds, whether or not mixed together: [o]ther, including mixtures: [o]ther." Well Luck contested the classification by filing a protest, arguing that the subject merchandise should enter at a duty-free rate under HTSUS Subheading 1206.00.00, which covers "[s]unflower seeds, whether or not broken." See J.A. 30, 34; see also Well Luck , 208 F.Supp.3d at 1367. Customs denied Well Luck's protest, and the CIT upheld Customs' classification. See Well Luck , 208 F.Supp.3d at 1367, 1377 ; see also J.A. 28–41 (Complaint).

The CIT determined that HTSUS Subheading 1206.00.00 covers "seeds of the common sunflower plant, Helianthus annuus , that are not processed in a way that renders them unsuitable for extraction of edible or industrial oils and fats, sowing, and other purposes," Well Luck , 208 F.Supp.3d at 1372, whereas HTSUS Subheading 2008.19.90 "covers parts of plants made ready or suitable in advance for eating, such as by dry-roasting or fat roasting, whether or not containing or coated with vegetable oil, salt, flavors, spices or other additives, and made fit for future use in a manner to prevent spoilage," id. at 1375. Applying these interpretations to the subject merchandise, the CIT held that Well Luck's "sunflower seeds are not classified in [HTSUS S]ubheading 1206.00.00 ... because it is undisputed that they are not suitable for general use," id. , but rather "are prepared or preserved not elsewhere specified or included within the meaning of [HTSUS S]ubheading 2008.19.90," id. at 1377.

DISCUSSION

I. Standard of Review

We review de novo the CIT's decision to grant summary judgment, applying the same standard used by the CIT to assess Customs' classification. See Otter Prods., LLC v. United States , 834 F.3d 1369, 1374–75 (Fed. Cir. 2016). "Although we review the decision of the CIT de novo, we give great weight to the informed opinion of the CIT and it is nearly always the starting point of our analysis." Schlumberger Tech. Corp. v. United States , 845 F.3d 1158, 1162 (Fed. Cir. 2017) (internal quotation marks, alterations, and citation omitted). The CIT "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." USCIT R. 56(a).

The classification of merchandise involves a two-step inquiry. See LeMans , 660 F.3d at 1315. First, we ascertain the meaning of the terms within the relevant tariff provision and, second, we determine whether the subject merchandise fits within those terms. See Sigma-Tau HealthSci., Inc. v. United States , 838 F.3d 1272, 1276 (Fed. Cir. 2016). The first step presents a question of law that we review de novo, whereas the second involves a question of fact that we review for clear error. Id. When, as here, no genuine dispute exists as to the nature of the subject merchandise, the two-step inquiry "collapses into a question of law [that] we review de novo." LeMans , 660 F.3d at 1315 (citation omitted).

II. The CIT Properly Granted Summary Judgment for the Government

A. Legal Framework

The HTSUS governs the classification of merchandise imported into the United States. See Wilton Indus., Inc. v. United States , 741 F.3d 1263, 1266 (Fed. Cir. 2013). The HTSUS "shall be considered ... statutory provisions of law for all purposes." 19 U.S.C. § 3004(c)(1) (2012).³

"The HTSUS scheme is organized by headings, each of which has one or more subheadings; the headings set forth general categories of merchandise, and the subheadings provide a more particularized segregation of the goods within each category." Wilton Indus. , 741 F.3d at 1266. "The first four digits of an HTSUS provision constitute the heading, whereas the remaining digits reflect subheadings." Schlumberger , 845 F.3d at 1163 n.4. "[T]he headings and subheadings ... are enumerated in chapters 1 through 99 of the HTSUS (each of which has its own section and chapter notes)...." R.T. Foods, Inc. v. United States , 757 F.3d 1349, 1353 (Fed. Cir. 2014). The HTSUS "also contains the ‘General Notes,’ the ‘General Rules of Interpretation’ (‘GRI’), the ‘Additional [U.S.] Rules of Interpretation’ (‘ARI’),^{[4 ]} and various appendices for particular categories of goods." Id. (footnote omitted).

The GRI and the ARI govern the classification of goods within the HTSUS. See Otter Prods. , 834 F.3d at 1375. "The GRI apply in numerical order, meaning that subsequent rules are inapplicable if a preceding rule provides proper classification." Schlumberger , 845 F.3d at 1163. GRI 1 provides, in relevant part, that "classification shall be determined according to the terms of the headings and any relative section or chapter notes." GRI 1 (emphasis added). "Under GRI 1, a court first construes the language of the heading, and any section or chapter notes in question, to determine whether the product at issue is classifiable under the heading." Schlumberger , 845 F.3d at 1163 (internal quotation marks and citation omitted). "[T]he possible headings are to be evaluated without reference to their subheadings, which cannot be used to expand the scope of their respective headings." R.T. Foods , 757 F.3d at 1353 (citations omitted). "Absent contrary legislative intent, HTSUS terms are to be construed according to their common and commercial meanings, which are presumed to be the same." Carl Zeiss, Inc. v. United States , 195 F.3d 1375, 1379 (Fed. Cir. 1999). "To discern the common meaning of a tariff term, we may consult dictionaries, scientific authorities, and other reliable information sources." Kahrs Int'l, Inc. v. United States , 713 F.3d 640, 644 (Fed. Cir. 2013) (citation omitted).

"After consulting the headings and relevant section or chapter notes" consistent with GRI 1, we may consider the relevant Explanatory Notes ("EN"). Fuji Am. Corp. v. United States , 519 F.3d 1355, 1357 (Fed. Cir. 2008).⁵ "The [ENs] provide persuasive guidance and are generally indicative of the proper interpretation, though they do not constitute binding authority." Chemtall , 878 F.3d at 1019 (internal quotation marks and citation omitted).

When, as here, "merchandise is prima facie classifiable under two or more headings or subheadings of the HTSUS" and GRI 2 does not apply, "we apply GRI 3 to resolve the classification." LeMans , 660 F.3d at 1316 (citation...