Schlumberger Tech. Corp. v. United States

• Decision Date: 22 July 2015
• Docket Number: Court No. 11–00266.,Slip Op. 15–78.
• Citation: 91 F.Supp.3d 1304
• Parties: SCHLUMBERGER TECHNOLOGY CORPORATION, Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

91 F.Supp.3d 1304

SCHLUMBERGER TECHNOLOGY CORPORATION, Plaintiff

v.UNITED STATES, Defendant.

Slip Op. 15–78.

Court No. 11–00266.

United States Court of International Trade.

July 22, 2015.

Alexander H. Schaefer, Crowell & Moring LLP, of Washington, DC, argued for plaintiff Schlumberger Technology Corp. With him on the brief were John B. Brew, Joseph L. Meadows, and David C. Wolff.

Aimee Lee, Civil Division, U.S. Department of Justice, of New York, NY, argued for defendant United States. With her on the brief were Amy M. Rubin, Acting Assistant Director, and Stuart Delery, Assistant Attorney General. Of counsel on the brief were Edward Maurer and Michael Heydrich, Office of Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection.

OPINION

STANCEU, Chief Judge:

In this action, plaintiff Schlumberger Technology Corp. (“STC” or “Schlumberger”) contests the tariff classification determined by U.S. Customs and Border Protection (“Customs” or “CBP”) for two types of imported bauxite proppants suitable for use in hydraulic fracturing.

Before the court are plaintiff's and defendant's motions for summary judgment. Schlumberger Tech. Corp.'s Mot. for Summ. J. (Nov. 22 & 25, 2013), ECF Nos. 64 (conf.), 69 (public) (“Pl.'s Mot.”); Def.'s Mot. for Summ. J. (Nov. 22, 2013), ECF Nos. 66 (conf.), 67 (public) (“Def.'s Mot.”). The court denies defendant's motion, determining that the government's proffered classifications are incorrect. The court grants summary judgment in favor of plaintiff.

I. Background

Schlumberger was the importer of record for two 2010 entries of bauxite proppants from the People's Republic of China (“China”) that are the subject of this case (“subject merchandise” or “subject proppants”).¹ Joint Stipulations of Fact No. 8 (Aug. 8, 2013), ECF Nos. 53 (conf.), 54 (public) ( “First Set of Stipulations”). Customs liquidated these entries, on December 27, 2010 and February 11, 2011, respectively, in both instances determining classification in subheading 6909.19.50, Harmonized Tariff Schedule of the United States (“HTSUS”) (“ceramic wares for laboratory, chemical or other technical uses ...: Other, other”), at 4% ad valorem.² Stipulation Nos. 2(c) (Dallas entry), 3(c) (Los Angeles/Long Beach entry). Customs determined the same classification in denying Schlumberger's protests of the liquidations. Protest Records for the Los Angeles/Long Beach Entry 1 (June 27, 2011) (“Los Angeles/Long Beach Entry Protest Record”), Ex. 2 to Mem. of Law & Authorities in Supp. of Schlumberger Tech. Corp.'s Mot. for Summ. J. (Nov. 22 & 25, 2013), ECF Nos. 64 (conf.), 69 (public) (“Pl.'s Br.”); Protest Records for the Dallas Entry 1 (July 11, 2011) (“Dallas Entry Protest Record”), Ex. 3 to Pl.'s Br.

Schlumberger initiated this action by filing a summons on July 29, 2011 and a complaint on August 2, 2011. Summons, ECF No. 1; Compl., ECF No. 5. Defendant filed an answer on January 6, 2012. Answer, ECF No. 12.

Schlumberger and defendant United States each moved for summary judgment. Pl.'s Mot.; Pl.'s Br.; Def.'s Mot.; Mem. in Supp. of Def.'s Mot. for Summary J. (Nov. 22, 2013), ECF Nos. 66 (conf.), 67 (public) (“Def.'s Br.”). Defendant and plaintiff each opposed the other's motion for summary judgment. Mem. of Law & Authorities in Supp. of Schlumberger Tech. Corp.'s Opp'n to Def.'s Mot. for Summ. J. (Dec. 30, 2013), ECF Nos. 71 (conf.), 72 (public) (“Pl.'s Opp'n”); Def.'s Opp'n to Pl.'s Mot. for Summ. J. (Dec. 30, 2013), ECF Nos. 73 (conf.), 74 (public) (“Def.'s Opp'n”). Plaintiff and defendant each filed reply briefs. Mem. of Law & Authorities in Supp. of Schlumberger Tech. Corp.'s Reply to Def.'s Opp'n to Schlumberger's Mot. for Summ. J. (Jan. 21, 2014), ECF Nos. 78 (conf.), 79 (public) (“Pl.'s Reply”); Def.'s Reply Mem. (Jan. 21, 2014), ECF Nos. 80 (conf.), 81 (public) (“Def.'s Reply”).

The court held oral argument on May 8, 2014. ECF No. 83. Prior to and following the oral argument, the parties stipulated to a number of facts. First Set of Stipulations (Stipulation Nos. 1–51); Addendum One to Joint Stipulations of Fact (Oct. 18, 2013), ECF Nos. 59 (conf.), 60 (public) ( “Second Set of Stipulations”) (Stipulation Nos. 52–53); Joint Status Report & Joint Statement of Stipulated Facts (June 9, 2014), ECF Nos. 87 (public), 86 (conf.) (“Third Set of Stipulated Facts”) (Stipulation Nos. 54–60).

II. Discussion

A. Jurisdiction and Standard of Review

The court exercises jurisdiction pursuant to 28 U.S.C. § 1581(a) (2006), according to which the court has jurisdiction over an action brought under section 515 of the Tariff Act of 1930 (“Tariff Act”), as amended, 19 U.S.C. § 1515 (2006), to contest a tariff classification by Customs. The court proceeds de novo in actions brought to contest CBP's denial of a protest. See Customs Courts Act of 1980 § 301, 28 U.S.C. § 2640(a)(1) (2006) (directing the Court of International Trade to “make its determinations upon the basis of the record made before the court”).

In cases involving a disputed tariff classification, the court, as an initial step, considers whether “the government's classification is correct, both independently and in comparison with the importer's alternative.” Jarvis Clark Co. v. United States, 733 F.2d 873, 878 (Fed.Cir.1984) (“Jarvis Clark ”). Plaintiff has the burden of showing that the government's determined classification is incorrect.³ Id. at 876. If plaintiff meets that burden, the court has an independent duty to arrive at “the correct result, by whatever procedure is best suited to the case at hand.” Id. at 878 (emphasis in original).

The court's determining the correct classification involves two steps. Faus Grp., Inc. v. United States, 581 F.3d 1369, 1371 (Fed.Cir.2009) (“Faus Grp. ”). “The first step addresses the proper meaning of the relevant tariff provisions, which is a question of law.” Id. “The second step involves determining whether the merchandise at issue falls within a particular tariff provision as construed, which, when disputed, is a question of fact.” Id. at 1371–72.

Tariff classification is determined according to the General Rules of Interpretation (“GRIs”), and, if applicable, the Additional U.S. Rules of Interpretation (“ARIs”).⁴ GRI 1 directs that tariff classification, in the first instance, “be determined according to the terms of the headings and any relative section or chapter notes.” GRI 1, HTSUS; Faus Grp., 581 F.3d at 1372. Once merchandise is determined to be correctly classified under a particular heading of the HTSUS, a court then looks to the HTSUS subheadings to determine the correct classification of the merchandise in question. GRI 6, HTSUS; Orlando Food Corp. v. United States, 140 F.3d 1437, 1440 (Fed.Cir.1998) (citations omitted).

Unless there is evidence of “contrary legislative intent, HTSUS terms are to be construed according to their common and commercial meanings.” La Crosse Tech., Ltd. v. United States, 723 F.3d 1353, 1358 (Fed.Cir.2013). Although not binding law, the Explanatory Notes (“ENs”) to the Harmonized Commodity Description and Coding System (“Harmonized System” or “HS”), maintained by the World Customs Organization, “may be consulted for guidance and are generally indicative of the proper interpretation of a tariff provision.”⁵ Degussa Corp. v. United States, 508 F.3d 1044, 1047 (Fed.Cir.2007).

Summary judgment is appropriate “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). Where tariff classification is at issue, “summary judgment is appropriate when there is no genuine dispute as to the underlying factual issue of exactly what the merchandise is.” Bausch & Lomb, Inc. v. United States, 148 F.3d 1363, 1365 (Fed.Cir.1998) (“Bausch & Lomb ”). In ruling on a motion for summary judgment, the court must credit the non-moving party's evidence and draw all inferences in that party's favor. Hunt v. Cromartie, 526 U.S. 541, 552, 119 S.Ct. 1545, 143 L.Ed.2d 731 (1999) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (“Anderson ”)). A factual dispute is genuine if it might affect the outcome of the suit under the governing law. Anderson, 477 U.S. at 248, 106 S.Ct. 2505.

B. General Description of the Merchandise

The facts as stated in this Opinion are not in dispute between the parties except where specifically indicated.

The subject proppants are produced from bauxite and are used in hydraulic fracturing, a technique for production from hydrocarbon reservoirs in which a fluid under high pressure is injected into the rock formation to create a fracture. See Int'l Trade Comm'n, Calcined Bauxite Proppants from Australia: Determination of the Comm'n in Investigation No. 731–TA–411 (Final) Under the Tariff Act of 1930, Together With the Info. Obtained in the Investigation at A–2, USITC Inv. No. 731–TA–411 (Final), March 1989 (“ITC Investigation on Calcined Bauxite Proppants ”); Stipulation No. 52. Plaintiff Schlumberger, an oil well-site services provider, incorporates proppants, such as those at issue in this litigation, into packages of oil well services it offers to customers. Stipulation Nos. 1, 8, 36. After importation, the proppants are combined with other materials and liquids to create the fracturing fluid, and, once injected, the proppants prevent the fractures from closing. Stipulation Nos. 36, 52.

The proppants at issue here are intermediate strength proppants that are less than a millimeter in diameter. Stipulation Nos. 2(a), 2(a)(i), 3(a), 3(a)(i), 20(b), 22(a), 23(a). The Los Angeles/Long Beach entry was comprised of “S580–2040 Ceramic Proppants” (“20/40 proppants”), and the Dallas entry was comprised of “S580–4070 Ceramic Proppants” (“40/70 proppants”). Stipulation Nos. 2(a), 3(a). The subject proppants were imported in 3,200 pound sacks and in bulk shipments. Stipulation No. 2(b), 3(b), 39, 41. The numbers “20/40” and “40/70” refer to the sieve...