Avenues in Leather, Inc. v. United States, 04-1443.

• Decision Date: 15 September 2005
• Docket Number: No. 04-1443.,04-1443.
• Citation: 423 F.3d 1326
• Parties: AVENUES IN LEATHER, INC., Plaintiff-Appellee, v. UNITED STATES, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

423 F.3d 1326

AVENUES IN LEATHER, INC., Plaintiff-Appellee, v. UNITED STATES, Defendant-Appellant.

No. 04-1443.

United States Court of Appeals, Federal Circuit.

September 15, 2005.

James Caffentzis, Fitch, King and Caffentzis, of New York, New York, argued for plaintiff-appellee. With him on the brief was Peter J. Fitch.

Amy M. Rubin, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellant. With her on the brief were Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, and Barbara S. Williams, Attorney in Charge, International Trade Field Office, of New York, New York. Of counsel on the brief was Karen P. Binder, Assistant Chief Counsel, United States Customs and Border Protection, of New York, New York.

Before MICHEL, Chief Judge, RADER and LINN, Circuit Judges.

LINN, Circuit Judge.

The United States appeals a decision of the Court of International Trade classifying certain folio merchandise imported by Avenues in Leather, Inc. ("Avenues") under subheading 4820.10.2020 of the Harmonized Tariff Schedule of the United States ("HTSUS"). Aves. in Leather v. United States, No. 99-09-00603, 2004 WL 897792 (Ct. Int'l Trade Apr. 26, 2004) ("CIT Opinion"). Because we conclude that the Court of International Trade correctly classified the imported goods, we affirm.

BACKGROUND

The merchandise at issue are Presentation Calcu-Folios imported by Avenues in 1997. These Calcu-Folios measure approximately 13.5 inches tall by 11.5 inches wide by 1.5 inches deep when closed, are zippered on three sides with an interior sleeve, possess one exterior open flat pocket and a number of small interior pockets, have a padded carrying handle fitted to the exterior spine, are constructed of paperboard covered with plastic foam and a vinyl/plastic exterior and interior, contain a solar-powered calculator, and have an interior three-ring metal binder permanently affixed to the spine.

Upon importation, the Bureau of Customs and Border Protection and its predecessor United States Customs Service ("Customs") classified the merchandise under HTSUS subheading 4202.12.20,¹ which covers "Trunks, suitcases, vanity cases, attaché cases, briefcases, school satchels, and similar containers... [w]ith outer surface of plastics." Avenues argued, however, that the Presentation Calcu-Folios should be classified under either HTSUS subheading 4820.30.00,² which covers "[b]inders (other than book covers), folders and file covers" or HTSUS subheading 4820.10.2020, which covers "[m]emorandum pads, letter pads and similar articles."

The difference between these two classifications is significant: items classified under subheading 4202.12.20 are dutiable at 20% ad valorem, while items under subheadings 4820.30.00 and 4820.10.2020 are dutiable at 3.7% and 2.8%, respectively.

This is not the first time the parties have disputed the proper tariff classification of this type of merchandise. A brief description of the procedural history of this case is warranted to provide the context for the Court of International Trade's decision, which is the subject of this appeal.

In 1993, upon importation of four other types of leather folios similar to the merchandise at issue in this case, Customs classified the leather folios under HTSUS subheading 4202.11.00. Aves. in Leather v. United States, 11 F.Supp.2d 719, 721 (Ct. Int'l Trade 1998). Avenues protested Customs' classification and filed suit in the Court of International Trade, arguing that the folios should be classified under subheading 4820.10.20. Id. The Court of International Trade granted summary judgment upholding Customs' classification. Id. at 726. Avenues appealed to this court, and we affirmed the judgment of the Court of International Trade. Aves. in Leather, Inc. v. United States, 178 F.3d 1241, 1246 (Fed.Cir.1999) ("Avenues I").

In 1997, Customs classified the Calcu-Folio goods, which are the subject of this appeal, under subheading 4202.12.20. Avenues disagreed with Customs' classification and filed a complaint in the Court of International Trade, contending that the merchandise is properly classifiable under subheading 4820.30.00. The Court of International Trade granted summary judgment affirming the classification based on the reasoning that, to avoid summary judgment, Avenues had to prove that our decision in Avenues I was "clearly erroneous." Id. We reversed the grant of summary judgment and remanded the case because this was a new entry and a court had not previously classified the Calcu-Folios. Aves. in Leather v. United States, 317 F.3d 1399, 1405 (Fed.Cir.2003) ("Avenues II").

On remand, a trial was held on October 1, 2003 at the Court of International Trade. To prove that the Calcu-Folios should be classified under HTSUS heading 4820, Avenues presented testimony of Otniel Shor, Caron Ann Williamson, and Sam Goldstein. Customs responded by presenting the testimony of Customs National Import Specialists Carl Abramowitz and Kevin Gorman to support its contention that the merchandise should be classified under heading 4202. The Court of International Trade rejected Customs' classification of the Presentation Calcu-Folios under subheading 4202.12.20, and held that they were classified properly under subheading 4820.10.2020 as "memorandum pads." CIT Opinion.

At the trial, Avenues' witness, Shor, the designer of Calcu-Folio, testified that the article was designed as an organizational aid for taking notes by allowing the user to organize and interact with the matter bound by the pad folio. He further testified that the inside sleeve was designed to hold a standard office folder, and the folio had a maximum inside capacity of 1 inch. Thus, Avenues contended, the folios at issue were akin to "portfolios," or flat cases designed and intended to hold papers.

Customs submitted several dictionary definitions of "briefcase" to argue that the merchandise was prima facie classifiable in heading 4202 as either a form of "briefcase" or as a "similar container" under an ejusdem generis analysis. Emphasizing the "container" aspects of the merchandise, Customs introduced evidence on the marketing of the goods as business travel goods. Customs further argued that the folios were capable of being used to carry non-paper personal and business objects.

In reaching its conclusion, the Court of International Trade recognized that the essential characteristics of the listed exemplars in heading 4202 are to "organize, store, protect, and carry various items." Based on the testimony of the witnesses and the evidence presented, it concluded that the Calcu-Folios had a different specific primary purpose—to facilitate the taking of notes as well as aid the organization of print and other visual flat materials capable of being bound by the article's metal binder or fit within its pockets. Relying on General Rules of Interpretation ("GRI") 3(b), the Court of International Trade concluded that the article had the essential character of a binder or a memorandum pad under heading 4820, and such features complemented the article's predominant purpose as an article of stationery, of paper or paperboard. Thus, the Court of International Trade classified the folios as memorandum pads, under Subheading 4820.10.2020.

The United States timely appealed to this court. We have jurisdiction under 28 U.S.C. § 1295(a)(5).

DISCUSSION

A. Standard of Review

Whether an imported item has been properly classified involves a two step analysis: (1) ascertaining the proper meaning of specific terms in the tariff provision; and (2) determining whether the merchandise at issue comes within the description of such terms as properly construed. Sports Graphics, Inc. v. United States, 24 F.3d 1390, 1391 (Fed.Cir.1994). Determining the proper meaning of terms is a question of law that we review de novo, while determining whether the item fits within such meaning is a question of fact that we review for clear error. Id.

On appeal, "the appellant bears the burden of establishing reversible error in the decision of the Court of International Trade, by showing that the court erred in its interpretation of the law, or that its findings of fact are clearly erroneous with due consideration to the appropriate level of deference." Park B. Smith, Ltd. v. United States, 347 F.3d 922, 925 (Fed.Cir.2003).

B. Analysis

I. Stare Decisis

Customs first argues that the Court of International Trade's decision violates the doctrine of stare decisis because it failed to distinguish this court's ruling in Avenues I. Specifically, Customs contends that because the Calcu-Folios are substantially the same as the articles at issue in Avenues I, the Court of International Trade should have been bound by the decision in that case, which classified the articles under section 4202 and rejected Avenues' attempt to classify them under section 4820. Customs further contends that the Court of International Trade erred by not providing any basis for distinguishing this case from Avenues I.

Avenues responds that the similarity of the articles does not preclude it from retrying the classification under the rule of law pronounced in United States v. Stone & Downer Co., 274 U.S. 225, 47 S.Ct. 616, 71 L.Ed. 1013 (1927). Avenues contends that it was allowed to present new or additional evidence to the trial court and have the second case considered on its own merits. Avenues finally responds that, contrary to the government's assertions, the public will not be left without any guidance due to the apparent conflict between this decision and Avenues I because the remaining cases will be resolved on a case by case basis either at the administrative or the judicial level.

It is well settled that collateral estoppel does not prevent an importer from successive litigation over the classification of merchandise, even when the subsequent importations involve the "same issue of...