Beloit Corp. v. US

• Decision Date: 02 February 1994
• Docket Number: Slip Op. 94-17. Court No. 91-02-00085.
• Citation: 843 F. Supp. 1489,18 CIT 67
• Parties: BELOIT CORP., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

843 F. Supp. 1489

18 CIT 67

BELOIT CORP., Plaintiff, v. UNITED STATES, Defendant.

Slip Op. 94-17. Court No. 91-02-00085.

United States Court of International Trade.

February 2, 1994.

Fitch, King and Caffentzis (James Caffentzis), for plaintiff.

Frank W. Hunger, Assistant Attorney General of the United States; Joseph I. Liebman, Attorney-in-Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice (Carla Garcia-Benitez), for defendant.

OPINION

CARMAN, Judge:

Plaintiff challenges the classification and liquidation of its imported merchandise pursuant to section 515 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1515(a) (1988). This Court has jurisdiction under 28 U.S.C. § 1581(a) (1988) and, for the reasons which follow, enters judgment for plaintiff.

I. BACKGROUND

A. The Merchandise

The merchandise at issue consists of Yankee dryer cylinders. The legislative history of item 668.05, Tariff Schedules of the United States (TSUS) (1983), which created duty-free treatment for imported Yankee dryer cylinders under the former TSUS, provides the following description of the subject merchandise:

A Yankee dryer cylinder is a component of a papermaking machine used to dry and finish, by creping or glazing, various grades of paper. For example, most sanitary tissues and paper towels are provided with a crepe finish imparted by a Yankee dryer cylinder. In addition, these cylinders can be adapted to furnish a glaze to other grades of paper such as kraft wrapping paper.

Yankee dryer cylinders range in diameter from about 10 to 18 feet and are steam heated. The shell of the cylinders ranges from 2 to 3 inches in thickness and consists of metals such as unalloyed cast iron, alloyed cast iron, and aluminum bronze.

H.R.REP. No. 257, 97th Cong., 1st Sess. 6-7 (1981). As wet sheets of paper move through the papermaking machine, the machine presses the sheets against the surface of the Yankee dryer cylinder to enable the cylinder to perform its various functions. H.R.REP. No. 1355, 95th Cong., 2d Sess. 2 (1978).

B. Relevant Statutory Provisions

Plaintiff relies on the following provisions of the Harmonized Tariff Schedules of the United States (HTSUS) (1990).

1. 8439 Machinery for making pulp of fibrous cellulosic material or for making or finishing paper or paperboard (other than the machinery of heading 8419) parts thereof .... Parts ....

8439.99 Other 8439.99.10 Of machinery for making paper or paperboard ... Free 2. CHAPTER 84 Notes .... 2. Subject to the operation of note 3 to section XVI, a machine or appliance which answers to a description in one or more of the headings 8401 to 8424 and at the same time to a description in one or more of the headings 8425 to 8480 is to be classified under the appropriate heading of the former group and not the latter. Heading 8419 does not, however, cover .... (e) Machinery or plant, designed for mechanical operation, in which a change of temperature, even if necessary, is subsidiary.

In addition, plaintiff refers to several items contained in the Tariff Schedules of the United States (TSUS):

1. 912.06¹ Yankee dryer cylinders (provided for in item 668.06, part 4D, schedule 6) ... Free ... On or before 12/31/81 2. Machines for making cellulosic pulp, paper, or paperboard; machines for processing or finishing pulp, paper, or paperboard, or making them up into articles: 668.00 Machines for making cellulosic pulp, paper, or paperboard ... Free .... Parts of the foregoing machines: .... Other: 668.06 Parts of machines for making cellulosic pulp, paper, or paperboard 3. Machines for making cellulosic pulp, paper, or paperboard; machines for processing or finishing pulp, paper, or paperboard, or making them up into articles: 668.00 Machines for making cellulosic pulp, paper, or paperboard ... Free .... Parts of the foregoing machines: .... Other: 668.05² Yankee dryer cylinders ... Free 4. Industrial machinery, plant, and similar laboratory equipment, whether or not electrically heated, for the treatment of materials by a process involving a change of temperature, such as heating, cooking, roasting, distilling, rectifying, sterilizing, pasteurizing, steaming, drying, evaporating, vaporizing, condensing, or cooling; instantaneous or storage water heaters, non-electrical; all the foregoing (except agricultural implements, sugar machinery, shoe machinery, and machinery or equipment for the heat-treatment of textile yarns, fabrics, or made-up textile articles) and parts thereof: .... Other:

661.67 Machinery for making cellulosic pulp, paper, or paperboard, and parts thereof ... 2.4% ad val.

Defendant relies on the following HTSUS provisions:

1. 8419 Machinery, plant or laboratory equipment, whether or not electrically heated, for the treatment of materials by a process involving a change of temperature, such as heating, cooking, roasting, distilling, rectifying, sterilizing, pasteurizing, steaming, drying, evaporating, vaporizing, condensing or cooling, other than machinery or plant of a kind used for domestic purposes; instantaneous or storage water heaters, non-electric; parts thereof: .... Dryers: .... 8419.32 For wood, paper pulp, paper or paperboard: .... 8419.32.50 Other ... 2.4% 2. GENERAL RULES OF INTERPRETATION Classification of goods in the tariff schedule shall be governed by the following principles: 1. The table of contents, alphabetical index, and titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes....

In addition, the following TSUS provision is relevant to the Court's discussion:

1. SCHEDULE 6.—METALS AND METAL PRODUCTS Part 4.—Machinery and Mechanical Equipment Part 4 headnotes: .... 2. Unless the context requires otherwise, and subject to headnote 1 to subpart A of this part, a multi-purpose machine is classifiable according to its principal purpose, but if such a machine is not described in a superior tariff heading as to its principal purpose, or if it has no one principal purpose, it is classifiable in subpart H of this part as a machine not specially provided for.

C. Customs' Classification

The United States Customs Service (Customs) classified the imported merchandise under subheading 8419.32.50, HTSUS. Subheading 8419.32.50 applies to "Dryers: .... For wood, paper pulp, paper or paperboard: .... Other: ...." Pursuant to this subheading, Customs imposed duties totalling 2.4% ad valorem.

Plaintiff filed timely protests under 19 U.S.C. § 1514(a) (1988) to contest Customs' classification. Customs subsequently denied the protests under 19 U.S.C. § 1515 and, after having paid all liquidated duties, plaintiff commenced this action within the time allowed by law. On May 12, 1993, this Court granted defendant's motion to designate this action a test case under USCIT R. 84(b).

II. CONTENTIONS OF THE PARTIES

A. Plaintiff

Plaintiff advances three principal arguments supporting its motion for summary judgment. First, plaintiff contends the treatment that Congress and Customs accorded to the merchandise under the former TSUS indicates the merchandise should be classified under subheading 8439.99.10, HTSUS. Plaintiff emphasizes the fact that Customs consistently classified Yankee dryer cylinders as machinery for making paper and parts thereof under item 668.06, TSUS. Pl's Br. at 2-3 (citing T.D. 56,521, 100 Treas.Dec. 771 (1965)); Customs H.Q. Ruling CLA-2:R:CV:MA 056271 E (1978) (1978 H.Q. Ruling); Customs H.Q. Ruling CLA-2:RRUCGC 061761 BB (1980) (1980 H.Q. Ruling). In addition, plaintiff notes Congress singled out Yankee dryer cylinders for duty-free treatment from October 21, 1978 until the effective date of the HTSUS, January 1, 1989, thereby indicating its intent to distinguish the subject merchandise from other dryers which were subject to duty. Id. at 3-4 (citing Tariff Schedules — Bearings, etc., and Hanger Units, Pub.L. No. 95-500, § 2, 92 Stat. 1683 (1978); Tariff Schedule Revisions, Pub.L. No. 97-446, § 108(b), 96 Stat. 2330 (1983) (repealed 1989)).

Plaintiff's second principal contention is that Customs' classification is incorrect because the subject merchandise's purpose and function have not changed since the enactment of the HTSUS. Id. at 5. Plaintiff maintains the rationale which supported Customs' and Congress' decision to differentiate between the subject merchandise and other dryers under the TSUS precludes the application of subheading 8419.32.50, HTSUS. According to plaintiff, this rationale distinguished Yankee dryer cylinders from other dryers on the basis of Customs' and Congress' finding that the cylinder's primary purpose is to give paper a creped or glazed finish and not to dry. Id. As a result, plaintiff suggests Chapter 84, Note 2(e), HTSUS, which bars heading 8419 from applying to "machinery ... in which a change of temperature, even if necessary, is subsidiary," incorporates the distinction recognized under the TSUS between Yankee dryer cylinders and dryers. Id. at 9-12; Pl's Reply Br. at 2-4. Therefore, plaintiff argues Customs must treat the subject merchandise under the HTSUS in the same manner as under the TSUS and classify the merchandise as parts of a papermaking machine under subheading 8439.99.10, rather than as parts of a paper dryer under subheading 8419.32.50.

Third, plaintiff contends Customs' classification is contrary to Congress' intent in adopting the HTSUS. Specifically, plaintiff asserts the classification contravenes Congress' intention that the transition to the HTSUS from the TSUS be "rate neutral" and the duty treatment contained in the TSUS carries over to the HTSUS. Pl's Br. at 6-7 (citing Omnibus Trade and Competitiveness Act of 1988, Pub.L. No. 100-418, § 1211; H.R. CONF.REP. No. 576, 100th Cong., 2d Sess. ...