Childcraft Educ. Corp. v. U.S., 83-1428

Decision Date29 August 1984
Docket NumberNo. 83-1428,83-1428
Citation742 F.2d 1413
Parties, 20 Ed. Law Rep. 39, 2 Fed. Cir. (T) 121 CHILDCRAFT EDUCATION CORP., Appellant, v. The UNITED STATES, Appellee. Appeal
CourtU.S. Court of Appeals — Federal Circuit

Peter J. Fitch, New York City, argued for appellant.

Judith M. Barzilay, New York City, argued for appellee. With her on the brief were Richard K. Willard, Acting Asst. Atty. Gen., David M. Cohen, Director, Washington, D.C., and Joseph I. Liebman, New York City, Attorney in Charge International Trade Field Office.

Before MARKEY, Chief Judge, and FRIEDMAN and RICH, Circuit Judges.

RICH, Circuit Judge.

Appellant Childcraft Education Corp. (Childcraft) appeals from the decision of the Court of International Trade (CIT), 572 F.Supp. 1275 (1983) which upheld the classification of the imported merchandise as toys, Item 737.90 of the Tariff Schedules of the United States (TSUS) instead of as "Machines not specially provided for," Item 678.50 TSUS, or "Electrical articles ... not specially provided for," Item 688.40 TSUS, as claimed. We reverse.

Background

The imports are articles primarily used by children, and are respectively known as "Teaching Typewriters," "Touch to Learn," and "Touch and Match." The Teaching Typewriter requires the use of programmed cards, each of which presents a problem to be solved, such as a simple addition or word completion exercise. When a child presses the key or keys representing the correct answer, the card moves forward out of the machine. Additional programs teach vocabulary, phonograms, and mathematics; and progressively more difficult program cards are available for each of these subject categories. The Touch to Learn article operates on the same principle but uses a programmed cassette in place of the card, and a correct answer advances the cassette to the next problem. Available programs teach, for example, counting, telling time, addition, subtraction and multiplication. The Touch and Match article teaches reading readiness. It utilizes a card having an item appearing on its left side which a child must match with the corresponding item on the card's right side, by simultaneously pressing the appropriate buttons. This article is supplied with a blank card to enable teachers to create individualized exercises for children with specific learning problems. A correct choice causes the machine to produce a noise and light a light. None of these articles will function in its intended manner without the card or cassette programs.

The Customs Service classified these articles as toys, TSUS 737.90, and the CIT affirmed. The primary issue, as formulated by the CIT, and the affirmative determination which formed the basis for its upholding of the classification of these articles as toys, was whether their chief use was for the amusement of children and adults, rather than for the education of pre-school children. Childcraft contends on appeal that these articles are primarily used for educational purposes and, therefore, that TSUS 678.50 or 688.40 would be correct. The government conceded below and at argument before this court that if the merchandise is not classifiable under TSUS 737.90, that Childcraft's suggested classification in TSUS 678.50 would be proper.

OPINION

The meaning of terms, such as "toy," is a question of law. Daw Industries, Inc. v. United States, 714 F.2d 1140, 1141 (Fed.Cir.1983). Both parties, as well as the CIT, relied upon the definition set forth in the TSUS (Schedule 7, part 5, subpart E, headnote 2) as adopted by a line of cases including B. Shackman & Co. v. United States, 67 Cust.Ct. 372, 380, C.D. 4300, (1971), that a toy is an article "chiefly used for the amusement of children or adults."

It is incumbent upon the importer in a case such as this to overcome the presumption of correctness which attaches to a classification by the Customs Service, and the importer has the burden of proving that the classification is incorrect, though the importer need not always prove that its own proposed classification is correct. Jarvis Clark Co. v. United States, 733 F.2d 873 (Fed.Cir.1984).

Whether particular items, such as the articles at issue here, fit the definition of toy is a question of fact reviewed under the clearly erroneous standard. Daw Industries, 714 F.2d at 1142. A finding is " 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948). Thus, in order to prevail, Childcraft must demonstrate clear error in the CIT's finding, based on the record below, that the imported articles are chiefly used for amusement and are thus toys.

The evidence of record consists primarily of witness testimony, a photocopy of one of Childcraft's catalogs, the three imported articles, and the programmed cards and cassettes used with these articles. As the CIT opinion notes, only one witness testified, and that was Childcraft's Senior Vice-President of Merchandising. The government called no witnesses.

Childcraft's witness testified that his company was primarily engaged in selling teaching aids and school supplies, and that he worked with educational consultants teachers, and others in the field of pre-school education. His further testimony was that approximately eighty per cent of Childcraft's business was generated by sales to schools and educational systems. Additional testimony indicated that the machines could not function without their programmed cards or cassettes, and that particular programs were progressive in degree of learning difficulty. The imported articles were merchandised through school catalogs and by sales representatives who conducted workshops with school teachers to demonstrate the items. Other sales were generated by public distribution through retail stores.

Due to the nature of this case, our holding as to whether or not the subject articles are correctly classified as toys depends on the facts adduced below. Thus, the CIT correctly couched the determinative issue before us in terms set forth by the former Customs Court in Ideal Toy Corp. v. United States, 78 Cust.Ct. 28, 33, C.D. 4688 (1977):

When amusement and utility become locked in controversy, the question becomes one of determining whether the amusement is incidental to the utilitarian purpose, or the utility purpose incidental to the amusement [citation omitted].

In finding that Childcraft "failed to demonstrate by the evidence of record that the imported merchandise is chiefly used for educational purposes and not chiefly used for the amusement of children," the CIT relied overmuch on certain comments by the witness that "he had observed children using the merchandise in school and that the children were enjoying themselves." The CIT erroneously found, from the following quoted testimony, an admission "that the basis [sic] of the merchandise was amusement of a young child with the hopeful purpose that the child would learn something while being amused." The quoted testimony was:

Young children, unless they are really new, have ideas, and the enviornonment [sic] around them every day is an...

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