Ciba-Geigy Corp. v. U.S.

• Decision Date: 11 August 2000
• Docket Number: CIBA-GEIGY
• Citation: 223 F.3d 1367
• Parties: (Fed. Cir. 2000) CORPORATION, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee. 99-1441 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1367

223 F.3d 1367 (Fed. Cir. 2000)

CIBA-GEIGY CORPORATION, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

99-1441

United States Court of Appeals for the Federal Circuit

DECIDED: August 11, 2000

REISSUED: August 11, 2000

Appealed from: United States Court of International Trade Judge Evan J. Wallach

Joseph S. Kaplan, Ross & Hardies, of New York, New York, argued for plaintiff-appellant.

John J. Mahon, Assistant Branch Director, International Trade Field Office, Commercial Litigation Branch, Civil Division, Department of Justice, of New York, New York, argued for defendant-appellee. With him on the brief were David W. Ogden, Assistant Attorney General; David M. Cohen, Director, of Washington, DC; andJoseph I. Liebman, Attorney in Charge, International Trade Field Office. Of counsel was Chi S. Choy, Attorney, Office of Assistant Chief Counsel, International Trade Litigation, U.S. Customs Service, of New York, New York.

Before MICHEL, LOURIE and RADER, Circuit Judges.

MICHEL, Circuit Judge.

Ciba-Geigy Corporation ("Ciba") appeals from a summary judgment of the United States Court of International Trade upholding a United States Customs Service ("Customs") classification of its imported color formers as "synthetic organic coloring matter" under Heading 3204 of the Harmonized Tariff Schedule of the United States ("HTSUS"). See Ciba-Geigy Corp. v. United States, 44 F. Supp. 2d 207 (Ct. Int'l Trade 1998). Ciba filed suit challenging the Customs decision to classify its products under HTSUS Heading 3204 rather than as "inks" under Heading 3215. On the government's motion for summary judgment, the Court of International Trade sustained the Customs classification and dismissed the action. Because we hold that the chapter notes to Chapters 29 and 32 explicitly prohibit classification of such products anywhere in Chapter 32 except Heading 3204, we affirm the judgment of the Court of International Trade classifying Ciba's color formers in Heading 3204.

BACKGROUND

There is no dispute between the parties concerning the basic characteristics of the imported merchandise in question. The color formers, known by their brand name "PERGASCRIPTS," are synthetic organic coloring matter used in the manufacture of carbonless and thermal copy paper. To produce carbonless copy paper, PERGASCRIPT powders are dissolved in and mixed with other ingredients to form a dispersion that is coated on one side of a first sheet of paper, the other side of which is the top sheet of a form that is to be produced in duplicate (e.g., a credit card authorization slip). The top side of a second sheet is coated with an activator. When the top side of the first sheet is written on, the pressure causes the two coated surfaces to react in such a way that color is produced on the second sheet, reproducing what was written on the first sheet. PERGASCRIPTS are also used in making thermographic paper. Thermographic paper is used for faxes and similar products where the application of heat to paper that has been coated with a dispersion of PERGASCRIPTS and other materials results in the formation of an image.

In addition to agreeing on the end uses of PERGASCRIPTS, both parties agree that PERGASCRIPTS are "separate chemically defined elements or compounds" and also "synthetic organic coloring matter." In fact, both parties agree that, based on these characteristics, the PERGASCRIPTS are properly classified in Chapter 32 of the HTSUS and are described in Heading 3204.

Chapter 32, which both parties agree is the proper chapter-level classification for PERGASCRIPTS, encompasses "tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and other coloring matter; paints and varnishes; putty and other mastics; [and] inks." Heading 3204 provides for:

[s]ynthetic organic coloring matter, whether or not chemically defined; preparations as specified in note 3 to this chapter based on synthetic organic coloring matter; synthetic organic products of a kind used as fluorescent brighteners or as luminophores, whether or not chemically defined.

HTSUS, Chap. 32, 3204 (1988). Heading 3215 encompasses "inks" of various sorts. Note 1(a) of Chapter 32 states that Chapter 32 does not cover the following:

[s]eparate chemically defined elements or compounds (except those of heading 3203 or 3204, inorganic products of a kind used as luminophores (heading 3206), glass obtained from fused quartz or other fused silica in the forms provided for in heading 3207, and also dyes and other coloring matter put up in forms or packings for retail sale, of heading 3212);

HTSUS, Chap. 32, Note 1(a) (1992) (emphasis added). An additional note to Chapter 32 specifies that Heading 3204 does not apply to the following:

pigments dispersed in nonaqueous media, in liquid or paste form, or a kind used in the manufacture of paints, including enamels (heading 3212), or to other preparations of heading 3207, 3208, 3209, 3210, 3212, 3213or 3215.

HTSUS, Chap. 32, Note 3 (1992) (emphasis added).

Chapter 29 of the HTSUS covers "organic chemicals." Both parties agree that PERGASCRIPTS generally fall within the definition of "organic chemicals." Note 2(f) to Chapter 29, however, excludes the following from Chapter 29:

[c]oloring matter of vegetable or animal origin (heading 3203), synthetic organic coloring matter, synthetic organic products of a kind used as fluorescent brightening agents or as luminophores (heading 3204) and dyes or other coloring matter put up in forms or packings for retail sale (heading 3212).

HTSUS, Chap. 29, Note 2(f) (1992) (emphasis added).

Because PERGASCRIPTS are undeniably "synthetic organic coloring matter" and "separate chemically defined compounds," Customs did not classify them in Chapter 29 but in Chapter 32 in subheadings 3204.19.40 and 3204.19.50 as other "synthetic organic coloring matter, whether or not chemically defined." Those subheadings carry a duty rate of 15% or 20% ad valorem. Ciba, however, claimed that all of the merchandise was classifiable as "ink, other than printing ink or drawing ink," under subheading 3215.90.50 with a duty of 1.8% ad valorem. Alternatively, Ciba contended that the PERGASCRIPTS were classifiable under 3215.90.50 as unfinished inks in accordance with General Rule of Interpretation ("GRI") 2(a). ¹ Ciba challenged the Customs classification in the Court of International Trade.

On the government's motion for summary judgment, the Court of International Trade concluded that Note (1)(a) precluded classification under Heading 3215, thereby rendering Note 3 irrelevant. Because Note 3 was not relevant, the court also held that the factual question of whether the PERGASCRIPTS are ink was not a material fact in dispute. See Ciba-Geigy, 44 F. Supp. 2d at 214. In its opinion, the Court of International Trade recognized that the word "of" in Note (1)(a) ("except those of heading 3203 or 3204"), when viewed in isolation, left some ambiguity about whether that note permitted separate chemically defined compounds to be classified under Chapter 32 only if they were classified in Heading 3203 or 3204, or if the mere fact that a separate chemically defined compound was described in Heading 3204 was sufficient for inclusion in Chapter 32 even if the compound was ultimately classified elsewhere in the Chapter, e.g., in Heading 3215. Nevertheless, the trial court found no ambiguity when the note was read as a whole, holding:

Had Congress intended separate chemically defined compounds to be classifiable in Heading 3215, it could easily have listed this heading as one of the specific exceptions to the general exclusion of such products from Chapter 32. The fact that it did not, in combination with Note 1(a), makes clear Congress' intent to exclude all separate chemically defined compounds from classifications in Heading 3215.

Id. at 212. The court then determined that it was not entirely clear, due to an insufficiency of factual information, whether the subheadings of Heading 3204 under which Customs had classified the PERGASCRIPTS were the appropriate classifications and denied the government's motion to that limited extent, "without prejudice to the filing of an additional motion for summary judgment upon completion of any further discovery." Ciba-Geigy, slip op. (unamended) at 15-16. The government then moved to amend the judgment to sustain the classification of the PERGASCRIPTS under subheadings 3204.19.40 and 3210.19.50 and to dismiss the action because Ciba had failed to meet its burden of proof to overcome the statutory presumption of correctness which is afforded Customs determinations. Ciba did not oppose the motion and the trial judge entered an order granting the government's motion to amend and dismissed the action. Ciba filed a timely appeal with this court, which has jurisdiction under 28 U.S.C. § 1295(a)(5) (1994).

DISCUSSION

Ciba asserts that the language of Note 1(a) of Chapter 32 is ambiguous and that the Court of International Trade misinterpreted that note to render Note 3 of the same chapter irrelevant, thereby erroneously granting summary judgment rather than resolving the disputed factual issue of whether PERGASCRIPTS are "ink." Ciba argues that the correct interpretation of the word "of" in Note 1(a) of Chapter 32 is that a separate chemically defined element or compound need only be described by 3204 rather than classified under 3204 to fall within Chapter 32. The government responds that the language of Note 1(a) of Chapter 32 is unambiguous on its face and plainly restricts classification of separate chemically defined elements or compounds, such as PERGASCRIPTS, to Headings 3203 or 3204. We agree with the government and affirm the decision of the trial court holding that PERGASCRIPTS, as separate chemically defined compounds, are excluded from Chapter 32 unless classified in Heading 3203, 3204, 3206, 3207 or 3212, as specified in Note 1(a) of that Chapter.

We review the Court...