Ciba-Geigy Corp. v. U.S.
| Decision Date | 16 November 2001 |
| Docket Number | No. 93-03-00148.,Slip Op. 01-134.,93-03-00148. |
| Parties | CIBA-GEIGY CORPORATION, Plaintiff, v. UNITED STATES, Defendant. |
| Court | U.S. Court of International Trade |
Ross & Hardies, New York City (John B. Pellegrini), for Plaintiff.
Stuart A. Schiffer, Acting Assistant Attorney General; Joseph I. Liebman, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, Department of Justice, John J. Mahon, Trial Attorney, for Defendant.
Plaintiff, Ciba-Geigy Corporation ("Ciba-Geigy"), sued to challenge the United States Customs Service's refusal to reliquidate certain shipments of "color preparations" imported by Ciba-Geigy. Plaintiff now moves for summary judgment, claiming reliquidation is required, following a timely protest under 19 U.S.C. § 1514, because, allegedly, the Government erroneously classified the subject merchandise under the Harmonized Tariff Schedule of the United States ("HTSUS") (1990) heading 3204, subheadings 3204.12.50, 3204.17.50, 3204.19.19, and that rather, the subject merchandise is properly classified under subheadings 3204.12.40, 3204.17.30, or 3204.19.15.1 Plaintiff asserts the color preparations, as they are not expressly referenced by the Chemical Appendix to the HTSUS, are therefore necessarily within the ambit of additional U.S. Note 3, Section VI, HTSUS ("Note 3") (1990). As a result, Plaintiff claims the lower tariff classifications should apply. The United States Customs Service ("Customs") has filed a cross motion for summary judgment claiming that the subject color preparations, are listed within the Chemical Appendix by the Chemical Abstract Service registry number ("C.A.S.No.") of the primary color ingredient or via trade name, chemical name, or color index name. As such, Customs avers the higher tariff rates are warranted. Both parties agree the resolution of this matter depends solely on whether the color preparations are described by Note 3, and that this question is purely one of law.
Customs has demonstrated that the subject color preparations are listed within the Chemical Appendix and are therefore not within the ambit of Note 3. Accordingly, the court grants its motion for summary judgment and denies Plaintiff's motion.
At issue is the proper tariff classification for 562 color preparations, each containing certain coloring matter that were imported by Plaintiff between February 1990 and October 1992. The preparations are employed in various capacities, including inks, dyes, paints, and stains and are generally composed of one or more color imparting ingredients and one or more non-color ingredients. Products listed in the Chemical Appendix are identified by a C.A.S. No., Color Index Name, trade name, or chemical name.
Ciba-Geigy Argues that the Plain Language of Note 3 and the De Minimus Rule Support Classification Under the Subheadings that Impose Lower Duty Rates.
Ciba-Geigy claims that the subject color preparations are not listed in the Chemical Appendix and that Customs therefore erroneously classified the preparations under the HTSUS subheadings with higher duty rates. Ciba-Geigy draws the court's attention to Note 3 as the critical distinction between Customs' chosen classification and its own. In summary, Ciba-Geigy states that:
[c]lassification in the provisions claimed to be correct by plaintiff requires that the merchandise: 1) be synthetic organic coloring matter or preparations based on such coloring matter; 2) be acid dyes, pigments, mixtures of the same, or preparation based thereon; and 3) not be specifically provided for and, therefore, classified in the residual provision, and; 4) be described in Note 3. The classifications asserted by the Customs service have the identical requirements save one; the classifications asserted by the Customs Service require that the preparations be outside Note 3, i.e., they must be listed in the Chemical Appendix.
Plaintiff's Memorandum in Support of its Motion for Summary Judgment ("Plaintiff's Motion") at 9. Customs agrees that this is the primary distinction between the parties' characterization of the color preparations. See Defendant's Motion.
Note 3 provides:
3. The term "products" described in additional U.S. note 3 to section VI refers to any product not listed in the Chemical Appendix to the Tariff Schedule and-
(a) For which the importer furnishes the Chemical Abstracts Service (C.A.S.) registry number and certifies that such registry number is not listed in the Chemical Appendix to the Tariff Schedule; or
(b) Which the importer certifies not to have a C.A.S. registry number and not to be listed in the Chemical Appendix to the Tariff Schedule, either under the name used to make Customs entry or under any other name by which it may be known.
U.S. Note 3, Section VI, HTSUS (emphasis added).
Ciba-Geigy claims that the Chemical Appendix cannot refer to a completed preparation by expressly referring to only an ingredient within that preparation. Plaintiff's Motion at 2. Id. at 2 (citing Confidential Appendix A to the Joint Stipulation). Although "[t]he majority of the subject preparations have as their principal ingredient in terms of function (and in 32 of 56 cases, in terms of relative weight) a pigment or dye whose C.A.S. No. is listed in the Chemical Appendix", id. at 5, "[t]he subject preparations are formulated preparations containing one or more color ingredients and one or more non-color ingredients ... and since each has non-color ingredients present in significant quantities, which ingredients are not listed in the Chemical Appendix, the Appendix does not cover these preparations." Id. at 2-3. Under this line of reasoning, the subject preparations do not have a specific C.A.S. No. and are therefore not included in the Chemical Appendix.
In support of this argument, Ciba-Geigy asserts that Customs failed to apply the de minimus rule and "classified the subject preparations as being within the scope of the Chemical Appendix by disregarding the presence of the non-listed color and non-color ingredients in the formulations." Id. at 12. Specifically, Plaintiff asserts that the two major principles underlying the de minimus rule dictate that 1) "ingredients which are significant in terms of quantity or function may not be ignored in determining classification" and 2) "the presence of ingredients may be ignored when they are insignificant." Id. (citing Varsity Watch Co. v. United States, 34 C.C.P.A. 155 (1947); United States v. Aetna Explosives Co., 256 U.S. 402, 41 S.Ct. 513, 65 L.Ed. 1013 (1921)). Plaintiff avers that each of the subject preparations contains non-color ingredients that perform significant and substantial functions. Secondly, Plaintiff avers that the non-color ingredients are present in significant quantities, "in the case of 24 of the 56 preparations at issue, they are present in quantities greater than the coloring matter." Id. at 17. As such, the alleged non de minimus presence of the non-color ingredients would place all of the subject color preparations outside the Chemical Appendix.
Thus, Ciba-Geigy asserts the relevant inquiry should be whether or not a given color preparation is listed in the Chemical Appendix by C.A.S. number, recognizing the color preparations are completed products that contain a significant array of non-color ingredients. If the answer is no, then Ciba-Geigy asserts that preparation is included within the scope of Note 3 and should be liquidated under according to the lower tariff rates.
Customs Claims that Plaintiff's Distinction Between "Products" and "Ingredients" Does Not Find Support Within the Chemical Appendix.
Customs claims that "Ciba-Geigy's focus on `ingredients' vs. `products' and its interpretation of the applicability of the de minimus rule are incorrect and their adoption would impermissibly circumscribe the scope of the Appendix and frustrate the intent of the legislature." Defendant's Motion at 9. Customs further claims that "the presence of non-color ingredients, whatever their magnitude or function, has no bearing upon either the classification of coloring matter or whether it is within the scope of the Chemical Appendix." Id. at 9-10.
Customs first relies on the Appendix's legislative history to argue that the subject color preparations are governed by the higher tariff rates and to counter Ciba- Geigy's application of the de minimus rule. Customs says that "[e]xamination of the history and reason for the enactment of the Chemical Appendix demonstrates that Ciba-Geigy's arguments here would impermissibly narrow and circumscribe the intended scope of the Chemical Appendix." Id. at 10. In short, since the United States International Trade Commission ("ITC") established the Chemical Appendix, Customs offers an interpretation of a pair of ITC publications that purport to articulate the scope of the Appendix. From these bulletins, Customs derives critical cutoff dates of January 1, 1978, prior to which the importation of the listed chemicals would trigger the higher tariff rates and May 1, 1978, prior to which the production of the listed chemicals within the United States would trigger the higher tariff rates. Customs concludes that there was "an explicit legislative intent to assess duty at a higher rate on inter alia, the synthetic organic coloring matter classifiable in Heading 3204, HTSUS, unless it was not imported or produced before the applicable dates...." Id. at 15.
Secondly, Customs argues that by insisting that the coloring matter in its products is an...
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