Crystal Clear Industries v. US, 91-12-00918.
| Decision Date | 28 January 1994 |
| Docket Number | No. 91-12-00918.,91-12-00918. |
| Citation | 843 F. Supp. 721,18 CIT 47 |
| Parties | CRYSTAL CLEAR INDUSTRIES, Plaintiff, v. UNITED STATES, Defendant. |
| Court | U.S. Court of International Trade |
Grunfeld, Desiderio, Lebowitz & Silverman, Steven P. Florsheim and Judith A. Schechter, New York City, for plaintiff.
Frank W. Hunger, Asst. Atty. Gen., Joseph I. Liebman, attorney-in-charge, Intern. Trade Field Office, Edith Sanchez Shea, United States Customs Service, Mark G. Nackman, Washington, DC, of counsel, for defendant.
This matter was submitted to trial for decision regarding the proper classification of packaging produced to ship and market glassware from column II countries in the United States. The parties stipulated to the preponderance of the facts and the issues in a pretrial order dated July 14, 1993. Where the parties contest the facts, or interpret them differently, the Court will so note appropriately.
The subject merchandise consists of glassware gift boxes produced in Austria and Italy, whose products are subject to column 1 ("most favored nation" or "MFN") duty rates upon importation into the United States. The boxes were shipped to the nations in which the glassware was produced. The glassware was packed in the gift boxes and exported to the United States. The boxes were imported containing glassware produced in East Germany, Romania and Czechoslovakia. Those countries' products are subject to column 2 duty rates. The subject boxes did not enter the commerce of the column 2 nations in which their glassware contents were produced.
The gift boxes entered in 1988 are boxes of paper, or of paperboard, or of papier-mache, or of combinations thereof. Those boxes are not described by TSUS items 256.48 or 256.52. The gift boxes entered in 1989 and 1990 are cartons or boxes of corrugated paper or paperboard.
Upon liquidation, duties were assessed on the value of the glassware under the appropriate TSUS or HTSUS provisions for glassware set forth in Schedule A of plaintiff's complaint. The classification of the glassware under these provisions is not disputed by plaintiff. The declared values of the boxes were included in the dutiable value of the glassware as packing for the glassware.
The boxes in this case are not sold, advertised, marketed or merchandised separately from the glassware. Typically, the box manufacturer has possession of the boxes for approximately one week and the glassware manufacturer has possession of the boxes for approximately two months.
Items shipped into the United States by Crystal Clear in decorated cardboard boxes are usually, but not always, sold to consumers at retail in the decorated boxes. The value of the crystal to the consumer does not change depending on whether the crystal is packaged in a plain box or a decorated box. Crystal Clear does not sell glassware at retail except for two annual warehouse sales at plaintiff's facilities in New Jersey.
Plaintiff claims that the Customs Service improperly classified the imported glassware gift boxes under TSUS item 546.60, or under one of four subheadings in the HTSUS, and assessed duties at the same column II duty rates applicable to their glassware contents (60% or 45% ad valorem). The proper classification of the imported gift boxes, according to plaintiff, is under TSUS item 256.54,2 or HTSUS subheading 4819.10.00,3 and they are dutiable respectively, at the column I rate of 3.9% and 2.8% ad valorem.
In the alternative, plaintiff claims that the subject gift boxes are classifiable under the same tariff provision as their glassware contents, but at the column I duty rates therefor, at 30% or 7.6% ad valorem.
To sustain its claim that the boxes were classified properly, defendant cites TSUS General Headnote and Rule of Interpretation 6(b)(i):
The Customs Service maintains that the boxes are the "usual or ordinary types of shipping containers or holders" and the boxes are designed for and only capable for use in the packing of glassware. Further, the boxes are ordinarily sold at retail with the glassware packed inside them. Therefore, where the TSUS is applicable, the inclusion of the value of the boxes in the dutiable value of the glassware packed inside them is appropriate, according to defendant.
Customs applied similar analysis to the claim under the HTSUS. HTSUS General Rule of Interpretation 5(b) states:
Subject to the provisions of rule 5(a) above, packing materials and packing containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use.
Customs recites that the boxes were entered with the glassware, are of a kind normally used for packing glassware and are not suitable for repetitive use. Therefore, where the HTSUS is applicable, the inclusion of the value of the boxes in the dutiable value of the glassware packed inside them is appropriate.
Additionally, Customs contends that the inclusion of the boxes in the dutiable value of the glassware is consistent with 19 U.S.C. § 1401a(b)(1)(A) which states:
Therefore, defendant asserts, the various applicable statutes indicate that its classification was proper and plaintiff's claims should be dismissed.
The Court must determine whether the subject gift boxes that were entered in 1988 (i.e., under the TSUS) are the usual or ordinary types of shipping or transportation containers or holders, if not designed for or capable of reuse, or are containers of usual types ordinarily sold at retail with their contents and;
Whether the subject gift boxes that were entered in 1989 and 1990 (i.e., under the HTSUS) are of a kind normally used for packing the goods that they contained, and are clearly not suitable for repetitive use.
Plaintiff sought to establish that the gift boxes are utilized to sell, merchandise, and market table top articles in a minority of instances: They are not the usual or ordinary packaging utilized to package giftware. The ordinary method of packaging for merchandising, plaintiff reasoned, is in plain corrugated box.
To support plaintiff's argument that the gift boxes are "unusual," plaintiff asserts that its gift boxes were ordered during a trend, were much more expensive than plain boxes, were highly decorated, and increased the salability of the glassware. See TSUS General Headnote 6(b)(iii); Fontana Hollywood Corp. v. United States, 64 Cust.Ct. 204, C.D. 3981 (1970) (wine bottles imported from Italy measuring four feet in height were "unusual" and separately classified by Customs)5 and United States v. W.J. Mulligan & Co., 29 C.C.P.A. 117, 122, C.A.D. 179, 1941 WL 4521 (1941) (). Plaintiff further notes that in addition to the peculiar form of the packaging, the value of the packaging was an important factor in Fontana and W.J. Mulligan influencing whether the container was separately dutiable.
Moreover, plaintiff argues that the decorative gift boxes were purely a marketing tool disassociated from the packaging per se. In fact, a significant amount of the gift boxed glassware is first packed in the ordinary plain corrugated box that plaintiff claims is the "usual" packaging material. Plaintiff explains that gift boxing was a transitory phenomena in the mid-1980s that permitted the merchant to display merchandise without having to remove it from the packing material.
Plaintiff makes the additional claim that because both parties agree that the boxes never "entered the commerce" of the column II countries in which the glassware was manufactured, the boxes should be assessed a column I rate regardless of their ultimate classification. Plaintiff argues that it is a well-established principle of customs law that the origin of an article is the country where the article was manufactured, produced, or grown. See 19 C.F.R. § 134.1(b). The only way for a product to lose "origin" in the source country is if it was "substantially transformed" in a second foreign country, or if it becomes a bona fide part of the commerce of the second foreign country.
According to plaintiff, the boxes were fully produced in the column I country and needed no assembly in the column II country. Therefore, the boxes were not substantially transformed. In addition, the parties agree the boxes never entered the commerce of the second foreign country. Accordingly, Plaintiff concludes that the duty rate should remain that of column I, the country of origin.
Plaintiff argues, in the alternative, that even if the Court were to find Crystal Clear's gift boxes to be of the "normal" kind used for marketing and transporting glassware, the boxes would be...
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