EM Chemicals v. US, Slip Op. 96-57. Court No. 91-02-00134.

• Decision Date: 20 March 1996
• Docket Number: Slip Op. 96-57. Court No. 91-02-00134.
• Citation: 923 F. Supp. 202,20 CIT 382
• Parties: E.M. CHEMICALS, Plaintiff, v. The UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

923 F. Supp. 202

20 CIT 382

E.M. CHEMICALS, Plaintiff, v. The UNITED STATES, Defendant.

Slip Op. 96-57. Court No. 91-02-00134.

United States Court of International Trade.

March 20, 1996.

Sonnenberg & Anderson (Philip Yale Simons, and Jerry P. Wiskin, New York City; Michelle D. Mancias, Chicago, IL, of counsel), for plaintiff.

Frank W. Hunger, Washington, DC, Assistant Attorney General; Joseph I. Liebman, New York City, Attorney-in-Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice (Barbara M. Epstein, New York City); United States Customs Service (Chi Choy, New York City), of counsel, for defendant.

MEMORANDUM AND ORDER

I INTRODUCTION

WALLACH, Judge:

Plaintiff, E.M. Chemicals, challenges the classification of imported thermochromic liquid crystal mixtures (hereinafter "TLCs"), also known as chiral nematic liquid crystal mixtures, by the United States Customs Service ("Customs"). Customs classified the merchandise as other products of the chemical industry containing five percent or more of aromatic substances under the Harmonized Tariff Schedule of the United States (hereinafter "HTSUS") subheading 3823.90.29, and assessed duty at a rate of 13.6 percent ad valorem plus 3.7 cents per kilogram. E.M. Chemicals asserts that the TLCs are properly classified under HTSUS subheading 3204.90.00 as "Synthetic organic coloring matter ... Other," with duty assessable at 5.9 per cent ad valorem. Defendant, the United States, argues, without a counterclaim, that if Heading 3204 is the appropriate heading, then subheading 3204.19.40 is the proper classification (which carries a 15% rate of duty). This Court exercises its jurisdiction pursuant to 28 U.S.C. § 1581(a) (1994).

The parties have submitted motions for summary judgment. They are denied because genuine issues of fact remain with respect to the "principal use" issue, discussed below. The purely legal issue concerning the structure of Heading 3204 and the subheadings thereunder is, however, appropriate for summary adjudication pursuant to USCITR 56(c). Consequently, the Court determines that if Plaintiff establishes at trial that the subject merchandise is "coloring matter" within the meaning of Heading 3204, then subheading 3204.19.40, suggested by Defendant, is the appropriate classification subheading for the merchandise.

II BACKGROUND

A

Statement Of Material Facts Not In Issue.

The imported merchandise at issue consists of Licritherm standard mixtures, designated by plaintiff as "TM75A", "TM75B", "TM74A" and "TM74B" and other special mixtures, designated by plaintiff as "TM533" and "TM519". These articles are chiral nematic liquid crystal mixtures, commonly known as "thermochromic liquid crystals." Complaint and Answer ¶ 5 (hereinafter "Comp. & Ans."); Plaintiff's Statement of Material Facts Not In Issue (hereinafter "PSMF") and Defendant's Response (hereinafter "DR") ¶ 4; Defendant's Statement of Material Facts Not In Issue (hereinafter "DSMF"), Plaintiff's Response (hereinafter "PR") ¶ 1. The imported articles are mixtures of chiral nematic liquid crystal compounds each of which has a different chemical composition. Comp. & Ans. ¶ 7; PSMF and DR ¶ 6. Merck Ltd. of Poole, England produces the liquid crystals. PSMF and DR ¶ 6. The imported TLCs are mixtures of two or more synthetic organic compounds. DSMF and PR ¶ 2; PSMF and DR ¶ 7. TLCs are used in their condition as imported and they do not undergo chemical processing after importation. PSMF and DR ¶ 27. In addition, they are not further chemically altered after importation. PSMF and DR ¶ 28.

Liquid crystals are classified as: smectic, nematic and chiral nematic.¹ In general, their molecules are rod-shaped. Comp. & Ans. ¶ 9.

Chiral nematic liquid crystals have a natural twisted structure which imparts a three-dimensional order. The individual liquid crystal molecules are arranged in parallel planes. On each plane the long axes of the molecules point in the same direction but in the next higher or lower plane the direction of the long axes of the liquid crystal molecules is offset, so that the direction of the long axes traces out a helical path when going from one plane of molecules to the next. Comp. & Ans. ¶ 12; PSMF and DR ¶ 10.

The helical architecture of chiral nematic liquid crystal molecules in the liquid crystal mixture causes it to exhibit color. The color depends on the chemical composition of the individual chiral nematic liquid crystal molecules in the mixture and, in most cases, the ambient temperature. Comp. & Ans. ¶ 13: PSMF and DR ¶ 11. As a result, TLCs are a particular color at a particular temperature. PSMF and DR ¶ 15. In some TLCs, if the temperature is changed by a small amount, a different color is exhibited. PSMF and DR ¶ 16. Other TLCs remain a single color over a wide temperature range. PSMF and DR ¶ 17. Dyes, pigments and thermochromic liquid crystals all absorb, reflect or constructively interfere with incident light to produce color and impart these colors to the products in which they are used, PSMF and DR ¶ 39, but TLCs are not pigments, DSMF and PR ¶ 6, or dyes. Comp. & Ans. ¶ 18, DSMF and PR ¶ 4, PSMF and DR ¶ 24.

E.M.'s TLCs with the designation "TM" change color over a narrow temperature range. PSMF and DR ¶ 20. E.M. uses different letter designations to indicate different uses of the TLCs. The "TM" mixtures here at issue function to exhibit color. PSMF and DR ¶ 22. A common application of TLCs is in temperature indicating devices in which they indicate the ambient temperature by changing color as the temperature changes.² PSMF and DR ¶ 35.

B

Material Facts In Issue.

The parties' central dispute is whether the principal use of TLCs is to impart color or measure temperature. Comp. & Ans. ¶ 16. Plaintiff states that TLCs impart color to the products in which they are incorporated. Defendant denies that the TLCs "impart" color, but says that they "exhibit" color at a particular temperature. PSMF and DR ¶ 43. Further, Plaintiff claims that TLCs impart a specific color at a specific temperature, but Defendant asserts that color is "exhibited" at a specific temperature. PSMF and DR ¶ 32. That factual issue precludes summary judgment. Because principal use is the determining factor of whether the basket provision applies to the subject merchandise, material facts are in dispute.

III DISCUSSION

A

Genuine Issues Of Material Fact Exist Which Preclude Summary Judgment As A Matter Of Law.

Under the rules of this Court, summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." USCITR 56(d). Summary judgment will be denied, however, if the parties present "a dispute about a fact such that a reasonable trier of fact could return a verdict against the movant." Semperit Indus. Prod., Inc. v. United States, 18 CIT ___, ___, 855 F.Supp. 1292, 1297 (1994), quoting Ugg Int'l, Inc. v. United States, 17 CIT 79, 83, 813 F.Supp. 848, 852 (1993) (citations omitted). As previously discussed, the parties dispute the material fact of whether the principal use of TLCs is as coloring matter. Accordingly, as is shown below, summary judgment must be denied to both parties.

B

Subheading 3823.90.29 Is A Basket Provision, Applicable To The Subject Merchandise Only If It Cannot Be Classified Under A More Specific Provision Of The HTSUS.

Customs classified the TLCs at issue under HTSUS 3823.90.29³ which reads, in part:

Chapter 38: Miscellaneous Chemical Products

3823 Prepared binders for foundry molds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included; residual products of the chemical or allied industries, not elsewhere specified or included:

.90 Other: Mixtures containing 5 percent or more by weight of one or more aromatic or modified aromatic substance

.29 Other.

Plaintiffs in a classification case are faced with two hurdles in order to prevail: "(1) deference to an agency's reasonable interpretation of the statute it administers; and (2) the statutory presumption, found in 28 U.S.C. Sec. 2639, that Customs's decisions have a proper factual basis unless the opposing party proves otherwise." Goodman Mfg., L.P. v. United States, 69 F.3d 505, 508 (Fed.Cir.1995); see 28 U.S.C. § 2639(a)(1) (1994). E.M. Chemicals, as Plaintiff, bears the burden of overcoming these barriers.

As stated above, Heading 3823 provides for: "chemical products ... not elsewhere specified or included; residual products of the chemical or allied industries, not elsewhere specified or included." (emphasis added). Plaintiff argues that according to the express language of this heading, if a chemical product is specified elsewhere in the tariff schedule it must be classified under the specified provision rather than under a subheading of Heading 3823. At oral argument, Defendant conceded, and the Court agrees with Plaintiff's argument that subheading 3823.90.29 is a "basket provision" which cannot be applied until other provisions of the HTSUS are examined to determine if the subject merchandise is more appropriately classified elsewhere. See Sturm, Customs Law & Admin § 52 (1995), at 78 and cases cited. Consequently, the Court will examine Plaintiff's proposed subheading, 3204.90.00 and Defendant's suggested subheading 3204.19.40, either of which, if applicable, would take the TLCs out of Customs' basket classification and successfully overcome both the deference owed to Customs in its capacity as administrator of the tariff schedules of the United States and the statutory presumption that Customs' decisions are based on a sound factual basis.

C

Heading 3204 Is A "Principal Use"...