Greenhalgh Mills Corp. v. United States, Court No. 82-6-00806.

• Decision Date: 02 December 1983
• Docket Number: Court No. 82-6-00806.
• Citation: 576 F. Supp. 646
• Parties: GREENHALGH MILLS CORP., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

576 F. Supp. 646

GREENHALGH MILLS CORP., Plaintiff, v. UNITED STATES, Defendant.

Court No. 82-6-00806.

United States Court of International Trade.

December 2, 1983.

Siegel, Mandell & Davidson, New York City (Allan H. Kamnitz and Michelle S. Benjamin, New York City, on briefs), for plaintiff.

J. Paul McGrath, Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Atty. in Charge, Commercial Litigation Branch, New York City (Michael P. Maxwell, New York City, on brief), for defendant.

LANDIS, Judge:

This case involves the importation of certain merchandise and accessories into the United States from England after the same had been used for approximately eleven (11) years in England and then resold to a non-related person after first having been manufactured in Czechoslovakia.

In this action plaintiff challenges the classification and valuation of merchandise and accessories of 306 Elitex Water Jet Looms and Accessories, imported at the Port of Boston during June and July of 1981.

The parties submit this action upon an agreed statement of facts in lieu of trial. Additionally, it has been indicated that the imported merchandise should have been valued at the appraised value less $29,350, which represents transaction value. (Section 402(b) of the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979, P.L. 96-39). This stipulation effectively removes the valuation question as issue for court decision.

The stipulation indicates the merchandise was manufactured in Czechoslovakia and further indicates that it was exported to England in 1968 and 1969 when purchased by Samuel Courtauld & Co. Ltd. (Courtauld). The looms, together with accessories of English origin, were installed in Courtauld's mill in Baintree (Essex), England, during 1968 and 1969 and were in continuous use at the Baintree site from the time of their installation until 1980 when the Baintree mill ceased operation. Also, Courtauld had no intention of reselling or exporting the merchandise to the United States when purchased in 1968 and 1969. In 1981, after the Baintree mill ceased production, the looms were sold to plaintiff, who is unrelated to the seller.

Customs classified the merchandise as weaving machines under TSUS item 670.14, assessing duty pursuant to the Column 2 rate of 40% ad valorem. Plaintiff contends the duty should be assessed at 6.4% ad valorem pursuant to the Column 1 rate of duty under TSUS item 670.14.

The pertinent provisions of TSUS relative to the respective classification made by Customs and claimed by plaintiff and the duty assessments thereunder are as follows:

General Headnote 3:

(f) Products of Communist Countries. Notwithstanding any of the foregoing provisions of this headnote, the rates of duty shown in column numbered 2 shall apply to products, whether imported directly or indirectly, of the following countries and areas pursuant to section 401 of the Tariff Classification Act of 1962, to section 231 or 257(e)(2) of the Trade Expansion Act of 1962, or to action taken by the President thereunder:

X X X Czechoslovakia X X X

(g) Products of All Other Countries. Products of all countries not previously mentioned in this headnote imported into the Customs territory of the United States are subject to the rates of duty set forth in column numbered 1 of the Schedules.

Schedule 6, Part 4, Subpart E

Weaving machines, knitting machines and textile machines for making lace, net, braid, embroidery trimmings, fabrics, or other textile articles:

Rates of Duty ________________ 1 : 2 ________________

670.14 Weaving machines ....6.4% ad val. 40% ad val.

Plaintiff basically argues that Courtauld, the entity from whom it purchased the merchandise, had no intention in 1968-69 of reselling or exporting the merchandise to this country in 1980 and, that the continuous use of the merchandise for over a decade caused it to become a bona fide part of English commerce losing all connection with Czechoslovakia and thereby being neither a direct nor indirect import from a communist country.

Defendant argues that General Headnote 3(f), TSUS applies to products of communist countries imported directly or indirectly into the United States, and that in the present case, it is clear that the imported merchandise originated in Czechoslovakia and was "indirectly" imported into the United States in the same condition as manufactured, albeit after long and continuous use in England. Defendant further contends that the use in the intermediate country, England has not changed the merchandise or its purpose as it is imported into the United States in the same condition as exported from Czechoslovakia, accordingly, they are indirect imports from that country.

After reviewing all the evidence of record, including the stipulation entered by the parties, I find that plaintiff has sustained its burden of showing that the imported merchandise had become a bona fide part of English commerce thereby severing all contact with the original manufacturing communist country.

The difference between a direct importation and an indirect importation was initially explained by the Customs Court of Patent and Appeals in United States v. Hercules Antiques, The Danwill Company, 44 CCPA 209, C.A.D. 662, (1957). The court per Judge Worley, in an opinion concurred in by Judge Rich, stated:

... It is reasonable to assume, therefore, that the words `imported indirectly' in the proclamation were intended to include merchandise which had been separated from the country in which it originated by something more than mere passage through or transshipment in an intermediate country.

Defendant attempts to interpret the CCPA language to mean that an importation that is not direct must be indirect and therefore still subject to General Headnote 3(f). If defendant's reasoning is followed to its logical conclusion then any product manufactured in a communist country could never lose its identity with the communist country no matter the duration of stay or nature of transaction that product was subject to in the intermediate country. This clearly is not a proper interpretation of the Hercules decision. Indeed, Judge Worley, in discussing earlier cases of the Customs Court, went on to say:

It would be difficult, if not impossible, to define exact standards for determining the duration of stay of merchandise in an intermediate country, the nature of the transactions to which it is subjected there, and other circumstances necessary to divest it of its status as an import, direct or indirect, from the Communist-dominated country in which it originated. However, we are of the opinion it must be

...