GRK Canada, Ltd. v. United States

• Decision Date: 04 August 2014
• Docket Number: No. 2013–1255.,2013–1255.
• Citation: 761 F.3d 1354
• Parties: GRK CANADA, LTD., Plaintiff–Appellee, v. UNITED STATES, Defendant–Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

761 F.3d 1354

GRK CANADA, LTD., Plaintiff–Appellee,

v.UNITED STATES, Defendant–Appellant.

No. 2013–1255.

United States Court of Appeals, Federal Circuit.

Aug. 4, 2014.

Craig E. Ziegler, Montgomery, McCracken, Walker & Rhoads, LLP, of Philadelphia, Pennsylvania, argued for plaintiff-appellee.

Jason M. Kenner, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of New York, New York, argued for defendant-appellant. With him on the brief were Stuart F. Delery, Assistant Attorney General, Jeanne E. Davidson, Director, of Washington, DC, Amy M. Rubin, Acting Assistant Director, International Trade Field Office, of New York, New York; and Beth C. Brotman, Office of Assistant Chief Counsel, United States Customs and Border Protection, of New York, New York.

Before PROST, Chief Judge,^*CLEVENGER and REYNA, Circuit Judges.

Opinion for the court filed by Chief Judge PROST. Dissenting opinion filed by Circuit Judge REYNA.

PROST, Chief Judge.

The United States appeals from the decision of the United States Court of International Trade granting GRK Canada Ltd.'s (“GRK”) cross-motion for summary judgment that various screws imported by GRK were properly classified as “self-tapping screws” under subheading 7318.14.10 of the Harmonized Tariff Schedule of the United States (2008) (“HTSUS”). GRK Canada, Ltd. v. United States, 884 F.Supp.2d 1340, 1342 (Ct. Int'l Trade 2013). Because the Court of International Trade refused to consider the use of the screws at any step of determining the classification of the subject articles at issue, we vacate and remand for further proceedings consistent with this opinion.

I

The imported articles at issue are GRK's Model R4 Screws (“R4”), RT Composite Trim Head Screws (“RT”), and Fin/Trim Head Screws (“Fin/Trim”). All these screws are made with corrosion-resistant case-hardened steel, and they are marketed for use in carpentry as building material fasteners. R4 screws, inter alia, have a flat self-countersinking ¹ head designed to cut away at the top layer of the material as the screw is driven into place. By contrast, RT and Fin/Trim screws are recommended for fine carpentry and trim applications, and these models have much smaller heads that are designed to prevent the screws from cracking and splitting the target material. RT screws, unlike Fin/Trim screws, include reverse threading, a second set of threads near the head that allows the head to be less noticeable along the surface of the target material. Each GRK model is available in a variety of lengths, diameters, and thread designs.

GRK imported the subject screws between January 2008 and August 2008. U.S. Customs and Border Protection (“CBP”) classified the screws at liquidation under the HTSUS subheading 7318.12.00, “other wood screws.” This classification carries a 12.5% ad valorem duty. GRK protested, claiming that the screws should instead have been classified under subheading 7318.14.10, “selftapping screws,” which would make them subject to a 6.2% ad valorem duty. The CBP denied GRK's protests, and GRK brought its challenge to the Court of International Trade, where the parties filed cross-motions for summary judgment.

II

The Court of International Trade described this as “a challenging case,” because the HTSUS does not specifically define either subheading. GRK, 884 F.Supp.2d at 1345. It noted that the subheadings were eo nomine provisions and that, as such, they described “an article by a specific name, not by use.” Id. It further characterized the government's position as relying not only on the physical characteristics of screws but also the materials in which they are used. The government argued that the scope of the “other wood screws” subheading was screws that were intended for use in wood or resilient materials (e.g., wood composite), while “self-tapping screws” were primarily intended to be used in materials such as steel, concrete, and marble. The government further argued that GRK's screws were intended for use in wood or other resilient materials, and were therefore correctly classified as “other wood screws.” The Court of International Trade concluded that, as such, the government's argument “depends heavily on use,” and “[t]his is a weakness that ultimately undermines the Government's proposed classification.” Id.

The court extensively analyzed what it called “use” arguments advanced by the government. In particular, it described the government's argument as an attempt to “convert an eo nomine provision into a use provision.” Id. at 1353. The court's analysis distinguished the case law on which the government relied as relating to the predecessor to the HTSUS, the Tariff Schedules of the United States (TSUS). In TSUS cases, courts had considered the use of articles in interpreting eo nomine provisions. However, in the Court of International Trade's view, such case law was not binding under the HTSUS due to its “far greater specificity, continuity, and completeness than the TSUS.” Id. Therefore, it determined that it would focus instead on physical characteristics in determining the scope of the subheadings at issue and in subsequently classifying the subject screws.

The Court of International Trade consequently established “workable definitions” for the subheadings. It construed “other wood screws” as “having (1) a flat, recessed, oval, round, or slotted head, (2) partially unthreaded shank, (3) coarse pitch spaced threads, and (4) a sharp gimlet point, and may also have (5) potential modifications to these criteria (such as sharper point angles or case hardening) so long as the modified screw retains an essential resemblance to a standard wood screw.” Id. at 1348. A “self-tapping screw” was construed as “being a specially hardened screw that can cut or form its own threads in the substrate without a separate tapping operation. More specifically,self-tapping screws (1) are made of case hardened steel, (2) have passed certain performance requirements, and (3) do not require a separate tapping operation.” Id. at 1352.

The Court of International Trade proceeded to then apply the General Rules of Interpretation of the Harmonized Tariff Schedule of the United States (“GRI”) to classify the screws. Following the definitions that it had established, the court described GRK's screws as having features of both self-tapping and wood screws. In particular, GRK screws are made of heat-treated, case hardened steel, were manufactured to meet minimum torsional strength requirements, and could cut mating threads without separate tapping. GRK screws also resemble standard wood screws while possessing modifications of the various parameters that the court determined were characteristic of the “other wood screws” classification.

The court began its analysis by determining that because it would be reasonable to conclude that the GRK screws were both self-tapping and wood screws, the analysis had to proceed beyond GRI 1. It then skipped GRI 2, as it applies only to goods that are either unfinished or incomplete. Based on its working definitions of the subheadings, the court found that GRI 3(a) was inapplicable, as the subheadings described articles at similar levels of specificity. It also determined that GRI 3(b) did not to apply, as the screws were not composite goods. The Court of International Trade finally settled on the “rarely used” GRI 3(c), in which goods are classified under the subheading that occurs last in numerical order—in this case, self-tapping screws, which are classified under subheading 7318.14.10 (by contrast to other wood screws under 7318.12.00). Id. at 1356. Accordingly, it ruled in favor of GRK, holding that the subject screws should be classified as self-tapping screws.

The United States appeals, and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5).

III

The first step of a classification decision is to determine the proper meaning of a tariff provision, which is a question of law reviewed de novo. Universal Elecs. Inc. v. United States, 112 F.3d 488, 491 (Fed.Cir.1997). The second step is to determine whether the subject imports are within a possible heading, which is a question of fact reviewed for clear error. Id. We review the Court of International Trade's grant of summary judgment as a matter of law, deciding de novo the interpretation of tariff provisions as well as whether there are genuine disputes of material fact. Millenium Lumber Distribution Ltd. v. United States, 558 F.3d 1326, 1328 (Fed.Cir.2009).

In determining the proper meaning of a tariff provision, we have held that where the HTSUS does not expressly define a term, “the correct meaning of the term is its common commercial meaning.” Arko Foods Int'l, Inc. v. United States, 654 F.3d 1361, 1364 (Fed.Cir.2011). To determine the common commercial meaning, a court “may rely upon its own understanding of terms used, and may consult standard lexicographic and scientific authorities.” Airflow Tech., Inc. v. United States, 524 F.3d 1287, 1291 (Fed.Cir.2008). In particular, a court also refers to the Explanatory Notes accompanying the HTSUS, which, though not controlling, provide interpretive guidance. E.T. Horn Co. v. United States, 367 F.3d 1326, 1329 (Fed.Cir.2004).

Neither party disputes that the tariff terms at issue in this case—“other wood screws” and “self-tapping screws”—are eo nomine provisions. “An eo nomine designation with no terms of limitation, will ordinarily include all forms of the named article.” Carl Zeiss, Inc. v. United States, 195 F.3d 1375, 1379 (Fed.Cir.1999) (quoting Hayes–Sammons Chem. Co. v. United States, 55 C.C.P.A. 69, 75 (1968)). Although an eo nomine provision generally “describes the merchandise by name, not by use,” such a provision may be limited by use when “the name itself inherently suggests a type of use.” Id. As discussed above, the Court of International Trade distinguished prior analysis under the TSUS that incorporated use in determining the...