Hemscheidt Corp. v. U.S., 94-1511
| Decision Date | 18 December 1995 |
| Docket Number | No. 94-1511,94-1511 |
| Citation | 72 F.3d 868 |
| Parties | HEMSCHEIDT CORPORATION, Plaintiff-Appellee, v. The UNITED STATES, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Federal Circuit |
Robert T. Wray, Robert Wray Associates, Washington, DC, argued for plaintiff-appellee.
James A. Curley, Commercial Litigation Branch, Department of Justice, New York City, argued for defendant-appellant. With him on the brief were Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director and Joseph I. Liebman, Attorney in Charge. Also on the brief was Jacob D. Diamond, Office of the Assistant Chief Counsel, International Trade Litigation, U.S. Customs Service, New York City, of counsel.
Before NEWMAN, CLEVENGER, and BRYSON, Circuit Judges.
The United States appeals from the decision of the United States Court of International Trade granting Hemscheidt Corporation's (Hemscheidt) motion for summary judgment, and holding that the change in the classification under which duties for Hemscheidt's imports are levied was not effective because Customs failed to provide notice as required by 19 U.S.C. Sec. 1315(d) (1994). We affirm.
Hemscheidt imports self-propelled hydraulic shield supports for use in underground coal mining machines. The mining machines have three components: (1) a cutting device for coal cutting from the face of a coal deposit; (2) a conveyer, located under the cutter, for removing the cut coal; and (3) a shield support for moving the cutting device, and protecting the whole machine from the newly exposed roof of the coal face. To function properly, the machine requires all three components.
For about twenty years, Hemscheidt paid a tariff for its imported shield supports under the provisions of Item 664.08 of the Tariff Schedule of the United States (TSUS). Item 664.08 of TSUS covered excavating, boring and extracting machinery for earth, minerals or ores, and parts thereof. On January 1, 1989, the Harmonized Tariff Schedule of the United States (HTSUS) went into effect. Under HTSUS, heading 8430 covers excavating, extracting or boring machinery for earth, minerals or ores, while heading 8431 covers parts for such machinery. For the next three years Customs liquidated Hemscheidt's entries of shield supports under heading 8430, HTSUS, at a rate of 2.5% ad valorem, the same rate as had been applied under Item 664.08. Between August 29, 1990, and January 29, 1991, Hemscheidt imported four shipments totalling 290 shield supports. Without notice, in April 1991, Customs discarded its practice of classifying the shield supports under heading 8430, and instead liquidated these four entries under heading 8479.90 of HTSUS at a rate of 3.7% ad valorem. Heading 8479 is a basket provision covering machines having individual functions and not specified or included elsewhere in Chapter 84 of the HTSUS. Customs demanded that Hemscheidt pay the difference in duties plus interest. Hemscheidt protested the reclassification of these four entries, and subsequently filed suit, arguing that the shield supports should have remained classified under heading 8430 with the lower duty rate. Hemscheidt moved for summary judgment in October 1993.
This case, and in particular this appeal, requires us to interpret 19 U.S.C. Sec. 1315(d). In relevant part, the statute reads:
No administrative ruling resulting in the imposition of a higher rate of duty or charge than ... shall ... have been applicable to imported merchandise under an established and uniform practice shall be effective ... prior to the expiration of thirty days after the date of publication in the Federal Register of notice of such ruling.... This subsection shall not apply with respect to increases in rates of duty resulting from the enactment of the Harmonized Tariff Schedule of the United States to replace the Tariff Schedules of the United States.
The statute on its face bars the levy and collection of increases in duties when an established and uniform practice exists taxing the particular imported goods at a lower rate, unless the higher rate has been fixed by an administrative ruling, notice of which has been given as provided in the statute. No such notice issued in this case. Such notice, however, is not required when the increased rate "results from" the enactment of the HTSUS.
The United States claims that the increased duties in this case resulted from the enactment of the HTSUS. Hemscheidt disagrees. It asserts that Customs merely changed its mind about the nature of the goods in question, deciding for the first time that the shield supports are not extracting machinery. Even if the terms of the HTSUS may permit administrative reclassification of the goods, Hemscheidt argues that such reclassification is not itself compelled by the terms of HTSUS. Absent such compulsion, Hemscheidt thinks that the notice provision of section 1315(d) remains in full force and effect.
On summary judgment, the parties agreed that before the enactment of HTSUS there existed an established and uniform practice of classifying the shield supports as "extracting machinery" under heading 664.08 of the TSUS.
The Court of International Trade framed the issue as whether, as a matter of law, the established and uniform practice of classifying the shield supports as extracting machinery survived the enactment of the HTSUS. If it did, the court then asked whether Hemscheidt was afforded proper notice of the change as required by the statute. The court noted that Hemscheidt had to overcome the presumption that Customs' reclassification was correct. The court then analyzed several factors in determining whether the established and uniform practice survived enactment of the HTSUS, using the framework provided in Beloit Corp. v. United States, 843 F.Supp. 1489, 1496-1502 (Ct.Int'l Trade 1994).
Initially, the court compared the plain language of the relevant old TSUS and new HTSUS sections. Heading 664.08, TSUS, included "extracting machinery ... whether stationary or mobile, for earth, minerals, or ores," and parts thereof. In comparison, heading 8430.50, HTSUS, includes "extracting ... machinery ... for earth, minerals, or ores ... Other machinery, self-propelled." Also, heading 8431, HTSUS, names "[p]arts suitable for use ... with the machinery of headings 8425 to 8430." The court noted the common language of these provisions. In contrast, Customs' chosen heading 8479, HTSUS, includes "[m]achines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter; parts thereof." Finding that there was no common language between TSUS 664.08 and HTSUS 8479, the court noted that the new HTSUS "basket provision" requires that the import have "individual function." The court concluded that "[t]he language from the prior TSUS classification was carried over, nearly verbatim, in [h]eadings 8430 and 8431 HTSUS." Thus, Customs' reclassification was a "noticeable departure" from the established and uniform classification.
Next, the court reviewed the explanatory notes for HTSUS 8479 which specify that the basket provision should be used only when the import cannot be classified as anything else. The court also noted that none of the other subheadings under 8479 relate to mining equipment, while 8430 clearly addresses mining machinery. The court then turned to the 1988 International Trade Commission Report, which contains a conversion chart guide that cross-references the old subheading 664.08, TSUS, with the new HTSUS headings, 8430 and 8431.
Each aspect of the court's analysis supported Hemscheidt's view that Customs' use of HTSUS 8479 resulted from a change of mind about the nature of the machinery in question, and not from an explicit statutory command in the HTSUS to deem the machinery as sufficiently removed from the mining arts to warrant its inclusion in the basket provision. Indeed, the very purpose of the court's extended analysis was to determine whether, in a given case, as a matter of law the HTSUS forces Customs to discard an existing and uniform...
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