Jewelpak Corp. v. U.S.

• Decision Date: 27 November 1996
• Docket Number: Court No. 94-04-00230.,Slip Op. 96-189.
• Citation: 950 F.Supp. 343
• Parties: JEWELPAK CORPORATION, Plaintiff, v. The UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

950 F.Supp. 343

JEWELPAK CORPORATION, Plaintiff, v. The UNITED STATES, Defendant.

Slip Op. 96-189.

Court No. 94-04-00230.

United States Court of International Trade.

November 27, 1996.

Fitch, King and Caffentzis, (Peter J. Fitch, James Caffentzis), New York City, for plaintiff.

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

I

INTRODUCTION

WALLACH, Judge:

Plaintiff, Jewelpak Corporation ("Jewelpak"), claims that the United States' Customs Service ("Customs") changed its position in connection with the classification of "presentation boxes",¹ and that the Court should declare the change invalid for failure to publish notice in the Federal Register.² Plaintiff also says Customs changed the classification of the boxes based on an amendment to the Explanatory Notes to the Harmonized System. It argues that without action by the International Trade Commission ("ITC") and the President to amend the Harmonized Tariff Schedule of the United States ("HTSUS"), that change would be improper.

Plaintiff moved for summary judgment on its second and third causes of action. Defendant cross-moved on those causes. Plaintiff's motion is denied and Defendant's granted. The Court finds Customs had no "position" regarding classification of the presentation boxes which would require publication of notice in the Federal Register before reclassification. It also finds Customs properly considered the amended Explanatory Note in reclassifying the presentation boxes, and did not need action by the ITC or the President. Jurisdiction is proper under 28 U.S.C. § 1581(a).

II BACKGROUND

It is uncontested that under the Tariff Schedules of the United States ("TSUS"), the boxes were classified according to their component of chief value. Plaintiff's Mem. In Support Of Its Motion For Summary Judgment at 7 ("Motion"); Defendant's Cross-Motion for Partial Summary Judgment at 1 ("Cross-Motion"). Upon enactment of the HTSUS, effective January 1, 1989, they were classified according to the constituent material that gave them their essential character, under to General Rule of Interpretation 3(b). HRL 951028, Mar. 3, 1993, see Ex. 7 to Motion.

Even before the HTSUS was enacted, however, the Harmonized System Committee ("HSC") considered amending the Explanatory Notes to the Harmonized Tariff System ("HTS") to include a description of "jewelry boxes". Initially, the HSC proposed a modification to provide that:

The term "jewelry boxes" covers not only boxes specially designed for keeping jewelry, but also small, lidded containers (with or without hinges) of the type in which individual articles of jewelry are normally sold.

Amendment of Heading 42.02 to Provide for the Inclusion of Articles Wholly or Mainly Covered with Paper (Amendment of Heading 42.02), HSC, 2nd Sess., Aug. 1, 1988, Doc. 34.701 E, Annex IJ/2, see Ex. A to Cross-Motion. The United States opposed that language and urged reconsideration. It expressed its concern that the amendment would subject some presentation boxes to textile import restraints. Amendment of Heading 42.02, HSC, 3rd Sess., Apr. 3, 1989, Doc. 35.327 E, see Ex. 11 to Motion. Eventually, the amendment to the Explanatory Note, effective on January 1, 1990, read:

The term "jewelry boxes" covers not only boxes specially designed for keeping jewelry, but also similar lidded containers of various dimensions (with or without hinges or fasteners) specially shaped or fitted to contain one or more pieces of jewelry and normally lined with textile material, of the type in which articles of jewelry are presented and sold and which are suitable for long-term use.

Amended Explanatory Note to Heading 42.02.

Customs relied, inter alia, upon the amended Explanatory Note, and found that because the merchandise was not "suitable for long-term use", it fell outside the definition of "jewelry boxes" in Heading 4202, HTSUS.³

In 1992, Customs notified Jewelpak that it was considering revoking HRLs 086186 and 089830, and requested comments. Letter of Jan. 27, 1992, see Ex. 10 to Motion. Jewelpak opposed revocation of the rulings. See HRL 951028. In revoking HRLs 086186 and 089830, Customs said the Explanatory Notes are "relevant as a guideline in determining the scope of a heading," HRL 951028 at 3, determined that the merchandise was capable of long-term use, and classified it under Heading 4202, HTSUS. Id.

III DISCUSSION

A Summary Judgment Is Appropriate Because There Is No Genuine Issue As To Any Material Fact And The Government Is Entitled To Judgment As A Matter Of Law

This Court may grant a motion for summary judgment "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 judgment as a matter of law." USCIT R. 56(d).

The parties agreed at oral argument that there is a genuine issue of material fact which precludes summary judgment on the first cause of action. Discovery was stayed with regard to this action pending the adjudication of the second and third causes of action. As a result, it is not practicable nor possible pursuant to USCIT R. 56(e) for the Court to ascertain whether material facts are controverted in the first cause of action. However, the Court finds that there are no genuine issues as to any material fact in the second and third causes of action, and that the Government is entitled to partial summary judgment as a matter of law.⁴

B The Customs Service Was Not Required To Publish Notice In The Federal Register Of Its Intent To Classify The Presentation Boxes Under A Different Provision Of The HTSUS

Jewelpak claims that Customs had an official "position" regarding the classification of the presentation boxes. According to Jewelpak, Customs violated 19 C.F.R. § 177.10(c)(2) when it failed to follow proper notice and comment procedures before revoking HRLs 086186 and 089830. For the reasons that follow, Jewelpak's arguments fail.

Congress requires that imported merchandise be correctly classified in a uniform manner. See 19 U.S.C. § 1502(a). Customs has implemented regulations to ensure uniform classification by establishing official classification "positions". They let interested parties comment when Customs is considering changing a position if the result will be a restriction or prohibition. Customs' regulation provides that:

Before the publication of a ruling which has the effect of changing a position of the Customs Service and which results in a restriction or prohibition, notice that the position (or prior ruling on which the position is based) is under review will be published in the FEDERAL REGISTER and interested parties given an opportunity to make written submissions with respect to the correctness of the contemplated change....

19 C.F.R. § 177.10(c)(2). Thus, to require Customs to publish notice, Plaintiff must demonstrate 1) that Customs had a position on the subject merchandise, and 2) that a change would result in a restriction or prohibition.

Customs Did Not Have A "Position" Regarding The Classification Of The Presentation Boxes

Plaintiff argues Customs had a "position" regarding classification of the presentation boxes, and that publication of notice was required before any change in classification would be effective. Plaintiff says Customs' position was that the boxes should be classified by their essential character, and not as "jewelry boxes" within the meaning of Heading 4202.

According to Plaintiff, Customs' "position" is found in a March 13, 1989 memorandum from the Director, Commercial Rulings Division, Office of Regulations and Rulings ("Director's Memorandum"), disseminated through the Customs Information Exchange ("CIE") to the various ports in June, 1989. Ex. 8 to Motion. The memorandum discussed the consequences of amending the Explanatory Note's definition of "jewelry boxes", and stated "... this decision [to continue to classify in chapter 39, 73, or 48 using the essential character test] does not represent a change in the current Customs position...." Id. at 2. As further support for its "position" argument, Plaintiff points to HRL 086186 of Jan. 2, 1990, and HRL 089830 of Jan. 26, 1991, in which Customs classified its boxes under Plaintiff's claimed provisions after it determined essential character based on component materials.

Plaintiff also cites Hemscheidt Corp. v. United States, 72 F.3d 868 (Fed.Cir.1995), arguing by analogy to Hemscheidt that the classification of the presentation boxes was subject to a "uniform and established practice" ("UEP") by Customs. In Hemscheidt, the Court of Appeals for the Federal Circuit ("CAFC") interpreted 19 U.S.C. § 1315(d) which provides in part:

No administrative ruling resulting in the imposition of a higher rate of duty or charge than the Secretary of the Treasury shall find to have been applicable to imported merchandise under an established and uniform practice shall be effective with respect to articles entered for consumption or withdrawn from warehouse for consumption prior to the expiration of thirty days after the date of publication in the Federal Register of notice of such ruling....

19 U.S.C. § 1315(d).

The CAFC interpreted the provision as barring the levy and collection of increases in duties in cases where an established and uniform practice exists concerning the rate of duty, unless an administrative ruling mandates the higher rate, notice of which is given in accordance with the statute. Hemscheidt, 72 F.3d at 870. There, both parties agreed an established and uniform classification practice had existed under the TSUS. Id. The CAFC held that "[r]eclassifications...