Kahrs Int'l Inc. v. United States

• Decision Date: 26 July 2011
• Docket Number: Slip Op. 11–89.Court No. 07–00343.
• Citation: 791 F.Supp.2d 1228
• Parties: KAHRS INTERNATIONAL, INC., Plaintiff,v.UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

791 F.Supp.2d 1228

KAHRS INTERNATIONAL, INC., Plaintiff,

v.UNITED STATES, Defendant.

Slip Op. 11–89.Court No. 07–00343.

United States Court of International Trade.

July 26, 2011.

Law Offices of George R. Tuttle, A.P.C. (Michael J. Tonsing, San Francisco, CA, Carl D. Cammarata, George R. Tuttle, Stephen S. Spraitzer), for Plaintiff.Tony West, Assistant Attorney General, Barbara S. Williams, Attorney–in–Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Mikki Cottet, Beverly A. Farrell); Yelena Slepak, Senior Trial Attorney, Office of the Assistant Chief Counsel for International Trade Litigation, U.S. Customs and Border Protection, of counsel, for Defendant.

Opinion & Order

CARMAN, Judge:

This action is before the Court on more motions for summary judgment—the sixth and seventh such motions filed in this case. Plaintiff brought this case disputing the classification of its imported merchandise, engineered hardwood flooring, under tariff subheadings for plywood. Plaintiff has two remaining claims by which it seeks reclassification. In the “fifth cause of action,” Plaintiff asserts a “commercial designation” claim, alleging that the term plywood has a meaning in the wholesale plywood trade that is different than its common meaning, and that the commercial designation excludes engineered hardwood flooring. In the recently added “eighth cause of action,” Plaintiff alternatively asserts that its goods do not fall within the common meaning of the term plywood. For the reasons set forth below, the Court finds that there is no genuine issue of any material fact with respect to these two claims, and that Defendant is entitled to judgment as a matter of law on both. Judgment will enter accordingly.¹

Procedural and Factual Background

This case has been aggressively litigated. The court has previously issued three opinions totaling 135 pages, in the process of resolving multiple procedural and substantive motions. Familiarity with these previous opinions ² is assumed. While the issues remaining in this case have diminished greatly, the amount of paper dedicated to arguing over them has increased exponentially. In particular, Plaintiff filed over 2,600 pages of exhibits in support of its motion for summary judgment on the eighth cause of action, and in opposition to Defendant's motion for summary judgment on the fifth and eighth causes of action. ( See Docket Nos. 178–187, 200–238, and 241.)

At issue in this case is the classification of three types of engineered hardwood flooring imported by Plaintiff: 14mm, 2–strip 15mm, and 3–strip 15mm. ³ (Mem. of Law in Supp. of Def.'s Mot. for Summ. J. on the Fifth and Eighth Causes of Action in the Compl. (“Def.'s Mot.”) 1; Pl.'s Mot. for Summ. Adjudication on the Eighth Cause of Action in the Compl. (“Pl.'s Mot.”) I–2.) U.S. Customs and Border Protection (“CBP” or “Customs”) classified Plaintiff's merchandise under HTSUS Subheading 4412.14.31 and 4412.29.36, eo nomine provisions for plywood, at a duty rate of 8% ad valorem. (Def.'s Mot. 1; Pl.'s Mot. II–1.) Kahrs asserts that its merchandise is appropriately classified under HTSUS Subheading 4412.29.56, a basket provision encompassing “veneered panels and similar laminated wood,” free of duty. (Pl.'s Mot. II–1.)

In Kahrs III, the Court held that Plaintiff's 14mm and 15mm flooring fell within the common meaning of the term plywood, and was therefore appropriately classified under the government's preferred tariff subheading. Kahrs III, 645 F.Supp.2d at 1277–78 ( citing Boen Hardwood Flooring, Inc. v. United States, 357 F.3d 1262 (Fed.Cir.2004) (“ Boen ”)). In so doing, the Court relied upon the definition of the term plywood as set out in Webster's Third New International Dictionary, the Explanatory Notes to heading 4412, and Boen. Id. at 1277.

Following Kahrs III, Plaintiff was left with one remaining claim that, if successful, could result in its preferred classification: the commercial designation claim set out in the fifth cause of action. (Compl. ¶¶ 48–62.) In this claim, Plaintiff alleges that at the time the HTSUS was enacted into law in 1988, there was a commercial designation for the term plywood that differed from the common meaning of plywood, that was general, definite, and uniform throughout the United States at that time, and that did not encompass plaintiff's engineered hardwood flooring. ( Id.) Any commercial designation claim, including this one, rests on the theory that “the trade designation [was] so universal and well understood that the Congress, and all the trade, are supposed to have been fully acquainted with the practice at the time the law was enacted.” Timber Products Co. v. United States, 515 F.3d 1213 (Fed.Cir.2008) ( quoting Jas. Akeroyd & Co. v. United States, 15 Ct.Cust. 440, 443, 1928 WL 27989, at *2–3 (1928)); see also Compl. ¶ 51 (“Congress intended to incorporate the commercial meaning of the term ‘plywood’ in Heading 4412.”).

Once Kahrs III was issued, this case appeared headed for trial on Plaintiff's commercial designation claim. ( See Docket No. 120 (scheduling order permitting Plaintiff to withdraw its previously filed motion for summary judgment on the fifth cause of action, permitting additional discovery, and setting dates for the submission of a pretrial order, and for trial).) The Court received what amounted to a proposed pretrial order in a series of filings made throughout July and August, 2010. (Docket Nos. 128–129, 132–135, 138–143.) As the Court was reviewing these myriad submissions, on October 11, 2010, Plaintiff sought leave of the Court to amend its Complaint to assert a claim that its goods were not properly classifiable under any HTSUS subheading for plywood, because the common meaning of that term does not encompass Plaintiff's product. (Docket No. 147.)

Initially, the Court was disinclined to grant Plaintiff's motion to amend its complaint. Not only was the motion made at an unusually late stage of the proceeding, but it appeared that the motion might have been deniable on grounds of futility. The meaning of a term in an HTSUS heading or subheading is a pure question of law. Medline Industries Inc. v. United States, 62 F.3d 1407, 1409 (Fed.Cir.1995). In this instance, the common meaning of the term plywood had been conclusively and unambiguously established by the Court of Appeals for the Federal Circuit (“CAFC”) in Boen. Boen, 357 F.3d at 1265. The definition of plywood for purposes of tariff classification is thus binding precedent on this Court, and, one might think, not subject to revision by this court.

Moreover, the question of fact—whether the imported items fall within the scope of a specific tariff subheading—had already been resolved by the Court in this case. See Medline Indus., 62 F.3d at 1409 (explaining that where in the HTSUS item is classified is a question of fact); Kahrs III, 645 F.Supp.2d at 1277–78 (deciding the question of fact in this case). Because Plaintiff has not alleged changed facts, the only basis for the Court to change its determination that Plaintiff's merchandise is classifiable as plywood would be if the legal determination in Boen as to the common meaning of the term plywood was incorrect. As explained above, this appeared to be a tough row to hoe.

Ultimately, however, the Court granted Plaintiff's motion to amend its complaint out of an abundance of caution. In doing so, the Court found instructive a series of cases under the name Schott Optical Glass, Inc. v. United States, which bore many similarities to the matter at hand. See Schott Optical Glass, Inc. v. United States, 7 CIT 36, 587 F.Supp. 69 (1984) (“ Schott II ”), rev'd 750 F.2d 62 (Fed.Cir.1984) (“ Schott III ”). In Schott II, the plaintiff had filed suit in the Court of International Trade (“CIT”) to dispute the classification of its goods under a tariff subheading for “other optical glass,” claiming that its goods did not fall within the common meaning of the term “optical glass.” Schott II, 587 F.Supp. at 69–70. In that case, as here, there was a preceding opinion from the Court of Appeals construing the common meaning of the relevant term in the tariff subheading—in that case, “optical glass.” See Schott Optical Glass Inc. v. United States, 67 CCPA 32, 612 F.2d 1283 (1979) (“ Schott I ”). The CIT concluded in Schott II that the CAFC had decisively resolved the legal question of the common meaning of “optical glass” in Schott I, and determined that stare decisis precluded the CIT from reaching a different conclusion about the common meaning of the term. Schott II, 587 F.Supp. at 70–71. Applying that apparently straightforward precedent, the CIT entered judgment for Defendant. Id. at 73.

In Schott III, the CAFC reversed the judgment of this court, citing “a well-recognized exception to stare decisis ” requiring that “[a] court will reexamine and overrule a prior decision that was clearly erroneous.” Schott III, 750 F.2d at 64 ( citing cases ). The CAFC faulted this court for refusing to permit the plaintiff to introduce evidence that might have shown that the interpretation of the common meaning of “optical glass” established by the Court of Appeals in Schott I had been clearly erroneous. Id. The CAFC found that by refusing to consider such evidence, this court had improperly borrowed from the doctrine of res judicata,⁴ which is inapplicable in customs classification cases. Id. ( citing United States v. Stone & Downer Co., 274 U.S. 225, 47 S.Ct. 616, 71 L.Ed. 1013 (1927) (“in customs classification cases a determination of fact or law with respect to one importation is not res judicata as to another importation of the same merchandise by the same parties.”).) Therefore, the holding of Schott III instructs that when the CAFC has ruled on a question of law, such as the common meaning of a tariff term, although such a ruling may constitute binding precedent and may serve as the basis for ...