Kanematsu Usa Inc. v. U.S.
| Decision Date | 29 January 2002 |
| Docket Number | Court No. 95-04-00405.,Slip Op. 02-9. |
| Citation | 185 F.Supp.2d 1364 |
| Parties | KANEMATSU USA INC., Plaintiff, v. UNITED STATES, Defendant. |
| Court | U.S. Court of International Trade |
Serko & Simon LLP, New York City (Daniel J. Gluck, David Serko, Jerome L. Hanifin) for Plaintiff.
Robert D. McCallum, Jr., Assistant Attorney General, Alanta, GA, John J. Mahon, Attorney-in-Charge, International Trade Field Office, Bruce N. Stratvert, Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, New York City; Chi S. Choy, Office of Assistant Chief Counsel, International Trade Litigation, U.S. Customs Service, New York City, Of Counsel, for Defendant.
This case is before the court after trial de novo. Kanematsu USA Inc. ("Plaintiff") challenges a decision of the United States Customs Service ("Customs") denying Plaintiff's protests filed in accordance with section 514 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1514 (1994).1 At issue is the proper tariff classification under 19 U.S.C. § 1202 (1993), Harmonized Tariff Schedule of the United States ("HTSUS"), of Plaintiff's importation of electromagnetic Power Take Off ("PTO") clutch/brakes.2
Upon importation, Customs classified the subject merchandise under subheading 8505.20.00. This subheading covers "electromagnetic couplings, clutches, and brakes[,]" and resulted in the assessment of a 3.9% ad valorem duty.3 Customs' classification was based on its belief that the subject merchandise contained both an electromagnetic clutch and an electromagnetic brake.4
Plaintiff claims, however, that the subject merchandise is classifiable as "parts of tractors suitable for agricultural use," under subheading 8708.99.10, where it is eligible for duty-free treatment.5 Plaintiff argues that the subject merchandise is a "unique device," containing two components, an electromagnetic clutch and a mechanical brake. According to Plaintiff, the brake portion of the subject merchandise is specifically excluded from chapter 85 by Explanatory Note 85.056 and, following a GRI 1 analysis, the PTO clutch/brake is classifiable in Chapter 87.7
Both Plaintiff and Customs agree that the merchandise at issue is a good, known as the PTO clutch/brake. See Revised Pretrial Order, Schedule C, Uncontested Facts ¶ 3. The PTO clutch/brake is principally used in lawn and garden tractors. Id. ¶ 7. It is not, however, used in propulsion of the tractor. Id. ¶ 4. Rather, power is transferred through the subject merchandise from the engine to operate various instruments attached to the tractor.8 See id. ¶ 5. The clutch and brake alternate in performing their functions: when the brake is engaged, the clutch must be disengaged and when the clutch is engaged, the brake must be disengaged. See id. ¶ 16.9
The parties also agree as to the general mechanics of the PTO clutch/brake. The brake is engaged as a result of internal spring forces. In the absence of an electrical current, the pre-loaded leaf springs pull the armature away from the rotor and into contact with the brake plate. See id. ¶ 16(C). Once the electrical current flows to the coil, the magnetic field attracts the armature to the rotor. See id. ¶ 16(B). The armature rotates with the rotor and torque is transferred from the armature to the pulley, from the pulley to the belt and ultimately to the implement attached to the tractor. See id.
The parties disagree, however, on whether the brake is a mechanical brake and whether one of the components of the PTO clutch/brake performs a principal function.
The court's jurisdiction is predicated on 28 U.S.C. § 1581(a)(1994). "The Court must determine `whether the government's classification is correct, both independently and in comparison with the importer's alternative.'" H.I.M./Fathom, Inc. v. United States, 21 CIT 776, 778, 981 F.Supp. 610, 613 (1997)(quoting Jarvis Clark Co. v. United States, 733 F.2d 873, 878 (Fed.Cir.1984)). Following the Supreme Court's holding in United States v. Mead Corp., 533 U.S. 218, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001), the Court does not afford the deference articulated in Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), to Customs' standard classification rulings such as that at issue here.
The analysis of a Custom's classification involves a two-step process. First, the court must ascertain "the proper meaning of specific terms in the tariff provision." David W. Shenk & Co. v. United States, 21 CIT 284, 286, 960 F.Supp. 363, 365 (1997). This aspect of Customs' classification is subject to de novo review, pursuant to 28 U.S.C. § 2640 (1994), because it is a question of law. See Russell Stadelman & Co. v. United States, 23 CIT ___, ___, 83 F.Supp.2d 1356, 1357 (1999), aff'd, 242 F.3d 1044 (Fed.Cir.2001). Then the court determines whether the goods come "within the description of such terms as properly construed." Shenk, 21 CIT at 286, 960 F.Supp. at 365. This is a question of fact.
The trial beings with a presumption of correctness. See, e.g., Salant Corp. v. United States, 24 CIT ___, ___, 86 F.Supp.2d 1301, 1303 (2000)(quoting Universal Elecs. Inc. v. United States, 112 F.3d 488, 492 (Fed.Cir.1997)( that "although the presumption of correctness applies to the ultimate classification decision ... the presumption carries no force as to questions of law")). To overcome the presumption, the party challenging the classification must produce a preponderance of evidence on the disputed factual question. See Universal Elecs. Inc., 112 F.3d at 492.
The HTSUS consists of (A) the General Notes; (B) the General Rules of Interpretation; (C) the Additional U.S. Rules of Interpretation; (D) sections I to XXII, inclusive (encompassing chapters 1 to 99, and including all section and chapter notes, article provisions, and tariff and other treatment accorded thereto); and (E) the Chemical Appendix.
The General Rules of Interpretation ("GRI") of the HTSUS govern the proper classification of merchandise. See Orlando Food Corp. v. United States, 140 F.3d 1437, 1439 (Fed.Cir.1998). Both parties argue that classification of the PTO clutch/brake should be made in accordance with GRI 1. Pursuant to GRI 1, "classification shall be determined according to the terms of the headings and any relative section or chapter notes." GRI 1, HTSUS; see also Orlando Food, 140 F.3d at 1440.
Plaintiff claims that the entire unit, the PTO clutch/brake, is classified as other parts of tractors. Customs claims that GRI 1 directs it to Section XVI, Note 3. According to this note composite goods are classified in accordance with their principal function, unless the circumstances otherwise require. In this case Customs claims that the Court could make one of two findings. According to Customs, the Court could either determine that (1) both components of the PTO clutch/brake are classifiable in the same subheading in Chapter 85, making a principal function analysis unnecessary, or (2) the brake is classifiable in Chapter 84 and the clutch in Chapter 85 with the clutch performing the principal function resulting in the PTO clutch/brake unit's classification in Chapter 85.
Although the parties agree on the general mechanics of the PTO clutch/brake, they do not agree on the type of brake used in the subject merchandise or how to define it. The parties also disagree on the mechanics of spring-set or fail-safe brakes and whether the brake at issue can be described as spring-set or fail-safe.10 Whether the brake at issue can be considered a spring-set brake helps determine how it is classified.
According to Plaintiff, the brake portion of the PTO clutch/brake is not a fail-safe brake, and this is demonstrated by its description of fail-safe brakes as well as the testimony and evidence introduced at trial. Plaintiff describes the operation of an electromagnetic spring-applied fail-safe brake as follows:
A. When no current is applied to an electromagnetic spring set brake, a series of compression coil springs push against the armature.
B. The force against the armature produced by the series of coil springs clamp [sic] the friction disk or rotor between the pressure plate and the armature.
C. The frictional clamping force is transferred to the hub which is mounted to a shaft.
D. When the brake is required to release, voltage/current is applied to the field coil creating a magnetic field.
E. The magnetic field pulls in the armature against the compression coil springs creating an air gap between the armature, the friction disk or rotor and the pressure plate. This allows the friction disk or rotor to turn freely with the shaft.
Revised Pretrial Order, Schedule C-1, Contested Facts ¶ 19. Plaintiff contends that the brake portion of the subject merchandise does not operate in this manner.
This description, however, is similar to the brake portion of the subject merchandise. Scott Fuller,11 one of Customs' witnesses, testified at trial that the fail-safe brake described by Plaintiff is "analogous" to the brake portion of the PTO clutch/brake. See Trial Tr. at 353 (); see also Trial Tr. at 300-08 (testimony of Sekella). It appears that the only difference between fail-safe brakes as described by the Plaintiff and the brake at issue are the number of clamps. Fuller explained that even though Step B describes a "clamping on two sides" and the brake portion of the subject merchandise is only clamped on one side, Trial Tr. at 351-52, these differences are merely attributable to the fact that the subject merchandise is a combination clutch/brake and not a stand alone brake. See id. at 394 ...
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