Libas, Ltd. v. U.S.

• Decision Date: 29 August 2000
• Docket Number: No. 95-01-00014.,SLIP OP. 00-110.,95-01-00014.
• Citation: 118 F.Supp.2d 1233
• Parties: LIBAS, LTD., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

118 F.Supp.2d 1233 LIBAS, LTD., Plaintiff,
v.
UNITED STATES, Defendant. SLIP OP. 00-110. No. 95-01-00014. United States Court of International Trade. August 29, 2000.

Law Offices of Elon A. Pollack (Elon A. Pollack and Eugene P. Sands), for plaintiff.

David W. Ogden, Assistant Attorney General; Joseph I. Liebman, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice; Bruce N. Stratvert, Attorney, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice; Edward Maurer, Office of Assistant Chief Counsel, International Trade Litigation, United States Customs Service; for defendant, of counsel.

Page 1234

OPINION

GOLDBERG, Judge.

This classification case involves 32 bales of cotton fabric imported from India into the United States in 1994. The United States Customs Service ("Customs") tested the fabric according to its "Methodology for the [A]nalysis of Woven Fabric to Determine Whether Fabric had been Power-loomed or Hand-loomed" (Customs's test). Based on the results, Customs determined the fabric was power-loomed and classified it under subheading 5208.42.40 of the Harmonized Tariff Schedule of the United States ("HTSUS"), dutiable at a rate of 11.4% ad valorem and subject to a quota restriction.

Plaintiff, Libas, Ltd., initiated this action in 1995 to challenge Customs's classification. Plaintiff argued that the fabric was hand-loomed, and should therefore have been classified under HTSUS 5208.42.10, dutiable at a rate of 6% ad valorem. Plaintiff also argued that Customs was required to accept the government of India's certification that the fabric was hand-loomed.

The Court held trial in May, 1996. In its subsequent opinion, Libas Ltd. v. United States, 20 CIT 1215, 944 F.Supp. 938 (1996), aff'd in part and vacated in part, 193 F.3d 1361 (Fed.Cir.1999) ("Libas II"), the Court sustained Customs's classification. First, the Court held that Customs was not required to accept as dispositive the government of India's certification that the fabric at issue was hand-loomed; in the Court's view, Customs acted within its statutory authority when it independently assessed whether the fabric at issue was hand-loomed or power-loomed. See 20 CIT at 1218, 944 F.Supp. at 941. Second, based on the evidence and testimony adduced at trial, the Court determined that the fabric was properly classified as power-loomed. See 20 CIT at 1220, 944 F.Supp. at 942.

On appeal, the United States Court of Appeals for the Federal Circuit ("Federal Circuit") affirmed the Court's determination that Customs had the authority to independently assess and reclassify fabric that had been certified as hand-loomed by the Indian government. See Libas II, 193 F.3d at 1364. The Federal Circuit, however, vacated and remanded the Court's determination that the fabric was power-loomed. See id. at 1369.

By statute, Customs's classification of goods is presumed to be correct. See 28 U.S.C. § 2639 (1994). The presumption applies to every subsidiary fact necessary to support classification, see Commercial Aluminum Cookware Co. v. United States, 20 CIT 1007, 1013, 938 F.Supp. 875, 881 (1996), including the "methods of weighing, measuring, and testing merchandise used by customs officers and the results obtained" therefrom. Exxon Corp. v. United States, 81 Cust.Ct. 87, 462 F.Supp. 378, 381 (Cust.Ct.1978) (quoting Consolidated Cork Corp. v. United States, 54 Cust. Ct. 83 (1965)), aff'd 66 C.C.P.A. 129, 607 F.2d 985 (Cust. & Pat. App.1979). An importer may rebut the presumption of correctness by "showing that [Customs's] methods or results are erroneous." Id. at 382 (quoting same). "If a Prima facie case is made out, the presumption is destroyed and the Government has the burden of going forward with the evidence." Id. (quoting same).

In this case, Customs's classification of the fabric as power-loomed and the test Customs used to arrive at that determination were both presumed to be correct. The Federal Circuit found that Customs's presumption of correctness had been overcome, however, because "Libas' [sic] argument at trial against the reliability of [Customs's] test was sufficient to rebut the statutory presumption of correctness accorded Customs classifications." Libas II, 193 F.3d at 1366 n. 2.

Given this posture, the Federal Circuit found wanting the Court's determination that Customs's classification was correct. In the Federal Circuit's view, the Court relied solely on the results of Customs's test, filed as part of the official record, to conclude that the fabric was power-loomed,

Page 1235

see id. at 1365, but "did not ascertain whether, or explain why, the Customs test was reliable according to appropriate standards." Id. at 1367.

To assess the reliability of Customs's test, the Federal Circuit stated that the Court should have employed the standards articulated by the United States Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). See Libas II, 193 F.3d at 1366-67. The Daubert standards are: (1) whether a theory or technique, such as Customs's test, has been tested; (2) whether it has been subjected to peer review and publication; (3) its known or potential rate of error; and (4) whether it is generally or widely accepted. See Daubert, 509 U.S. at 593-94, 113 S.Ct. 2786. Importantly, the Federal Circuit counseled that the Daubert standards bear not only on whether evidence is admissible, but also on how much or how little weight the Court should accord such evidence.¹ See Libas II, 193 F.3d at 1366.

In light of the Daubert standard, the Federal Circuit found the record before it "insufficient ... to make a determination of ... [the] reliability [of Customs's test] with any confidence," and advised that "[f]urther evidentiary hearings are probably called for." Id. at 1369. In accordance with those instructions, the Court conducted a hearing to assess the reliability of Customs's test.

At the hearing, defendant failed to establish that its test satisfied any of the Daubert standards cited by the Federal Circuit. And while the Daubert factors are not a "definitive checklist or test," Daubert, 509 U.S. at 593, 113 S.Ct. 2786, defendant also failed to demonstrate that its test bears any other indicia of reliability.

According to Daubert, one of the "key question[s]" the Court should consider is whether a theory or technique "can be (and has been) tested." 509 U.S. at 593, 113 S.Ct. 2786. Daubert also directs the Court to "consider the known or potential rate of error" of a theory or technique. Id. at 594, 113 S.Ct. 2786. In this case,...