Libas v. U.S.

• Decision Date: 07 October 1999
• Parties: (Fed. Cir. 1999) LIBAS, LTD., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee. 97-1145 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1361

193 F.3d 1361 (Fed. Cir. 1999)

LIBAS, LTD., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

97-1145

United States Court of Appeals for the Federal Circuit

DECIDED: October 7, 1999

Appealed from: United States Court of International Trade Judge Richard W. Goldberg

Elon A. Pollack, Law Offices of Elon A. Pollack, of Los Angeles, California, argued for plaintiff-appellant. With him on the brief was Heather C. Litman.

Bruce N. Stratvert, Attorney, Civil Division, Commercial Litigation Branch, International Trade Field Office, of New York, New York, argued for defendant-appellee. With him on the brief were David M. Cohen, Director, Commercial Litigation Branch, Department of Justice, of Washington, DC; and Joseph I. Liebman, Attorney in Charge, International Trade Field Office. Of counsel was Edward N. Maurer, Attorney, Office of Assistant Chief Counsel, International Trade Litigation, U.S. Customs Service, of New York, New York.

Before MICHEL, GAJARSA and CUDAHY,^* Circuit Judges.

CUDAHY, Circuit Judge.

This case is centrally about the responsibilities of a trial court to ensure that its determinations based on expert testimony are founded upon reliable, scientifically trustworthy procedures. The issue arises here in the context of our review of a trial court's determination concerning the weight rather than the admissibility of evidence. Libas, Ltd. (Libas), a fabric importer, challenges the determination of a trial court that the United States Customs Service (Customs) properly classified certain fabric imported by Libas as power-loomed rather than as hand-loomed and therefore subject to a higher duty rate and an entry quota. Libas argues that the trial court erred in holding, first, that Customs has the legal authority to make the determination by testing the fabric and second, that, on the basis of certain tests performed by Customs, the fabric was power-loomed. We agree that Customs had the authority to classify the fabric, but we hold that the trial court's ruling that the fabric was power-loomed was not supported by evidence in the record of the reliability of the tests, and hence was clearly erroneous.

I.

Libas imports fabric from India through the Port of Los Angeles. In August 1994, it imported 32 bales of rolled cotton fabric which had been certified by the Indian Government as hand-loomed, and entered this fabric as "certified hand-loomed" under Subheading 5208.42.1000, Harmonized Tariff Schedules of the United States (HTSUS). In September 1994, Customs demanded redelivery of the fabric and subjected it to a new test developed by the Los Angeles Customs Laboratory, namely, the "Methodology for the [A]nalysis of Woven Fabric to Determine whether Fabric had been Power-loomed or Hand-loomed" (the Customs test). In November 1994, on the basis of this test, Customs reclassified the fabric as power-loomed, Subheading 5208.42.4000, HTSUS.

Under the Customs test, fabrics are classified as hand-loomed or power-loomed based on characteristics which are supposed to result from different means of manufacture. Woven fabric of any kind is made by running horizontal "weft" or "woof" yarns through a set of vertical "warp" yarns with a shuttle; patterns in the fabric are created by lifting or lowering selected warp yarns at each pass or "pick" of the shuttle. Use of a special kind of shuttle called a "fly-shuttle" can increase the speed at which a pick is "thrown" or completed. Fly-shuttles are in common use in India and can be either hand-thrown or machine-powered. The same kinds of yarns can be used with both processes.

The Customs test is premised on the idea that, because weavers cannot regulate their movements with the precision of a machine, hand-loomed fabrics exhibit less uniformity, evenness and consistency than machine-loomed fabrics. The fabric at issue exhibited two particular characteristics upon testing which were central in Customs' classification of them as power-loomed. First, Customs found a weft tension defect of only one-and-one half inches, associated, according to Customs, with the small variations found in machine weaving as against the greater weft tension defects in hand weaving, where weft tension is unregulated. Second, Customs found an area where the thread ran out, which Customs concluded was characteristic of machine weaving because it assumed that hand weavers, being close to their work, would notice that the thread had ended and would therefore reweave the fabric to remove the defect.

Classifying the fabric as power-loomed was a matter of some import to Libas. Power-loomed fabrics are subject under HTSUS to nearly double the duty rate for hand-loomed fabrics and, unlike hand-loomed fabrics, are subject to a quota and require a visa for entry. Libas protested in a timely way, but in December 1994, Customs denied the protest on the ground that the laboratory report of the test showed that the fabric "exhibit[ed] characteristics of machine-made fabric." Fourteen additional shipments of similar fabric by Libas were held up by this determination at the time of the filing of this lawsuit in January 1996. At a bench trial held in May 1996, the Court of International Trade heard evidence regarding the production process of the fabric both from experts who testified about various aspects of the Customs test and from a witness who claimed personal knowledge of the process of manufacture. The trial court found against Libas in an opinion issued in October 1996. Libas then filed this appeal.

II.

Libas denies that Customs has the statutory authority to unilaterally reclassify the fabric based on the test because under the governing legal scheme, Libas says, Customs must defer to the Indian Government's certification or, in case of a dispute, consult with that government. (HTSUS is indeed a statute but is not published physically in the United States Code. See 19 U.S.C. § 1202.) The key statutory language at issue is that of Additional Note 4 to Chapter 52 (Cotton), HTSUS, defining the term "certified hand-loomed fabrics," as "fabrics made on a hand loom (i.e., a nonpower-driven loom) by a cottage industry and which prior to exportation have been certified by an official of a government agency of the country where the fabrics were produced to have been so made." The Court of International Trade read this as plainly granting Customs the authority to determine whether the fabrics at issue were actually "made on a hand loom." The trial court treated the requirement that the fabrics actually be made on a hand loom as separate and independent from the requirement of prior certification by the exporting country's government. The trial court therefore rejected Libas' claim that satisfaction of the requirement of Indian Government certification was dispositive.

Libas, however, argues that this determination was erroneous because statutes must be interpreted as consistent with subsequent international agreements. At the least, Libas argues, later international agreements control over prior statutes if there is a direct conflict. HTSUS became effective January 1, 1989. See Pub. L. 100-418. Libas maintains that Customs has no authority to reclassify fabric which has been certified as hand-loomed by the Indian Government in view of the Agreement Relating to Trade in Textiles and Textile Products, Feb. 6, 1987, U.S.-India (the Bilateral Agreement), and the later Amendment to that Agreement, Dec. 21, 1989, 1989 WL 407622. The Bilateral Agreement states that either government "has the right to request consultation with the other . . . on any matter" pertaining to the Agreement itself, Paragraph 21, and the Amendment says that "hand-loomed fabrics . . . shall remain exempt" from quota and visa requirements "if properly certified in accordance with . . . the Agreement." Paragraph 1(C). Therefore, Libas says, Customs lacks the authority it claims.

To win this argument, Libas would have to show that Note 4, read together with the Bilateral Agreement and its Amendment, clearly and unambiguously mandates that if Customs disagrees with the Indian Government's certification of some fabric, the only recourse Customs has is consultation with the Indian authorities under Paragraph 21 of the Bilateral Agreement. But the most that Libas in fact argues is that the language will bear this reading. Libas says that Paragraph 21 of the Bilateral Agreement "can be interpreted" as a blueprint for Customs to follow. Customs, Libas urges, "could have" sought consultation with the Indian Government instead of unilaterally reclassifying the fabric as power-loomed. The language of Paragraph 21 of the Bilateral Agreement is concededly permissive. It does not, even if read together with Note 4, clearly and unambiguously mandate that the United States must consult with the Indian authorities if it disagrees with their certification of imported fabric instead of unilaterally reclassifying the fabric. There is no requirement of consultation, only a right to consult.¹ Because the Bilateral Agreement, as amended, can be read consistently with Note 4 to grant Customs the authority it claims, we have no occasion to consider whether the subsequently amended Agreement trumps the statute. The language of the statute and of the Agreement clearly states that Customs has the required authority. The trial court, therefore, did not err in determining that Customs has the required authority.

III.

We now address the Court of International Trade's determination that the fabric was power-loomed rather than hand-loomed. Legal determinations made by that court are reviewed de novo, while its factual findings are reviewed for clear error. See United States v. Hitachi America, Ltd., 172 F.3d 1319, 1326 (Fed. Cir. 1999); Ct. Int'l Trade R. 52(a). By statute, Customs' classification decision "is presumed to be correct." Universal Elec. Inc. v. United States, 112 F.3d 488, 491 (Fed. Cir. 1997) (citing 28 U.S.C. § 2639(a)(1)...