Midwest of Cannon Falls, Inc. v. U.S., s. 96-1271

• Citation: 122 F.3d 1423
• Decision Date: 14 August 1997
• Docket Number: Nos. 96-1271,96-1279,s. 96-1271
• Parties: MIDWEST OF CANNON FALLS, INC., Plaintiff/Cross-Appellant, v. The UNITED STATES, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1423

122 F.3d 1423

19 ITRD 1388

MIDWEST OF CANNON FALLS, INC., Plaintiff/Cross-Appellant, v. The UNITED STATES, Defendant-Appellant.

Nos. 96-1271, 96-1279.

United States Court of Appeals, Federal Circuit.

Aug. 14, 1997.

Joel K. Simon, Serko & Simon, New York City, argued for Plaintiff/Cross-Appellant. With him on the brief were Arlen T. Epstein and Leibert L. Greenberg.

Mikki Graves Walser, Attorney, Commercial Litigation Branch Civil Division, Department of Justice, International Trade Field Office, New York City, argued for Defendant-Appellant. With her on the brief was Joseph I. Liebman, Attorney in Charge. Also with her on the brief were Frank W. Hunger, Assistant Attorney General, and David M. Cohen, Director, Department of Justice, Washington, DC. Of counsel on the brief was Sheryl A. French, International Trade Field Office, New York City.

Before RICH, NEWMAN, and CLEVENGER, Circuit Judges.

CLEVENGER, Circuit Judge.

The United States (the government) appeals from the judgment of the United States Court of International Trade holding that the Customs Service (Customs) incorrectly classified 25 of the 29 imported items. Midwest of Cannon Falls, Inc. (Midwest) cross-appeals on the classification of two of the four items on which the trial court ruled in favor of the government. We hold in favor of Midwest, affirming the trial court's judgment with respect to the 25 items appealed by the United States and reversing with respect to the two items cross-appealed by Midwest.

I

Midwest imports the following 29 holiday-related items for resale to retailers: (1) Nutcrackers (Santa, soldier, king, presidents, athletes and professionals); (2) Wooden pull toy (ice skater); (3) Toy smoker (Santa); (4) Porcelain and fabric mache Santa; (5) Fabric mache Mrs. Claus; (6) Cast iron stocking hangers (Santa); (7) Cast iron stocking hangers (Santa with lamb); (8) Cast iron stocking hangers (Christmas elf); (9) Cast iron stocking hangers (stacked animal); (10) Cast iron stocking hangers (cargo car); (11) Terra cotta turkey container; (12) Earthenware rabbit with carrot; (13) Heart-shaped metal wreath; (14) Jack-o'-lantern earthenware mug; (15) Jack-o'-lantern earthenware pitcher; (16) Christmas water globe; (17) Easter water globe; (18) Santa with chimney smoker; (19) Fabric mache Santa with bag of toys; (20) Fabric mache Scanda Klaus; (21) Fabric mache MacNicholas; (22) Porcelain Santa with light-up tree; (23) Resin figures (hooded Santa roly-poly); (24) Resin figures (figures decorating tree); (25) Resin figures (Santa in sleigh); (26) Resin figures (Santa with tree); (27) Resin figures (old-fashioned Santa figure); (28) Resin figures (Santa with deer); and (29) Resin figures (Santa sewing an American flag).

All of the above items are advertised and sold to consumers before the particular holiday with which they are associated, the vast majority being sold during the Christmas season. They were entered in 1990 and 1991 and liquidated in 1991. Customs classified the products variously as earthenware ornamental ceramic articles, dolls, glassware, other tableware and kitchenware articles, other ornaments of base metal, and other articles of plastics.

Midwest claims that all of the items should be classified as festive, carnival or other entertainment articles under heading 9505 of the Harmonized Tariff Schedule of the United States (HTSUS). In particular, it argues that the Christmas-related items should be classified as Christmas ornaments or as other articles for Christmas festivities under subheading 9505.10, and that the items related to Halloween, Thanksgiving, Valentine's Day, and Easter should be classified as other festive articles under subheading 9505.90.

Of the 29 items, the trial court held in favor of Midwest on all except for four items (items 11, 12, 14 and 15). The United States appeals the 25 items on which Midwest prevailed, and Midwest cross-appeals two of the four items on which the United States prevailed--items 14 (jack-o'-lantern earthenware mug) and 15 (jack-o'-lantern earthenware pitcher). Items 11 and 12 are not on appeal.

II

A classification decision, ultimately, is a question of law based on two underlying steps. Universal Elecs. Inc. v. United States, 112 F.3d 488, 491 (Fed.Cir.1997). The first step is to determine the scope of the tariff classification provision. This step, being a question of law, is reviewed de novo by this court. Totes, Inc. v. United States, 69 F.3d 495, 497-98 (Fed.Cir.1995). The second step asks whether the items at issue come within a particular tariff provision, as properly interpreted, and is a question of fact. Id. at 498. Because the government's primary argument here centers around the legal scope of the classification term "Christmas ornament," we independently review the trial court's and Customs' decisions. See Universal Elecs., 112 F.3d at 493 ("On questions of law, we defer to neither Customs' nor the Court of International Trade's interpretations; we decide such questions afresh."); Rollerblade, Inc. v. United States, 112 F.3d 481, 484 (Fed.Cir.1997) ("[N]o deference attaches to Customs' classification decisions ... where there are no disputed issues of material fact.").

III

This case raises the following three principal issues: (1) whether the trial court correctly rejected the government's argument that the items at issue are categorically excluded from classification as "festive articles" under heading 9505, HTSUS; (2) whether the trial court correctly held that "Christmas ornaments" under subheading 9505.10.25 are not limited to articles that (a) hang primarily from a tree, (b) are inexpensive, and (c) are traditionally associated with Christmas; and (3) whether the trial court correctly held that festive articles with a utilitarian function are categorically excluded from classification under heading 9505. As explained in turn below, we affirm the trial court's decision as to the first two issues and reverse as to the last issue.

A

The government's lead argument is that most of the items at issue are categorically excluded from classification under heading 9505, HTSUS. ¹ We begin our analysis with the language of the pertinent HTSUS provisions:

The government argues that heading 9505, HTSUS ("Festive, carnival or other entertainment articles") is by its plain language limited to "entertainment" articles, which the government further defines as articles for "amusement or merriment." The government focuses on the phrase "or other entertainment articles." It argues that the term "other entertainment" operates to modify the preceding words, "festive and carnival." The government then concludes that all of the articles under heading 9505, including festive and carnival articles, must be limited to "entertainment articles." The government contends that none of the imported items are entertainment items (i.e., used for amusement or merriment), and consequently, none can be classified under heading 9505.

The government's argument fails for two reasons. First, it is somewhat unclear what the government means by articles for "entertainment, amusement or merriment" because the imported items (e.g., various Santa figures) are at least as "entertaining" as Christmas tree ornaments that the government admits belong under heading 9505. As far as the degree of "entertainment, amusement or merriment" is concerned, we perceive no appreciable difference between the two, each of which exists in order to enhance the state of merriment at the yuletide holiday season. Thus, to the extent Christmas tree ornaments are "entertainment" articles within the meaning of heading 9505 as advocated by the government, so are the imported items at issue. Second, we note that heading 9505 includes nativity scenes and figures thereof. See heading 9505.10.30, HTSUS. Thus, even under the government's own argument, heading 9505 covers a range of products spanning Christmas tree ornaments to nativity scenes. The imported Christmas ornaments here are at least as "entertaining" as the nativity scenes. In sum, all of the items at issue are used in celebration of and for entertainment on a joyous holiday, and they are all prima facie classifiable as "festive articles" under heading 9505.

B

The government next seeks to impose three requirements to the term, "Christmas ornaments," namely that such articles must: (a) hang primarily from a tree; (b) be inexpensive; and (c) be traditionally associated with Christmas. We agree with the trial court that the requirements advocated by the government find no basis either in the plain language of the HTSUS or in any other controlling authority.

First, the government argues that the term "Christmas ornament" is often understood by consumers and industry participants to refer to "Christmas tree ornament" and that the classification term should be limited accordingly. The trial court acknowledged that evidence adduced at trial demonstrated that the term was often understood as limited to "Christmas tree ornament," but the court found that "the evidence failed to demonstrate that this interpretation was consistent." Having reviewed the trial record relied on by the government, we too acknowledge that evidence tended to show that consumers and industry participants often would think of "Christmas tree ornaments" when asked of "Christmas ornaments." However, the testimony of various witnesses was hardly conclusive on the meaning of "ornament" and was conditioned by such qualifiers as "probably," "in most cases," "the majority of our customer base," and "I can't give you a good definition."

Although the testimony of consumers and industry participants is probative, this court is more persuaded by the action taken by Congress itself on the issue: when Congress converted from the Tariff Schedules of the United States (TSUS) to the HTSUS, the relevant tariff provision was changed from "Christmas tree ornaments" to "Christmas ornaments." See...