Rubie's Costume Company v. U.S., 02-1373.

• Decision Date: 01 August 2003
• Docket Number: No. 02-1373.,02-1373.
• Citation: 337 F.3d 1350
• Parties: RUBIE'S COSTUME COMPANY, Plaintiff-Appellee, v. UNITED STATES, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1350

337 F.3d 1350

RUBIE'S COSTUME COMPANY, Plaintiff-Appellee, v. UNITED STATES, Defendant-Appellant.

No. 02-1373.

United States Court of Appeals, Federal Circuit.

August 1, 2003.

V. James Adduci, II, Adduci, Mastriani & Schaumberg, LLP, of Washington, DC, argued for plaintiff-appellee. With him on the brief was David F. Nickel. Of counsel was Mark N. Bravin, Morgan, Lewis & Bockius LLP, of Washington, DC.

Saul Davis, Attorney, International Trade Field Office, Department of Justice, of New York, NY, argued for defendant-appellant. On the brief were Robert D. McCallum, Jr., Associate Attorney General; David M. Cohen, Director, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC; and John J. Mahon, Acting Attorney in Charge, International Trade Field Office. Of counsel on the brief was Beth C. Brotman, Attorney, Office of Assistant Chief Counsel, United States Customs Service, of New York, NY.

Marjorie M. Shostak, Stein Shostak Shostak & O'Hara, of Los Angeles, CA, for amicus curiae Creative Designs International Ltd., Peachtree Playthings, What Kids Want, and the Toy Association of Southern California. With her on the brief were S. Richard Shostak, Bruce N. Shulman, and Heather C. Litman.

Mark N. Bravin, Morgan, Lewis & Bockius LLP, of Washington, DC, for amicus curiae the Paper Magic Group, Inc. and Fun World/Easter Unlimited, Inc. With him on the brief was Rachel B. Irish.

Before NEWMAN, BRYSON, and GAJARSA, Circuit Judges.

Opinion for the court filed by Circuit Judge GAJARSA; Dissenting opinion filed by Circuit Judge BRYSON.

GAJARSA, Circuit Judge.

The United States ("government") appeals the final decision of the United States Court of International Trade granting the motion for summary judgment to Rubie's Costume Company ("Rubie's") on the grounds that the classification of certain Halloween costumes by the United States Customs Service ("Customs") as "Festive, carnival or other entertainment articles, including magic tricks and practical joke articles; parts and accessories thereof: Other: Other" ("festive articles") under subheading 9505.90.6000, Harmonized Tariff Schedule of the United States ("HTSUS")¹ was erroneous and that the costumes are properly classified as "Other garments, knitted or crocheted: Of man-made fibers: Other" ("wearing apparel") under subheading 6114.30.30, HTSUS. Rubie's Costume Co. v. United States, 196 F.Supp.2d 1320 (Ct. Int'l Trade 2002). Because we conclude that Customs's classification ruling is persuasive and therefore must be granted deference under Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944), we reverse.

I. BACKGROUND

The merchandise at issue comprises textile costumes, which are made in toddler, child, and adult sizes traditionally worn in conjunction with the celebration of Halloween or to costume parties. On July 26, 1996, Rubie's filed a Request for Information, seeking a tariff classification for five textile costumes: "Witch of the Webs", "Abdul Sheik of Arabia," "Pirate Boy," "Witch," and "Cute and Cuddly Clown."² See 19 U.S.C. § 1516(a)(1) (2000); 19 C.F.R. § 175.1 (2003). In response to Rubie's request, Customs issued Headquarters Ruling Letter ("HQ") 959545, determining that the "Cute and Cuddly Clown" would be classified as "Babies' garments and clothing accessories" with a duty rate of 16.7 (now 16.1) percent ad valorem, while the other costumes ("imports" or "subject merchandise") would be classified as "festive articles," requiring duty-free entry under the general column one rate of duty. See HQ 959545 (June 2, 1997).

On July 7, 1997, Rubie's filed a Domestic Interested Party Petition, asserting classification of all imported textile costumes as articles of apparel in Chapter 61 or 62, HTSUS. See 19 U.S.C. § 1516; 19 C.F.R. § 175 (2003). Rubie's, the largest manufacturer of costumes in the United States, contended that virtually identical costumes to those manufactured by Rubie's were being imported into the United States and some of these textile costumes were being erroneously classified as festive articles, requiring duty-free treatment. Customs published a notice of receipt of Rubie's petition and solicited written comments regarding the petition from interested parties. Receipt of Domestic Interested Party Petition Concerning Tariff Classification of Textile Costumes, 62 Fed.Reg. 66,891 (Dec. 22, 1997); see also 19 U.S.C. § 1516; 19 C.F.R. § 175.21(a) (2003). The comment period closed on February 20, 1998, and Customs received numerous comments in support of, and in opposition to, the reclassification.

In HQ 961447, Customs denied Rubie's petition requesting reclassification and affirmed the classification in HQ 959545, in which four of the five textile costumes were classified as "festive articles" because they were found to be flimsy, non-durable, and not normal articles of wearing apparel. See HQ 961447 (July 22, 1998). Customs rejected Rubie's argument that imported costumes made of textiles should be classified under Chapter 61 or 62, HTSUS, as items of apparel. Id.

HQ 961447 reviewed the history of the classification of flimsy Halloween costumes under both the HTSUS and its predecessor, the Tariff Schedules of the United States ("TSUS"). Under the TSUS, Customs classified children's costumes as "toys" and adult Halloween costumes as "wearing apparel." HQ 082626 (Sept. 29, 1988). This classification of adult costumes as "wearing apparel" was challenged by domestic importers in Traveler Trading Co. v. United States, 713 F.Supp. 409 (Ct. Int'l Trade 1989), which resulted in Customs changing its position and classifying certain adult costumes as toys due to their flimsy construction and lack of utilitarian value. Subsequent to the implementation of the HTSUS in 1989, Customs reversed its position and classified all textile costumes as wearing apparel. HQ 087291 (Dec. 4, 1990); see also HQ 084103, 1989 WL 380930 (Customs) (July 27, 1989). In September of 1994, Customs entered into a settlement agreement with Traveler Trading Co., Inc. ("Settlement Agreement"), agreeing to classify all costumes of a flimsy nature and lacking in durability as festive articles. After entering into the Settlement Agreement, Customs issued HQ 957318, classifying textile costumes of a flimsy nature and construction, lacking in durability, and generally recognized as not being normal articles of apparel as "festive articles." HQ 957318, 1994 WL 830448 (Customs) (Nov. 15, 1994).

Customs published notice of the denial of the Domestic Interested Party Petition and notice of Rubie's desire to contest HQ 961447. Denial of Domestic Interested Party Petition; Petitioner's Desire to Contest Decision Concerning Tariff Classification of Textile Costumes, 63 Fed.Reg. 67,170 (Dec. 4, 1998); see also 19 U.S.C. § 1516; 19 C.F.R. § 175.24 (2003). On June 29, 1999, Customs notified Rubie's that the entry of the "Scream Robe Costume,"³ had been liquidated as "festive articles," requiring duty-free treatment. See 19 U.S.C. § 1516(c); 19 C.F.R. § 175.25(b) (2003).

Subsequently, Rubie's filed a complaint in the Court of International Trade challenging HQ 961447. The Court of International Trade held that HQ 961447 should not be afforded the deference articulated in Skidmore "[b]ecause that ruling is both logically and factually defective." Rubie's Costume, 196 F.Supp.2d at 1326. Instead, the Court of International Trade determined that the imports fall within the exclusion for "fancy dress, of textiles, of chapter 61 or 62," in Note 1(e), which precludes classification of the imports as "festive articles." Id. at 1331. The Court of International Trade reasoned that "the phrase [`fancy dress'] includes both types of clothing; the formal and expensive, and the cheap and flimsy." Id. at 1322. Accordingly the Court of International Trade granted the motion for summary judgment to Rubie's. Id. The government timely appealed, and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5).

II. STANDARD OF REVIEW

We review a grant of summary judgment by the Court of International Trade de novo. Mead Corp. v. United States, 283 F.3d 1342, 1345 (Fed.Cir.2002). We accord a classification ruling by Customs a measure of deference proportional to its "power to persuade." United States v. Mead Corp., 533 U.S. 218, 235, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001) (quoting Skidmore, 323 U.S. at 140, 65 S.Ct. 161). While we recognize the responsibility to accord a classification ruling the degree of deference commensurate with its power to persuade, we also recognize our independent responsibility to decide the legal issue regarding the proper meaning and scope of tariff terms. Rocknel Fastener, Inc. v. United States, 267 F.3d 1354, 1358 (Fed.Cir.2001).

III. DISCUSSION

A.

This case presents the question of whether HQ 961447, in which Customs determined that textile costumes of a flimsy nature and construction, lacking in durability, and generally recognized as not being normal articles of apparel are classifiable as "festive articles" and hence qualify for duty-free treatment, merits Skidmore deference because of its power to persuade.

The government and amicus curiae argue that HQ 961447 should be accorded Chevron deference, Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), because the classification ruling was published pursuant to a deliberative notice-and-comment rulemaking process. In the alternative, the government argues that the Court of International Trade failed to afford HQ 961447 Skidmore deference by improperly substituting its own judgment for that of Customs, Specifically, the government argues that the imports are not "fancy dress, of textiles, of chapter 61 or 62" (emphasis added), because they are costumes of a flimsy nature and construction, lacking in durability, and generally recognized as not being normal articles of apparel. In...