Simod America Corp. v. U.S.
| Decision Date | 19 April 1989 |
| Docket Number | No. 88-1637,88-1637 |
| Citation | 872 F.2d 1572 |
| Parties | SIMOD AMERICA CORP., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Federal Circuit |
Michael S. O'Rourke, of Rode & Qualey, New York City, argued for plaintiff-appellant. With him on the brief were William J. Maloney and Eleanore Kelly-Kobayashi.
Joseph I. Liebman, Attorney in Charge, Intern. Trade Field Office, Dept. of Justice, New York City, argued for defendant-appellee. With him on the brief were John R. Bolton, Asst. Atty. Gen., David M. Cohen, Director, and Barbara Epstein.
Before RICH and BISSELL, Circuit Judges, and NICHOLS, Senior Circuit Judge.
Simod America Corp. ("Simod") appeals from the judgment of the United States Court of International Trade holding that its shoe components imported from Italy in 1980-84 are dutiable as footwear under items 700.35 and 700.67 of the Tariff Schedules of the United States (TSUS). Simod America Corp. v. United States, 693 F.Supp. 1172 (Ct. Int'l Trade 1988) (Re, C.J.). We reverse and remand.
Simod imported partially constructed athletic shoes from Italy. As imported, the articles included an upper, the portion of the shoe that covers the top of the foot ("the shoe top"), and a thin piece of fabric, called an underfoot, which was sewn in the location where the shoe sole was ultimately to be placed and remained there on completion of the shoe. Some of the shoe tops had an exterior of more than 50 percent leather and others did not.
The manufacturing performed in Italy was begun by applying a cutting die to a sheet of textile or leather materials. Leather materials were cleaned and skived (pared) before proceeding to the production line. The pieces of cut material were then stitched together and ornamented. Next, eye stays were applied to the shoe material and then metal eyes were attached with the use of a fully automated machine, and counterpanels were glued to the articles by a thermosetting machine. Finally, an underfoot was attached to the shoe top in the location where the sole was ultimately to be placed. The underfoot is a necessary preparation for lasting.
The shoe tops were imported into the United States where they were lasted and provided with shoe soles and manufactured into finished athletic shoes at a factory in Middletown, Rhode Island. The soles manufactured at the Middletown plant were of a type produced by injecting liquid polyurethane into a mold and allowing it to harden. The polyurethane injection process was skillfully demonstrated to this court and the trial court by way of a videotape.
The process of making the polyurethane shoe soles centers around a machine known to the trade as a Desma 513/24. The Desma is a massive piece of equipment costing $800,000 to one million dollars. The machine has 24 stations, each station having a mold which forms the shoe sole and a last which is used to shape the shoe top into an appropriate form. Because shoes come in different sizes, 30 to 40 pairs of different size lasts are required. The lasts are individually hand crafted, and one set of 30 to 40 lasts takes approximately an entire year to produce. Thus, before even a beginning of the shoe sole injection process, significant start-up time and start-up costs were incurred.
The shoe sole manufacturing process began by heating the polyol and isocyanate chemicals which make up the polyurethane shoe soles in separate ovens at differing temperatures for 24 and 48 hours, respectively. The polyol material was then dyed with a coloring suspension, a procedure which required 20 to 40 minutes time. The molds at each station of the Desma machine were thoroughly cleaned to remove remnants of polyol from prior injections and then sprayed with releasing agents.
Next, the imported merchandise was mounted onto the last and mold at each station and secured in place by the underfoot. The shoe top was hammered by hand to take the shape of the last. Cement was applied to the bottom and sides of the shoe top, and polyurethane was then injected into the mold to form the outsole of the shoe.
The Desma has a control panel which regulates many of the machine's operations. A timer is set to control the duration of the injection; a counter regulates the quantity of polyurethane injected into the mold and the ratio of polyurethane to isocyanate. The quantity of material injected is varied by the control panel according to the size of the shoe being made.
A first injection of polyurethane was shot into a mold at each station to form the shoe outsole. After the first injection was completed, the mold release agent was removed from the shoe outsole. Failure completely to remove the release agent would have prevented the second injection from adhering properly and ruined the partially constructed merchandise. Once the release agent was completely removed from the outsole, a second injection was shot into each mold to create the shoe midsole. The mold had to be properly sealed to the shoe top, as improper sealing between the shoe top and the mold causes the polyurethane to seep out and create a defective shoe. After the second injection was successfully performed, the shoe soles required between 12 and 24 hours to harden. After hardening, the shoes were passed through a finishing line where they were trimmed, cleaned, and otherwise touched up through the use of both hand and machine labor. The operations performed on the finishing line took approximately 20 minutes per pair.
To the extent the above-discussed details of the manufacturing process were not found by the trial court, they are undisputed in the record before us.
Turning now to the classifications at issue, the relevant tariff provisions for the leather shoe tops are:
Classified under:
Schedule 7, Part 1, Subpart A:
Footwear, of leather (except footwear with uppers of fibers):
* * * *
Other
700.35 For men, youths, and boys 8.5% ad val. (198084)
Claimed under:
Schedule 7, Part 13, Subpart B:
Leather cut or wholly or partly manufactured into forms or shapes
suitable for conversion into footwear:
* * * *
Other
791.27 Uppers 5% ad val. (1980)
4.8% ad val. (198183)
4.4% ad val. (1984)
Alternatively claimed under:
Schedule 7, Part 13, Subpart B:
Articles not specially provided for, of leather:
* * * *
791.90 Other 3.5% ad val. (1980)
3% ad val. (1981)
2.5% ad val. (1982)
2% ad val. (1983)
1.5% ad val. (1984)
The pertinent tariff provisions for the articles having an exterior surface of
less than 50 percent leather are:
Classified under:
Schedule 7, Part 1, Subpart A:
Footwear (whether or not described elsewhere in this subpart) which is
over 50 percent by weight of rubber or plastics or over 50 percent by
weight of fibers and rubber or plastics with at least 10 percent by
weight being rubber or plastics:
* * * *
Other footwear (except footwear having uppers of which over 50
percent of the exterior surface area is leather):
* * * *
Other
* * * *
Other
* * * *
700.67 Valued 90 cents per pr. k 37.5% ad val.
over (19811984)
$3.00
but not
over
$6.50
per pair
Claimed under:
Schedule 3, Part 7, Subpart B:
Articles not specially provided for, of textile materials:
Lace or net articles, whether or not ornamented, and other
articles ornamented:
Other articles, not ornamented:
Of cotton:
* * * *
386.50 Other 14% ad val. (198081)
12.8% ad val. (1982)
11.7% ad val. (1983)
10.5% ad val. (1984)
The imported merchandise was classified by the Customs Service ("Customs") as unfinished "footwear" under items 700.35 and 700.67, and that classification was sustained by the Court of International Trade.
Whether the trial court clearly erred in determining that the imported merchandise is properly classified under the "footwear" provisions.
Webster's Third New International Dictionary, Unabridged, at 886 (1976) defines footwear as:
wearing apparel for the feet (as shoes, boots, slippers, overshoes) usu. excluding hosiery.
It is not disputed that at the completion of the manufacturing...
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