Simod America Corp. v. US

• Decision Date: 28 July 1988
• Docket Number: Court No. 85-5-00649.
• Parties: SIMOD AMERICA CORP., Plaintiff, v. The UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

693 F. Supp. 1172

SIMOD AMERICA CORP., Plaintiff, v. The UNITED STATES, Defendant.

Court No. 85-5-00649.

United States Court of International Trade.

July 28, 1988.

Rode & Qualey (Michael S. O'Rourke, New York City, on the brief, and at the trial), for plaintiff.

John R. Bolton, Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office, Commercial Litigation Branch (Barbara M. Epstein, New York City, on the brief, and at the trial), for defendant.

Lamb & Lerch, Richard J. Kaplan, New York City, for amicus curiae, Rubber and Plastic Footwear Manufacturers Ass'n, Inc.

RE, Chief Judge:

The question presented in this case pertains to the proper classification, for customs duty purposes, of certain merchandise imported from Italy from 1980 to 1984, and described on the customs invoices as shoe "uppers."

The merchandise was classified by the Customs Service as "footwear" under items 700.35 and 700.67 of the Tariff Schedules of the United States (TSUS), depending upon the amount of leather on the exterior surface, and duty was imposed as required under those items. Pursuant to General Interpretative Rule 10(h), TSUS, which provides that "a tariff description for an article covers such article ... whether finished or not finished," "unfinished" footwear is included within the tariff description for "footwear." Plaintiff protests this classification and contends that the merchandise having an exterior of more than 50 percent leather is properly classifiable as shoe "uppers" under item 791.27, TSUS, or alternatively as articles of leather not specially provided for under item 791.90, TSUS. As for the merchandise having an exterior surface of less than 50 percent leather, plaintiff contends that it is properly classifiable as articles of textile not specially provided for under items 386.04, 386.07, or 386.50, TSUS.

Although the duties imposed by Customs and those claimed by plaintiff varied depending upon the amount of leather on the exterior surface, the duties on "unfinished" footwear are considerably higher than those imposed for parts or components of shoes. Hence, plaintiff protests the classification as "unfinished" footwear since, in its opinion, the imported merchandise required substantial additional manufacturing processes in the United States before it could be sold as footwear. Relying upon Daisy-Heddon, Div. Victor Comptometer Corp. v. United States, 66 CCPA 97, C.A. D. 1228, 600 F.2d 799 (1979), plaintiff urges that the nature, extent, and relative value of these additional manufacturing processes prevent classification as "unfinished" footwear, and require that the merchandise, as imported, be classified as parts or components of shoes or shoe "uppers." The defendant, however, maintains that the merchandise was "unfinished" footwear since the imported shoe uppers also contained an "underfoot," and, being substantially complete, the imported merchandise was properly classified as "unfinished" footwear.

The pertinent statutory provisions of the tariff schedules are as follows:

For merchandise having an exterior surface of more than 50 percent leather:

                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. (1980-84)
                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. (1981-83)
                                                                               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)
                For merchandise having an exterior surface of less than 50 percent leather:
                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 over $3.00 but not over $6.50 per
                                     pair ........................................90¢ per pr. + 37.5% ad
                                                                                  val. (1981-1984)
                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:
                386.04          Of cotton: .......................................40% ad val. (1980-81)
                                   Shoe uppers ...................................37% ad val. (1982)
                                                                                  34% ad val. (1983)
                                                                                  31% ad val. (1984)
                                Other:
                386.07              Shoe uppers ..................................25% ad val. (1980-81)
                                                                                  22.5% ad val. (1982)
                                                                                  20% ad val. (1983)
                                                                                  17.5% ad val. (1984)
                             Other articles, not ornamented:
                                 Of cotton:
                                    ....
                386.50              Other ........................................14% ad val. (1980-81)
                                        Shoe uppers                               12.8% ad val. (1982)
                                                                                  11.7% ad val. (1983)
                                                                                  10.5% ad val. (1984)
                

The question presented is whether the imported merchandise has been properly classified by the Customs Service as "unfinished" footwear under items 700.35 and 700.67, TSUS, or whether it is properly classifiable as shoe "uppers" or other articles not specifically provided for under items 791.27, 791.90, 386.04, 386.07, or 386.50, TSUS. In order to decide the question presented, the court must consider "whether the government's classification is correct, both independently and in comparison with the importer's alternative." Jarvis Clark Co. v. United States, 733 F.2d 873, 878 (Fed.Cir.1984). Pursuant to 28 U.S.C. § 2639(a)(1) (1982), the classification of the Customs Service is presumed to be correct and the burden of proof is upon the party challenging its classification.

After an examination of the merchandise, the exhibits, the testimony, and the pertinent lexicographic definitions, the court holds that plaintiff has not overcome the presumption of correctness, and the classification is sustained. The imported merchandise predominantly of leather was "unfinished" footwear and was properly classified as "footwear," under item 700.35, TSUS, and the imported merchandise predominantly of textile was also "unfinished" footwear and was properly classified as "footwear," under item 700.67, TSUS.

The imported articles are athletic shoe uppers with a piece of material, called the "underfoot," sewn on the bottom. From 1980 to 1984, Simod America Corporation (Simod), the American subsidiary of an Italian corporation, imported the merchandise to its factory in Middletown, Rhode Island. At the Middletown plant, various styles of athletic footwear were finished by the production and addition of soles through a polyurethane injection molding process.

Simod's Italian parent corporation commissioned independent Italian stitching rooms to prepare the merchandise for importation, and supplied the stitching rooms with leather, certain nonleather components, and specialized machinery. In accord with directions submitted by Simod's parent corporation, workers at the stitching rooms cut the leather into parts and stitched those parts together. Various nonleather components were also attached in the stitching rooms. The final part attached by the stitching room workers was a piece of material, which was sewn to the bottom of each imported article. This part is called the "underfoot." The underfoot aids or makes possible the attachment of a sole to the imported article.

At Simod's factory in Middletown, Rhode Island, the imported merchandise was fitted with a sole. The centerpiece of Simod's factory is the Desma 513, a 24-station machine that uses a polyurethane injection process to make soles and attach them to the imported articles. The "uppers" with the attached "underfoot" were placed on lasts (forms molded in the size and shape of a shoe), and the Desma machine injected polyurethane onto the bottom of each article. The underfoot served to keep the imported merchandise on the last and permitted the injection of polyurethane onto the underfoot. Without the attached underfoot, the polyurethane would leak out from the imported merchandise, preventing the...