Stewart-Warner Corp. v. U.S.
| Decision Date | 19 November 1984 |
| Docket Number | No. 84-1041,STEWART-WARNER,84-1041 |
| Citation | 748 F.2d 663 |
| Parties | , 3 Fed. Cir. (T) 20 CORPORATION, Appellee, v. The UNITED STATES, Appellant. Appeal |
| Court | U.S. Court of Appeals — Federal Circuit |
Joseph I. Liebman, New York City, argued for appellant. With him on the brief were Richard K. Willard, Acting Asst. Atty. Gen., David M. Cohen, Director, and Deborah E. Rand, Washington, D.C.
Terence P. Stewart, Stewart & Stewart, Washington, D.C., argued for appellee. With him on the brief was Eugene L. Stewart, David A. Hirsh and D. Scott Nance, Washington, D.C.
Sidney H. Kuflik, Lamb & Lerch, New York City, was on the brief for amicus curiae.
Before DAVIS, SMITH and NIES, Circuit Judges.
In this customs case, the initial classification by the United States Customs Service of certain speedometers as "other" speedometers was rejected by the United States Court of International Trade, which held instead that they should be classified as "bicycle" speedometers. Appellant, the United States (Government), appeals the judgment of the Court of International Trade. We reverse.
The principal issue before this court is whether the trial court erred, as a matter of law, in holding that certain imported speedometers of a "bicycle-type," used primarily on exercisers, are "bicycle speedometers" within the meaning of item 711.93, Tariff Schedules of the United States (TSUS), 1 rather than "other" speedometers under TSUS 711.98. A secondary issue is whether the trial court clearly erred regarding certain factual findings concerning the description and use of the subject speedometers.
Appellee Stewart-Warner Corporation (Stewart-Warner) is an American manufacturer of the subject speedometers and is seeking reclassification, on a prospective basis, of competing imported merchandise. 2 The judge below referred to this as a "rare event" in his court. We observe that the Government's prosecuting an appeal in this court that will reduce the rate of duty must be equally as rare.
The importer of the challenged entry is not a party to this action, but another importer, Diversified Products Corporation, has participated as amicus curiae. When the product entered this country the Customs Service classified it under TSUS 711.98, "other," a basket category covering certain "revolution counters" and similar items with a 1984 duty of 1.9 percent ad valorem for such products from most countries, as opposed to classifying it under TSUS 711.93, "bicycle speedometers and parts thereof," which carries a 1984 duty of 20.9 percent ad valorem for such items from most countries. 3 The lower court, after a 3-day trial on the issue, held against the Customs Service's classification and in favor of Stewart-Warner's position that the product should be classified under the higher-duty "bicycle speedometer" provision, because that provision encompasses "bicycle-type" speedometers, including those primarily used on exercisers. The Government has appealed here.
Regarding the product itself, we refer to it hereafter as the double-gear hub drive speedometer (double-gear speedometer), as have all the parties and the lower court. We set forth below precisely the factual description of the product as found by the trial court: 4
[T]he speedometers which are the subject of this action had not been invented at the time the new TSUS provision for bicycle speedometers was enacted in 1965. In the early 1970's, however, in response to a growing demand for a speedometer which could be mounted on the left side of either a bicycle or an exerciser, the Japanese developed the double-gear hub drive speedometer--the subject of the present action.
The advantage of the double-gear hub drive speedometer vis-a-vis its single-gear counterpart is its capacity to give a clockwise speed indicator readout when mounted on the left side of a wheel. The single-gear speedometer can only give a clockwise readout when mounted on the right side of a wheel. Since, as a practical matter, the design of exercise cycles precludes mounting a speedometer on the right side of the wheel, the double-gear hub drive speedometer has been used primarily in conjunction with exercisers, though it is perfectly suited for use on bicycles. Indeed, in all respects save one, this speedometer is physically identical with a single-gear bicycle speedometer, the one difference being that the former has the additional gear which permits it to function in a clockwise manner when mounted on the left side of a wheel. [Emphasis supplied.]
Stewart-Warner, which urges that this court affirm the lower court's holding that the double-gear speedometers are properly classified as "bicycle speedometers," nevertheless alleges error in a number of that court's factual findings. Hence we discuss further the facts involving the product's description and use as found by the trial court.
OpinionThe meaning of customs classification terms, such as "bicycle speedometers," is an issue of law which we review independently, while the question whether a particular item fits that meaning is a question of fact which we review under the clearly erroneous standard. 5 In a classification challenge such as this commenced in the Court of International Trade, the Customs Service's decision is presumed correct, and the burden of proving otherwise rests upon the challenger. 6
Stewart-Warner urges that we affirm the lower court's holding that the legislative history of TSUS 711.93 indicates that Congress meant for "bicycle-type" speedometers, including those here at issue, to be classified under that provision. The Government and amicus counter that the lower court erred as a matter of law in not recognizing that the term "bicycle speedometers," by its clear wording, provides only for speedometers chiefly used on bicycles, not on exercisers. Alternatively, the Government and amicus contend that the lower court misinterpreted the legislative history of TSUS 711.93 and that Congress did not intend to include all "bicycle-type" speedometers in that provision. We examine both theories.
Assuming for the purpose of thorough analysis that the plain meaning of the statutory term, "bicycle speedometers," is not clear to us, we examine its legislative history, as did the lower court. The most important piece in that immediate history is the statement in the 1965 House Ways and Means Committee Report regarding the new provision: 7
This new provision for bicycle speedometers would include certain bicycle-type speedometers which are used to a limited extent on motor scooters and motor bikes and which are currently classified under item 711.92 as being "suitable for use in highway-type motor vehicles." [Emphasis supplied.]
This statement clearly states Congress' intent that "certain bicycle-type speedometers which are used to a limited extent on motor scooters and motor bikes" are included in the new provision. It states no more and no less. It does not, for example, distinguish between light-and heavy-weight speedometers, as Stewart-Warner has stressed, nor does it differentiate among speedometers by value, as Congress earlier had done. It does distinguish a certain type of speedometer by the concept of use--i.e., those which are used to a limited extent on motor scooters and motor bikes, and which, by implication, are therefore chiefly or mostly used on bicycles. Other than these two ideas--that certain speedometers used to a limited extent on motor scooters and motor bikes should be classified under the new bicycle speedometer provision because, by implication, they are mostly used on bicycles, and that the concept of use is somehow involved in this provision--Congress has not told us more.
This reading is consistent, in our view, with the 1964 "Faithorn letter" from a Stewart-Warner executive to the House Ways and Means Committee. 8 In that letter Stewart-Warner complained about the loophole arising from the then-existing low-duty TSUS provision for "speedometers suitable for use in highway type motor vehicles," under which provision speedometers suitable for use on motor bikes or mopeds were being imported and then sold for use on bicycles, thereby avoiding a much higher duty provision. Stewart-Warner believed that this problem would put it out of the bicycle-speedometer-manufacturing business entirely. Naturally, Congress responded, but not by using the tariff language Stewart-Warner suggested in that letter. That language would have created a new item: "Other speedometers * * * including speedometers suitable for use on bicycles whether or not also suitable for installation on motor bicycles or motorcycles." Instead, Congress created an entirely new provision specifically and simply for "bicycle speedometers." It abolished the old item covering speedometers suitable for use on highway-type vehicles, and created instead an "other" basket category. 9
In short, from the Faithorn letter we draw the same two conclusions as from the House report. Congress was concerned that speedometers mostly or actually used on bicycles were being imported under a lower duty provision covering speedometers suitable for use on mopeds and the like, and the concept of the speedometers' use--rather than their size or value or other criteria--was important in distinguishing among the speedometers. Neither Mr. Faithorn, nor the Congress, had in mind in 1964 a problem with speedometers mostly used on exercisers but suitable for use on bicycles, any more than we today or anyone else (other than inventors with great engineering and commercial foresight) have in mind a customs classification problem with, one may imagine, speedometers mostly used on treadmill equipment in a 1990's space station but suitable for use on bicycles as well.
The lower court, whose long experience in customs classification matters we...
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