Structural Industries, Inc. v. U.S.

• Decision Date: 15 February 2005
• Docket Number: Court No. 00-00203.,Slip Op. 05-21.
• Citation: 360 F.Supp.2d 1330
• Parties: STRUCTURAL INDUSTRIES, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

360 F.Supp.2d 1330

STRUCTURAL INDUSTRIES, INC., Plaintiff, v. UNITED STATES, Defendant.

Slip Op. 05-21.

Court No. 00-00203.

United States Court of International Trade.

February 15, 2005.

COPYRIGHT MATERIAL OMITTED

Fitch, King and Caffentzis (James Caffentzis), New York, New York, for Plaintiff.

Robert D. McCallum, Jr., Assistant Attorney General; John J. Mahon, Acting Attorney-in-Charge, International Trade Field Office; Jack S. Rockafellow, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice; Beth C. Brotman, Attorney, Office of Assistant Chief Counsel, International Trade Litigation, United States Customs Service, for Defendant, of counsel.

CARMAN, Judge.

[After remand from the Court of Appeals for the Federal Circuit, an evidentiary hearing, and review of the evidence, papers and arguments submitted by the parties, judgment is entered for Plaintiff as to the tariff classification of certain clip frames. Defendant is directed to reliquidate the subject merchandise in accordance with this opinion.]

OPINION

This case is before this Court pursuant to a remand ordered by the United States Court of Appeals for the Federal Circuit ("CAFC"). Structural Industries, Inc. v. United States, 356 F.3d 1366 (Fed.Cir.2004).¹ The tariff classification of certain clip frames is at issue in this case. Structural Industries, Inc. ("Plaintiff") challenges the United States Customs Service's² ("Customs" or "Defendant") classification of the subject merchandise under heading 7013 of the Harmonized Tariff Schedule of the United States ("HTSUS") (1999).³ 19 U.S.C. § 1202 (2000). Based upon findings of fact and conclusions of law set forth below, the Court enters final judgment for Plaintiff.

BACKGROUND

The subject merchandise is frames comprised of three components: a flat glass cover, a masonite back, and four metal clips. (Pl.'s Statement of Material Facts ¶¶ 2-3; Def.'s Resp. to Pl.'s Statement of Material Facts ¶¶ 2-3.) An image, which could be a photograph, picture, or other flat item (e.g., a document), is placed between the glass cover and masonite back. (Def.'s Statement of Undisputed Material Facts ¶¶ 3-4.) The metal clips, which fit into grooves cut into the masonite back (Br. for Structural Industries, Inc., Pl. ("Pl.'s Br.") at 10), hold the image, glass, and masonite together. Plaintiff markets some or all of the subject merchandise under the name "Euro Clip." (Def.'s Statement of Undisputed Material Facts ¶ 2; Pl.'s Resp. to Def.'s Statement of Undisputed Facts ¶ 2.) For convenience, this Court refers to the subject merchandise as the Euro Clip.

In 1999, Customs liquidated the Euro Clip under HTSUS tariff item 7013.99.40,⁴ if valued not over $0.30 each, and 7013.99.50, if valued over $0.30 each but not over $3.00 each. (Pl.'s Br. in Supp. of Its Mot. for Summ. J. at 1; Mem. in Supp. of Def.'s Cross-Mot. for Summ. J. at 4.) The assessed duty rates were 38 percent ad valorem and 30 percent ad valorem, respectively. (Id.)

Plaintiff filed a protest concerning the classification of the Euro Clip, which Customs denied, and Plaintiff commenced litigation. (Pl.'s Summons at 1.) After considering the parties' briefs, this Court denied Plaintiff's motion for summary judgment and granted Defendant's cross-motion for summary judgment. Structural Industries, Inc. v. United States, 240 F.Supp.2d 1327 (CIT 2002)⁵ ("Structural I"), rev'd and remanded, Structural Industries, Inc. v. United States, 356 F.3d 1366 (Fed.Cir.2004). The CAFC remand mandate directed this Court to hold a hearing on the essential character of the subject merchandise. Structural Industries, 356 F.3d at 1372.

This Court held an evidentiary hearing on November 10, 2004, during which each party presented one witness. Jamie Hirsh, president of Structural Industries, Inc., testified on behalf of Plaintiff. (Tr. 18-99.) Kelly Egan, a fact witness with experience in the framing industry, testified on behalf of Defendant. (Tr. 99-154.) At the Court's request, the parties submitted post-hearing concurrent briefs on the issue of the classification of the Euro Clip. Having reviewed the evidence presented at the hearing and the parties' briefs and for the reasons following, this Court now holds that wood is the essential character of the Euro Clip. The correct classification of the Euro Clip is 4414.00.00.

AGREED FACTS

Prior to the evidentiary hearing, the parties submitted a Pre-Trial Stipulation ("PT Stip.") of agreed facts. Some relevant facts are reiterated here for convenience:

1. The imported merchandise is to be classified under [HTSUS] General Rule of Interpretation 3(b) as if it consisted of the material or component that gives it its essential character. (PT Stip. ¶ 1.)

2. The subject clip frames are composite goods made up of different components. (Id. at ¶ 2.)

3. The height and width dimensions of the glass cover and the masonite back are approximately the same. (Id. at ¶ 5.)

4. Plaintiff markets the imported merchandise as Euro Clip frames or clip frames. (Id. at ¶ 6.)

5. The articles are accurately described, among other descriptions which may [be] equally accurate, as "picture holders." (Id. at ¶ 7.)

6. These picture holders may also be used to display documents or other images. (Id. at ¶ 8.)

7. Other than the metal clips, the articles do not have a border. (Id. at ¶ 9.)

8. The glass covers (id. at ¶ 10) and protects (id. at ¶ 11) the photograph or other image placed in the Euro Clip.

9. For the three sizes of Euro Clip at issue, the cost breakdown of the components is as follows:

a) 4" × 6": masonite back — 25.3%; glass cover — 24.5%; metal clips — 50.2%;

b) 8" × 10": masonite back — 34.3%; glass cover — 33.1%; metal clips — 32.6%;

c) 11" × 14": masonite back — 37.7%; glass cover — 36.4%; metal clips — 25.9%.

(Id. at ¶ 12.)

10. The masonite back is classifiable under HTSUS heading 4421. (Id. at ¶ 14.)

11. The glass cover is classifiable under HTSUS heading 7006. (Id. at ¶ 15.)

PARTIES' CONTENTIONS

I. Plaintiff's Contentions

Plaintiff submits that on the basis of GRI 3(b) the whole of the subject merchandise is classified as if it consisted solely of the element providing the essential character. (Pl.'s Br. at 2 (citing Better Home Plastics Corp. v. United States, 119 F.3d 969 (Fed.Cir.1997); The Pomeroy Collection, Ltd. v. United States, 336 F.3d 1370 (Fed.Cir.2003)).) Plaintiff suggests four possible alternative HTSUS tariff classifications for the Euro Clip:

1. 4414.00.00 (Pl.'s Br. at 2, 6): Wooden frames for paintings, photographs, mirrors or similar objects;

2. 7326.90.85 (id. at 2): Other articles of iron or steel: Other: Other;

3. 8306.30.00 (id. at 3, 6, 13): Bells, gongs and the like, nonelectric, of base metal; statuettes and other ornaments, of base metal; photograph, picture or similar frames, of base metal; mirrors of base metal; and base metal parts thereof: Photograph, picture or similar frames; mirrors; and parts thereof; and

4. 4421.90.98 (id. at 2, 6. 13): Other articles of wood: Other: Other: Other.

Plaintiff's primary argument is that the masonite back provides the essential character of the Euro Clip. (id. at 2, 11.) Plaintiff supports this contention by pointing out that

1. The masonite back is thicker than the glass (id. at 4);

2. The Euro Clip cannot be used for its intended purpose without the masonite back (id. at 5);

3. The masonite back prevents the image from twisting (id.);

4. The masonite back is indispensable to the structure and function of the Euro Clip (id. at 9); and

5. The masonite back makes the product what it is because it has four slots cut, sized, and aligned in the exact manner to accept the metal clips, which join the components (id. at 10).

Upon establishing that wood is the essential character of the Euro Clip, Plaintiff contends that the whole is correctly classified as a frame of wood, or wooden frame, under tariff item 4414.00.00. (Id. at 2.) Plaintiff suggests that the Euro Clip, with the essential character of wood, should be classified as a wooden frame because

1. Plaintiff markets the Euro Clip as a "clip frame" (id. at 3);

2. The Euro Clip is designed to be hung on a wall, either vertically or horizontally (id. at 4);

3. The Euro Clip is intended to display a photograph or other image in the manner of a frame (id. at 3, 4);

4. The industry recognizes many types of frames, not all of which have borders on four sides (id. at 5);

5. The Euro Clip is displayed and sold in retailers' frame departments. (id.); and 6. The Euro Clip competes (for sales) with other (more traditional) types of frames (id.).

Plaintiff alternatively argues that if wood is not the essential character of the Euro Clip then the subject merchandise should be classified based on the essential character being the metal clips (HTSUS 7326.90.85). (Id. at 2.) To support the alternate theory of classification, Plaintiff points out that the clips are the only other component (together with the masonite back) necessary for the intended function of the subject goods (id. at 9).

If the metal clips provide the essential character of the Euro Clip, Plaintiff also suggests that the subject merchandise may be classified as metal frames under HTSUS tariff item 8306.30.00. (Id. at 3.) According to Plaintiff, the marketing name "clip frame" "highlights the significance and importance of the metal clips" (id.), and the Euro Clip satisfies the tariff meaning of the term "picture frame" of base metal (id.).

II. Defendant's Contentions

Defendant asserts that the essential character of the Euro Clip is the glass front (Def.'s Proposed Findings of Fact and Post-Trial Br. ("Def.'s Br.") at 10) and defends the classification of the subject merchandise as liquidated — HTSUS tariff item 7013.99.40 or 7013.99.50, depending on value. As support for its contention that the glass component provides the essential character of the subject merchandise, Defendant points to the...