U.S. v. Haggar Apparel

• Decision Date: 21 April 1999
• Docket Number: 972044
• Citation: 526 U.S. 380,119 S.Ct. 1392,143 L.Ed.2d 480
• Parties: UNITED STATES v. HAGGAR APPAREL CO. (97-2044) 127 F.3d 1460, vacated and remanded. SUPREME COURT OF THE UNITED STATES 119 S.Ct. 1392 143 L.Ed.2d 4802044 UNITED STATES, PETITIONER v. HAGGAR APPAREL COMPANY ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT [
• Court: U.S. Supreme Court

526 U.S. 380

119 S.Ct. 1392

143 L.Ed.2d 480

UNITED STATES v. HAGGAR APPAREL CO.

(97-2044)

127 F.3d 1460, vacated and remanded

SUPREME COURT OF THE UNITED STATES

No. 97 2044

UNITED STATES, PETITIONER v. HAGGAR APPAREL COMPANY

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

[April 21, 1999]

Justice Kennedy delivered the opinion of the Court.

This case concerns regulations relating to the customs classification of certain imported goods. The regulations were issued by the United States Customs Service with approval of the Secretary of the Treasury. The question is whether these regulations, deemed controlling by the Treasury, are entitled to judicial deference in a refund suit brought in the Court of International Trade. Contrary to the position of that Court and the Court of Appeals for the Federal Circuit, we hold the regulation in question is subject to the analysis required by Chevron U.S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), and that if it is a reasonable interpretation and implementation of an ambiguous statutory provision, it must be given judicial deference.

I

Respondent Haggar Apparel Co. designs, manufactures, and markets apparel for men. This matter arises from a refund proceeding for duties imposed on men's trousers shipped by respondent to this country from an assembly plant it controlled in Mexico. The fabric had been cut in the United States and then shipped to Mexico, along with the thread, buttons, and zippers necessary to complete the garments. App. 37 38. There the trousers were sewn and reshipped to the United States. If that had been the full extent of it, there would be no dispute, for if there were mere assembly without other steps, all agree the imported garments would have been eligible for the duty exemption which respondent claims.

Respondent, however, in the Government's view, added one other step at the Mexican plant: permapressing. Permapressing is designed to maintain a garment's crease in the desired place and to avoid other creases or wrinkles that detract from its proper appearance. There are various methods and sequences by which permapressing can be accomplished, and one of respondent's contentions is that the Treasury's categorical approach fails to take these differences into account.

For the permapressed garments in question here, respondent purchased fabric in the United States that had been treated with a chemical resin. Id., at 37. After the treated fabric had been cut in the United States, shipped to Mexico, and sewn and given a regular pressing there, respondent baked the garments in an oven at the Mexican facility before tagging and shipping them to the United States. The baking operation took some 12 to 15 minutes. Id., at 38. With the right heat, the preapplied chemical was activated and the permapress quality was imparted to the garment. If it had delayed baking until the articles returned to the United States, respondent would have had to take extra, otherwise unnecessary steps in the United States before shipping the garments to retailers. Id., at 127 28; App. to Pet. for Cert. 20a 21a. In addition, respondent maintained below, there would have been a risk that during shipping unwanted creases and wrinkles might have developed in the otherwise finished garments. Ibid.

The Customs Service claimed the baking was an added process in addition to assembly, and denied a duty exemption; respondent claimed the baking was simply part of the assembly process, or, in the words of the controlling statute, an "operatio[n] incidental to the assembly process." Subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), 19 U.S.C. § 1202; Item 807.00, Tariff Schedule of the United States (TSUS), 19 U.S.C. § 1202 (1982 ed.). Respondent's case was made more difficult by a regulation, to be discussed further, that deems all permapressing operations to be an additional step in manufacture, not part of or incidental to the assembly process. See 19 CFR § 10.16(c) (1998). The issue before us is the force and effect of the regulation in subsequent judicial proceedings.

After being denied the exemption it sought for the permapressed articles, respondent brought suit for refund in the Court of International Trade. The court declined to treat the regulation as controlling. 938 F. Supp. 868, 874 875 (1996). In making its determination, the court relied on a detailed analysis stemming from United States v. Mast Industries, Inc., 668 F.2d 501 (CCPA 1981), a leading precedent on this duty exemption from the predecessor to the Court of Appeals for the Federal Circuit. Mast Industries, in fact, involved garment fabrication and assembly, though the Court of International Trade drew also on cases involving other assembly operations. E.g., 938 F. Supp., at 872 (citing General Motors Corp. v. United States, 976 F.2d 716 (CA Fed. 1992) (painting of sheet metal component parts used in motor vehicles)). The court ruled in favor of respondent. 938 F. Supp., at 875. On review, the Court of Appeals for the Federal Circuit declined to analyze the regulation under Chevron, and affirmed. 127 F.3d 1460, 1462 (1997). We granted certiorari, 524 U.S. ___ (1998), and we now vacate the judgment of the Court of Appeals and remand the case for further proceedings.

II

The statute on which respondent relies provides importers a partial exemption from duties otherwise imposed. The exemption extends to:

"Articles assembled abroad in whole or in part of fabricated components, the product of the United States, which (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process such as cleaning, lubricating and painting." Subheading 9802.00.80, HTSUS, 19 U.S.C. § 1202.

(The HTSUS became law on January 1, 1989, replacing the provisions of the former TSUS. See 19 U.S.C. § 3004. Item 807.00 of the TSUS, the previous statute which governs some of the shipments at issue in this case, is identical to HTSUS Subheading 9802.00.80.)

The relevant regulation interpreting the statute with respect to permapressed articles provides as follows:

"Any significant process, operation, or treatment other than assembly whose primary purpose is the fabrication, completion, physical or chemical improvement of a component, or which is not related to the assembly process, whether or not it effects a substantial transformation of the article, shall not be regarded as incidental to the assembly and shall preclude the application of the exemption to such article. The following are examples of operations not considered incidental to the assembly :

. . . . .

"(4) Chemical treatment of components or assembled articles to impart new characteristics, such as showerproofing, permapressing, sanforizing, dying or bleaching of textiles." 19 CFR § 10.16(c) (1998).

The regulation was adopted in 1975 by the Commissioner of Customs upon approval by the Treasury Department, after notice-and-comment rulemaking. See 39 Fed. Reg. 24651 (1974) (proposed regulation); 40 Fed. Reg. 43021 (1975) (final regulation).

In contending that the regulation is not within the general purview of the Chevron framework, respondent advances two sets of arguments. First, citing the terms of the regulation and its enabling statutes, respondent contends the regulation is limited in application to customs officers themselves and is not intended to govern the adjudication of importers' refund suits in the Court of International Trade. Second, in reliance on the authority and jurisdiction of the Court of International Trade, respondent argues that even if the Treasury Department did intend the regulation to bear on the determination of refund suits, the Court of International Trade is empowered to interpret the tariff statute without giving the usual deference to regulations issued by the administering agency.

As to the first set of arguments, respondent says the regulation binds Customs Service employees when they classify imported merchandise under the tariff schedules but does not bind the importers themselves. The statutory scheme does not support this limited view of the force and effect of the regulation. The Customs Service (which is within the Treasury Department) is charged with the classification of imported goods under the proper provision of the tariff schedules in the first instance. There is specific statutory direction to this effect: "The Customs Service shall, under rules and regulations prescribed by the Secretary [of the Treasury,] fix the final classification and rate of duty applicable to" imported goods. 19 U.S.C. § 1500(b). In addition, the Secretary is directed by statute to "establish and promulgate such rules and regulations not inconsistent with the law as may be necessary to secure a just, impartial and uniform appraisement of imported merchandise and the classification and assessment of duties thereon at the various ports of entry." §1502(a). See also General Headnote 11, TSUS, 19 U.S.C. § 1202 (1982 ed.) (authorizing the Secretary "to issue rules and regulations governing the admission of articles under the provisions" of the tariff schedules); General Note 20, HTSUS, 19 U.S.C. § 1202 (same). The Secretary, in turn, has delegated to the Commissioner of Customs the authority to issue generally applicable regulations, subject to the Secretary's approval. Treasury Dept. Order No. 165, T. D. 53160 (Dec. 15, 1952).

Respondent relies on the specific direction to the Secretary to make rules of classification for "the various ports of entry" to argue that the statute authorizes promulgation of regulations that do nothing more than ensure that customs officers in field offices around the country classify goods according to a similar and consistent scheme. The regulations issued under the statute have no bearing, says respondent, on the rights of the...