Winter-Wolff, Inc. v. U.S., Slip Op.98-15.

• Decision Date: 20 February 1998
• Docket Number: Court No. 95-12-01712.,Slip Op.98-15.
• Parties: WINTER-WOLFF, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

Page 1258

996 F.Supp. 1258

WINTER-WOLFF, INC., Plaintiff, v. UNITED STATES, Defendant.

Slip Op.98-15.

Court No. 95-12-01712.

United States Court of International Trade.

February 20, 1998.

Barnes, Richardson & Colburn, (James S. O'Kelly and Christopher E. Pey), for plaintiff.

Frank W. Hunger, Assistant Attorney General; Joseph I. Liebman, Attorney-in-Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice; Office of the Assistant Chief Counsel, International Trade Litigation, United States Customs Service (Beth C. Brotman), of counsel, for defendant.

OPINION

GOLDBERG, Judge.

Plaintiff importer, Winter-Wolff, Inc., ("Winter-Wolff") challenges the United States Customs Service's ("Customs") classification of laser-treated aluminum capacitor foil imported from Switzerland in 1995.

In response to plaintiff's request for a ruling, the District Director at the port of Ogdensburg, New York, classified the laser-treated foil as aluminum foil, not further worked, under Harmonized Tariff Schedule of the United States ("HTSUS") subheading 7607.11.30, dutiable at a rate of 5.8% ad valorem. Plaintiff filed a timely protest of the ruling with Customs headquarters. Customs affirmed the District Director's ruling in HQ 958058, dated September 29, 1995.

Winter-Wolff then filed a timely appeal of Customs' decision, claiming the laser treatment constitutes "further working" and, as a result, the merchandise falls outside the ambit of HTSUS subheading 7607.11.30 and, instead, is properly classified under subheading 7607.19.60, dutiable at a rate of 3% ad valorem. Pursuant to 28 U.S.C. § 2640(a)(1) (1994), trial ensued on October 22 and 23, 1997. The Court exercises jurisdiction in this matter under 28 U.S.C. § 1581(a) (1994). The Court finds for plaintiff.

I. ISSUES PRESENTED

Plaintiff claims the aluminum foil is "further worked" by the laser treatment and thus falls outside HTSUS subheading 7607.11.30, a tariff provision that requires applicable merchandise to be "not further worked." Instead, plaintiff contends the imports, as "further worked," are within the purview of HTSUS subheading 7607.19.60 and are properly dutiable at 3% ad valorem. Plaintiff maintains the common, dictionary meaning of the term "further worked" mandates this conclusion. To support this argument, plaintiff called three witnesses at trial: (1) Mr. Hans K. Sprunger, International Sales Manager for Lawson Mardon Neher AG ("Neher"), the producer of the laser-treated foil; (2) Mr. Daniel E. Weil, Manager of Winter-Wolff, Inc.; and (3) Mr. Herman Fletcher Jr., General Manager for Capacitor Products at Cooper Power Systems ("Cooper"), a capacitor manufacturer.

The government, on the other hand, asserts the meaning of the term "further worked" as defined in the commercial, metallurgical sense validates Customs' classification. As support for this argument, the government relies upon the testimony of one expert witness, Dr. Michael McNallan. Alternatively, the government submits that the laser treatment cuts the foil to shape such that the merchandise should be classified as capacitor foil that has been "cut-to-shape" under HTSUS subheading 7607.19.30, dutiable at a rate of 5.7% ad valorem.

This case boils down to one issue — whether the classification decision should be guided by the dictionary meaning or the commercial meaning of the tariff term "further worked." Resolution of this issue settles the following questions: (1) whether Customs correctly classified the imported foil under 7607.11.30, "Aluminum foil ... rolled but not further worked," or whether the laser treatment on the imported merchandise constitutes "further working" within the meaning of Heading 7607, HTSUS?; and (2) whether, in the event the imported merchandise is found to have been "further worked," it has also been "cut to shape" such that it should be classified under subheading 7607.19.30 with a dutiable rate of 5.7% ad valorem?

II. BACKGROUND

The merchandise at issue is aluminum foil for capacitors imported in rolls of widths of 228mm to 635mm, all of which are less than 0.01mm thick, that has been slit by a laser treatment. The laser-treated foil is produced in Switzerland by Neher. Manufacture of all aluminum capacitor foil, including the laser-treated variety at issue here, involves a multi-step process. First, foil stock is annealed, cooled, and rolled several times to reduce the thickness. Next, the foil stock is double rolled, i.e., two layers of foil stock are rolled at the same time, to further reduce the thickness of the merchandise. The foil is then rewound and slit with mechanical knives to desired widths.

At this point, the capacitor foil may be sold, and is sold, without the laser treatment. Foil sold at this point is referred to as "hard" or "wet" (i.e., foil with rolling oils) capacitor foil. If it is not sold at this stage, the foil is further annealed to remove certain oils and either sold or placed in inventory. From inventory, the foil is readied for sale in one of two manners: (1) as "soft" or "dry" capacitor foil, or (2) as laser-treated capacitor foil. If the foil is sold as "soft/dry" capacitor foil, the foil is simply removed from inventory and sold as is. The laser-treated foil, however, must undergo an additional process before shipment. Specifically, the foil is removed from inventory and passed beneath a laser. As the foil passes under the laser, the laser melts one of the foil's edges. The laser-treated side of the foil is distinguished by its rounded edge, which stands in contrast to the rough edges found on foil slit by knives. See Pl.'s Ex. 6. Importantly, while one edge of the foil passes under the laser, the other edge is simultaneously mechanically sheared by knives.

As its name suggests, capacitor foil is a type of aluminum foil dedicated for end use in capacitors. Capacitors are devices used by electrical utility companies to store electric energy. Capacitors may be found at substations for electrical utilities as well as on some overhead distribution lines. Electrical utilities use the capacitors to compensate for inherent deficiencies in A/C power lines. More specifically, when transferring electricity from a generator to a customer, power lines often introduce an inductive current that may cause voltages to drop. Capacitors, as electrical opposites, cancel out the inductive current in the lines and, hence, function as valuable components for electrical utilities.

Capacitors are manufactured using poly-propylene film and aluminum capacitor foil. The film and foil are wound together in packs. Several of the packs are then placed in stainless steel tanks that are sealed, vacuum processed, and painted to make a capacitor. Two of plaintiff's witnesses, Mr. Sprunger and Mr. Fletcher, testified that the laser-treated foil is preferred by high-voltage capacitor manufacturers because the rounded edges, unlike the knife-slit edges, increase the discharge inception voltage ("DIV") performance of capacitors. Superior DIV performance is preferred by electrical utilities because it diminishes the possibility that the capacitor will experience a phenomena known as dielectric breakdown or "corona," the leading cause of capacitor failures.

III. STANDARD OF REVIEW

The factual portion of a Customs' classification decision enjoys a statutory presumption of correctness; the importer plaintiff has the burden of proving otherwise. 28 U.S.C. § 2639(a)(1) (1994); Anhydrides & Chems., Inc. v. United States, ___ Fed. Cir. (T) ___, ___, 130 F.3d 1481, 1485-86 (1997); Goodman Mfg., L.P. v. United States, ___ Fed. Cir. (T) ___, ___, 69 F.3d 505, 508 (1995) (statutory presumption of correctness is limited to factual determinations). Pursuant to 28 U.S.C. § 2640(a), however, the legal basis for Customs' classification decision is subject to de novo review. Indeed, the Court has a statutory duty when it reviews classification decisions to find the correct result. 28 U.S.C. § 2643(b); Rollerblade, Inc. v. United States, ___ Fed. Cir. (T) ___, ___, 112 F.3d 481, 484 (1997). In making this determination, 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, 2 Fed. Cir. (T) 70, 75, 733 F.2d 873, 878 (1984). Because the parties do not dispute Customs' factual findings here, the presumption of correctness is not relevant. This case is reviewed de novo.

IV. DISCUSSION

This case requires the Court to determine the correct meaning of the term "further worked" as it appears in HTSUS subheading 7607.11.30. "[T]he meaning of a tariff term is a question of law." Brookside Veneers, Ltd. v. United States, 6 Fed. Cir. (T) 121, 124, 847 F.2d 786, 788 (1988). It is fundamental that a court should determine the correct classification of a tariff term by first turning to the terms of the statute, i.e., the HTSUS, and its legislative history, i.e., the relevant Chapter and Section Notes. See, e.g., Lynteq, Inc. v. United States, ___ Fed. Cir. (T) ___, ___, 976 F.2d 693, 696 (1992) (citations omitted); see also GRI 1, HTSUS (providing that "classification shall be determined according to the terms of the headings and any relative section or chapter notes...."). When, however, a tariff term is not clearly defined by the statute or its legislative history, it is also fundamental that the correct meaning of the tariff term is "presumed to be the same as its common or dictionary meaning in the absence of evidence to the contrary." Rohm & Haas Co. v. United States, 2 Fed. Cir. (T) 28, 29, 727 F.2d 1095, 1097 (1984) (quoting Bentkamp v. United States, 40 C.C.P.A. 70, 78 (1952) (citation omitted)). See also Mita Copystar America v. United States, ___ Fed. Cir. (T) ___, ___, 21 F.3d 1079, 1082 (1994); Brookside Veneers, 6 Fed. Cir. (T) at 125, 847 F.2d at 789 (citation omitted).

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