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Thursday, November 12, 2:00 - 3:30 PM - Evasion & Circumvention of AD/CVD Orders
Panel discussion concerning developments in CBP evasion investigations, DOC scope/circumvention inquiries, and the interplay between the two.
Wednesday, October 28, 3:00 - 5:30 PM -
CITBA Fall Semi-Annual Meeting
Panel discussion about recent executive actions and fireside chat with Chief Judge Stanceu.
Thursday, October 8, 5:30 - 6:30 PM - Trade Negotiations: Behind the Scenes, A Fireside Chat
Stephanie Hartmann and Barbara Broussard moderated a conversation with current and former trade negotiators on the behind-the-scenes world of trade negotiations, from NAFTA to USMCA.
Tuesday, September 15, 2:00 - 3:30 PM - CITBA Black Voices in Trade: Promoting Racial Justice through Opportunity and Advancement
African American members of the trade bar talked about their experiences in our field and what we all can do to further the cause of racial justice.
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NEWS FROM THE CLERK OF THE COURT OF INTERNATIONAL TRADE
By Stephen Swindell and Scott Warner*
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| *Stephen Swindell is the Supervisor and Scott Warner is the Operations Manager for Case Management at the Court of International Trade. |
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A Sign of the Times: Rule Amendment Rhymes
New amendments to the Rules of the Court became effective on December 1st, so hold on tight. Here's a silly summary of them, all done in rhyme, but for the real thing, check out the Court's website.
- If it's in the realm of serving and filing documents you wish to thrive, then be sure to check out the latest amendments to CIT Rule 5.
- When a class action case is more your cup of tea, behold, there are amendments to Rule 23.
- Reciting your A's, B's and your 1581(c)'s too? Put the amendments to Rule 56.2 in your queue!
- Curious about enforcing a judgment and the stay of proceedings? You'd be smart to add the amendments to Rule 62 to your readings.
- If you or your colleagues have proceedings involving a surety, the amendments to Rule 65.1 are a necessity.
- If anyone out there can make a rule amendment rhyme out of the heading, "Documents in Action Described in 28 U.S.C. § 1581(c), Except an Action Described in Section 517(g) of the Tariff Act of 1930, or (f)", for Rule 73.2, then our best hats off to you.
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How Do We Substantially Transform Christmas and Classify Hanukkah?
By Jill Cramer*
Jill A. Cramer is a partner at Mowry & Grimson, PLLC. She can be reached at jac@mowrygrimson.com.
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The holidays are upon us. COVID-19 may have put a damper on celebrations, but U.S. Customs and Border Protection's stocking is still full this year. Customs receives dozens of Christmas-related ruling requests each year, and 2020 was no exception. Over 30 rulings issued by Customs in 2020 discuss "Christmas" or "Holiday" merchandise. If binding ruling requests are any measure, a wide variety of Christmas-themed products were on Americans' wish lists this year from Christmas tree ornaments to twinkly lights to decorative gnomes. Although the spirit of the season would suggest that holiday-related articles should enter duty free - and many do under their primary U.S. Harmonized Tariff Schedule (HTSUS) classification or under the special classification provision in HTSUS subheading 9817.95 - some products are subject to duties regardless of holiday theming.
One sign of the times in 2020 was the Customs ruling issued on Christmas-themed face masks. In Customs Ruling NY N314454 (Sept. 22, 2020), Customs examined a Chinese-origin "Christmas Face Covering" that was "designed and intended to be used during the Christmas holiday season as a fashionable, non-medical, face mask" featuring snowmen, candy canes, snowflakes and holly accents. Without discussion, Customs concluded that the masks were classified under HTSUS subheading 6307.90.9875 ("Other made up articles, including dress patterns: Other: Other: Other: Face masks, including respirators without replaceable filters: Other face masks: Other"), carrying a regular duty rate of 7% and additional Section 301 tariffs of 7.5%, although a Section 301 tariff exclusion was available.
Among the other remarkable Christmas-related rulings issued by Customs in 2020 were decisions on the HoHoHoH2o Automatic Christmas Tree Watering Device and the Santa Hat, Chip & Dip. The HoHoHoH2o was a water tank in the shape of a wrapped gift that included a water pump, hose and sensors designed to be placed in a Christmas tree stand to keep the tree sufficiently watered. See Customs Ruling NY N314519 (Sept. 28, 2020). In analyzing classification, Customs first determined that the HoHoHoH2o could not be categorized as an electronic device because its operation did not depend on an electrical phenomenon. Customs then proceeded through the General Rules of Interpretation (GRIs), finding that the HoHoHoH2o was a composite good within the meaning of GRI 3(b) but concluding that neither the pump nor the sensors imparted the essential character of the device. Customs therefore resorted to GRI 3(c) - the last-in-numerical-order rule - and classified the HoHoHoH2o under duty-free subheading 9026.10.6000 ("Instruments and apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gases ... parts and accessories thereof: For measuring or checking the flow or level of liquids: Other: Other."). Christmas joy ran out for this importer, however, because, given its Chinese origin, the HoHoHoH2o was also subject to Section 301 duties of 7.5%.
"The Santa Hat, Chip & Dip," was described as "a circular plate designed for the serving of chips" featuring "a representation of a black belt with a gold buckle," "a circular compartment which is designed to hold dip" and a "three-dimensional representation of a Santa hat [that] fits over the dip compartment and acts as a lid." Customs Ruling NY N313615 (Aug. 12, 2020). Customs determined that the Santa serveware was classified under HTSUS subheading 6912.00.4810 ("Ceramic tableware, kitchenware, other household articles and toilet articles, other than of porcelain or china: Tableware and kitchenware: Other: Other: Other: Other...Suitable for food or drink contact"). This classification is normally subject to a 9.8% duty rate, but Customs found that the chip and dip also met the terms of the duty-free provision in HTSUS subheading 9817.95.05, which provides for "articles classifiable in subheadings 6912.00 [among others]....: utilitarian articles in the form of a three-dimensional representation of a symbol or motif clearly associated with a specific holiday in the United States." Christmas was thereby saved for The Santa Hat, Chip & Dip.
Notably, there was a single ruling issued by Customs in 2020 mentioning "Hanukkah" (or its common spelling variants). In Customs Ruling NY N312677 (July 9, 2020), Customs examined the "Hanukkah Mystery Punch Box," described as a folding box of corrugated paperboard printed with familiar Hanukkah icons containing eight compartments overlaid with paper that allowed the user to insert eight gifts into separate compartments after which "a child punches their hand through one of the holes and the underlying paper to retrieve one of the gifts." Customs rejected classification of the punch box as a toy under HTSUS heading 9503 or as a festive article under heading 9505, finding instead that the Hanukkah Mystery Punch Box was a composite good under GRI 3(b). Customs determined that folding box component imparted the essential character of the punch box because it was the component that held the gifts and conveyed "seasonal consumer appeal." Customs, therefore, held that classification was proper under duty-free subheading 4819.10.0040 ("Cartons, boxes, cases, bags and other packing containers, of paper, paperboard, cellulose wadding or webs of cellulose fibers; box files, letter trays and similar articles, of paper or paperboard of a kind used in offices, shops or the like: Cartons, boxes and cases, of corrugated paper or paperboard: Other"). Alas, no Hanukkah miracle was in store. Given the product's Chinese origin, it was subject to the Section 301 tariff of 25% under List 3, although an exclusion was available for part of 2020.
Customs has also had the opportunity to classify other Hanukkah-related merchandise such as dreidels and menorahs over the years. Customs has ruled that dreidels are classified under the duty-free HTSUS subheading 9503.00.0073 ("Tricycles, scooters, pedal cars and similar wheeled toys...dolls, other toys...puzzles of all kinds; parts and accessories thereof... 'Children's products' ...: Other: Labeled or determined by importer as intended for use by persons: 3 to 12 years of age."). See Customs Ruling NY N255776 (Aug. 26, 2014). Menorahs and their candles, meanwhile, also enter duty free under subheading 9505.90.6000 ("Festive, carnival or other entertainment articles, other: other"). See, e.g., Customs Ruling NY J82947 (Apr. 7, 2003); Customs Ruling NY NI87432 (Oct. 21, 2002). In addition, Customs has weighed in on a more modern contribution to the ancient Festival of Lights celebration, the "Mensch on a Bench." In Ruling NY N279492 (Oct. 5, 2016), Customs examined the classification of the "Mensch on a Bench" play set, described as "a full-figured plush figure named Moshe, a hardcover story book illustrated with colored pictures and a play environment consisting of a cardboard bench, table and Menorah (the Hebrew word for candelabra)." Customs applied the sets analysis in GRI 3(b), deciding that the essential character of the play set was "imparted by the plush doll," leading to classification of Moshe and his accoutrements as a child's toy under duty-free subheading 9503.00.0073, supra.
Although classification rulings on holiday items from various faiths are common, country-of-origin rulings are as rare as finding PlayStation 5 on store shelves this year. According to a review of the Customs Ruling Online Search System, or CROSS, there were no origin rulings issued on holiday items in 2020, and the total number of origin rulings issued over the years appears to be roughly equivalent to the Twelve Days of Christmas.Nevertheless, there are several noteworthy origin rulings from days of yore. In Ruling NY N302350 (Mar. 1, 2019), a case examining marking requirements, chocolate blocks and chips were manufactured in Belgium and then shipped to China where they were melted, passed through a sieve, tempered and poured into a Santa mold and then wrapped in foil. Customs found that "the essential physical and chemical characteristics of the chocolate are unchanged when compared to the finished [Santa]. In addition, the processing of the chocolate block into novelty shapes does not change either the name or the use of the chocolate." Customs thus concluded that Santa was properly marked as a "Product of Belgium."
The majority of past country-of-origin rulings on holiday articles involve Christmas lights, an item rumored to be difficult to procure in 2020 as more of us stay home and crave holiday adornments. Although the analysis is nuanced, a common theme is that mere assembly of the components of string lights from individual parts does not result in substantial transformation of imported materials but more complex operations such as injection molding plastic components and forming glass tubes for the lights are considered to result in an article with a new name, character and use. See, e.g., Customs Ruling HQ H303816 (June 14, 2019); Customs Ruling NY N299944 (Aug. 24, 2018). Proving substantial transformation of holiday lights can, therefore, be as complicated as untangling the mass of green wires hastily put away last season.
Just like family gatherings over the holidays, Customs' decisions have been known to lead to conflict. Both the Court of International Trade (CIT) and the U.S. Court of Appeals for the Federal Circuit have been gifted a number of appeals over the years from importers disgruntled with a Customs decision on how to classify their holiday offerings. Among the most prominent court proceedings in recent years was one involving how to classify Santa Claus. In a 2017 decision, Judge Barnett analyzed whether a Santa Claus costume was a "festive article" entitled to enter duty free under HTSUS heading 9505, as argued by the importer, or instead "fancy dress," classifiable based on its individual components under Chapter 61 and thus dutiable at duty rates as high as 32% ad valorem, as determined by Customs. See Rubies Costume Co. v. United States, 279 F. Supp. 3d 1145, 1150 (Ct. Int'l Trade 2017), aff'd, 922 F.3d 1337 (Fed. Cir. 2019). After a methodical review of the HTSUS and relevant chapter notes, past case law involving classification of costumes and expert testimony, Judge Barnett generally upheld Customs' original classification determination. Explaining that "the Santa Suit's association with the Christmas season does not foreclose its classification as wearing apparel," Judge Barnett concluded that due to durability for multiple wearings and cleanings, the Santa jacket and pants "constitute fancy dress of a durable, non-flimsy nature, and are normal articles of apparel classifiable pursuant to Chapter 61" and, therefore, were precluded from classification under the duty-free provision in Chapter 95 as "festive articles." Id. at 1165.
Santa is nothing if not persistent, so he sought further review of the matter at the Federal Circuit. In affirming Judge Barnett's decision, the Federal Circuit noted that "[t]here is no dispute that the Santa Suit is a costume traditionally worn in conjunction with the celebration of Christmas, a festive occasion, to portray Santa Claus, a fictional jolly character that significantly contributes to the festivity of the occasion. Instead, the dispute centers on the meaning and scope of terms in the HTSUS, not on the nature of the Santa Suit." Rubies Costume Co. v. United States, 922 F.3d 1337, 1344 (Fed. Cir. 2019). The Federal Circuit agreed with the CIT that Santa's jacket and pants were manufactured to survive multiple wears through many Christmas seasons and required dry cleaning, demonstrating that these items were of a "durable and nonflimsy construction" and therefore precluded from classification as "festive articles." Id. at 1346-47.
Another notable court decision from recent years arose from a decades-long dispute over the proper classification of "Christmas Hugs," something most of us will be doing without this year. See Russ Berrie & Co. v. United States, 329 F. Supp. 3d 1345, 1370-71 (Ct. Int'l Trade 2018) (analyzing the classification of a number of categories of Christmas and holiday merchandise). In an opinion employing the term "Christmas" over 80 times, Chief Judge Stanceu determined that "there can be no genuine issue of material fact as to the nature of Christmas Hugs," described as "small, rounded objects depicting non-human creatures." Id. at 1370. The Court rejected the importer's claim that the Christmas Hugs were festive articles classifiable under HTSUS heading 9505 (and thus duty free), concluding that "nothing about [the Christmas Hugs'] physical structure, appearance, or packaging indicates that they are Christmas decorations or articles traditionally used at Christmas. Instead, these small plastic, cartoon-like figures have the amusing characteristics of toys" classified under 9503.49.00 ("Other Toys... representing animals or non-human creatures ... Other") dutiable at a rate of 6.8%. Id. at 1371.
For those CITBA members focusing their practice on trade remedies, we still have seasonal delights for you in court precedent. Of note are several cases examining whether Christmas candles were subject to the antidumping order on petroleum wax candles from the People's Republic of China. At issue in San Francisco Candle Co. v. United States, 206 F. Supp. 2d 1304, 1309 (Ct. Int'l Trade 2002), for example, was whether a scope exception for holiday novelty candles applied to candles featuring images of Santa, holly leaves, candy canes and other holiday designs. Judge Pogue painstakingly examined the decorative aspects of each candle and remanded the case to Commerce for reconsideration of its initial decision that the candles were ineligible for the holiday candle scope exclusion because, among other reasons, the holiday designs would burn away when the candles were lit, the designs were "minimally decorative" and the designs "were not easily recognizable as holiday images." Id. at 1312-17. On remand, the Department of Commerce reversed course and found most of the candles were excluded from the scope under the holiday candles exclusion, but those with only "inconspicuous" holiday imagery remained in scope, a determination upheld by the court. See San Francisco Candle Co. v. United States, 265 F. Supp. 2d 1374, 1381-1383 (Ct. Int'l Trade 2003) (citing Commerce remand), aff'd, 2004 U.S. App. LEXIS 12106 (Fed. Cir. 2004); see also Springwater Cookie & Confections, Inc. v. United States, 20 C.I.T. 1192 (Ct. Int'l Trade 1996) (examining the holiday novelty candle exclusion for a different group of products).
In a year of unprecedented events, it is comforting to know that the consistent, reassuring process of binding classification rulings and appellate procedures remain intact. If you find yourself with time on your hands in the coming weeks, there are many more holiday tales to read in the annals of Customs rulings and court jurisprudence. Only time will tell what novel holiday articles will delight Customs and the courts in 2021.
Happy Holidays to all!
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