Trade Groups Urge CAFC to Reconsider Tariff Engineering Case, 'Use' in 'Eo Nomine' Classification
A recent Federal Circuit decision on tariff engineering is the latest in a string of cases that threatens to throw the importing community into turmoil, trade groups said in briefs requesting that the court rehear the case. The American Association of Exporters and Importers, the Customs and International Trade Bar Association and, in a joint brief, the National Association of Manufacturers and the U.S. Chamber of Commerce say the appeals court’s decision on Ford transit vans threatens to upend a century of precedent on tariff classification by solidifying use as a factor in eo nomine tariff classification.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
In its June 7 opinion, the U.S. Court of Appeals for the Federal Circuit overturned a Court of International Trade decision by finding vans imported with a rear passenger seat that was removed post-importation were cargo vans, not passenger vans, and subject to a higher rate of duty (see 1906070061). While CIT had based its decision on its finding that the goods should be classified in their condition at time of importation (see 1708170032), CAFC followed recent precedent by finding their post-importation purpose and eventual use as cargo vans was a factor.
“This Court’s opinions regarding evidence of ‘use’ in eo nomine provisions has broad reaching and negative consequences for the importing community, CBP’s determinations, and the issues being litigated before the courts,” CITBA said. Though CAFC said that use should only be considered under rare circumstances where an eo nomine provision suggests use, “the importers CITBA members represent now do not know when a classification implies a specific use,” CITBA said.
“Respectfully, CITBA suggests that there are many Headings where evidence of use could become a consideration,” the bar association said. For example, a provision for butter knives suggests use for spreading butter, and evidence may surface that a cake-server is commonly used to serve pie, it said. “Do those facts change the classifications in the face of a clear common and commercial understanding of the physical characteristics that define each utensil?”
This recent line of cases, which includes one on GRK Canada's wood screws as an early example (see 14080420), also means importers will be less able to rely on tariff classification rulings and court decisions. Eo nomine classification is determined according to a good’s common and commercial meanings, which is a question of law informed by dictionary definitions and other factors, including an article’s common use. On the other hand, principal use is a fact-based determination that may change based on the year the court or CBP decides a tariff classification issue.
The Federal Circuit’s decision “needlessly undermines century-old settled principles of duty classification, introducing massive uncertainty and subjectivity into the process,” NAM and the U.S. Chamber said in their joint brief. “It allows like goods to be treated differently at the whim of customs officials. And it precludes companies from engaging in lawful business planning to minimize duties,” they said. “Eo nomine tariff codes represent the vast majority of tariff codes, and the [CAFC] panel has done away with the bright-line rule that has governed this tariff category for more than a century,” they said.
In its petition for rehearing, filed July 22, Ford requests an en banc review, meaning all CAFC judges would rehear the case and potentially reverse the decision. According to an information sheet on the CAFC website, the Federal Circuit “grants few petitions for rehearing each year,” and “en banc consideration is rare” and only granted under certain circumstances. Those include failure to follow existing Supreme Court or Federal Circuit precedent, or following Federal Circuit precedent that the party requesting a rehearing seeks to have overturned.
Email ITTNews@warren-news.com for copies of the briefs.