Customs Bulletin Weekly, Vol. 51, November 15, 2017, No. 46

U.S. Court of International Trade

◆

Slip Op. 17–146

MAVERICK TUBE CORPORATION, Plaintiff, v. UNITED STATES, Defendant,

and SEAH STEEL CORPORATION, Defendant-Intervenor.

Before: Richard K. Eaton, Judge

Court No. 15–00303

[Plaintiff Maverick Tube Corporation’s motion for judgment on the agency record is

denied, and the United States Department of Commerce’s ﬁnal negative countervailing

duty determination is sustained.]

Dated: October 27, 2017

Robert E. DeFrancesco and Brett A. Shumate, Wiley Rein, LLP, of Washington, DC,

for plaintiff. With them on the brief were Alan H. Price, Tessa V. Capeloto, Adam M.

Teslik.

Loren M. Preheim, Assistant Director, Commercial Litigation Branch, Civil Divi-

sion, U.S. Department of Justice, of Washington, DC, for defendant. With him on the

brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Jeanne E.

Davidson, Director, Claudia Burke, Assistant Director, and Ryan M. Majerus, Trial

Attorney. Of counsel on the brief was Khalil Gharbieh, Attorney, Office of the Chief

Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce, of

Washington, DC.

Daniel E. Parga, Law Office of Jeffrey M. Winton PLLC, of Washington, DC, for

defendant-intervenor. With him on the brief was Jeffrey M. Winton.

OPINION

Eaton, Judge:

Before the court is Maverick Tube Corporation’s (“Maverick” or

“plaintiff”) motion for judgment on the agency record challenging the

ﬁnal determination of the United States Department of Commerce

(“Commerce” or the “Department”) in Welded Line Pipe From the

Republic of Korea: Final Negative Countervailing Duty Determina-

tion, 80 Fed. Reg. 61,365 (Dep’t Commerce Oct. 13, 2015), P.R. 457

and accompanying Issues and Decision Memorandum, P.R. 450 (“Fi-

nal Determination”).

Plaintiff objects to the Final Determination on three grounds,

claiming that (1) Commerce acted contrary to law by concluding that

the Government of the Republic of Korea’s (“Korean Government”)

provision of electricity to defendant-intervenor SeAH Steel Corpora-

tion (“SeAH”) did not beneﬁt the company; (2) Commerce’s conclusion

that the Korean Government’s provision of electricity did not beneﬁt

SeAH was unsupported by substantial evidence; and (3) Commerce’s

determination not to apply adverse facts available

(“AFA”) to the

Korean Government was unsupported by substantial evidence. Pl.’s

Mem. Supp. Mot. J. Agency R., ECF No. 32 (“Pl.’s Br.”) 3. Additionally,

plaintiff asks the court to “remand the issue of speciﬁcity

[2]

to the

agency” because Commerce’s failure to reach a ﬁnal determination on

speciﬁcity “was contingent on its unlawful and unreasonable ﬁnding

of no beneﬁt.” Pl.’s Br. 4.

Defendant the United States (the “Government” or “defendant”), on

behalf of Commerce, argues that Commerce’s determination that the

Korean Government’s provision of electricity “provides no beneﬁt to

[respondent] SeAH . . . because the prices charged to [SeAH] . . . were

consistent with [the Korea Electricity Power Corporation’s

(“KEPCO”)] standard pricing mechanism,” is both in accordance with

law and supported by substantial evidence. Final Determination at

18; see Def.’s Resp. Pl.’s Mot. J. Agency R., ECF No. 39 (“Def.’s Br.”) 10.

Speciﬁcally, defendant maintains that, under the regulatory frame-

work, Commerce properly determined that KEPCO’s electricity prices

“were set in accordance with . . . market principles” based on Com-

merce’s “analysis of the [KEPCO’s] price-setting philosophy [i.e., stan-

dard pricing mechanism].” Def.’s Br. 10. In addition, the Government

maintains that Commerce did not apply AFA lawfully because the

Korean Government “was fully cooperative” by “respond[ing] to Com-

merce’s multiple, detailed questionnaires. . . .” Def.’s Br. 23. Defen-

dant’s papers do not address the issue of speciﬁcity. Because the

Government argues that Commerce properly determined that a ben-

eﬁt was not conferred, however, the Government presumably believes

the issue of speciﬁcity need not be addressed. This court has juris-

diction pursuant to 28 U.S.C. § 1581(c) (2012); 19 U.S.C. § 1516a

(a)(1)(A).

Defendant-Intervenor SeAH states that defendant “has provided

sufficient justiﬁcation for denying Maverick’s motion,” and therefore,

determined “it [was] not necessary . . . to explain its own views of the

If Commerce determines that the use of facts available is warranted under 19 U.S.C. §

1677e(a), and makes the additional ﬁnding that a party has “failed to cooperate by not

acting to the best of its ability to comply with a request for information,” it may use an

adverse inference “in selecting from among the facts otherwise available.” 19 U.S.C. §

1677e(b) (2012); Artisan Mfg. Corp. v. United States, 38 CIT __, __, 978 F. Supp. 2d 1334,

1342 (2014). This is generally referred to as “adverse facts available.”

Pursuant to the statute, a subsidy must be “speciﬁc” to be countervailable. See 19 U.S.C.

§ 1677(5)(A). “Speciﬁcity” may be established in several ways, one of which is by showing

that a particular industry is favored over others. See 19 U.S.C. § 1677(5A)(D)(iii)(IV)

(providing that a subsidy is speciﬁc “as a matter of fact” if “[t]he manner in which the

authority providing the subsidy has exercised discretion in the decision to grant the subsidy

indicates that an enterprise or industry is favored over others”).

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

issues . . . or the reasons that Maverick’s motion should be denied.”

Def.-Int.’s Resp. Pl.’s Mot. J. Agency R., ECF No. 40, 1.

Because the court ﬁnds that Commerce’s Final Determination was

supported by substantial evidence and in accordance with law, plain-

tiff’s motion for judgment on the agency record is denied.

LEGAL FRAMEWORK

A countervailable subsidy exists where “an authority [i.e. a govern-

ment or governmental actor] . . . provides a ﬁnancial contribution

. . . to a person and a beneﬁt is thereby conferred.” 19 U.S.C. §

1677(5)(B). When the ﬁnancial contribution consists of a provision of

goods or services, a beneﬁt is found when “such goods or services are

provided for less than adequate remuneration,” with the adequacy of

remuneration determined “in relation to prevailing market condi-

tions for the good or service being provided . . . in the country which

is subject to the investigation or review.” 19 U.S.C. § 1677(5)(E)(iv).

Examples of prevailing market conditions include “price, quality,

availability, marketability, transportation, and other conditions of

purchase or sale.” 19 U.S.C. § 1677(5)(E).

Importantly for plaintiff, § 1677(5)(E)(iv) reﬂects a change in deﬁ-

nition of what amounts to a “beneﬁt” following the passage of the

Uruguay Round Agreements Act (“URAA”).

See Certain Softwood

Lumber Prods. From Canada, 66 Fed. Reg. 43,186, 43,196 (Dep’t

Commerce Aug. 17, 2001) (preliminary affirmative countervailing

duty determination). Prior to the URAA, a subsidy would have been

found present when goods or services were provided “at preferential

rates.” 19 U.S.C. § 1677(5)(A)(ii)(II) (1988). Under the former prefer-

entiality standard, “preferential” meant “more favorable treatment to

some within the relevant jurisdiction than to others within that

jurisdiction,” but not that preferential treatment was necessarily

“inconsistent with commercial considerations.” Countervailing Du-

ties, 54 Fed. Reg. 23,366, 23,372 (Dep’t Commerce May 31, 1989)

(notice of proposed rulemaking and request for public comments)

(“1989 Proposed Rule”)

; see also Final Negative Countervailing Duty

Determinations; Certain Softwood Prods. From Canada, 48 Fed. Reg.

24,159, 24,167 (Dep’t Commerce May 31, 1983).

Following the passage of the URAA and the adoption of the “ad-

equate remuneration” language, Commerce concluded that it wished

Uruguay Round Agreements Act, Pub. L. No. 103–465, § 101, 108 Stat. 4814 (codiﬁed as

19 U.S.C. § 3511 (1994)).

Although not adopted, the 1989 Proposed Rule “codif[ied] much of the Department’s

existing practice with respect to the identiﬁcation and measurement of subsidies under the

countervailing duty law.” Countervailing Duties, 54 Fed. Reg. at 23,366.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

to “acquire some experience with the new statutory provision before

codifying [its] methodology [for determining the adequacy of remu-

neration] in the form of a regulation.” Countervailing Duties: Final

Rule, 63 Fed. Reg. 65,348, 65,377 (Dep’t Commerce Nov. 25, 1998)

(“Preamble”). In 1997, Commerce sought guidance as to how to con-

form its regulations with the language of the URAA. See Countervail-

ing Duties: Proposed Rule, 62 Fed. Reg. 8818 (Dep’t Commerce Feb.

26, 1997) (notice of proposed rulemaking and request for public com-

ments) (“1997 Proposed Rule”). In response to the 1997 request,

Commerce received comments emphasizing the importance of basing

the adequate remuneration benchmark on market prices that have

not been distorted by a government’s involvement in the market.

Commerce also received comments regarding its stated intention to

continue employing a preferentiality analysis when the government

is the sole provider of goods or services (e.g., for provisions of elec-

tricity, water, or natural gas).

One commenter urged Commerce to

codify a preferentiality-type analysis for such situations; others ar-

gued that this approach would not “adequately measure the differ-

ential between the price paid for the input and the full market value

of the input.” Preamble, 63 Fed. Reg. at 65,377.

Thereafter, based on its experience and the comments it received,

Commerce noted that “[p]articular problems can arise in applying

[the adequate remuneration] standard when the government is the

sole supplier of the good or service in the country or within the area

where the respondent is located.” Steel Wire Rod From Trinidad and

Tobago, 62 Fed. Reg. 55,003, 55,006 (Dep’t Commerce Oct. 22, 1997)

(ﬁnal affirmative countervailing duty determination). Commerce

reached this conclusion because, when the government is the sole

supplier of the good or service, “there may be no alternative market

prices available” to use as a benchmark against which to measure the

supplier’s price. Steel Wire Rod From Trinidad and Tobago, 62 Fed.

Reg. at 55,006; see also Steel Wire Rod From Germany, 62 Fed. Reg.

54,990, 54,994 (Dep’t Commerce Oct. 22, 1997) (ﬁnal affirmative

countervailing duty determination). Thus, when there is no market-

In particular, as to the anticipated inclusion of a preferentiality-based analysis in the

regulations, Commerce stated:

We should note, however, that while “adequate remuneration” has replaced “preferential”

as the standard, we do not believe this precludes us from continuing to apply certain

preferentiality-based analyses we have used in the past. See Pure Magnesium and Alloy

Magnesium from Canada, 57 FR 30946, 30949 (1992); and Certain Fresh Cut Flowers

from the Netherlands, 52 FR 3301, 3302 (1987). There is no indication that Congress

intended to change our practice with respect to government-provided goods and services

such as electricity, water, or natural gas; i.e., goods and services provided to a wide variety

of users by a government-owned company that is usually the sole provider of the good or

service.

1997 Proposed Rule, 62 Fed. Reg. at 8836.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

based benchmark to compare the government price to, Commerce

found that it was necessary to “examine other options” for determin-

ing whether the goods or services were provided for adequate remu-

neration. Steel Wire Rod From Germany, 62 Fed. Reg. at 54,994.

In early investigations under the new statute, Commerce’s “other

options” included an examination of such factors as “whether the

government has followed a consistent rate making policy, whether it

has covered its costs, whether it has earned a reasonable rate of

return in setting its rates, and/or whether it applied market prin-

ciples in determining its rates.” Steel Wire Rod From Trinidad and

Tobago, 62 Fed. Reg. at 55,007; see also Steel Wire Rod From Ger-

many, 62 Fed. Reg. 54,994. Commerce made it clear, however, that

such considerations “in no way indicate[d] a departure from [its]

preference for relying on market conditions in the relevant country

. . . .” Steel Wire Rod from Trinidad and Tobago, 62 Fed. Reg. at

55,007.

After gaining some further experience with the adequate remu-

neration standard, Commerce codiﬁed its methodology. See 19 C.F.R.

§ 351.511 (1999). To conform to the URAA, and its preference for

market-based benchmark prices, Commerce adopted a three-tiered,

hierarchical approach for determining the adequacy of remuneration

of an investigated good or service. See 19 C.F.R. § 351.511.

Under this methodology, Commerce generally begins by identifying

a proper benchmark price, which is “the price that could have consti-

tuted adequate remuneration,” and then compares that price with the

government-determined price paid by respondents. Fine Furniture

(Shanghai) Ltd. v. United States, 748 F.3d 1365, 1368 (Fed. Cir. 2014);

see 19 C.F.R. § 351.511. The preferred method is to “compar[e] the

government price to a market-determined price for the good or service

resulting from actual transactions in the country in question” (a “tier

one” benchmark analysis). See 19 C.F.R. § 351.511(a)(2)(i). If no use-

able market-determined price can be traced to actual transactions

within the country, Commerce will then compare “the government

price to a world market price where it is reasonable to conclude that

such price would be available to purchasers in the country in ques-

tion” (a “tier two” benchmark analysis). 19 C.F.R. § 351.511(a)(2)(ii).

If no world market price is available to in-country purchasers, how-

ever, Commerce will then determine the adequacy of remuneration by

“assessing whether the government price is consistent with market

principles” (thus, Commerce’s regulations provide for a “tier three”

benchmark analysis). 19 C.F.R. § 351.511(a)(2)(iii).

The preamble to § 351.511 states that a tier three benchmark

analysis will involve an examination of “such factors as the govern-

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

ment’s price-setting philosophy [(i.e., standard pricing mechanism)

costs (including rates of return sufficient to ensure future operations),

or possible price discrimination.” Preamble, 63 Fed. Reg. at 65,378.

Notably, however, Commerce stated that it need not “put[] these

factors in any hierarchy, and [it] may rely on one or more of these

factors in any particular case.” Preamble, 63 Fed. Reg. at 65,378. The

Preamble then cites Pure Magnesium and Alloy Magnesium From

Canada (“Magnesium from Canada”) as an example of a useful tier

three benchmark analysis for measuring the adequacy of remunera-

tion with respect to government-provided goods or services when the

government entity is the sole provider of the good or service. Pre-

amble, 63 Fed. Reg. at 65,378 (citing Magnesium from Canada, 57

Fed. Reg. 30,946 (Dep’t Commerce July 13, 1992) (ﬁnal affirmative

countervailing duty determination)); see also 1997 Proposed Rule, 62

Fed. Reg. at 8836 (“There is no indication that Congress intended to

change our practice [i.e., of using the Magnesium from Canada analy-

sis,] with respect to government-provided goods and services such as

electricity . . . .”).

In Magnesium from Canada, the Department found that

the ﬁrst step the Department takes in analyzing the potential

preferential provision of electricity—assuming a ﬁnding of

speciﬁcity

[7]

—is to compare the price charged with the appli-

cable rate on the power company’s non-speciﬁc rate schedule

. . . . If the rate charged is consistent with the standard pricing

mechanism and the company under investigation is, in all other

respects, essentially treated no differently than other industries

which purchase comparable amounts of electricity, we would

probably not ﬁnd a countervailable subsidy.

Magnesium from Canada, 57 Fed. Reg. at 30,949. In other words,

under the Magnesium from Canada analysis, the Department ﬁrst

examines how the government-owned utility company sets its rates

and then determines whether a respondent receives a price that is

better than that afforded other companies or industries purchasing

comparable amounts of electricity.

As Commerce did in its Final Determination, the court uses the terms “price-setting

philosophy” and “standard pricing mechanism” interchangeably. See Final Determination

at 26. (“[T]he Department may rely on either the use of a standard pricing mechanism

(‘price-setting philosophy’) or a utility company’s costs . . . .”).

It can be presumed that speciﬁcity, in this context, means “domestic subsidies . . . provided

or required by government action to a speciﬁc enterprise or industry, or group of enterprises

or industries.” 19 U.S.C. § 1677(5)(A)(ii) (1988).

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

BACKGROUND

On October 16, 2014, Maverick ﬁled a countervailing duty petition

covering imports of welded line pipe from the Republic of Korea

(“Korea”) and on November 5, 2014, Commerce initiated a counter-

vailing duty investigation.

Welded Line Pipe From the Rep. of Korea

and the Rep. of Turkey, 79 Fed. Reg. 67,419 (Dep’t Commerce Nov. 13,

2014) (initiation of countervailing duty investigations). Commerce

selected SeAH and NEXTEEL Co., Ltd. (“NEXTEEL”) as mandatory

respondents for individual examination. The period of investigation

(“POI”) was from January 1, 2013, through December 31, 2013. Com-

merce investigated, among other things, whether KEPCO, a state-

owned and controlled entity that supplied “substantially all of the

electricity in Korea,” provided respondents with a countervailable

subsidy in the form of the provision of electricity for less than ad-

equate remuneration. Final Determination at 13, 14–17.

On March 20, 2015, Commerce issued a negative preliminary de-

termination, ﬁnding that the Korean Government and KEPCO pro-

vided producers and exporters of welded line pipe from Korea only de

minimis countervailable subsidies.

See Welded Line Pipe From the

Rep. of Korea, 80 Fed. Reg. 14,907, 14,908 (Dep’t Commerce Mar. 20,

2015) (“Preliminary Determination”).

Following the Preliminary Determination, the Department issued

supplemental questionnaires to the Korean Government. See Letter

from Yoon & Yang LLC to Sec’y Commerce: Resp. to the Suppl.

Questionnaire, C.R. 316–322, P.R. 380–386, ECF Nos. 35–2, 3410

(April 14, 2015) (“Suppl. Questionnaire Resp.”). In order to determine

how the electricity rates were set, the Department asked for copies of

the applications KEPCO actually ﬁled with the Ministry of Trade,

Industry and Energy (“Trade Ministry”) for the electricity tariffs in

effect from January 1 through January 13 and January 14 through

November 20, 2013, which the Korean Government had not provided

The scope of this investigation covered

circular welded carbon and alloy steel (other than stainless steel) pipe of a kind used for

oil or gas pipelines (welded line pipe), not more than 24 inches in nominal outside

diameter, regardless of wall thickness, length, surface ﬁnish, end ﬁnish, or stenciling.

Welded line pipe is normally produced to the American Petroleum Institute (API) speci-

ﬁcation 5L, but can be produced to comparable foreign speciﬁcations, to proprietary

grades, or can be non-graded material.

Welded Line Pipe From the Rep. of Korea and the Rep. of Turkey, 79 Fed. Reg. 67,419,

67,423, App. 1.

Under 19 U.S.C. § 1671b(b)(4)(A), if the “aggregate of the net countervailable subsidies is

less than 1 percent ad valorem,” then Commerce will disregard such de minimis counter-

vailable subsidies.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

during the Preliminary Determination.

Suppl. Questionnaire Resp.

at 6–12. In response, the Korean Government submitted copies of the

appropriate applications as well as data summaries supporting the

relevant tariff increases. See Suppl. Questionnaire Resp. at 6–12; see

also Suppl. Questionnaire Resp., Exs. GSQ4RE-2, GSQ4RE-4,

GSQ4RE-5, GSQ4RE-9, GSQ4RE-10. In June, Commerce conducted

a veriﬁcation of the questionnaire responses. Veriﬁcation Question-

naire Resp., ECF Nos. 35–2, 42, C.R. 385, P.R. 430 (Aug. 17, 2015)

(summary of veriﬁcation responses). Although Commerce ultimately

found that the Korean Government had “adequately responded to all

of the Department’s detailed questions” involving its provision of

electricity to the respondents, plaintiff raised several concerns involv-

ing the information the Korean Government submitted to Commerce

regarding KEPCO’s price-setting procedures. Final Determination at

24–26.

On October 13, 2015, Commerce issued its ﬁnal negative counter-

vailing determination. See Final Determination. As it had in the

Preliminary Determination, the Department began its analysis by

determining the proper tier under 19 C.F.R. § 351.511(a)(2) (2014).

Commerce found a tier one benchmark analysis was inappropriate

because KEPCO “is the primary utility company in Korea providing

electricity to Korean consumers, and the [Korean Government] regu-

lates the rates that KEPCO charges for electricity.” Final Determi-

nation at 15. In other words, there was no competitive-market deter-

mined price that could provide an adequate benchmark. In addition,

Commerce declined to use a tier two benchmark analysis because

“[t]he [Korean Government] has stated that there is no cross-border

transmission or distribution of electricity in Korea,” and “the Depart-

ment will only use world market prices if the good or service is

actually available to the purchaser in the country under investiga-

tion.” Final Determination at 16. Therefore, Commerce elected to use

its “ﬁnal alternative,” a tier three benchmark analysis, in which “the

Department will assess whether the prices charged by KEPCO are

set in accordance with market principles through an analysis of such

factors as KEPCO’s [standard pricing mechanism], costs . . . , or

possible price discrimination.” Final Determination at 16.

Based on the information used by KEPCO “to develop the tariff

schedules that were applicable during the POI,” Commerce found

According to answers submitted by the Korean Government in response to Commerce’s

supplemental questionnaires “[t]he calculation of costs provided [to Commerce during

earlier responses] are KEPCO cost[s] . . . for the entire POI [i.e., the entirety of 2013].”

Suppl. Questionnaire Resp. at 12. Nevertheless, Commerce found that the Korean Govern-

ment’s supplemental questionnaire responses “provided the necessary information to be

used in [Commerce’s] analysis as to whether the prices are in accord with a standard pricing

mechanism.” Final Determination at 30.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

that the company’s prices were consistent with market principles

solely through an analysis of KEPCO’s standard pricing mechanism.

Final Determination at 17–18. In other words, Commerce did not

depend on facts otherwise available,

as it had in the Preliminary

Determination, to determine how KEPCO set its rates, but rather it

relied on questionnaire responses. Speciﬁcally, Commerce ﬁrst deter-

mined how KEPCO set its rates and if they were consistent with a

standard pricing mechanism. Next, the Department “examine[d] the

electricity rates charged to [the] investigated respondents to deter-

mine whether the price charged is consistent with the power compa-

ny’s standard pricing mechanism.” Final Determination at 17. Using

the analysis found in Magnesium from Canada, Commerce found

that because the rates charged to respondents were consistent with

KEPCO’s standard pricing mechanism, and the companies were “in

all other respects essentially treated no differently than other com-

panies and industries which purchase[d] comparable amounts of elec-

tricity,” respondents received no beneﬁt. Final Determination at

17–18 (citing Magnesium from Canada, 57 Fed. Reg. at 30,946). That

is, Commerce ﬁrst determined if KEPCO had a standard pricing

mechanism and how it worked, and then examined whether this

same method was employed to set the rates for respondents and other

companies and industries purchasing similar amounts of electricity.

With respect to KEPCO’s standard pricing mechanism, Commerce

veriﬁed that the utility company developed its electricity rates based

on annual cost data obtained from an independent accounting ﬁrm

that audited KEPCO’s costs and calculated its annual cost of electric-

ity. Final Determination at 17. Those ﬁgures were later used to

calculate the tariff for each customer classiﬁcation. Final Determina-

tion at 17. Thus, the Department found:

To develop the electricity tariff schedules that were applicable

during the POI, KEPCO ﬁrst calculated its overall cost includ-

ing an amount for investment return. This cost includes the

operational cost for generating and supplying electricity to the

consumers as well as taxes. The cost for each electricity classi-

ﬁcation was calculated by (1) distributing the overall cost ac-

cording to the stages of providing electricity (generation, trans-

mission, distribution, and sales); (2) dividing each cost into ﬁxed

cost, variable cost, and the consumer management fee; and (3)

then calculating the cost by applying the electricity load level,

Under 19 U.S.C. § 1677e(a), if “necessary information is not available on the record” or

“an interested party or any other person . . . withholds information that has been requested

by the administering authority . . . or . . . provides such information but the information

cannot be veriﬁed,” then Commerce shall use “the facts otherwise available” in making its

determination.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

peak level, and the patterns of consuming electricity. Each cost

was then distributed into the ﬁxed charge and the variable

charge. KEPCO then divided each cost taking into consideration

the electricity load level, the usage pattern of electricity,

[12]

and

the volume of the electricity consumed. Costs were then distrib-

uted according to the number of consumers for each classiﬁca-

tion of electricity.

Final Determination at 17. Commerce “veriﬁed that KEPCO applied

this same . . . standard pricing mechanism to determine the electric-

ity tariffs for each tariff classiﬁcation including the industrial tariff

that was paid by the respondents during the POI” and thus found

that “the [Korean Government] provided the necessary information to

be used in [the Department’s] analysis as to whether the prices are in

accord with a standard pricing mechanism” pursuant to §

351.511(a)(2)(iii). Final Determination at 17–18, 30. Commerce also

found that there was “no information on the record that SeAH . . .

[was] treated differently from other industrial users of electricity that

purchase comparable amounts of electricity.” Final Determination at

18. Next, the Department rejected plaintiff’s arguments that the

Korean Government did not cooperate with Commerce and that AFA

should therefore be applied because Commerce found that the Korean

Government had not failed to cooperate to the best of its ability in the

proceeding. Final Determination at 29 (“The [Korean Government]

adequately responded to all of the Department’s extensive and de-

tailed questions in its responses . . . . Our detailed supplemental

questions on electricity were not the general result of the [Korean

Government’s] unwillingness to respond to our questions but rather,

were due to the complicated nature of an analysis of market prin-

ciples required under the 19 CFR 351.[5]11(a)(2)(iii). Therefore, we

disagree with the petitioner’s argument that the [Korean Govern-

ment] has prevented or forestalled the Department’s attempt to col-

lect the appropriate information to conduct an analysis under 19 CFR

351.[5]11(a)(2)(iii).”).

As a result, Commerce found that “consistent with 19 CFR 351.511

and Magnesium from Canada . . . [KEPCO’s] program provides no

beneﬁt to SeAH . . . because the prices charged to [SeAH] under the

applicable industrial tariff were consistent with KEPCO’s standard

For instance, if a classiﬁcation consumed most of its electricity at night when demand

was low, it would be charged less. See Detailed Approval Standards for Power Generation

Business, Standards for Calculation of Electricity Charges, Tolerance of Electricity Meters

and Electric Power System Operation (Apr. 1, 2012), ECF No. 42, Art. 9(2) (“In principle, the

electricity charges consist of basic charges, electricity volume charges and fuel cost adjust-

ment charges.”).

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

pricing mechanism” and thus, that the Korean Government provided

no countervailable subsidy. Final Determination at 18.

This action followed.

STANDARD OF REVIEW

“The court shall hold unlawful any determination, ﬁnding, or con-

clusion found . . . to be unsupported by substantial evidence on the

record, or otherwise not in accordance with law.” 19 U.S.C. §

1516a(b)(1)(B)(i). “Substantial evidence is deﬁned as ‘more than a

mere scintilla,’ as well as evidence that a ‘reasonable mind might

accept as adequate to support a conclusion.’” Mukand, Ltd. v. United

States, 767 F.3d 1300, 1306 (Fed. Cir. 2014) (quoting Consol. Edison

Co. of N.Y. v. NLRB, 305 U.S. 197, 229 (1938)).

DISCUSSION

I. Commerce’s Determination that the Korean

Government’s Provision of Electricity did not Beneﬁt

Respondents is in Accordance with Law and Supported

by Substantial Evidence

A. Commerce’s Use of the Standard Pricing

Mechanism Analysis was in Accordance with Law

Plaintiff’s primary argument is that Commerce, in reaching its

determination, unlawfully relied on a factor “‘which Congress has not

intended it to consider.’” Pl.’s Br. 24 (quoting Motor Vehicle Mfrs. Ass’n

of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)).

Speciﬁcally, plaintiff argues that Commerce’s use of the standard

pricing mechanism analysis found in Magnesium from Canada

merely “measured price discrimination,” and thus, only demonstrated

that the Korean Government did not “provide electricity at ‘prefer-

ential’ rates.” Pl.’s Br. 23. According to plaintiff, by “limit[ing] its

examination to whether prices were consistent with KEPCO’s stan-

dard pricing mechanism . . . Commerce failed to meaningfully con-

sider the question posed by the statute,” (i.e., whether the Korean

Government received adequate remuneration for its electricity) and

therefore unlawfully “equated the lack of preferentiality with ad-

equate remuneration.” Reply Br. Pl.’s (“Pl.’s Reply Br.”) 2, 4.

Plaintiff maintains that Commerce was required by the statute to

do more. It insists that although “Congress had amended the [Tariff]

Act to replace the former ‘preferential’ standard with the current

‘adequate remuneration’ standard,” the Magnesium from Canada

determination, which Commerce relied upon, is bad precedent be-

cause it was decided prior to the statutory amendment. Pl.’s Br. 24.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

(“When Commerce issued its determination in Magnesium from

Canada, the Act provided that subsidies include ‘[t]he provision of

goods or services at preferential rates.’” (citing 19 U.S.C. §

1677(5)(A)(ii)(II) (1988))). For Maverick, the statutory amendment

providing for “adequate remuneration” requires Commerce to analyze

whether government prices are “marketbased”—a determination

plaintiff asserts cannot be made solely by examining whether respon-

dents received a rate outside of what it would have received if the rate

were set by the standard pricing mechanism. See Pl.’s Reply Br. 3, 6

(“[A] lack of preferential pricing in and of itself does not show that

prices are market based.”). Thus, according to Maverick, Commerce’s

use of the standard pricing mechanism analysis “elevates a single

citation in the [Preamble] above what is required by the statute” and

“eliminates the distinction between the preferentiality standard and

the adequacy of remuneration standard.” Pl.’s Reply Br. 3, 6.

For Commerce, however, “[d]etermining whether a government-set

price for electricity is in accordance with market principles by exam-

ining whether the electricity prices are set using the utility company’s

standard pricing [mechanism] is consistent with [its] regulations and

precedent.” Final Determination at 23 (citing Preamble, 63 Fed. Reg.

at 65,378). As for the URAA’s change to the adequate remuneration

standard, defendant maintains Commerce’s regulations found at 19

C.F.R. § 351.511 complied with the statute because the regulation

“ﬂipped the regulatory hierarchy, with market prices from the coun-

try under investigation and world market prices moving up the hier-

archy, and other considerations, including price discrimination, re-

maining potentially relevant only if the preferred data are

unavailable.” Def.’s Br. 20. In other words, for Commerce, what con-

stitutes adequate remuneration depends on the nature of the mar-

ketplace, and where the marketplace is a government-controlled mo-

nopoly, there is a role for a preferentiality-based test.

Defendant then contends that, contrary to plaintiff’s characteriza-

tion, the concept developed in Magnesium from Canada was “an

analytical methodology distinct from simple price discrimination.”

Def.’s Br. 21; see also Final Determination at 23 (“The petitioner

misinterprets 19 CFR 351.511 regarding the beneﬁt analysis of the

government provision of a good or service.”). Defendant argues that

the standard pricing mechanism analysis was created “to account for

the commercial market conditions by which electricity is provided to

consumers,” by implicitly recognizing that “electricity tariffs are gen-

erally based upon the type and amount of consumption of electricity

and that utility rates vary depending on the size and classiﬁcation of

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

the electricity consumer.” Def.’s Br. 22; see also Final Determination

at 17 n.79 (“The principle of the standard pricing mechanism recog-

nizes the commercial and market practices and conditions for the

provision of electricity.”). Thus, factors such as amount of electricity

consumed and the time of day that it is consumed can affect the price

of electricity where a government monopoly controls the supply.

The Department also insists that it took into account acquisition

costs, speciﬁcally ﬁnding that

[t]he petitioner is correct that we did not request the cost infor-

mation from KEPCO’s generating subsidiaries. This informa-

tion was not requested because the information from the gener-

ating subsidiaries was not relevant to our analysis. Electricity

generators, including subsidiaries of KEPCO, sell electricity to

the Korea Power Exchange [(“KPX”)] and KEPCO purchases the

electricity that it distributes to all of its customers from KPX

. . . . Therefore, the cost of this electricity is identical for all the

tariff classes (residential, general, industry, etc.) within Korea.

The cost of electricity is based upon the purchase price of elec-

tricity from the KPX; therefore, this is the cost that is relevant

for determining whether KEPCO’s industrial tariff schedule is

developed using a standard pricing mechanism. We also note

that the cost data underlying the tariff rate calculations were

prepared by an independent accounting ﬁrm.

Final Determination at 23–24; see also Def.’s Br. 18 (“KEPCO’s costs

for electricity are based upon the purchase price from the Korea

Power Exchange, which is the cost that was relevant to Commerce’s

evaluation of whether the power company’s rates were developed

using a standard pricing mechanism.”).

In addition, Commerce claims that the standard pricing mechanism

analysis is in accord with the adequate remuneration standard found

in the statute. According to defendant, its Magnesium from Canada

analysis works as follows: ﬁrst, the Department determines whether

the government’s standard pricing mechanism is in accordance with

market-principles, and second, it considers whether the respondents

are treated any differently from other consumers. See Transcript of

Oral Argument at 13–14, Maverick Tube Corp. v. United States (No.

15–00303). Therefore, defendant argues that it is wrong to simply call

Commerce’s approach a preferentiality test. See Def.’s Br. 21.

The court ﬁnds that (1) Commerce’s regulation is a reasonable

interpretation of the statute and (2) the Department lawfully inter-

preted its regulation to determine the adequacy of remuneration for

the electricity provided to respondents during the POI.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

“When reviewing Commerce’s construction of the trade statute, this

Court is directed by the two-step framework set forth by Chevron.”

Xiping Opeck Food Co. v. United States, 38 CIT __, __, 34 F. Supp. 3d

1331, 1342 (2014) (citing Fine Furniture, 748 F.3d at 1369); see also

Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467

U.S. 837, 842–43 (1983). The ﬁrst step requires the court to deter-

mine whether Congress’ intent under the statute is clear. Chevron,

467 U.S. at 842–43; see also Robinson v. Shell Oil Co., 519 U.S. 337,

341 (“The plainness or ambiguity of statutory language is determined

by reference to the language itself, the speciﬁc context in which that

language is used, and the broader context of the statute as a whole.”).

If Congress’ intent is clear, the court “must give effect to the unam-

biguously expressed intent of Congress.” Chevron, 467 U.S. at

842–43. Should the court determine that Congress has not directly

addressed the question at issue, that is, if “the statute is silent or

ambiguous with respect to the speciﬁc issue, the question for the

court is whether the agency’s answer is based on a permissible con-

struction of the statute.” Id. (footnote omitted). Under this second

step, provided that Commerce’s construction of the statute is reason-

able, it will be found to be in accordance with law. See United States

v. Eurodif S.A., 555 U.S. 305, 317 (2009).

Here, the court ﬁnds Commerce’s interpretation of the statute—

namely, that when a government is the sole, or nearly sole, provider

of a good or service, Commerce may determine the adequacy of re-

muneration through its standard pricing mechanism analysis (in-

cluding use of a preferentiality-based test)—to be a reasonable con-

struction of the statute.

As an initial matter, despite plaintiff’s arguments to the contrary,

Congress’ intent in adopting the URAA amendment is unclear as to

the proper method for determining the adequacy of remuneration.

Section 1677(5)(E) simply states that the adequacy of remuneration

“shall be determined in relation to prevailing market conditions for

the good or service being provided . . . in the country which is subject

to the investigation or review.” 19 U.S.C. § 1677(5)(E). The statute

then gives a non-exhaustive list of “prevailing market conditions,”

which include “price, quality, availability, marketability, transporta-

tion, and other conditions of purchase or sale.” Id. Aside from this list

of conditions, the statute gives no guidance as to how the Department

should interpret the adequacy of remuneration language. It is worth

noting, however, that cost of production is absent from the list.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

An examination of the Statement of Administrative Action

(“SAA”)

accompanying the URAA reveals that 19 U.S.C. §

1677(5)(E)’s language comes almost verbatim from the guidelines set

out in Article 14 of the Subsidies Agreement, a part of the Uruguay

Round Agreement. See Uruguay Round Agreements Act, Statement of

Administrative Action, H.R. Doc. No. 103–316, at 912–13 (1994),

reprinted in 1994 U.S.C.C.A.N. 4040, 4239. Therefore, while the

source of the adequacy of remuneration language is known, neither

the statute, nor the SAA gives guidance as to Congress’ intent when

the words were enacted. Nor does there appear to be any legislative

history that provides guidance.

Once it has been established that the deﬁnition of “adequate remu-

neration” is unclear, step two of Chevron comes into play. Under step

two, the court must determine whether Commerce’s construction of

the statute is reasonable. See Chevron, 467 U.S. at 843.

The court ﬁnds that Commerce’s construction of the statute is

reasonable. In a state-controlled monopolistic market, it is reasonable

to determine the adequacy of remuneration by ﬁrst examining how

the state sets its rates, as the state (and not necessarily supply-and-

demand)

controls price and availability. If the state does use a

standard pricing mechanism to set its rates (i.e., if its prices are set by

a consistent discernable method), it is also reasonable for Commerce

to determine the adequacy of remuneration by examining whether

respondents received a preferential rate when compared to those

entities receiving a rate set by the standard pricing mechanism.

As noted, the statute directs Commerce to determine if a beneﬁt is

present by determining whether a good or service is provided “for less

than adequate remuneration.” Adequate remuneration is to be mea-

sured by “prevailing market conditions . . . in the country which is

subject to the investigation or review.” 19 U.S.C. § 1677(5)(E). The

statute does not direct Commerce to create a ﬁctional model market

or (as shall be seen) to audit KEPCO’s books to determine if it covers

its costs. The statute directs Commerce to judge the adequacy of

The SAA, which “shall be regarded as an authoritative expression by the United States

concerning the interpretation and application of the [URAA],” 19 U.S.C. § 3512(d), states:

Article 14 of the Agreement sets guidelines for methods used to calculate beneﬁt. . . . The

guidelines set out in Article 14 are that: . . . the provision of goods or services . . . by a

government confers a beneﬁt where the provision is made for less than adequate remu-

neration . . . with the adequacy of remuneration determined in relation to prevailing

market conditions for the good or service in question in the country of provision or

purchase (including price, quality, availability, marketability, transportation, and other

conditions of purchase or sale).

SAA, at 912–13.

The provision of electricity, in particular, is often subject to state control. See, e.g., N.Y.

POWER AUTH., ANNUAL REPORT 53 (2015).

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

remuneration based on market conditions that actually exist in Ko-

rea. That the Korean electricity market is controlled by a state run

monopoly does not change the statute.

The court, moreover, is unconvinced that simply because Magne-

sium from Canada was guided by a different statutory standard, its

standard pricing mechanism analysis cannot be used to determine

the adequacy of remuneration under a tier three benchmark analysis.

Although the statutory change marked a departure from deﬁning a

beneﬁt in terms of preferentiality, that does not mean that Magne-

sium from Canada’s standard pricing mechanism analysis is not

relevant to determine the adequacy of remuneration when market-

based prices are unavailable. There is no evidence in the legislative

history that Congress intended the dramatic change in law plaintiff

suggests. In fact, the legislative history seems to indicate that Con-

gress simply chose to enact the language contained in the Uruguay

Round Agreement.

Commerce’s past experience shows that, in certain situations,

preferentiality-like tests may be useful when determining the ad-

equacy of remuneration. See, e.g., Steel Wire Rod From Germany, 62

Fed. Reg. at 54,994.

Indeed, in a monopolistic situation, such as the

electricity market in Korea, the state-controlled market provides the

only source from which Commerce can obtain a price. That is, in

situations involving the state-controlled provision of electricity, ﬁnd-

ing that electricity rates are based on a standard pricing mechanism

and then examining if a company or industry receives a preferential

rate is a reasonable way to determine whether a state-controlled

supplier received adequate remuneration.

Plaintiff spends a great deal of time in its papers claiming that

Commerce unlawfully applied a preferential analysis in reaching its

determination. In doing so, plaintiff appears to argue that Commerce

was somehow prohibited from assembling information as to whether

the respondents were charged less for their electricity than other

consumers. Why this should be the case is a bit of a mystery. Should

it have developed that respondents were paying less than others

similarly situated for the provision of electrical service, this would be

evidence that the rate paid by respondents was not arrived at by the

In Steel Wire Rod From Germany, Commerce determined that the Government of the

Free and Hanseatic City of Hamburg (“GOH”), which leased land to producers and export-

ers of steel wire rod from Germany, used a “standard lease for all enterprises in the port

area” and that “[t]here are no special provisions made for different industries.” Steel Wire

Rod From Germany, 62 Fed. Reg. at 54,994. Therefore, because the respondent “pa[id] a

standard rate charged by the GOH to all enterprises leasing land similar to [respondent’s],

and because these prices are set in reference to market conditions, [Commerce] deter-

mine[d] that [respondent’s] lease rate is not countervailable.” Steel Wire Rod From Ger-

many, 62 Fed. Reg. at 54,994.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

application of KEPCO’s standard pricing mechanism (i.e., that the

rate was not based on the electricity “market” in Korea). In other

words, plaintiff’s assertions fail to consider that Commerce ﬁrst ex-

amined how the rates were set, and only then asked if the market-

based rates (albeit a monopolistic market) were calculated the same

as the rates respondents paid for electricity. Merely because Com-

merce employed an analysis it used for other purposes elsewhere to

make this comparison does not (1) prohibit Commerce from collecting

evidence of the existence (or lack thereof) of a cheap rate for respon-

dents or (2) prohibit Commerce from using this information to make

a determination as to whether respondents’ rate was set by the

principles used to determine the rate of others purchasing electricity

in the Korean market.

Plaintiff also maintains that Commerce’s explanation for its deter-

mination “is insufficient and patently unreasonable.” Pl.’s Br. 30. The

court, though, agrees with the defendant that Maverick “cannot sub-

stitute [various third party reports] for the benchmark analysis Com-

merce is required to perform pursuant to 19 C.F.R. § 351.511(a)(2).”

Def.’s Br. 22. Here, Commerce found that KEPCO’s standard pricing

mechanism was developed based on its annual cost data as calculated

by an independent accounting ﬁrm. Final Determination at 17. In

addition, Commerce found that KEPCO used these ﬁgures to “calcu-

late the tariff for each customer classiﬁcation” based on standard

methodologies set forth in the standards for calculation of electricity

charges issued by the Korean Ministry of Knowledge Economy. Final

Determination at 17 (citing Detailed Approval Standards for Power

Generation Business, Standards for Calculation of Electricity

Charges, Tolerance of Electricity Meters and Electric Power System

Operation (Apr. 1, 2012), ECF No. 42). Commerce then found that

KEPCO applied this same standard pricing mechanism to determine

respondents’ tariff rates and that respondents were not treated any

differently from “other industrial users of electricity that purchase

comparable amounts of electricity.” Final Determination at 18. Fi-

nally, as Commerce noted in its Final Determination, “[t]he principle

of the standard pricing mechanism recognizes the commercial and

market practices and conditions for the provision of electricity.” Final

Determination 17 n.79. In other words, under the tier three bench-

mark analysis Commerce takes the market as it ﬁnds it, even if it is,

for all practical purposes, a monopoly.

Accordingly, the court holds that Commerce’s construction of the

statute—that Commerce may determine the adequacy of remunera-

tion based on the standard pricing mechanism analysis developed in

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

Magnesium from Canada—is reasonable, and thus, in accordance

with law.

B. Commerce’s Interpretation of “Adequate Remu-

neration” was in Accordance with Law

Maverick’s second, and related, argument is that the Department’s

interpretation of “adequate remuneration” is not in accordance with

law. Pl.’s Br. 20. Speciﬁcally, plaintiff maintains that Commerce

“erred in its interpretation of ‘adequate’ because failing to recover

costs can never be adequate.” Pl.’s Br. 20. In support of its position,

plaintiff cites to Webster’s II New College Dictionary, which deﬁnes

“adequate” as “able to satisfy a requirement” and “remunerate” as “to

pay one for goods provided, services rendered, or losses incurred.”

Pl.’s Br. 21 (quoting Webster’s II New College Dictionary (2001)).

Plaintiff maintains that, in accordance with these deﬁnitions, the

plain meaning of § 1677(5)(E) requires that adequate remuneration

mean, at a minimum, that “the seller is able to cover its costs to

provide a good.” Pl.’s Br. 21.

The court, however, ﬁnds that defendant’s interpretation of “ad-

equate remuneration” is in accordance with law. Although plaintiff

argues that Commerce misinterpreted the statute, the real thrust of

its argument is that Commerce did not look at the right information.

Speciﬁcally, plaintiff seems to argue that the only appropriate way to

determine the adequacy of remuneration in this case would be to

examine KEPCO’s suppliers’ costs. See, e.g., Pl.’s Br. 22 (“[W]ithout a

complete cost build up from Korean electricity generators, beginning

with fuel costs, there was no way for the Department to determine

whether [KEPCO’s] prices were set according to market principles.”).

As discussed previously, however, the preamble to § 351.511 reason-

ably provides that Commerce may look solely at a government’s

price-setting philosophy (i.e., its standard pricing mechanism) under

a tier three benchmark analysis. Preamble, 63 Fed. Reg. at 65,378

(“Where the government is the sole provider of a good or service, and

there are no world market prices available or accessible to the pur-

chaser, we will assess whether the government price was set in

accordance with market principles through an analysis of such fac-

tors as the government’s price-setting philosophy, costs . . . or possible

price discrimination. We are not putting these factors in any hierar-

chy, and we may rely on one or more of these factors in any particular

case.”).

Indeed, § 351.511 accomplishes the post-URAA preference for

market-based prices through its hierarchical approach. When

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

market-based prices (i.e., prices derived from actual transactions in

the country under investigation or available on the world market) are

available, Commerce must compare the government price to these

benchmarks. See 19 C.F.R. § 351.511(a)(2)(i)-(ii). When the govern-

ment is the “sole supplier of a good or service,” however, three factors

are useful in determining whether a government provision of goods or

services is provided for less than adequate remuneration: the stan-

dard pricing mechanism, costs, and possible price discrimination.

Preamble, 63 Fed. Reg. at 65,378. Here, Commerce reasonably exam-

ined KEPCO’s standard pricing mechanism and found that the Ko-

rean Government received adequate remuneration for its electricity

because it determined the respondent’s rate in the same manner it

did other industrial consumers.

While these prices were not set by what would normally be thought

of as free market principles (i.e., prices set by supply and demand),

they were not the result of guesswork. In this case, the “market” is not

some hypothetical world market for electricity or even an imagined

regional one. Rather, it is the actual market for electricity in Korea.

Accordingly, Commerce veriﬁed how KEPCO developed its electricity

tariffs during the POI:

KEPCO ﬁrst calculated its overall cost including an amount for

investment return. This cost includes the operational cost for

generating and supplying electricity

[16]

to the consumers as well

as taxes. The cost for each electricity classiﬁcation was calcu-

lated by (1) distributing the overall cost according to the stages

of providing electricity (generation, transmission, distribution,

and sales); (2) dividing each cost into ﬁxed cost, variable cost,

and the consumer management fee; and (3) then calculating the

cost by applying the electricity load level, peak level, and the

patterns of consuming electricity. Each cost was then distrib-

uted into the ﬁxed charge and the variable charge. KEPCO then

divided each cost taking into consideration the electricity load

level, the usage pattern of electricity, and the volume of the

electricity consumed. Costs were then distributed according to

the number of consumers for each classiﬁcation of electricity.

As Commerce later clariﬁed in its Final Determination,

[e]lectricity generators, including subsidiaries of KEPCO, sell electricity to the KPX and

KEPCO purchases the electricity that it distributes from the KPX. . . . Therefore, the cost

of this electricity is identical for all the tariff classes . . . within Korea. Although

[Maverick] is correct that the [Korean Government] did not provide the individual

generating costs for KEPCO’s generating subsidiaries, the Department did not request

this information. The costs for electricity are based upon the purchase price of electricity

from the KPX; therefore this is the cost that is relevant for determining whether KEP-

CO’s industrial tariff schedule is developed using a standard pricing mechanism.

Final Determination at 27.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

Final Determination at 17. Commerce veriﬁed that KEPCO’s annual

costs were calculated by an independent accounting ﬁrm. Final De-

termination at 17. Thus, although Commerce itself did not make a

detailed analysis of KEPCO’s costs, it veriﬁed KEPCO’s costs and how

they were used to set the rates.

Commerce then focused on whether respondents were treated the

same as other industrial consumers. The Department found that

respondents were not “treated differently from other industrial users

of electricity that purchase comparable amounts of electricity,” and

they were charged in accordance with KEPCO’s standard pricing

mechanism. Final Determination at 18. Commerce then reasonably

determined that KEPCO’s prices reﬂected the Korean electricity mar-

ket, and thus, that respondents were not receiving a better price than

other consumers in the Korean market.

Plaintiff insists, however, that the Department was required to

determine if the price respondents paid covered the costs to provide

electricity in all market conditions. Pl.’s Br. 21–22. Not only is this

ﬁnding not directed by the dictionary deﬁnitions of “adequate” and

“remuneration” plaintiff provides in its papers (i.e., “able to satisfy a

requirement” and “pay one for goods provided” does not equal cover

costs), but it is elemental that the functioning of a free market guided

by the law of supply and demand sometimes results in sales below

cost. Since covering costs would not be required in a tier one or tier

two benchmark analysis, it is difficult to see how it should be required

here.

Accordingly, Commerce’s interpretation of “adequate remunera-

tion,” namely, that in a tier three benchmark analysis, the adequacy

of remuneration may be determined by taking into account a stan-

dard pricing mechanism analysis, was reasonable and thus in accor-

dance with law.

C. Commerce Has Supported its Beneﬁt Analysis with

Substantial Evidence

Plaintiff argues that “Commerce failed to provide a satisfactory

explanation for concluding that Korean electricity prices are set in

accordance with market principles” as required by 19 C.F.R. §

351.511(a)(2)(iii). Pl.’s Br. 28. Speciﬁcally, plaintiff contends that,

because there is record evidence that KEPCO’s electricity tariffs were

not set by supply and demand and may be below cost, there are

therefore “signiﬁcant pricing distortions throughout the Korean elec-

tricity market.” Pl.’s Br. 28. For plaintiff, Commerce must explain

why such evidence does not undermine its determination that the

KEPCO’s prices were set in accordance with market principles under

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

the regulation. Pl.’s Br. 30. Accordingly, plaintiff argues that Com-

merce’s conclusion unlawfully “‘suggest[s] a result contrary to clear

weight of the evidence’” and thus is not supported by substantial

evidence. Pl.’s Br. 18 (quoting USX Corp. v. United States, 11 CIT 82,

84, 655 F. Supp. 487, 489 (1987)).

Maverick bases this argument on the results of a 2013 Korean

National Assembly report, which found that KEPCO sells electricity

for less than cost. Pl.’s Br. 29 (“‘The government subsidizes and

charges less-than-normal electricity cost to the steel industries for

their exceeding use of electricity. . . . The 100 biggest corporations [in

Korea] are using over KRW 9 trillion worth of discounted industrial

scale electricity. . . . There are huge losses because of discounted

industrial electricity consumption.’” (quoting Initial Questionnaire

Resp., C.R. 76, P.R. 127, ECF. No. 35–2 (Jan. 21, 2015) Ex. E-4)).

Plaintiff also supports its argument by referencing the Korean Board

of Audit and Inspection report, which stated that KEPCO’s electricity

tariffs for industrial use covered only 85.8 percent of its production

costs. Pl.’s Br. 29 (citing Petition for Imposition of Antidumping and

Countervailing Duties, C.R. 1–28, P.R. 1–28, ECF No. 35–2 (Oct. 16,

2014) Ex. IV-49). Maverick then notes that some record evidence

indicates that KEPCO itself has conceded that it sells electricity at a

loss. Pl.’s Br. 30 (“‘The distortion of the energy price structure result-

ing from the less-than-cost electricity prices has rapidly increased

electricity consumption in place of petroleum or gas, which has re-

sulted in record high electricity consumption peaks in winter seasons

since 2009.’” (quoting Suppl. Questionnaire Resp., Ex. GSQ4RE-4)).

Finally, Maverick adds that the Korean Government’s “failure to

provide and Commerce’s refusal to request data regarding KEPCO’s

actual costs of generating electricity” undermines its conclusion that

the cost of electricity is identical for all classes of consumers and for

Commerce “to conclude that the only relevant question is the price at

which KEPCO purchased the electricity from its affiliate, the KPX,

wholly ignores the fact that KEPCO’s subsidiaries generated the

electricity, which KEPCO is reselling at a loss.” Pl.’s Br. 31, 33.

Therefore, plaintiff argues that Commerce’s determination is not sup-

ported by substantial evidence.

In response, the Government argues that Commerce veriﬁed that

KEPCO developed its electricity tariff schedules during the POI

based on (1) the company’s annual cost data, as audited and calcu-

lated by an independent accounting ﬁrm, and (2) Korea’s standard

methodology for establishing electricity tariffs. Def.’s Br. 13 (citing

Final Determination at 17). Defendant then notes that Commerce

also veriﬁed that this same standard pricing mechanism was applied

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

during the POI. Accordingly, defendant argues that, using the factors

found in 19 C.F.R. § 351.511(a)(2)(iii) and the Preamble, substantial

evidence supported Commerce’s determination that the prices were

set in accordance with market principles. Def.’s Br. 15–16.

Also, as has been noted, defendant maintains that Commerce did

not ignore costs in its analysis. Def.’s Br. 17. Speciﬁcally, the Govern-

ment contends that “KEPCO developed its electricity tariff schedules

based on the company’s annual cost data, as audited and calculated

by an independent accounting ﬁrm, and an amount for investment

return . . . [and] Commerce explained that it relied on the cost data

underlying KEPCO’s standard price calculations because they were

prepared by an independent accounting ﬁrm, which served to support

their accuracy.” Def.’s Br. 17 (citing Final Determination at 17, 28, 30

n.132). Therefore, in Commerce’s view, the use of numbers overseen

by an independent accounting ﬁrm as part of KEPCO’s standard

pricing mechanism established that the electricity tariffs would cap-

ture KEPCO’s costs, even if Commerce did not actually audit the

numbers provided. See Def.’s Br. 17.

Defendant further argues that “Commerce did not ignore the re-

ports [cited by plaintiff]; rather, it utilized and referred to multiple

reports in its summary of background information in the [Final De-

termination].” Def.’s Br. 22. The Government then notes that Com-

merce reviewed the Korea National Assembly report on KEPCO, but

found that respondents were not among the companies for which

KEPCO reported losses. Def.’s Br. 23 (citing Final Determination at

14, 23). In other words, Commerce did not ﬁnd this evidence as

convincing as plaintiff.

As to Commerce’s decision not to request cost information from

KEPCO’s electricity-generating subsidiaries, defendant insists that

this information “was not relevant” to its analysis because KEPCO’s

subsidiaries “sold electricity to the [KPX], which then sold KEPCO

nearly all of the electricity it distributed.” Def.’s Br. 17–18 (citing

Final Determination at 23–24). Put another way, for defendant, the

relevant cost associated with KEPCO’s standard pricing mechanism

was the purchase price paid to KPX, not electricity-generation costs.

Def.’s Br. 18. Therefore, defendant maintains that, by verifying the

information used to develop KEPCO’s rates, Commerce veriﬁed all

that was required under its regulations and the preamble to §

351.511(a)(2)(iii) (i.e., that KEPCO used a standard pricing mecha-

nism), and its determination is thus supported by substantial evi-

dence.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

The court ﬁnds that Commerce’s determination was supported by

substantial evidence. “Substantial evidence is ‘such relevant evidence

as a reasonable mind might accept as adequate to support a conclu-

sion.’” Huaiyin Foreign Trade Corp. v. United States, 322 F.3d

1369,1374 (quoting Consol. Edison Co., 305 U.S. at 229). As discussed

above, Commerce provided a clear explanation for why KEPCO’s

standard pricing mechanism was in accordance with market prin-

ciples (albeit the principles of a monopolistic market), and thus, why

the Korean Government received adequate remuneration. See supra

Section I.B. Here, Commerce was able to verify that “KEPCO applied

the same price-setting philosophy or standard pricing mechanism to

determine the electricity tariffs for each tariff classiﬁcation including

the industrial tariff that was paid by [SeAH] during the POI” and

further found that “there is no information on the record that SeAH

. . . [is] treated differently from other industrial users of electricity

that purchase comparable amounts of electricity,” and thus, reason-

ably determined that, pursuant to § 351.511(a)(2)(iii), respondents

did not receive a beneﬁt. Final Determination at 17–18.

Although plaintiff makes arguments that the record is devoid of

evidence supporting Commerce’s conclusion because certain ﬁnancial

information could not be traced, the court notes that Commerce rea-

sonably found that this evidence (e.g., data sourced from the KEPCO

Data Network

) was not necessary to verify the standard pricing

mechanism used by KEPCO to set its electricity tariffs as required

under a tier three benchmark analysis. Therefore, because Com-

merce’s method conformed to the law and the information Commerce

relied on was fully veriﬁable, its determination is supported by sub-

stantial evidence.

Based on the forgoing, the court ﬁnds that the Department has

cited substantial evidence that respondents did not receive a beneﬁt

by KEPCO’s provision of electricity.

II. Commerce’s Determination not to Apply Adverse Facts

Available to the Korean Government was Supported by

Substantial Evidence

Finally, Maverick argues that the Department’s failure to apply

AFA to the Korean Government is unsupported by substantial evi-

dence and an abuse of discretion. Pl.’s Br. 43. Under 19 U.S.C. §

1677e(b), when a party fails to act to the best of its ability in respond-

ing to information requests, Commerce may apply AFA. According to

Maverick, “the [Korean Government] blatant[ly] refus[ed] to cooper-

The KEPCO Data Network is a “statistical division within KEPCO.” Veriﬁcation Ques-

tionnaire Resp. at 10.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

ate to the best of its ability with Commerce’s repeated requests for

necessary information.” Pl.’s Br. 43. Speciﬁcally, plaintiff claims that

the Korean Government did not provide cost data in electronic for-

mat, did not make necessary officials available, did not provide elec-

tricity generation costs, and that it provided “insufficient, incomplete,

and inconsistent questionnaire responses to Commerce.” Pl.’s Br. 43.

Defendant argues that the Korean Government was “fully coopera-

tive,” and responded to Commerce’s multiple and detailed question-

naires. Def.’s Br. 23. Defendant notes that “an interested party fails to

cooperate to ‘the best of its ability’” when it fails to “‘put forth its

maximum effort to provide Commerce with full and complete answers

to all inquiries.’” Def.’s Br. 24 (quoting Nippon Steel Corp. v. United

States, 337 F.3d 1373, 1382 (Fed. Cir. 2003)). Defendant emphasizes,

that Commerce is “only required to verify factual information relied

upon in making its ﬁnal determination.” Def.’s Br. 24 (citing 19 U.S.C.

§ 1677e(a)(2)(D)); 19 U.S.C. § 1677m(i)(1). Thus, Commerce claims

that it did not rely on unveriﬁed data in making its ﬁnal determina-

tion and that it was able to verify how KEPCO set its prices based on

the questionnaire responses. Def.’s Br. 24 (citing Final Determination

at 26–27, 30). Commerce states that the Korean Government cooper-

ated by providing the information needed to complete this veriﬁca-

tion. Final Determination at 29–30.

With regard to the lack of electricity-generating cost information,

defendant contends that Commerce did not ask the Korean Govern-

ment to provide this information, because, as has been seen, it

deemed that the information was irrelevant. Def.’s Br. 25 (citing Final

Determination at 27). Next, the Government maintains that Com-

merce issued a substantial number of questionnaires not because of

the Korean Government’s “unwillingness to respond, but rather of the

complicated nature of an analysis of market principles under 19

C.F.R. § 351.511(a)(2)(iii).” Def.’s Br. 25 (citing Final Determination at

29). Therefore, according to defendant, none of the grounds for ap-

plying AFA pursuant to § 1677e(b) were present, and Commerce’s

failure to apply AFA was supported by substantial evidence.

The court ﬁnds that Commerce reasonably determined that the use

of AFA was not required by the facts or the law. The Korean Govern-

ment provided extensive answers to Commerce’s detailed and com-

plicated questions in its January 21, 2015, March 6, 2015, March 11,

2015, April 14, 2015, and May 19, 2015 responses. See Final Deter-

mination at 29. Based on these responses, Commerce was able to

verify the information it actually used to reach its determination. No

interested party can be found to have failed to cooperate for not

answering questions it was not asked. Nor can a party be found to

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

have failed to cooperate by not providing information irrelevant to a

proceeding. Accordingly, it cannot be said that the Korean Govern-

ment failed to “put forth its maximum effort to provide Commerce

with full and complete answers to all inquiries” in this investigation.

Nippon Steel Corp., 337 F.3d at 1382. Commerce, then, reasonably

determined it was unnecessary to apply AFA in this case.

CONCLUSION

For the foregoing reasons, plaintiff’s motion for judgment on the

agency record is denied. Judgment will be entered accordingly.

Dated: October 27, 2017

New York, New York

/s/ Richard K. Eaton

RICHARD K. EATON, JUDGE

◆

Slip Op. 17–147

RUBIES COSTUME CO., Plaintiff, v. UNITED STATES, Defendant.

Before: Mark A. Barnett, Judge

Court No. 13–00407

[The court denies Plaintiff’s motion for summary judgment and grants Defendant’s

cross-motion for summary judgment.]

Dated: October 31, 2017

Glenn H. Ripa, John A. Bessich, and Suzanne L. McCaffery, Follick & Bessich, of

New York, NY, for Plaintiff.

Peter A. Mancuso, Trial Attorney, Commercial Litigation Branch, Civil Division,

U.S. Department of Justice, of New York, NY, for Defendant. With him on the brief were

Chad A. Readler, Acting Assistant Attorney General, and Amy M. Rubin, Assistant

Director. Of Counsel on the brief was Michael W. Heydrich, Office of the Assistant Chief

Counsel, International Trade Litigation, U.S. Customs and Border Protection, of New

York, NY.

OPINION

Barnett, Judge:

In this case, the court addresses the issue of the proper classiﬁca-

tion of a Santa Claus costume. Is it a “festive article” entitled to duty

free treatment, or is it fancy dress, of textile, akin to wearing apparel,

dutiable at the rates applicable to the particular parts of the costume?

Application of classiﬁcation principles in this case (the General Rules

of Interpretation, which direct the court to apply the terms of the

Harmonized Tariff Schedule, and relevant judicial precedent) leads to

a ﬁnding that, while ﬂimsy and non-durable costumes (whether for

Halloween, Christmas, or any other holiday) generally receive duty

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

free treatment as festive articles, and non-ﬂimsy, durable Christmas

sweaters may also receive duty free treatment as festive articles

(because they are not fancy dress), a relatively well-made, durable,

dry clean only Santa Claus costume constitutes fancy dress, of textile,

and is, therefore, excluded from classiﬁcation as a festive article.

Before the court are cross-motions for summary judgment. See Pl.’s

Mot. for Summ. J., ECF No. 28, and Mem. of Law in Supp. of Pl.’s Mot.

for Summ. J (“Pl.’s MSJ”), ECF No. 28–1; Def.’s Cross-Mot. for Summ.

J. and Mem. in Supp. of Def.’s Cross-Mot. for Summ. J (“Def.’s

XMSJ”), ECF No. 30. Plaintiff Rubies Costume Company (“Rubies” or

“Plaintiff”) contests the denial of its protest challenging U.S. Customs

and Border Protection’s (“Customs” or “CBP”) classiﬁcation of a

multi-piece Santa Claus suit (“Santa Suit”). See Summons, ECF No.

1; Compl., ECF No. 5. Plaintiff contends the Santa Suit qualiﬁes for

duty free treatment as a “[f]estive, carnival or other entertainment

article[]” (hereinafter referred to as a “festive article”) pursuant to

subheading 9505.10.50 of the Harmonized Tariff Schedule of the

United States (“HTSUS”), or, alternatively, subheading 9505.90.60 of

the HTSUS. Pl.’s MSJ at 2–3. Defendant United States (“Defendant”

or the “Government”) contends that Customs correctly classiﬁed the

Santa Suit under tariff provisions corresponding to the individual

garments and accessories that, together, compose the Santa Suit.

Def.’s XMSJ at 1–2. For the following reasons, the court ﬁnds that the

Santa Suit is not a festive article, and, therefore, is properly classiﬁed

pursuant to the below-stated individual tariff provisions.

BACKGROUND

I. Material Facts Not in Dispute

The party moving for summary judgment must show “there is no

genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” United States Court of International

Trade (“USCIT”) Rule 56(a). Movants should present material facts

as short and concise statements, in numbered paragraphs, and cite to

“particular parts of materials in the record” as support. USCIT Rule

56(c)(1)(A); see also USCIT Rule 56.3(a)(“factual positions described

in Rule 56(c)(1)(A) must be annexed to the motion in a separate, short

and concise statement, in numbered paragraphs”). In responsive pa-

pers, the nonmovant “must include correspondingly numbered para-

graphs responding to the numbered paragraphs in the statement of

the movant.” USCIT Rule 56.3(b). Parties ﬁled cross motions for

summary judgment and submitted separate statements of undis-

puted material facts with their respective motions. See Pl.’s Am.

Statement of Material Facts Not in Dispute (“Pl.’s SOF”), ECF No. 34;

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

Def.’s Statement of Undisputed Material Facts (“Def.’s SOF”), ECF

No. 30–1. Defendant also ﬁled a response to Plaintiff’s statement of

facts. See Def.’s Resp. to Pl.’s Statement of Material Facts Not in

Dispute (“Def.’s Resp. to Pl.’s SOF”), ECF No. 30–2. Plaintiff did not

ﬁle a response to Defendant’s statement of facts and has informed the

court that it admits all of Defendant’s factual assertions. See Notice

from the Court (June 26, 2017), ECF No. 36. Parties also ﬁled supple-

mental facts speciﬁc to the Santa Suit jacket. See Pl.’s Resp. to the

Court’s Order of July 28, 2017 (“Pl.’s Suppl. Br.”), Ex. 1 (CBP Lab

Report NY20171073), ECF No. 40–1; Def.’s Resp. to the Court Order

Dated July 28, 2017 Req. Suppl. Brieﬁng (“Def.’s Suppl. Br.”), Ex. 2

(CBP Lab Report NY20171073), ECF No. 41–2. Upon review of the

Parties’ facts (and supporting exhibits),

the court ﬁnds the following

undisputed and material facts.

Rubies, a wholesale and retail costume company, is the importer of

record of the subject Santa Suit. Pl.’s SOF ¶¶ 1, 9; Def.’s Resp. to Pl.’s

SOF ¶¶ 1, 9; see also Pl.’s SOF ¶ 21; Def.’s Resp. to Pl.’s SOF ¶ 21

(subject merchandise is imported for domestic resale).

The Santa

Suit consists of a red jacket, pants, and hat, a black belt with a metal

buckle, white gloves, black shoe covers, a white wig, and a Santa sack

that are packaged together for retail sale as the “Premier Plush 9

Piece Santa Suit.” Def.’s SOF ¶ 1. Only the jacket, pants, gloves, and

sack are at issue in this case.

The jacket and pants consist of 73% acrylic and 27% knit polyester

material,

and have sewn-in care labels stating that each item is “Dry

Clean Only.” Id.¶¶2, 3. The jacket is made in one “standard size,”

consists of plush fabric, and is fully lined with satin polyester. Id.¶ 4;

Physical Sample. The jacket fabric “has a stitch count per one centi-

meter of [seven] in the horizontal [direction] and [seven] in the ver-

tical direction.” Pl.’s Suppl. Br, Ex. 1; Def.’s Suppl. Br., Ex. 2. The

jacket has “a full front opening secured by a zipper,” which is hidden

The exhibits include a physical sample of the Santa Suit. See Def.’s XMSJ, Ex. 3 (“Physical

Sample”), ECF No. 30–5 (certiﬁcation of ﬁling and service of physical exhibit or item).

Citations are provided to the relevant paragraph number of the undisputed facts and

response; internal citations generally have been omitted.

Plaintiff also produces and sells children’s Halloween costumes. The “typical” children’s

Halloween costumes Plaintiff markets “do not have ﬁnished edges or zippers, and close in

the back with Velcro or a snap, or are made to ‘slipover’ the wearer.” Def.’s SOF ¶¶ 19, 21.

Those costumes are intended for one-time use and retail for 10–20 USD. Id.¶¶ 22–23.

The belt, beard, wig, hat, and shoe covers were liquidated duty free as entered under

subheading 9505.90.60. Pl.’s SOF ¶ 4; Def.’s Resp. to Pl.’s SOF ¶ 4; see also Def.’s XMSJ at

2 n. 1.

Defendant does not expressly state that the jacket and pants are made from “knitted”

material. However, laboratory testing on the jacket performed in response to the court’s

inquiry demonstrates that the fabric (which matches the fabric used to construct the pants)

“is of cut-pile weft knit construction.” Pl.’s Suppl. Br, Ex. 1; Def.’s Suppl. Br., Ex. 2.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

by a left-over-right faux fur cover held in place by two metal snaps,

one at the collar of the jacket and one at the base of the jacket. Def.’s

SOF ¶¶ 6–7. The double-layer collar consists of white faux fur fabric.

Id. ¶ 5. “The jacket has long sleeves with turned edges, trimmed with

white faux fur fabric cuffs,” id.¶ 8, and “a straight cut hemmed bottom

trimmed with the same white faux fur fabric,” id.¶ 9. The jacket may

be worn over other clothing or undergarments, id.¶ 10, and has belt

loops for the belt, Physical Sample. The pants have a satin polyester

lining, pockets with hemmed edges, an elasticized waist, and tightly

stitched interior seams. Def.’s SOF ¶¶ 11–12. The white knit gloves

consist of 100% polyester knit fabric. Id.¶ 13.

The sack is made from

the same material as the jacket and pants, and has a drawstring cord.

Id.¶ 14. The Santa Suit packaging describes the sack as a “toy bag.”

Physical Sample.

The Santa Suit has a wholesale price of USD 60–70 and a retail

price of USD 100, which is considered “a mid-to-high price point.” Id.

¶ 24. It is “manufactured to be worn repeatedly during a single

Christmas season” and “is intended to survive multiple wearings and

cleanings” over several Christmas seasons. Id.¶¶ 25–26. The Santa

Suit covers the body of the individual wearing it and provides warmth

and protection to the wearer. Id.¶ 27.

II. Procedural History

On June 20, 2012, Rubies sought a binding pre-importation ruling

from Customs regarding the classiﬁcation of the Santa Suit. See Def.’s

XMSJ, Ex. 2 (“HQ H237067”), ECF No. 30–4. On June 20, 2013,

Customs issued its ruling. See generally HQ H237067. Relying on the

Court of Appeals for the Federal Circuit’s (“Federal Circuit”) opinion

in Rubie’s Costume Co. v. Unites States (“Rubie’s II”),

337 F.3d 1350

(Fed. Cir. 2003),

and Customs’ informed compliance publication re-

garding the classiﬁcation of textile costumes, Customs distinguished

the “well-made” Santa Suit from the “ﬂimsy costumes” it classiﬁes as

Physical inspection of the gloves reveals strips of material that form the sides of two

adjacent ﬁngers. See Physical Sample.

Rubie’s II reversed the USCIT’s decision in Rubie’s Costume Co. v. United States (“Rubie’s

I”), 26 CIT 209, 196 F. Supp. 2d 1320 (2002). In Rubie’s II, the same plaintiff as in this case

(but therein described as a domestic manufacturer of costumes) had ﬁled a Domestic

Interested Party Petition asserting that all imported textile costumes should be classiﬁed

as wearing apparel in Chapters 61 or 62. 337 F.3d at 1352.

In accordance with the summons ﬁled in this case, there is no apostrophe in “Rubies.” See

Summons at 1. In contrast, in the case giving rise to the Rubie’s I and Rubie’s II opinions,

the summons contains an apostrophe in “Rubie’s” in the case caption. See Rubie’s Costume

Co. v. United States, Court No. 99–00388, ECF No. 44 (electronic docket sheet).

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

festive articles. HQ H237067 at 6–9.

Accordingly, Customs deter-

mined that the jacket and pants are classiﬁable as “wearing apparel”

under headings 6105 and 6103, respectively. Id. at 9. Customs further

found that the gloves and sack are classiﬁable under headings 6116

and 4202, respectively. Id. at 9–10.

On August 20, 2013, Plaintiff entered 36 Santa Suits under Entry

Number BPQ1066668–8 through the John F. Kennedy Airport in New

York. Compl. ¶¶ 5–6; Answer ¶¶ 5–6, ECF No. 11; see also Summons

at 1. On October 25, 2013, Customs liquidated the Santa Suits as

follows:

Item HTSUS

Classiﬁcation

Duty Rate

Jacket 6105.20.20 32.0% ad valorem

Pants 6103.43.15 28.2% ad valorem

Gloves 6115.95.60

10.0% ad valorem

Sack 4202.92.30 17.6% ad valorem

Beard, Wig, Hat, Belt,

and Shoe covers

9505.90.60 Free of Duty

Pl.’s SOF ¶ 4; Def.’s Resp. to Pl.’s SOF ¶ 4.

Rubies timely protested Customs’ classiﬁcation of the subject mer-

chandise; on December 14, 2013, that protest was deemed denied.

Pl.’s SOF ¶¶ 5–6; Def.’s Resp. to Pl.’s SOF ¶¶ 5–6; see also Summons

at 1. Rubies challenges the denial of its protest. Parties have fully

briefed the issues. The court now rules on the cross-motions for

summary judgment.

JURISDICTION AND STANDARD OF REVIEW

The court has subject matter jurisdiction pursuant to 28 U.S.C. §

1581(a). Jurisdiction is uncontroverted in this case. Pl.’s SOF ¶ 2;

Def.’s Resp. to Pl.’s SOF ¶ 2.

The court may grant summary judgment when “there is no genuine

issue as to any material fact,” and “the moving party is entitled to

judgment as a matter of law.” Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 247 (1986); USCIT R. 56(a). The court’s review of a classi-

Following the Federal Circuit’s opinion in Rubie’s II, in June 2008 Customs issued an

informed compliance publication titled, “What Every Member of the Trade Community

Should Know About: Classiﬁcation of Textile Costumes under the HTSUS.” See Def.’s XMSJ,

Ex. 5 (“Textile Costumes ICP” or “the ICP”), ECF No. 30–7.

Defendant contends the gloves should have been classiﬁed under subheading 6116.93.94.

Def.’s Resp. to Pl.’s SOF ¶ 4. Cf. HQ H237067 at 9 (ﬁnding the gloves classiﬁable under

heading 6116). Heading 6115 covers “Panty hose, tights, stockings, socks and other hosiery,

including graduated compression hosiery (for example, stockings for varicose veins) and

footwear without applied soles, knitted or crocheted,” and, thus, does not describe the

subject gloves.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

ﬁcation decision involves two steps. First, it must determine the

meaning of the relevant tariff provisions, which is a question of law.

See Bausch & Lomb, Inc. v. United States, 148 F.3d 1363, 1365 (Fed.

Cir. 1998) (citation omitted); see also id. at 1366 (characterizing the

ﬁrst step as “constru[ing] the relevant (competing) classiﬁcation

headings”). Second, it must determine “what the merchandise at

issue is,” which is a question of fact. Id. at 1366. When no factual

dispute exists regarding the merchandise, summary judgment is ap-

propriate and resolution of the classiﬁcation turns solely on the ﬁrst

step. See id. at 1365–66; id. at 1365 (“The ultimate question in a

classiﬁcation case is whether the merchandise is properly classiﬁed

under one or another classiﬁcation heading,” which is “a question of

law[] . . . because what is at issue is the meaning of the terms set out

in the statute . . . .”) (citations omitted); see also Sigma–Tau Health-

Science, Inc. v. United States, 838 F.3d 1272, 1276 (Fed. Cir. 2016)

(citations omitted).

The court reviews classiﬁcation cases on “the basis of the record

made before the court.” 28 U.S.C. § 2640(a). While the court accords

deference to Customs’ classiﬁcation rulings relative to their “power to

persuade,” United States v. Mead Corp., 533 U.S. 218, 235 (2001)

(quoting Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)), it has “an

independent responsibility to decide the legal issue of the proper

meaning and scope of HTSUS terms,” Warner-Lambert Co. v. United

States, 407 F.3d 1207, 1209 (Fed. Cir. 2005) (citing Rocknel Fastener,

Inc. v. United States, 267 F.3d 1354, 1358 (Fed. Cir. 2001)). It is “the

court’s duty to ﬁnd the correct result, by whatever procedure is best

suited to the case at hand.” Jarvis Clark Co. v. United States, 733 F.2d

873, 878 (Fed. Cir. 1984).

DISCUSSION

I. Legal Framework

The General Rules of Interpretation (“GRIs”) provide the analytical

framework for the court’s classiﬁcation of goods. See N. Am. Process-

ing Co. v. United States, 236 F.3d 695, 698 (Fed. Cir. 2001). “The

HTSUS is designed so that most classiﬁcation questions can be an-

swered by GRI 1.” Telebrands Corp. v. United States, 36 CIT ___, ___,

865 F. Supp. 2d 1277, 1280 (2012), aff’d 522 F. App’x 915 (Fed. Cir.

2013). GRI 1 states that, “for legal purposes, classiﬁcation shall be

determined according to the terms of the headings and any [relevant]

section or chapter notes.” GRI 1, HTSUS. The court considers chapter

and section notes of the HTSUS in resolving classiﬁcation disputes

because they are statutory law, not interpretive rules. See Arko Foods

Int’l, Inc. v. United States, 654 F.3d 1361, 1364 (Fed. Cir. 2011)

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

(citations omitted); see also Park B. Smith, Ltd. v. United States, 347

F.3d 922, 929 n. 3 (Fed. Cir. 2003) (chapter and section notes are

binding on the court).

“Absent contrary legislative intent, HTSUS terms are to be ‘con-

strued [according] to their common and popular meaning.’” Baxter

Healthcare Corp. of Puerto Rico v. United States, 182 F.3d 1333, 1337

(Fed. Cir. 1999) (quoting Marubeni Am. Corp. v. United States, 35

F.3d 530, 533 (Fed. Cir. 1994)). Courts may rely upon their own

understanding of terms or consult dictionaries, encyclopedias, scien-

tiﬁc authorities, and other reliable information. Brookside Veneers,

Ltd. v. United States, 847 F.2d 786, 789 (Fed. Cir. 1988); BASF Corp.

v. United States, 35 CIT ___, ___, 798 F. Supp. 2d 1353, 1357 (2011).

For additional guidance on the scope and meaning of tariff headings

and chapter and section notes, the court also may consider the Ex-

planatory Notes to the Harmonized Commodity Description and Cod-

ing System, developed by the World Customs Organization. See Deck-

ers Outdoor Corp. v. United States, 714 F.3d 1363, 1367 n. 1 (Fed. Cir.

2013). Although Explanatory Notes do not bind the court’s analysis,

they are “indicative of proper interpretation” of the tariff schedule.

Lynteq, Inc. v. United States, 976 F.2d 693, 699 (Fed. Cir. 1992)

(quoting H.R. Rep. No. 100–576, at 549 (1988) (Conf. Rep.), reprinted

in 1988 U.S.C.C.A.N. 1547, 1582).

II. Competing Tariff Provisions

Plaintiff contends the Santa Suits are properly classiﬁed as festive

articles under subheading 9505.10.50 or, alternatively, 9505.90.60.

Pl.’s MSJ at 2–3. Chapter 95 covers “Toys, Games, and Sports Req-

uisites; Parts and Accessories thereof.” The asserted subheadings

(and relevant legal notes) are as follows:

9505: Festive, carnival or other entertainment articles, including magic

tricks and practical joke articles; parts and accessories thereof:

9505.10 : Articles for Christmas festivities and parts and accesso-

ries thereof:

9505.10.50 : Other .............................................. Free.

9505.90 : Other:

9505.90.60 : Other .............................................. Free.

Pursuant to the chapter notes, “fancy dress, of textiles, of chapter

61 or 62,” are excluded from classiﬁcation under Chapter 95. Ch. 95,

Note 1(e). Also excluded are “[s]ports bags or other containers of

heading 4202, 4303 or 4304,” Ch. 95, Note 1(d), and “gloves, mittens

and mitts (classiﬁed according to their constituent material),” Ch. 95,

Note 1(u).

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

Defendant contends the jacket, pants, and gloves are properly clas-

siﬁed as articles of apparel pursuant to subheadings of Chapter 61,

and the sack is properly classiﬁed pursuant to a subheading of Chap-

ter 42. Def.’s XMSJ at 1–2. Chapter 61 covers “Articles of Apparel and

Clothing Accessories, Knitted or Crocheted.” Chapter 42 covers “Ar-

ticles of Leather; Saddlery and Harness; Travel Goods, Handbags and

Similar Containers; Articles of Animal Gut (other than Silkworm

Gut).” The speciﬁc subheadings (and relevant legal notes) asserted by

Defendant are as follows:

6103: Men’s or boys’ . . . trousers, . . . breeches and shorts (other than

swimwear), knitted or crocheted:

6103.43 : Of synthetic ﬁbers:

6103.43.15 : Other ....................... 28.2% ad valorem.

6105: Men’s or boys’ shirts, knitted or crocheted:

6105.20 : Of man-made ﬁbers:

6105.20.20 : Other .......................... 32% ad valorem.

6116: Gloves, mittens and mitts, knitted or crocheted:

6116.93 : Of synthetic ﬁbers:

6116.93.94 : Other: With fourchettes ......... 18.6% ad

valorem.

4202: [T]traveling bags, . . . knapsacks and backpacks, handbags, shopping

bags, . . . sports bags, . . . and similar containers, . . . of textile mate-

rials, . . . or wholly or mainly covered with such materials . . .:

4202.92 : Other: With outer surface of sheeting of plastic or of

textile materials: Travel, sports and similar bags: With

outer surface of textile materials:

4202.92.30 : Other ....................... 17.6% ad valorem.

Section XI, which includes Chapter 61, excludes “[a]rticles of chap-

ter 95.” Sect. XI, Note 1(t).

Pursuant to Note 9 to Chapter 61,

“[g]arments of this chapter designed for left over right closure at the

front shall be regarded as men’s or boys’ garments.” Ch. 61, Note 9.

Chapter 42 also excludes “[a]rticles of chapter 95.” Ch. 42, Note 1(l).

Pursuant to Additional U.S. Note 1 to Chapter 42, “[f]or the purposes

of heading 4202, the expression ‘travel, sports and similar bags’

means goods . . . of a kind designed for carrying clothing and other

personal effects during travel, including backpacks and shopping

bags of this heading . . . .” Ch. 42, Add’l U.S. Note 1.

The legally binding notes attendant to Chapters 42, 61, and 95

demonstrate that articles may be described by headings of each

Also relevant is Note 14 to Section XI, which provides that “[u]nless the context otherwise

requires, textile garments of different headings are to be classiﬁed in their own headings

even if put up in sets for retail sale. For the purposes of this note, the expression ‘textile

garments’ means garments of headings 6101 to 6114 and headings 6201 to 6211.” Sect. XI,

Note 14.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

chapter, and “expressly resolve[] this conﬂict in favor of classiﬁcation

in chapter 95” unless the article falls into one of Chapter 95’s exclu-

sionary notes. See Michael Simon Design, Inc. v. United States, 501

F.3d 1303, 1305, 1306–07 (Fed. Cir. 2007) (explaining that note 1(e) to

Chapter 95 excludes “only certain clothing articles”; thus, festive

sweaters were properly classiﬁed as festive articles and not wearing

apparel). In other words, Chapter 95’s exclusionary notes provide

exceptions to the general rule of classiﬁcation thereunder for particu-

lar articles of Chapters 42, 61, and 62. See Sect. XI, Note 1(t) (Chapter

61 excludes “[a]rticles of chapter 95); Ch. 42, Note 1(l) (Chapter 42

excludes “[a]rticles of chapter 95). But see Ch. 95, Notes 1(d), (e), (u)

(“[s]ports bags or other containers” of headings 4202, 4303, and 4304;

“fancy dress, of textiles, of chapter 61 or 62”; and “gloves . . . (classiﬁed

according to their constituent material)” are not covered by Chapter

95). Accordingly, for Plaintiff’s asserted classiﬁcation to be correct, the

components of the Santa Suit must be prima facie classiﬁable as

festive articles and must not be covered by any of Chapter 95’s

exclusions. As discussed below, the Santa Suit components are cov-

ered by the exclusions to Chapter 95; thus, the court need not and

does not reach the issue of whether they constitute festive articles.

III. Classiﬁcation of the Jacket and Pants

The GRIs govern the proper classiﬁcation of merchandise and are

applied in numerical order. N. Am. Processing Co., 236 F.3d at 698.

Pursuant to GRI 1, the court ﬁrst “must determine the appropriate

classiﬁcation ‘according to the terms of the headings and any relative

section or chapter notes’ . . . [with] terms of the HTSUS . . . construed

In its moving brief, Plaintiff contends that

the classiﬁcation of the Santa [Suit] at issue should not be determined on the basis of an

analysis that focuses primarily and arbitrarily on the type of construction and/or the

quality of the materials, and diminishes the intended use of the costume, and the festive

holiday or occasion for which it was designed. . . . The determination as to whether a

costume is classiﬁable as a festive article is more properly based upon whether it is closely

associated with a festive occasion, whether it is displayed or used principally during that

festive occasion, and whether its nature and appearance precludes its characterization as

wearing apparel.

Pl.’s MSJ at 22 (emphasis added). According to Plaintiff, the Federal Circuit’s opinions in

Michael Simon Design, 501 F.3d 1303, and Park B. Smith, 347 F.3d 922, provide the proper

criteria for classifying the Santa Suit. Pl.’s MSJ at 22–23. Those cases provide the test for

determining whether an article is a festive article under heading 9505. See Michael Simon

Design, 501 F.3d at 1306 (citing Park B. Smith, 347 F.3d at 927). They do not interpret

Chapter 95’s exclusionary notes, and, thus, address only part of the pertinent inquiry. As

discussed infra, Chapter 95’s exclusionary notes bar classiﬁcation pursuant to that chapter;

therefore, the court does not address Plaintiff’s arguments regarding the proper application

of the Federal Circuit’s festive article test to the subject merchandise. See Pl.’s MSJ at

19–21; Pl.’s Affirmation in Opp’n to Summ. J. Mot. (“Pl.’s Resp.”) at 8–9, ECF No. 32; see also

Def.’s XMSJ at 20–21; Reply Mem. of Law in Supp. of the Government’s Cross-Mot. for

Summ. J. (“Def.’s Reply”) at 12–13, ECF No. 35.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

according to their common commercial meaning.” Millenium Lumber

Dist. Ltd. v. United States, 558 F.3d 1326, 1328–29 (Fed. Cir. 2009)

(citations omitted).

A. Construction of Note 1(e) to Chapter 95

Pursuant to Note 1(e), “fancy dress, of textiles, of chapter 61 or 62,”

is barred from classiﬁcation under chapter 95. Ch. 95, Note 1(e). That

phrase is not deﬁned in the HTSUS. In Rubie’s II, however, the

Federal Circuit spoke to the meaning of the phrase and addressed

when costumes should be classiﬁed as festive articles rather than

wearing apparel. 337 F.3d at 1356–60. The court’s analysis, therefore,

begins with an explication of the Federal Circuit’s opinion and related

judicial and Customs rulings to the extent that they illuminate the

proper construction of Note 1(e).

The merchandise at issue in Rubie’s II consisted of ﬁve textile

costumes “traditionally worn [at] . . . Halloween or to costume par-

ties.” Id. at 1352. They included a child-sized “Witch of the Webs”

dress, “Pirate Boy” top and pants, and “Witch” dress, an adult-sized

“Abdul, Sheik of Arabia” sheath, and a “Cute and Cuddly Clown”

jumpsuit. Id. at 1352 & n.2. On June 2, 1997, in response to a request

ﬁled by Rubie’s, Customs determined “that the ‘Cute and Cuddly

Clown’ would be classiﬁed as ‘Babies’ garments and clothing accesso-

ries’ with a duty rate of 16.7 (now 16.1) percent ad valorem, while the

other costumes . . . would be classiﬁed as ‘festive articles,’ requiring

duty free entry.” Id. at 1352 (citing HQ 959545 (June 2, 1997)).

Thereafter, Customs denied the Domestic Interested Party Petition

ﬁled by Rubie’s, which asserted that the ﬁve textile costumes should

be classiﬁed as wearing apparel, and affirmed its prior determination.

Id. at 1352–53 (citing HQ 961447 (July 22, 1998) (“HQ 961447”)); see

also supra note 8.

HQ 961447 reiterated the classiﬁcation analysis that Customs had

relied on for the decade prior to its issuance, tracing its origin to a

case in this court styled as Traveler Trading Co. v. United States, 13

CIT 380, 713 F. Supp. 409 (1989)). See HQ 961447 at 2; Rubie’s II, 337

F.3d at 1353, 1358. In that case, Traveler Trading Co. (“Traveler”)

sued the United States regarding Customs’ classiﬁcation of “ﬂimsy”

adult textile costumes as “wearing apparel” under the predecessor to

the HTSUS, the TSUS, rather than as “toys” as it classiﬁes children’s

costumes. Traveler, 13 CIT at 380, 384, 713 F. Supp. at 410, 413.

During settlement negotiations, Customs reconsidered its basis for

distinguishing adult Halloween costumes from children’s Halloween

costumes. Id. at 380–81, 713 F. Supp. at 410–11. Customs reasoned

that “[t]hese are costumes which are ﬂimsily constructed and possess

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

no signiﬁcant utilitarian value. . . . These costumes are distinguish-

able from theatrical costumes or religious and folk-like regalia which

are detailed, well-constructed, and intended for a speciﬁc use other

than mere amusement.” Id. at 380–81, 713 F. Supp. at 410–11 (cita-

tion omitted). In ruling on Traveler’s application for attorneys’ fees

and costs, the court deemed “unreasonable” Customs’ initial classiﬁ-

cation of “ﬂimsy [adult] Halloween costumes as wearing apparel.” Id.

at 383–84, 713 F. Supp. at 412–13 (distinguishing “expensive, well-

constructed ballroom gowns, safari outﬁts, certain types of uniforms,

and other adult garments,” which “may serve as both Halloween

costumes and wearing apparel” from “witches, pirates, and [similar

costumes], which are ﬂimsily constructed”) (internal quotation marks

and citation omitted).

A few years later, Traveler again sued the United States over

Customs’ “classiﬁcation of textile costumes as articles of ‘fancy dress’

excluded from classiﬁcation in Chapter 95 [of the HTSUS].” HQ

961447 at 2 (citing Traveler Trading Co. v. United States, Court No.

91–02–00084). Customs subsequently determined that the court’s

opinion in Traveler and recent judicial opinions concerning relevant

provisions of the HTSUS meant that it should “reexamine[] its view

regarding the scope of the term ‘fancy dress’ as it relates to costumes.”

HQ 961447 at 2 (noting that “Customs [initially] took the view that

fancy dress included ‘all’ textile costumes regardless of quality, dura-

bility, or the nature of the item”). Following the execution of a settle-

ment agreement between Customs and Traveler, Customs issued HQ

957318 (Nov. 15, 1994) (“HQ 957318”), wherein it stated that cos-

tumes that “are of a ﬂimsy nature and construction, lack durability,

and are generally recognized as not normal articles of apparel” would

be classiﬁed as festive articles. HQ 957318 at 1; see also HQ 961447

at 2.

In later rulings, Customs identiﬁed certain characteristics that it

would assess to determine whether an article was “of a ﬂimsy nature

and construction, lacking in durability, and generally [not] recognized

as a normal article of apparel.” HQ 961447 at 4 (citations omitted)

(identifying “zipper closures,” “abundant styling features such as a

ﬁtted bodice with darts,” “petal shaped panels sewn into a waistline,”

and “sheer/decorative panels sewn into the seams of costumes” as

indicative of fancy dress). Applying those characteristics to the mer-

chandise at issue in Rubie’s II, Customs determined that four of the

ﬁve costumes were classiﬁable as festive articles. Id. (noting that

those costumes “featured simple pull-on type garments with no zip-

pers, inset panels, darts, or hoops,” and raw and unhemmed edges

leaving the costumes “susceptible to runs and frays”). In contrast, the

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

“Cute and Cuddly Clown” costume “was particularly well-constructed

and had a substantial amount of ﬁnishing work (i.e., the sewing used

to construct the article),” and did not have any raw edges. Id. For

those reasons, Customs classiﬁed the Cute and Cuddly Clown cos-

tume as wearing apparel. Id.

On appeal to the USCIT, the court disagreed with Customs’ inter-

pretation of Note 1(e). Rubie’s I, 26 CIT at 210, 196 F. Supp. 2d at

1322. Citing several dictionary deﬁnitions, the court deﬁned “fancy

dress” as synonymous with “costume” generally, and, therefore, re-

jected the Government’s argument that “fancy dress” is limited to

“elaborate or substantial costumes such as those worn by actors in the

theater, and formal wear such as tuxedos and ball gowns worn to

special events.” Id. at 216–17, 19 F. Supp. 2d at 1328 (citations

omitted).

The Rubie’s I court proceeded to examine the scope of

Chapters 61 and 62 to determine the type of fancy dress (costumes)

excluded. Id. at 219, 196 F. Supp. 2d at 1330–31. Relying on the U.S.

Supreme Court’s opinion in Arnold

and this court’s opinion in

H.I.M./Fathom,

the Rubie’s I court found that “for merchandise to

be properly classiﬁed within Chapters 61 or 62, strong emphasis must

be placed on the material

of the merchandise and whether it could

be worn at a particular time.” Id. at 219, 196 F. Supp. at 1331.

Because the costumes at issue were “meant to adorn the human body

at a particular time, either on Halloween or at any other event where

the wearer desires to mimic another,” and as they were “within the

norms of apparel as it is viewed in the United States,” the Rubie’s I

court held that the costumes were classiﬁable pursuant to subhead-

ing 6114.30.30 of the HTSUS. Id. at 219–220, 196 F. Supp. at 1331.

The Federal Circuit reversed on the basis that HQ 961447 was

sufficiently persuasive to be accorded Skidmore deference. See Rubie’s

II, 337 F.3d at 1356; Skidmore, 323 U.S. at 140. The Federal Circuit

agreed with the lower court that “fancy dress” means “a costume (as

for a masquerade or party) departing from conventional style and

The Rubie’s I court determined that Traveler, which addressed tariff provisions covering

wearing apparel and toys, was inapposite because it related to the pre-HTSUS code and the

interpretation of the term “fancy dress” was not at issue. Rubie’s I, 26 CIT at 217–18, 196

F. Supp. 2d at 1329. Accordingly, the Rubie’s I court rejected Customs’ reliance on “[t]he

criteria of ﬂimsiness” favored in Traveler as a way to distinguish costumes that are classi-

ﬁable as toys from costumes that are classiﬁable as wearing apparel. Id.

In Arnold, the Court deﬁned “wearing apparel” as “embracing all articles which are

ordinarily worn, [] dress in general.” Arnold v. United States, 147 U.S. 494, 496 (1893).

In H.I.M./Fathom, the court concluded that wetsuits constituted clothing because they

“are articles worn as an outer covering for the human body at a particular time.” H.I.M./

Fathom, Inc. v. United States, 21 CIT 776, 781, 981 F. Supp. 610, 615 (1997).

Chapter 61 covers knitted or crocheted“Articles of Apparel and Clothing Accessories,”

whereas Chapter 62 covers “Articles of Apparel and Clothing Accessories” that are not

knitted or crocheted.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

[usually] representing a ﬁctional or historical character.” Rubie’s II,

337 F.3d at 1356–57 (citing Rubie’s I, 26 CIT at 216, 196 F. Supp. at

1327); see also id. at 1357 (“That the term ‘fancy dress,’ . . . includes

costumes is plain enough . . . .”). According to the Federal Circuit,

however, the lower court insufficiently analyzed the type of fancy

dress excluded:

a reading of the exclusion in Note 1(e) to Chapter 95, HTSUS,

that focuses solely on the term “fancy dress” and turns a blind

eye to the immediately following words “of textiles, of chapter 61

or 62” construes the term fancy dress in disregard of the context

of the exclusion as a whole. . . . The words in Note 1(e) “of

textiles, of chapter 61 or 62” immediately following “fancy

dress,” establish the context in which the term “fancy dress” is to

be applied, and thereby circumscribe, qualify, and limit the type

of “fancy dress” that was intended by the drafters to be excluded

from Chapter 95, HTSUS, to textile costumes falling within the

purview “of chapter 61 or 62.” Thus, . . . the exclusion to Chapter

95, HTSUS, encompasses textile costumes that are classiﬁable

as “wearing apparel” under Chapter 61 or 62.

Id. (emphasis added). The Federal Circuit interpreted “wearing ap-

parel” as “embracing all articles which are ordinarily worn—dress in

general,” id. (quoting Arnold, 147 U.S. at 496), and “clothes or cov-

erings for the human body worn for decency or comfort,” id. (quoting

Antonio Pompeo v. United States, 40 Cust. Ct. 362, 364 (1958) (also

noting that “common knowledge indicates that adornment is also an

element of many articles of wearing apparel”)).

“Cognizant of [those] deﬁnitions,” the Federal Circuit found HQ

961447 “logical and well-reasoned.” Id. The court determined that HQ

961447 correctly classiﬁes as festive articles “ﬂimsy, non-durable

costumes having utility and used as well for festive occasions, based

on functional or structural deﬁciencies as compared with the stan-

dard counterpart articles (e.g., wearing apparel).” Id. The court cited

Customs’ identiﬁcation of “the texture and quality of the materials as

‘ﬂimsy and non-durable’” suggesting that the textile costumes’ “prin-

cipal intended use is for a one time festive occasion [which] [is]

distinct from ‘wearing apparel’ which the courts have held to be used

for decency, comfort, adornment or protection.” Id. (quoting HQ

961447) (second alteration added).

Additionally, although the sub-

The court also approved of Customs’ consideration of “such factors as the extent of the

styling features such as zippers, inset panels, darts or hoops, and whether the edges of the

materials had been left raw or ﬁnished” to determine the “texture and quality of the

[costumes’] materials.” Rubie’s II, 337 F.3d at 1357 (citing HQ 961447).

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

ject merchandise “may simulate the structural features of wearing

apparel, and have some incidents of ‘clothes or coverings for the

human body worn for decency or comfort,’” id. at 1358 (quoting An-

tonio Pompeo, 40 Cust. Ct. at 364), “they are not practical ‘articles

which are ordinarily worn,’” id. (quoting Arnold, 147 U.S. at 496); see

also id. (“[T]he Halloween costumes . . . have enormous ‘make believe’

or festive value . . . and incidentally afford the element of covering for

decency or comfort.”). The Federal Circuit, therefore, was persuaded

by Customs’ view that “fancy dress” for purposes of Note 1(e) does not

include “imported textile costumes [that] are of a ﬂimsy nature and

construction, lacking in durability and generally not recognized as

normal articles of wearing apparel”; instead, such costumes are clas-

siﬁable as “festive articles.” Id. at 1360.

Accordingly, this court is

guided by the same criteria.

Avenues in Leather, Inc. v. United

States, 423 F.3d 1326, 1331 (Fed. Cir. 2005) (the Federal Circuit’s

interpretation of tariff terms are binding on this court).

Strictly speaking, the Federal Circuit held that “[w]hen the imported textile costumes are

of a ﬂimsy nature and construction, lacking in durability and generally not recognized as

normal articles of wearing apparel, it is neither illogical nor unreasonable to conclude that

the subject merchandise is classiﬁable as festive articles.” Id. at 1360. However, the context

of the opinion, the court’s discussion therein, and the fact that “festive articles” and “fancy

dress, of textiles, of Chapters 61 or 62” are mutually exclusive categories, supports the

conclusion that the court’s holding regarding the nature of the items that belong in the ﬁrst

category reﬂect its opinion regarding those that do not belong in the second category.

This understanding is supported by Customs’ ICP regarding the classiﬁcation of textile

costumes. See supra note 9; Textile Costumes ICP. Pursuant to Rubie’s II, the Textile

Costumes ICP recommends that “all ﬂimsy, non-durable textile costumes that are not

recognized as ordinary articles of apparel are classiﬁed under 9505.90.6000, HTSUS[]

(ﬂimsy); all textile costumes that exceed the ﬂimsy, non-durable standards or are recognized

as ordinary articles of apparel are classiﬁed in Chapters 61 or 62, HTSUS[] (well-made).” Id.

at 10.

Additionally, the ICP’s guidance recognizes that Customs’ ﬂimsiness analysis is distinct

from the inquiry whether an item is an ordinary article of apparel. This distinction makes

sense given the origin of Customs’ ﬂimsiness analysis as determining “the scope of the term

‘fancy dress’ as it relates to costumes.” Textile Costumes ICP at 9; see also HQ 961447 at 2.

Customs does not employ its ﬂimsiness analysis to determine what constitutes apparel for

purposes of Chapter 61 or 62; rather, “CBP only applies this test to garments which are

prima facie classiﬁable in Chapter 95.” HQ H145555 (Aug. 6, 2012) at 9 (declining to apply

the test for what constitutes “fancy dress” for purposes of Note 1(e) as discussed in Rubie’s

II to determine whether the subject item (the “Snuggie®”) should be classiﬁed as a garment

or a blanket) (citing Textile Costumes ICP). But cf. Allstar Marketing Group, LLC v. United

States,41 CIT ___, ___, 211 F. Supp. 3d 1319, 1329–31 (2017) (Rubie’s II’s discussion of what

constitutes “wearing apparel” informs the court’s interpretation of “garment” pursuant to

subheading 6114.30.30).

Plaintiff contends that Rubie’s II“established” that the type of fancy dress excluded by

Note 1(e) consists of “expensive and well-constructed ballroom gowns, safari outﬁts such as

those used for hunting, certain types of uniforms, and other adult garments. Pl.’s MSJ at 15.

As Defendant contends, however, the Federal Circuit did not disturb Customs’ ﬁnding that

the “Cute and Cuddly Clown” costume met the criteria for fancy dress. Def.’s XMSJ at 15.

Thus, the Federal Circuit’s understanding of that term is not so limited. Moreover, the

Rubie’s II court’s only reference to such items is contained in a passing reference to what

“Customs determined.” 337 F.3d at 1356 (“Customs determined that ‘fancy dress . . . of

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

B. Whether the Jacket and Pants are “Fancy Dress, of

Textiles, of Chapter 61 or 62”

a. Parties’ Contentions

Plaintiff contends that the Santa Suit “is not well-made, and does

not meet wearing apparel production standards.” Pl.’s MSJ at 9.

support its contention, Plaintiff primarily relies on a report prepared

by its expert witness, Roni Start.

See Pl.’s MSJ, Ex. 3 (“Start

Report”), ECF No. 28–3.

Ms. Start distinguishes “well-made” from

“well-sewn,” and concludes that the Santa Suit “is not well-made.”

Start Report at 10 (“Parts of Rubies’ Santa Claus costume are ‘well

sewn’ but not ‘well made’ . . . .”); see also Pl.’s Resp. at 2 (“A well-sewn

costume . . . [is] not necessarily . . . an article of wearing apparel for

tariff classiﬁcation purposes.”); id. at 5 (“The distinction between a

well-made garment and a well-sewn costume is critical [to] determin-

ing whether . . . the [Santa Suit] is ‘fancy dress.’”). As evidence that

the Santa Suit is not well-made, Ms. Start points to its one-size ﬁts all

sizing, the quality of fabric and lining, and its ﬂammability directive.

Start Report at 10–11; see also Pl.’s MSJ at 10–11; Pl.’s Resp. at 3–4.

Plaintiff also contends that the Santa Suit “is not a well-constructed

ball gown, a safari outﬁt, or like garment that one would expect to

ﬁnd at a stylish soiree. It is not a uniform or an adult garment. It is

a costume . . . .” Pl.’s MSJ at 15. According to Plaintiff, the Santa Suit

“is worn, [but] it is not ordinarily worn; instead, it is placed on the

body and intended to depict Santa Claus.” Pl.’s Resp. at 8; see also

Pl.’s MSJ at 23 (“The [Santa Suit is] not ordinarily worn and [was]

chapter 61 or 62’ refers to elaborate or substantial costumes such as ‘expensive, well-

constructed ballroom gowns, safari outﬁts, certain types of uniforms, and other adult

garments.’”) (citing HQ 961447). Customs did not, however, deﬁne fancy dress in that

manner. Rather, it was, in part, the Traveler court’s view that “expensive, well-constructed

ballroom gowns, safari outﬁts, certain types of uniforms, and other adult garments may

serve both as Halloween costumes and wearing apparel” that prompted Customs to “reex-

amine[] its view regarding the scope of the term ‘fancy dress’ as it relates to costumes.” HQ

961447 at 2; see also Traveler,13 CIT at 383, 713 F. Supp. at 412.

Plaintiff presents its arguments in connection with the Santa Suit generally, although, as

previously noted, only the jacket, pants, gloves, and sack are at issue here. See supra note

4 and accompanying text.

Defendant does not contest Ms. Start’s qualiﬁcations. See Def.’s XMSJ at 28–32. Ms. Start

is the Department Chair of Apparel Industry Management and Menswear at the Fashion

Institute of Design and Merchandising in Los Angeles, California, and the Owner/President

of RJM Consulting. Start Report, Ex. A (“Start Resume”), ECF No. 28–3. Plaintiff also

submitted Ms. Start’s deposition testimony. See Pl.’s MSJ, Ex. 5 (“Start Dep.”), ECF No.

28–5.

Plaintiff also contends that Customs erred because “[v]irtually all of Rubies’ costumes are

. . . sewn in [costume] factories,” and “[a] ‘costume’ factory . . . generally [does not] make[]

. . . apparel[,] which has vastly different quality requirements.” Pl.’s MSJ at 11 (citing Pl.’s

MSJ, Ex. 7 (“Beige Decl.”), ECF No. 28–7). Plaintiff’s argument is premised on facts that are

both disputed by Defendant and that are immaterial to the classiﬁcation issue in question;

thus, the court will not consider it. See Pl.’s SOF ¶ 10; Def.’s Resp. to Pl.’s SOF ¶ 10.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

created for Christmas festivities.”). Finally, Plaintiff contends that

the Santa Suit’s design, use, function, and commercial market are

relevant factors. Pl.’s Resp. at 9–11.

In response to Plaintiff’s expert, Defendant asserts that Ms. Start

has too “narrowly deﬁne[d] articles of apparel by equating them with

articles of ‘fashion.’” Def.’s XMSJ at 17 (noting that Ms. Start con-

cluded that because the Santa Suit “was never part of any fashion

development process” it is not “apparel” but is instead a “costume”)

(quoting Start Report at 5–8). Pointing to the court’s Allstar opinion,

Defendant notes that none of the dictionary deﬁnitions cited by the

court in its examination of the term “apparel” refer to “fashion” or a

“fashion development process.” Id. at 17–18 (citing Allstar, 211 F.

Supp. 3d at 1329–31). Defendant cites several additional cases to

support its contention “that ‘non-traditional’ articles of clothing con-

stitute wearing apparel for classiﬁcation purposes.” Id. at 18–19

(citing Riddell, Inc. v. United States, 754 F.3d 1375 (Fed. Cir. 2014)

(football jerseys, pants, and girdles); Lemans Corp. v. United States,

660 F.3d 1311 (Fed. Cir. 2011) (motocross jerseys and pants, and

motorcycle jackets); H.I.M./Fathom, 981 F. Supp. 610 (wetsuits and

related accessories)).

Additionally, Defendant asserts the court should accord little

weight to Ms. Start’s expert opinion because it is unreliable and

irrelevant. Def.’s XMSJ at 28–32; Def.’s Reply at 9–12. Speciﬁcally,

Defendant contends that Ms. Start’s opinion is “not based on relevant

industry standards” and instead represents her “subjective beliefs,” is

contradictory at times, arbitrary, and lacking a logical foundation.

Def.’s XMSJ at 30. Defendant further contends that Ms. Start’s opin-

ion “touch[es] on issues of common knowledge” and contains “an

entire section dedicated to fashion theory and development,” which is

“irrelevant to whether the Santa Suit is an article of ‘wearing apparel’

or a ‘festive article’” for classiﬁcation purposes. Id. at 31.

Finally, Defendant contends that the Santa Suit “is well[-

]constructed, made to last[,] and [able to] withstand multiple wear-

ings and cleanings,” and “provides decency, comfort, adornment and

protection.” Id. at 13.

b. Consideration of Plaintiff’s Expert’s Opinion

The court’s consideration of Plaintiff’s proffered expert testimony is

guided by the factors stated in Daubert v. Merrell Dow Pharm., Inc.,

509 U.S. 579 (1993) and Rule 702 of the Federal Rules of Evidence.

See Libas, Ltd. v. United States, 193 F.3d 1361, 1366 (Fed. Cir. 1999);

G.G. Marck & Associates, Inc. v. United States, Slip Op. 15–62, 2015

WL 3757040, at *9 (2015) (relying on Rule 702 to determine the

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

weight to afford expert testimony to resolve summary judgment mo-

tions in a classiﬁcation case). Pursuant to Rule 702, expert testimony

is admissible when

(a) the expert’s scientiﬁc, technical, or other specialized knowl-

edge will help the trier of fact to understand the evidence or to

determine a fact in issue; (b) the testimony is based on sufficient

facts or data; (c) the testimony is the product of reliable prin-

ciples and methods; and (d) the expert has reliably applied the

principles and methods to the facts of the case.

Fed. R. Evid. 702. The “trial judge, acting as ‘gatekeeper,’ must ‘en-

sure that any and all [expert] testimony or evidence admitted is not

only relevant, but reliable.’” Libas, 193 F.3d at 1366 (quoting Daubert,

509 U.S. at 589); see also Kumho Tire Co., Ltd. v. Carmichael, 526

U.S. 137 (1999) (extending the court’s “gatekeeping” role to all expert

testimony).

In short, “for an expert witness’s testimony to be ad-

missible, it must be reliable, relevant, and helpful to the trier of fact.”

G.G. Marck, 2015 WL 3757040, at *9.

Ms. Start’s opinion fails to meet any of the Rule 702 requirements.

Preliminarily, the correct classiﬁcation of the Santa Suit is a legal

issue, not a factual issue, and one that is resolved on the basis of the

undisputed material facts set forth above. Bausch & Lomb, 148 F.3d

at 1365; supra Background Sect. I. Thus, there is no “trier of fact” to

aid.

Moreover, Ms. Start’s opinion is unhelpful--and, thus, irrelevant--

because she approaches the inquiry from the perspective of “fashion

theory” and “fashion development,” Start Report at 5–8, but whether

an article constitutes apparel or fancy dress for classiﬁcation pur-

poses does not depend on whether it is fashionable, see, e.g., Rubie’s

II, 337 F.3d at 1357. Ms. Start’s analysis of the Santa Suit applies

standards relevant to “menswear,” Start Report at 10–11, but those

are not the standards articulated by the Federal Circuit, see Rubie’s

II, 337 F.3d at 1357, 1360.

Ms. Start’s opinion on this issue is also unreliable. “[R]eliability is

the touchstone for expert testimony,” Libas, 193 F.3d at 1366, and it

requires more than subjective belief or unsupported speculation,

The Libas court noted that “Daubert and Kumho were decided in the context of deter-

mining standards for the admissibility of expert testimony under the Federal Rules of

Evidence,” but opined that “the proposition for which they stand, that expert testimony

must be reliable, goes to the weight that evidence is to be accorded as well as to its

admissibility.” 193 F.3d at 1366.

Plaintiff, therefore, is incorrect in its assertion that the Start Report “is based upon [Ms.

Start’s] comprehension and understanding of relevant industrial standards in the wearing

apparel industry, and not on any subjective belief.” Pl.’s Resp. at 4 (emphasis added).

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

Daubert, 509 U.S. at 590. Ms. Start’s assertions are highly general

and often unsupported. For example, she offers no basis for her

distinction between “well-made” and “well-sewn” for purposes of iden-

tifying wearing apparel. See Start Report at 10. Ms. Start then con-

tradicts her report during her deposition when she acknowledges that

apparel need not be “well-made,” see Start Dep. 122:11–14, and that

the “[Santa Suit] jacket in particular was pretty much well-made but

[has] an acetate lining,” id. at 149:20–150:3. In fact, Ms. Start admit-

ted that she formed her opinion that the Santa Suit was not apparel

before she even examined it. Id. at 124:13–21; see also id. at

182:22–183:4 (opining that a Santa Claus costume “would still be a

costume” even if “it was the most well-made”).

Ms. Start’s preconceived opinion regarding the Santa Suit high-

lights the problem with her expert testimony. She begins her report

by stating that she has “been asked by counsel for investigate [sic]

and opine on the extent to which the Santa Claus costume which

[Plaintiff] created is a costume or well-made apparel, and therefore

which customs classiﬁcation should be applied.” Start Report at 4.

She concludes her report by noting that “[i]n casual discussions with

friends and colleagues about this question of whether a Santa Claus

costume is a costume or apparel, it is usually followed by laughter.

They cannot believe someone would consider a Santa costume as

apparel.” Start Report at 12. Ms. Start misunderstands the precise

nature of the inquiry--or was misinformed. The issue is not whether

the Santa Suit is a costume or apparel as those terms are colloquially

understood; rather, the issue is whether the Santa Suit is “fancy

dress, of textiles, of Chapters 61 or 62,” or a “festive article,” as those

terms are deﬁned in the HTSUS and relevant case law, which is a

legal question. Though Ms. Start may be a menswear/apparel fashion

expert, her expertise is not helpful to the court’s analysis of the legal

question before it, and, therefore, the court will not consider the Start

Report in making its determination.

c. The Jacket and Pants are “Fancy Dress, of Tex-

tiles, of Chapters 61 or 62”

The court is guided by the criteria stated in Rubie’s II; that is,

whether the jacket and pants “are of a ﬂimsy nature and construction,

lacking in durability[,] and generally not recognized as normal ar-

ticles of wearing apparel.” 337 F.3d at 1360.

Considerations

Customs’ Textile Costumes ICP, upon which CBP relied in the underlying ruling, further

sets forth four criteria for assessing ﬂimsiness and durability: styling, construction, ﬁnish-

ing touches, and embellishments. See Textile Costumes ICP at 11; HQ H237067 at 8. The

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

relevant to ﬂimsiness and durability include the presence of “zippers,

inset panels, [and] darts or hoops, and whether the edges of the

materials [are] raw or ﬁnished.” Id. at 1357 (citing HQ 961447 gen-

erally as well as HQ 957948 and HQ 957952, which “set[] forth

certain styling and sewing features of costumes which exemplify the

characteristics of ‘textile articles of fancy dress’ under Chapter 61 or

62”).

In contrast to the merchandise at issue in Rubie’s II, which “fea-

tured simple pull-on type garments with no zippers,” and raw and

unhemmed edges, HQ 961447 at 4; see also Rubie’s II, 337 F.3d at

1352 n.2, the jacket, which is lined, has “a full front opening secured

by a zipper,” which is hidden by a left-over-right faux fur cover held

in place by two metal snaps, one at the collar of the jacket and one at

the base of the jacket, Def.’s SOF ¶¶ 4, 6–7. “The jacket has long

sleeves with turned edges, trimmed with white faux fur fabric cuffs,”

id.¶ 8, and “a straight cut hemmed bottom trimmed with the same

white faux fur fabric,” id.¶ 9. The physical characteristics (and physi-

cal inspection) of the jacket indicate a substantial, durable item that

will survive multiple wearings and cleanings over several Christmas

seasons, see id.¶¶ 3, 25–26.

The pants present a closer question. They are a “simple pull-on type

garment” with an elastic waist, but common knowledge dictates that

the same may be said of many pairs of pants that are unquestionably

“wearing apparel.” The bottom of the pants are not hemmed, though

the image depicted on the packaging demonstrates that the pants are

to be tucked into the shoe covers; thus, the unhemmed bottom will not

be visible. See Physical Sample. The pants are lined, with tightly

stitched interior seams, and feature pockets with hemmed edges.

Def.’s SOF ¶¶ 11–12. Taken together, the pants, like the jacket,

indicate a durable item that will survive multiple wearings and

cleanings. Id.¶¶ 3, 25–26.

To be sure, the jacket and pants may be intended for use only

during the Christmas season. See Pl.’s MSJ at 22 (“It cannot be

argued that people wear Santa Claus costumes as everyday apparel

. . . .”); Def.’s SOF ¶ 25. But regularity of wear is not dispositive; items

that are worn for speciﬁc, perhaps infrequent, purposes may consti-

tute wearing apparel. See Riddell, 754 F.3d at 1375 (football jersey’s

Textile Costumes ICP also recommends that “it is important to consider the garment as a

whole,” and “whether . . . it is reasonable to conclude that the article is a normal article of

apparel.” Textile Costumes ICP at 11. The only additional criteria provided for determining

whether an article is a normal article of apparel are that “[n]ormal articles of apparel are

usually designed for multiple wear and cleaning.” Id. Here, Customs based its classiﬁcation

determination on its ﬁnding that the jacket and pants are “well-made” pursuant to the

ICP’s four-factor ﬂimsiness criteria and “are suitable for repeated wear and can only be dry

cleaned.” See HQ H237067 at 9.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

pants, and girdles are classiﬁable as wearing apparel); Lemans, 660

F.3d at 1311 (motocross jerseys and pants, and motorcycle jackets are

wearing apparel); H.I.M./Fathom, 981 F. Supp. at 610 (wetsuits and

related accessories are wearing apparel).

There is language in Rubie’s II that suggests the festive value of the

costumes at issue disfavored classiﬁcation as wearing apparel:

[while the imports may simulate the structural features of wear-

ing apparel, and have some incidents of “clothes or coverings for

the human body worn for decency or comfort,” Antonio [Pompeo],

40 Cust. Ct. at 364, they are not practical“articles which are

ordinarily worn,” Arnold, 147 U.S. at496. . . . Rather, the Hal-

loween costumes for consumers have enormous “make believe”

or festive value during appropriate occasions such as Halloween

and incidentally afford the element of covering for decency or

comfort. To the extent that such elements have any character-

istics similar to “wearing apparel” to consumers of Halloween

costumes, such features are clearly secondary to the costumes’

festive value.

Rubie’s II, 337 F.3d at 1358 (emphasis added); see Pl.’s MSJ at 15–16

(contending the Santa Suit’s “value as wearing apparel to the con-

sumer is clearly secondary to its ‘make-believe’ or festive value”). The

context in which the statement in Rubie’s II was made, however,

involved costumes so ﬂimsy their “principal intended use [was] for a

one time festive occasion,” as “distinct from ‘wearing apparel’ which

courts have held to be used for decency, comfort, adornment or pro-

tection.” Rubie’s II, 337 F.3d at 1356 (quoting HQ 961447 at 3).

Thus, they were not “practical” articles of apparel, and their festive

value exceeded their value as wearing apparel. See id. at 1358. In

contrast, the Santa Suit jacket and pants are manufactured for “re-

peated[]” wear over several Christmas seasons, i.e., years, are suit-

able for dry cleaning, and provide warmth and protection to the

wearer. Def.’s SOF ¶¶ 3, 25–27. They are articles--jackets and pants-

that are “ordinarily worn.” See Arnold, 147 U.S. at 496 (the term

“wearing apparel” covers “all articles of dress”).

Further, the court does not interpret Rubie’s II as supplying a

bright-line rule whereby any item of festive value is excluded from

classiﬁcation as wearing apparel. Note 1(e) excludes from Chapter 95

The costumes at issue in Rubie’s II appear to resemble the children’s Halloween costumes

Plaintiff produces and sells, which “do not have ﬁnished edges or zippers, and close in the

back with Velcro or a snap, or are made to ‘slipover’ the wearer,” are intended for one-time

use, and retail for 10–20 USD. Def.’s SOF ¶¶ 19, 21–23. In contrast, the Santa Suit retails

for 100 USD and is intended to be worn numerous times. Id.¶¶ 25–26.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

articles that are prima facie festive articles but also “fancy dress, of

textiles, of Chapter 61 or 62.” In other words, Note 1(e) excludes a

subset of festive articles that also meet certain requirements. Undue

emphasis on the festive or make-believe nature of the article would

nullify Note 1(e); such an interpretive approach has long been disfa-

vored. Cf, e.g., D. Ginsberg & Sons, Inc. v. Popkin, 285 U.S. 204, 208

(1932) (it is a “cardinal rule” that “if possible, effect shall be given to

every clause and part of a statute”). Accordingly, the Santa Suit’s

association with the Christmas season does not foreclose its classiﬁ-

cation as wearing apparel.

In sum, the jacket and pants constitute fancy dress of a durable,

non-ﬂimsy nature, and are normal articles of apparel classiﬁable

pursuant to Chapter 61. They are, therefore, excluded from Chapter

95.

Proceeding to the precise classiﬁcation, “[g]arments of [Chapter 61]

designed for left over right closure at the front shall be regarded as

men’s or boys’ garments.” Ch. 61, Note 9. The jacket has a left-over-

right faux fur cover held in place by two metal snaps, one at the collar

of the jacket and one at the base of the jacket, Def.’s SOF ¶¶ 67; thus,

it is classiﬁable as a men’s or boy’s garment.

Heading 6105, pursuant to which Customs classiﬁed the jacket,

covers “[m]en’s or boy’s shirts, knitted or crocheted.” See HQ H237067

Plaintiff seeks to rely on the court’s recent Allstar opinion. Pl.’s MSJ at 23. According to

Plaintiff, the court, in Allstar, noted that Rubie’s II“ held that costumes are not ordinarily

worn, and although costumes impart decency or comfort for the wearer, such beneﬁts were

incidental to their primary purpose, that is, . . . Halloween fun.” Id. (citing Allstar, 211 F.

Supp. 3d at 1331). The Allstar court discusses the Rubie’s II court’s ﬁndings vis-à-vis the

costumes at issue in that case, not costumes generally. The court did not--and does not--

construe Rubie’s II as foreclosing all costumes from classiﬁcation as wearing apparel. If all

items reﬂecting festive or make-believe value were eliminated from the scope of the phrase

“of textiles, of Chapter 61 or 62,” there would be nothing for Note 1(e) to exclude.

This ﬁnding is supported by Explanatory Note (“EN”) 95.05, which suggests that heading

9505 covers “[f]estive, carnival or other entertainment articles, which in view of their

intended use are generally made of non-durable material,” for example, “[a]rticles of fancy

dress, [such as] masks, false ears and noses, wigs, false beards and moustaches,” but not

“fancy dress of textile materials, of Chapter 61 or 62.” EN 95.05 (boldtype omitted) (other

emphasis added). The Federal Circuit disapproved of the Rubie’s I court’s reliance on EN

95.05 as support for the lower court’s conclusion that the costumes at issue did not belong

in Chapter 95 because the type of fancy dress EN 95.05 contemplates as covered thereunder

includes accessories to costumes rather than the actual textile costumes. Rubie’s II, 337

F.3d at 1359 (“Although the examples in the Explanatory Notes are probative and some-

times illuminating, we shall not employ their limiting characteristics, to the extent there

are any, to narrow the language of the classiﬁcation heading itself. Nothing from the

pertinent subheading 9505.90.6000— ‘Festive, carnival or other entertainment articles:

Other: Other’—limits 9505.90.6000 only to accessories.”). It is also true, however, that the

ENs are generally “indicative of proper interpretation” of the tariff schedule. Lynteq, 976

F.2d at 699. Although not all festive articles are made of non-durable material, see Michael

Simon Design, 501 F.3d at 1305, 1306–07 (classifying festive sweaters as festive articles),

EN 95.05 supports the court’s consideration of the Santa Suit jacket’s durability, and its

ﬁnding that the jacket’s durability distinguishes it from the costumes in Rubie’s II and

disfavors classiﬁcation in Chapter 95.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

at 11. However, Note 4 to Chapter 61 states that “[h]eading[] 6105

. . . [does] not cover . . . garments having an average of less than 10

stitches per linear centimeter in each direction counted on an area

measuring at least 10 centimeters by 10 centimeters.” Ch. 61, Note 4.

Laboratory testing conducted in the course of this litigation demon-

strates that the jacket does not meet Note 4’s requirement. Pl.’s

Suppl. Br, Ex. 1; Def.’s Suppl. Br., Ex. 2. Thus, it is not classiﬁable as

a shirt.

Parties dispute the proper alternative classiﬁcation. Plaintiff con-

tends the jacket may be classiﬁable as a coat pursuant to HTSUS

6101.30.20, a suit-type jacket pursuant to HTSUS 6103.33.20, or in

the “basket” provision pursuant to HTSUS 6114.30.30, which covers

articles not speciﬁcally described elsewhere in Chapter 61. Pl.’s

Suppl. Br. at 3–4.

Defendant disagrees with most of Plaintiff’s

proposed alternatives. See generally Def.’s Resp. to Pl.’s Suppl. Br.,

ECF No. 42. Defendant instead contends that the jacket is classiﬁable

as a “[s]weater[], pullover[], sweatshirt[], waistcoat[] (vest[]) [or ]

similar article[]” pursuant to HTSUS 6110.30.30. Def.’s Suppl. Br. at

3–5 (emphasis added). Defendant alternatively contends the jacket is

classiﬁable pursuant to the basket provision, HTSUS 6114.30.10. Id.

at 5–6. Plaintiff disagrees with Defendant’s assertion that the jacket

is classiﬁable pursuant to HTSUS 6110.30.30, see Pl.’s Reply to Gov-

ernment’s Resp. as to Alternative Classiﬁcations (“Pl.’s Suppl. Reply”)

at 2, ECF No. 43, and contends that the whole inquiry underscores its

assertion that the Santa Suit “is a ‘festive’ article celebrating the

Christmas holiday, and not an ‘apparel’ article normally worn as

clothing,” id. at 3.

Heading 6101 covers “Men’s or boys’ overcoats, carcoats, capes,

cloaks, anoraks (including ski-jackets), windbreakers and similar ar-

ticles, knitted or crocheted, other than those of heading 6103.” The

relevant Explanatory Note indicates that such items are “character-

ised [sic] by the fact that they are generally worn over all other

clothing for protection against the weather.” EN 61.01. The subject

jacket may be worn over other clothing or just undergarments, Def.’s

SOF ¶ 10, and although it affords some protection, id.¶ 27, it is not

worn for protection as are the heading’s exemplars.

Heading 6103 covers “suit-type jackets [and] blazers.”

The rel-

evant Explanatory Note indicates that “[t]he ‘jackets or blazers’ have

Plaintiff affirms its position that the Santa Suit should be classiﬁed pursuant to Chapter

95, and responds to the court’s order only “by assuming arguendo that it is not.” Pl.’s Suppl.

Br. at 1.

Heading 6103 also covers “[m]en’s or boy’s suits [and] ensembles.” Note 3(a) provides that

“[t]he term ‘suit’ means,” inter alia, “two or three pieces made up, in respect of their outer

surface, in identical fabric.” Ch. 61, Note 3(a). Likewise, the term “ensemble” refers to “a set

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

the same characteristics as the suit coats and suit jackets described in

Chapter Note 3(a) and in Part (A) [to EN 61.03].” EN 61.03. Part (A)

to EN 61.03 describes jackets with “a full front opening without a

closure or with a closure other than a slide fastener (zipper).” The

Santa Suit jacket has a zipper closure, Def.’s SOF ¶ 6; thus, it is not

covered by heading 6103.

Heading 6110 covers “[s]weaters, pullovers, sweatshirts, waistcoats

(vests) and similar articles, knitted or crocheted.” Defendant offers

the following dictionary deﬁnitions of the named articles: (1) sweater:

“[c]lothing for the upper part of the body worn either as an outer-

garment or under a coat or jacket,” Charlotte Mankey Calasibetta,

Essential Terms of Fashion: A Collection of Deﬁnitions (“Essential

Terms of Fashion”) 210 (Fairchild Publications) (1986));

(2) pull-

over: “[a]ny light knit shirt without neck placket or fastening,” alter-

natively, “[s]weater with round, crew, or V-neck pulled on over the

head as contrasted with a cardigan or coat sweater, which opens down

the front, Charlotte Mankey Calasibetta & Phyllis Tortora, The Fair-

child Dictionary of Fashion (“Dictionary of Fashion”) 408, 441 (Fair-

child Publications, Inc.) (2003);

(3) sweatshirt: “[l]ong-sleeved,

ﬂeece-backed, cotton-knit pullover or zipped-front knit shirt made

with rib-knit crew neck . . ., rib-knit cuffs and waistband,” id. at 408;

and (4) vest: “[a]n item of wearing apparel extending to the waist or

longer . . ., usually worn over a blouse or shirt and sometimes under

a suit jacket,” Essential Terms of Fashion at 225. According to Defen-

dant, the named articles

are united by the following essential characteristics: each article

covers the upper body; provides some warmth but does not

protect against the elements (wind, rain or extreme cold); and,

may be worn over a lighter garment (shirt or undershirt) but is

not designed to be worn over all other clothing.

Def.’s Suppl. Br. at 4. Defendant contends that because the jacket

shares these characteristics, it is a “similar article” pursuant to the

rule of ejusdem generis. Id. at 3–4.

of garments . . . composed of several pieces made up in identical fabric.” Ch. 61, Note 3(b).

The subject jacket and pants are not made of identical fabric: the jacket features faux fur

fabric, whereas the pants do not. Def.’s SOF ¶¶ 8, 11–12. And, the Santa Suit as a whole is

composed of several additional pieces made up of different materials. Id.¶ 1. Thus, neither

the jacket and pants, nor the Santa Suit as a whole, are classiﬁable as a “suit” or “en-

semble.”

Essential Terms of Fashion is Exhibit 3 to Defendant’s supplemental brief. See Def.’ s

Suppl. Br., Ex. 3, ECF No. 41–3.

Dictionary of Fashion is Exhibit 1 to Defendant’s supplemental brief. See Def.’s Suppl.

Br., Ex. 1, ECF No. 41–1.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

The rule of ejusdem generis

provides that when “general words

follow an enumeration of speciﬁc items, the general words are read as

applying only to other items akin to those speciﬁcally enumerated.”

Schlumberger Tech. Corp. v. United States, 845 F.3d 1158, 1165 n.8

(Fed. Cir. 2017) (citation omitted). In “classiﬁcation cases, ejusdem

generis requires that the imported merchandise possess the essential

characteristics or purposes that unite the articles enumerated eo

nomine [by name] in order to be classiﬁed under the general terms.”

Totes II, 69 F.3d at 498 (citation omitted) (emphasis added); see also

Victoria’s Secret Direct, LLC v. United States, 769 F.3d 1102, 1107

(Fed. Cir. 2014) (“Applying the phrase ‘and similar articles’ to the

merchandise at issue, then, requires determining whether the mer-

chandise, considering all of its features, shares the unifying charac-

teristics of the particular heading.”).

Identifying the essential (or

unifying) characteristics is “a question of law” and “a matter of com-

mon sense.” Victoria’s Secret, 769 F.3d at 1107. “[T]he unifying char-

acteristics may consist of both affirmative features and limitations.”

Id.

As Defendant suggests, the named articles share the essential

characteristics of covering the upper body, providing some degree of

warmth, and being suitable for wear over a light garment. The Santa

Suit jacket shares these characteristics. See Physical Sample (dem-

onstrating the obvious point that the jacket is worn on the upper

body); Def.’s SOF ¶¶ 10, 27 (it is undisputed that the jacket may be

worn over an undergarment or clothing, and provides warmth to the

wearer); Victoria’s Secret, 769 F3d at 1107 (instructing courts to ﬁrst

consider the unifying characteristics before determining whether the

subject merchandise shares those characteristics).

The relevant Explanatory Note supports the court’s ﬁnding with

respect to the exemplars’ essential characteristics and the jacket’s

Ejusdem generis “means ‘of the same kind.’” Totes, Inc. v. United States (“Totes II”), 69

F.3d 495, 498 (Fed. Cir. 1995), aff’g Totes, Inc. v. United States (“Totes I”), 18 CIT 919, 865

F. Supp. 867 (1994).

The rule of ejusdem generis “does not apply . . . when the items do not ﬁt into any kind

of deﬁnable category.” Victoria’s Secret, 769 F.3d at 1107 n.1 (internal quotation marks and

citation omitted).

The Federal Circuit notes that an article may not “share[] the heading’s unifying

characteristics” when it has “a more speciﬁc primary purpose that is inconsistent with the

listed exemplars.” Victoria’s Secret, 769 F.3d at 1107 (citation omitted). In other words, the

subject merchandise may share the essential characteristics but have some other features

that “defeat ‘similarity’— necessarily meaning that the unifying characteristics of the

heading’s list include a limitation that excludes such other features.” Id. at 1107–08. The

Santa Suit jacket’s festive value is not inconsistent with the named articles. Moreover, the

enumerated items are not strictly limited to items lacking festive or make-believe value.

Indeed, Note 1(e) instructs that wearing apparel may have festive or make-believe value, or

else there would be no “fancy dress, of textiles, of chapter 61 or 62” to exclude. See supra

note 27 and accompanying text.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

sharing of those characteristics. It provides that “heading [6110]

covers a category of knitted or crocheted articles, without distinction

between male or female wear, designed to cover the upper parts of the

body (jerseys, pullovers, cardigans, waistcoats and similar articles).”

EN 61.10 (emphasis added). Defendant deﬁnes “cardigan” as “a

sweater or jacket that opens the full length of the center front and

usu. has a round or V-shaped collarless neck,” Def.’s Suppl. Br. at 5

(quoting Webster’s Third New Int’l Dictionary of the English Lan-

guage Unabridged (1993) (“Webster’s”) at 337), or as “[a]n adjective

used to describe collarless garments with round or V-necklines that

button down the front,” id. (quoting Dictionary of Fashion at 61).

Defendant contends that the jacket is like a cardigan “because, al-

though it has a collar which cardigans do not, it is a knitted article,

designed to cover the upper body, and it has a full length opening in

the center front.” Id. (citing Physical Sample). Plaintiff characterizes

Defendant’s argument as “convoluted” and “ludicrous.” Pl.’s Suppl.

Reply at 2 (“In support of its position, [D]efendant actually makes the

convoluted argument that since a cardigan is a collarless sweater or

jacket, a jacket can be classiﬁed as a sweater. This argument is

ludicrous . . . .”). But Plaintiff is incorrect.

The Explanatory Note provides examples of articles that share the

essential characteristics of the articles named in the heading; that is,

articles that cover the upper body, provide warmth, and may be worn

over a light garment. Moreover, the Explanatory Note’s exemplars do

not represent the limits of what may be deemed “similar” to the

heading’s exemplars. See EN 61.10 (heading 6110 includes “jerseys,

pullovers, cardigans, waistcoats and similar articles”) (emphasis

added); Rubie’s II, 337 F.3d at 1359 (courts should not employ any

“limiting characteristics [in the Explanatory Notes’ exemplars], to the

extent there are any, to narrow the language of the classiﬁcation

heading itself”). The jacket’s addition of a collar, which a cardigan

may have, see Def.’s Suppl. Br. at 5 (quoting Webster’s at 337), is not

dispositive because the absence of a collar is not a deﬁning feature of

the exemplars in the heading or Explanatory Note. Moreover, com-

mon knowledge dictates that waistcoats (or vests) may have a collar

and, thus, are not, by deﬁnition, collarless. See Brookside Veneers, 847

F.2d at 789 (courts may rely upon their own understanding of HTSUS

terms). The exemplars in the heading and the Explanatory Note are

all distinct in various respects, but they also share the essential

characteristics of covering the upper body, providing warmth, and

being suitable for wear over a light garment, as does the Santa Suit

jacket. Accordingly, it is classiﬁable pursuant to heading 6110, spe-

ciﬁcally, HTSUS 6110.30.30, which covers “[s]weaters, pullovers,

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

sweatshirts, waistcoats (vests) and similar articles, knitted or cro-

cheted. . . . [o]f man-made ﬁbers . . . [o]ther.”

As to the pants, heading 6103 covers “men’s or boy’s . . . trousers

. . . .” “Trousers” may be deﬁned as “an outer garment extending from

the waist to the ankle . . ., covering each leg separately, made close-

ﬁtting or loose-ﬁtting in accord with the fashion of different periods.”

Webster’s at 2453. The pants are classiﬁable pursuant thereto; spe-

ciﬁcally, HTSUS 6103.43.15 (covering “men’s or boy’s . . . trousers

. . . [o]f synthetic ﬁbers . . . [o]ther”).

IV. Classiﬁcation of the Gloves

Heading 6116 covers knitted gloves, mittens and mitts. The gloves,

which consist of polyester knit fabric, Def.’s SOF ¶ 13, are prima facie

classiﬁable pursuant to heading 6116. Accordingly, they are excluded

from classiﬁcation under Chapter 95. See Ch. 95, Note 1(u). The

gloves are properly classiﬁed pursuant to HTSUS 6116.93.94

(cov-

ering “[g]loves . . . [o]f synthetic ﬁbers . . . . [o]ther . . . [w]ith

fourchettes”).

HTSUS 6110.30.30 provides a rate of duty of 32% ad valorem, which is the same as

HTSUS 6105.20.20 pursuant to which Customs classiﬁed the jacket. See Pl.’s SOF ¶ 4;

Def.’s Resp. to Pl.’s SOF ¶ 4.

Plaintiff contends, without citation to supporting authority, that the Santa Suit’s “design,

use, function[,] and commercial market” are “highly relevant” to its classiﬁcation. Pl.’s Resp.

at 9–10. The Federal Circuit has held that use may be an appropriate consideration when

examining classiﬁcation under competing eo nomine provisions. GRK Can., Ltd. v. United

States, 761 F.3d 1354, 1355 (Fed. Cir. 2014) (trial court erred in refusing to consider use to

determine whether subject merchandise should be classiﬁed as self-tapping screws or wood

screws). Accordingly, use may be considered when determining the commercial meaning of

a term in an eo nomine provision when the merchandise named in that provision “inher-

ently suggests a type of use,” or when determining whether a particular article “ﬁts within

the classiﬁcation’s scope.” Id. at 1358–59 (citations omitted). As to the latter inquiry, the

court may consider “the subject article’s physical characteristics, as well as what features

the article has for typical users, how it was designed and for what objectives, and how it is

marketed.” Id. at 1358 (citations omitted). Here, the court is tasked with determining

whether the Santa Suit jacket and pants are described by Note 1(e) to Chapter 95, thereby

foreclosing them from classiﬁcation as festive articles pursuant to that chapter. Cf. Sig-

ma–Tau HealthScience, Inc., 838 F.3d at 1277, 1278 (declining to consider use when

interpreting an eo nomine provision, and noting that a chapter note determined under

which of two competing provisions the subject merchandise must be classiﬁed); Allstar, 211

F. Supp. 3d at 1332–37 (considering such factors as design, use, function, and marketing to

determine whether the Snuggie® is classiﬁable as a garment or blanket). That determina-

tion is guided by the Federal Circuit’s interpretation of the relevant tariff terms. See

Avenues in Leather, 423 F.3d at 1331 (the court is bound by the Federal Circuit’s interpre-

tation of tariff terms). Accordingly, Plaintiff’s argument is unavailing.

HTSUS 6116.93.94 provides a rate of duty of 18.6% ad valorem, which is more than the

10% duty rate Customs assessed pursuant to HTSUS 6115.95.60. See Pl.’s SOF ¶ 4; Def.’s

Resp. to Pl.’s SOF ¶ 4.

A “fourchette” is “the strip or shaped piece used for the sides of the ﬁngers of a glove.”

Webster’s at 898. The subject gloves have fourchettes. See supra note 6.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

V. Classiﬁcation of the Sack

Heading 4202 covers “traveling bags, . . . knapsacks and backpacks,

handbags, shopping bags, . . . sports bags, . . . and similar containers,

. . . of textile materials.” The sack consists of the same plush fabric as

the jacket and pants, and has a drawstring cord. Def.’s SOF ¶ 14. It

is described in the packaging as a “toy bag.” Physical Sample. The

Government contends that the sack is classiﬁable pursuant to head-

ing 4202 because it shares the “essential purpose” or “essential char-

acteristics,” and “is of the same class of kind,” as the named articles.

Def.’s XMSJ at 24, 25.

Defendant points the court to Totes I, 18 CIT

at 924–25, 865 F. Supp. at 872,

and Processed Plastic Co. v. United

States, 29 CIT 1129, 395 F. Supp. 2d 1296 (2005).

Heading 4202 is an eo nomine provision, Totes II, 69 F.3d at 498,

which therefore “include[s] all forms of the named article,” Carl Zeiss,

Inc. v. United States, 195 F.3d 1375, 1379 (Fed. Cir. 1999). Addition-

ally, the term “similar containers” implicates the rule of ejusdem

generis. Processed Plastics, 29 CIT at 1147 n.30, 395 F. Supp. 2d at

1313 n.30. The Federal Circuit has deﬁned the essential characteris-

tics of the heading 4202 exemplars as “organizing, storing, protecting,

and carrying various items.” Totes II, 69 F.3d at 498 (approving of the

trial court’s determination of same).

Here, the sack’s plush material, drawstring cord, and description as

a “toy bag” indicates that it serves the purpose of storing, protecting,

and carrying toys. Def.’s SOF ¶ 14; Physical Sample.

With some

effort, the drawstring cord may be pulled tightly closed to prevent

toys from falling out, or it may be used to tie off the top of the sack.

Physical Sample. To the extent the sack lacks compartments and

pockets, its organizational capacity is unclear. However, the ubiqui-

tous textile “shopping bag,” one of the named articles, also generally

lacks organizational features, so the court does not ﬁnd the lack of

Plaintiff did not respond to Defendant’s argument. See generally Pl.’s Resp.

In Totes I, the court applied the rule of ejusdem generis to classify trunk organizers

pursuant to Heading 4202 because they “possess[ed] the essential characteristics of or

serve[ed] a common purpose like that served by the exemplars in Heading 4202, and hence

by the operation of ejusdem generis fall within the purview of ‘similar containers.’” 18 CIT

at 924–25, 865 F. Supp. at 872.

In Process Plastics, the court determined that children’s backpacks and beach bags were

properly classiﬁed pursuant to Heading 4202, and not as “toys” pursuant to heading 9503,

in part, because they “serve[d] the purposes of organizing, storing, and protecting toys or

other personal effects.” 29 CIT at 1145–48, 395 F. Supp. 2d at 1312–14.

Webster’s deﬁnes “bag,” inter alia, as “a container made of . . . cloth, . . . or other ﬂexible

material and usu. closed on all sides except for an opening that may be closed (as by folding,

pasting, tying, or sewing), being of sizes ranging from small to very large and being

specially designed and treated for properly holding, storing, carrying, shipping, or distrib-

uting any material or product--compare POUCH, SACK.” Webster’s at 162. The sack ﬁts

that deﬁnition. See Physical Sample.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

organizational capacity dispositive. See, e.g., Brookside Veneers, 847

F.2d at 789 (courts may rely on their own understanding of terms).

Further, not all of heading 4202’s exemplar’s necessarily share all of

the above-stated essential characteristics. See Totes I, 18 CIT at 925,

865 F. Supp. at 873 (noting that “some” of the exemplars are designed

to carry their contents). Because the sack serves the purposes of

storing, protecting, and carrying, it is prima facie classiﬁable pursu-

ant to heading 4202. It is, therefore, foreclosed from classiﬁcation

pursuant to Chapter 95. Ch. 95, Note 1(d).

Proceeding to the appropriate subheading, “[t]ravel, sports and

similar bags . . . of textile materials: [o]ther,” are covered by subhead-

ing 4202.92.30. The phrase “travel, sports and similar bags,” includes

articles “designed for carrying clothing and other personal effects

during travel, including . . . shopping bags.” Ch. 42, Add’l U.S. Note 1.

The sack appears capable of carrying toys (or other personal effects)

from A to B, similar to a shopping bag. Accordingly, the sack is

properly classiﬁed pursuant to HTSUS 4202.92.30.

CONCLUSION

For the reasons discussed above, the components of the Santa Suit

at issue in this case are properly classiﬁed pursuant to the following

HTSUS provisions: (1) jacket: HTSUS 6110.30.30; (2) pants: HTSUS

6103.43.15; (3) gloves: HTSUS 6116.93.94; and (4) sack: HTSUS

4202.92.30. Accordingly, the court denies Plaintiff’s motion for sum-

mary judgment and grants Defendant’s cross-motion for summary

judgment.

Judgment will be entered accordingly.

Dated: October 31, 2017

New York, New York

/s/ Mark A. Barnett

MARK A. BARNETT, JUDGE

Defendant requested summary judgment for the reasons “explained in [its] accompany-

ing memorandum of law.” Def.’s Cross-Mot. for Summ. J. at 1. Defendant’s memorandum of

law urged the court to affirm Customs’ classiﬁcation of the subject jacket pursuant to

HTSUS 6105.20.20. Def.’s XMSJ at 1. As discussed above, in supplemental brieﬁng, Defen-

dant acknowledged that HTSUS 6105.20.20 does not cover the subject jacket, and asserted

that HTSUS 6110.30.30 is the correct classiﬁcation. Def.’s Suppl. Br. at 4–5. The court

agrees. Accordingly, the court construes Defendant’s cross-motion as being amended by its

supplemental brief, and therefore grants the motion in full.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

Slip Op. 17–149

KALLE USA, INC, Plaintiff, v. UNITED STATES, Defendant.

Before: Gary S. Katzmann, Judge

Court No. 13–00003

[Plaintiff’s motion for summary judgment is denied and defendant’s cross-motion

for summary judgment is granted.]

Dated: November 2, 2017

Frederick Van Arnan, Jr., Barnes, Richardson, & Colburn, LLP, of New York, argued

for plaintiff. Of counsel on the brief was Alan Goggins.

Hardeep K. Josan, Trial Attorney, Commercial Litigation Branch, Civil Division,

U.S. Department of Justice, of New York, NY, argued for defendant. With her on the

brief were Joyce R. Branda, Acting Assistant Attorney General, Amy M. Rubin, Assis-

tant Director, and Lisa M. Gonzalo, as Trial Attorney. Of counsel on the brief was Paula

Smith, Office of the Assistant Chief Counsel for International Trade Litigation, U.S.

Department of Customs & Border Patrol of New York. With them on the supplemental

brief was Benjamin C. Mizer and on the Defendant’s Response to Court Order was

Chad A. Readler, Acting Assistant Attorney General of New York.

OPINION

Katzmann, Judge:

How should food casings composed of both textile and plastic be

classiﬁed for the purposes of determining what tariff rate should

apply to their importation? In this action, Plaintiff Kalle USA Inc.

(“Kalle”) contests the denials of its administrative protests by U.S.

Customs and Border Protection (“Customs”) and disputes the tariff

classiﬁcation under the Harmonized Tariff Schedule of the United

States (2010) (HTSUS)

which Customs determined for two of its food

casing products, NaloProtex G1 (“G1”) and NaloProtex G2 (“G2”).

Speciﬁcally, Kalle contends that the G1 and G2 products—which are

used for encasing raw sausage, scalded-emulsion sausage, cooked-

meat emulsion sausage, ham and other processed meat products, and

cheese—should be classiﬁed as plastics, while the United States (“the

Government”) argues that Customs correctly classiﬁed the casings as

made up textile products. Joint Statement of Undisputed Facts ¶ 4,

Sept. 19, 2014, ECF No. 23 (“JSUF”). Before the court is Kalle’s

Motion for Summary Judgment (“Pl.’s Br.”) and the Government’s

Cross Motion for Summary Judgment on behalf of Customs (“Def.’s

Br.”). The court concludes that Customs correctly classiﬁed the G1

All references to section notes, chapter notes, headings or subheadings contained herein

are to 2010 HTSUS.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

and G2 casings, and therefore denies Kalle’s Motion for Summary

Judgment and grants the Government’s Cross Motion for Summary

Judgment.

BACKGROUND

1. The Merchandise at Issue

a. Facts Common to Both NaloProtex G1 and NaloProtex

G2 Casings

The following facts are not in dispute. The merchandise at issue is

known as NaloProtex G1 and NaloProtex G2 casings (“G1 and G2

casings”). JSUF ¶ 2. These products are imported into the United

States from Germany by Kalle USA Inc. Id.; Oral Argument, ECF No.

68. The G1 and G2 products are casings used for encasing raw sau-

sage, scalded-emulsion sausage, cooked-meat emulsion sausage, ham

and other processed meat products, and can also be used for encasing

cheese. JSUF ¶ 4.

The starting material for both the G1 and G2 casings is a textile ﬂat

sheeting. Id.¶ 5. The textile fabric portion of the casings is coated in

plastic on one side, the outer side. Id.¶ 6. U.S. Patent 8,147,933 B2,

dated April 3, 2012, describes the Gl and G2 casings as “textile food

casings” consisting of a “textile envelope” with a “longitudinal seam,”

and a plastic “coating applied in an amount to allow said textile

structure to be recognized within the coated casing.” Id.¶ 7. The inner

textile fabric layer and the outer plastic coating layer together pro-

vide a casing that has several desirable features, including the ability

to absorb dyes and aroma substances and transfer these substances

into the encased product. Id.¶ 8. The textile material gives the cas-

ings strength and shape, and provides a matrix to hold the plastic

coating. Id.¶ 9. The textile material also ensures the mechanical

stability of the casings. Id.¶ 10. The plastic coating material “only ﬁlls

the interstitial spaces between the textile ﬁbers” and is applied in a

thin enough layer that the textile structure of the casing is still

recognizable. Id.¶¶ 11–13. The plastic coating serves to prevent mois-

ture transmission both into and out of the casings. Id.¶ 14. During

manufacture of the G1 and G2 casings, the coated textile sheeting is

trimmed to the appropriate width, folded over on its sides to form a

tube, and then ﬁxed with a seam by gluing. Id.¶ 15. The casings are

ﬂexible. Id.¶ 16. Both products are imported in rolls of ﬂattened tubes

which are wound around a cardboard core. Id.¶ 17. Both G1 and G2

casings are used for the same applications. Id.¶ 18. The key difference

between the G1 and G2 casings is that the G2 casing is stronger and

thinner than the G1, giving the G2 better tear strength and better

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

machineability. Id.¶ 19. After importation, Kalle cuts the G1 and G2

casings to lengths required by customers, impregnates the casings

with ﬂavors, and then sells the casings to the processed meat indus-

try. Id.¶ 20. Kalle’s customers stuff the casings with cooked sausages,

ham, or other processed meats to create ﬁnished products for end

users. Id.¶ 21.

b. Characteristics Particular to NaloProtex G1 Casings

The G1 casing was imported under one of the nine entries at issue,

JJ8–0290211-I. Id.¶ 34. The commercial invoice describes NaloProtex

G1 casings as “150–210–23 NaloProtex _ FP Dia. 108 Flw. 165.0,”

with or without other words, letters, or numbers of description. Id.¶

35. The G1 product is described by Kalle in its marketing literature as

a “textile barrier casing” with transfer properties. Id.¶ 36. Pursuant

to U.S. Customs and Border Protection Laboratory Report Number

CH20090925, dated October 5, 2009 (“Lab Report”), the outer surface

of the G1 casing consists of a rubber/plastic material and an inner

surface layer of woven fabric. Id.¶ 37. The woven fabric portion of the

G1 casing is composed of 100%, by weight, man-made viscose rayon

and polyester ﬁbers. Id.¶ 38; Lab Report. The G1 casing is composed

of approximately 63% rubber/plastic and 37% woven fabric. JSUF ¶

39; Lab Report. The rubber/plastic material is composed of polyvi-

nylidene chloride. JSUF ¶ 40; Lab Report. The woven fabric portion

of the G1 casing is a textile. JSUF ¶ 41. The textile and plastic

portions of the G1 casings are both measurable layers. Id.¶ 42. The

textile portion of the G1 casing has a thickness of l80 µm, a weight of

60g/m

, and a cost of .64 Euro/165cm. Id.¶ 43. The textile portion of

the G1 casing is coated in plastic on the outer surface. Id.¶ 44. The

plastic portion of the G1 casing has a thickness of 30µm, a weight of

90g/m

, and a cost of 1.10 Euro/165cm. Id.¶ 45. The thickness of the

textile fabric portion of the G1 casing is six times greater than the

thickness of the plastic coating. Id.¶ 46. The G1 casing comes in a

variety of widths and diameters, ranging from 58 mm wide (when

ﬂat) and 37 mm in diameter to 245 mm wide and 156 mm in diameter.

Id.¶ 47. All sizes of the NaloProtex G1 casings are imported in 500 m

rolls. Id.¶ 48 (as corrected).

During Oral Argument on October 11, 2017, the parties moved to correct errors in the

record, stating that the G1 and G2 casings come in rolls of 500 m (meters), rather than the

500 mm indicated in the JSUF. ECF No. 68. The court granted their motion. Id.

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

c. Characteristics Particular to NaloProtex G2 Casings

Eight of the nine entries at issue contain G2 casings, including

entry numbers JJ8–02896602, JJ8–0289688–3, JJ8–0289987–9,

JJ8–0290123–8, JJ8–0290210–3, JJ8–0290213–7, JJ8–02905817,

and JJ8–0290584–1. Id.¶ 22. The NaloProtex G2 casings are desig-

nated on the commercial invoices as “NaloProtex G2” with or without

other words, letters, or numbers of description. Id.¶ 23. The G2

product is described by Kalle in its marketing literature as a “textile

casing with barrier and transfer properties.” Id.¶ 24. The G2 casing

consists of a high strength woven polyester fabric with a plastic

polymer coating that is part acrylic and part polyvinylidene chloride.

Id.¶ 25. The woven fabric of the NaloProtex G2 product is a textile.

Id.¶ 26. The textile and plastic portions of the G2 are both measur-

able layers. Id.¶ 27. The textile fabric portion of the G2 casing has a

thickness of 140 µm, a weight of 67 g/m

, and a cost of .96 Euro/

165cm. Id.¶ 28. The textile portion of the G2 casing is coated with

plastic on the outer surface. Id.¶ 29. The plastic portion of the G2

casing has a thickness of 20µm, a weight of 62 g/m

, and a cost of .73

Euro/165 cm. Id.¶ 30. The thickness of the textile portion of the G2 is

seven times greater than the thickness of the plastic coating. Id.¶ 31.

The G2 casings range in width (when ﬂat) from 111 mm to 245 mm,

and in diameter from 74 mm to 156 mm. Id.¶ 32. All sizes of the G2

casings are imported in 500 m rolls. Id.¶ 33 (as corrected); see supra

n.2.

2. Procedural History

Kalle was the importer of record of nine entries of casings (de-

scribed above) made through the port of Chicago, Illinois, between

July 26, 2010 and August 11, 2010. Summons, Jan. 4, 2013, ECF No.

1. The entries were liquidated between June 10, 2011 and June 24,

2011 subheading 6307.90.98 HTSUS “Other made up articles, includ-

ing dress patterns: . . . Other . . . Other” subject to duty at 7% ad

valorem. Id.; Def.’s Br. at 1. Kalle—believing that the casings should

have been classiﬁed under subheading 3917.39.0050, HTSUS “Plas-

tics and Articles thereof . . . Tubes, pipes and hoses and ﬁttings

therefor (for example, joints, elbows, ﬂanges), of plastics: . . .Other

. . . Other,” subject to duty at 3.1%—contested the liquidations by

ﬁling a protest on September 10, 2011. Summons; Pl.’s Br. at 1.

Customs denied the protest on November 5, 2012, based on the

reasoning from its earlier classiﬁcation decisions involving the same

100

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

products.

Id.; see HQ155323, Application for Further Review of pro-

test No. 3901–10–100443: Naloprotex G-1 Sausage Casing (March 30,

2012), Def.’s Br. Ex. A (“HQ155323”); NY N086782, The tariff classi-

ﬁcation of sausage casings from China (Dec. 10, 2009), Def.’s Br. Ex.

B (“NY N086782”). This action followed. Kalle moved for summary

judgment on September 29, 2014. Pl.’s Br. The Government cross-

moved for summary judgment on November 24, 2014. Def.’s Br.

Oral argument was held on September 24, 2015, and the court

requested supplemental brieﬁng on October 9, 2015. ECF No. 43.

Both parties ﬁled their supplemental briefs on November 20, 2015

and their supplemental replies on December 23, 2015. Pl.’s Suppl. Br.

1, ECF No. 47; Def.’s Suppl. Br. 1, ECF No. 48; Pl.’s Suppl. Reply 1,

ECF No. 52; Def.’s Suppl. Reply 1, ECF No. 53. The court again

ordered supplemental brieﬁng on March 7, 2016, and both parties

ﬁled their supplemental briefs in response to that order on April 22,

2016. Order, ECF No. 54; Pl.’s Suppl. Br. 2, ECF No. 56; Def.’s Suppl.

Br. 2, ECF No. 55. Kalle and the Government also ﬁled supplemental

replies on May 20, 2016. Pl.’s Suppl. Reply 2, ECF No. 59; Def.’s

Suppl. Reply 2, ECF No. 60.

On August 10, 2017, the case was reassigned to a new judge, and

oral argument was held anew on October 11, 2017. Reassignment

Order, ECF No. 62; Oral Argument, ECF No. 68.

APPLICABLE LAW

1. Jurisdiction and Standard of Review

The Court has jurisdiction over this action under 28 U.S.C. §

1581(a) (2012), according to which the court has jurisdiction over an

action brought under section 515 of the Tariff Act of 1930 as amended,

19 U.S.C. § 1515 (2012) to contest a denial of a protest by customs.

In a tariff classiﬁcation case, the Court proceeds de novo. Park B.

Smith, Ltd. v. United States, 347 F.3d 922, 924 (Fed. Cir. 2003); see

Customs Courts Act of 1980 § 301, 28 U.S.C. § 2640(a)(1)(2012)

(directing the Court of International Trade to review classiﬁcation

rulings on “the basis of the record made before the court”). The Court

ﬁrst considers whether “the government’s classiﬁcation is correct,

both independently and in comparison with the importer’s alterna-

Both HQ155323 and NY 086782 address protests and classiﬁcation inquiries that occurred

prior to Protest 3901–11–100951--at issue here--and the record does not contain a separate

report speciﬁcally addressing Protest 3901–11–100951. See HQ155323, NY N086782. But

HQ155323 and NY 086782 involve the same G1 and G2 casings, and the Government states

that these earlier decisions contain the basis for Customs’ classiﬁcations. Def.’s Br. at 7 n.4.

Further citations to the Tariff Act of 1930, as amended, are to the relevant provision of

Title 19 of the U.S. Code, 2012 edition.

101

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tive.” Value Vinyls, Inc. v. United States, 568 F.3d 1374, 1377, 1380

(Fed. Cir. 2009); Jarvis Clark Co. v. United States, 733 F.2d 873, 878

(Fed. Cir. 1984). The plaintiff has the burden of showing the govern-

ment’s determined classiﬁcation to be incorrect. Park B. Smith, 347

F.3d at 925; Jarvis, 733 F.2d at 876. If the plaintiff meets that burden,

the Court has an independent duty to arrive at “the correct result, by

whatever procedure is best suited to the case at hand.” Value Vinyls,

568 F.3d at 1377 (citing Jarvis, 733 F.2d at 878) (emphasis in origi-

nal).

While the Court accords respect to Customs’ classiﬁcation rulings

relative to their “power to persuade,” United States v. Mead Corp.,

533 U.S. 218, 235 (2001) (citing Skidmore v. Swift & Co., 323 U.S.

134, 140 (1944)), the Court also has “an independent responsibility to

decide the legal issue of the proper meaning and scope of HTSUS

terms.” Wilton Indus., Inc. v. United States, 741 F.3d 1263, 1265 (Fed.

Cir. 2013) (citing Warner-Lambert Co. v. United States, 407 F.3d 1207,

1209 (Fed. Cir. 2005)).

2. Summary Judgment under Rule 56

The Court grants summary judgment “if the movant shows that

there is no genuine dispute as to any material fact and the movant is

entitled to judgment as a matter of law.” USCIT R. 56(a). In a tariff

classiﬁcation action, summary judgment is appropriate when “the

material facts of what the merchandise is and what it does are not at

issue.” Wilton Indus., 741 F.3d at 1266–67; Bausch & Lomb, 148 F.3d

1363, 1365 (Fed. Cir. 1998). In ruling on a summary judgment mo-

tion, the Court credits the non-moving party’s evidence and draws all

inferences in that party’s favor. Hunt v. Cromartie, 526 U.S. 541, 552

(1999) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255

(1986)). “Only disputes over facts that might affect the outcome of the

suit under the governing law will properly preclude the entry of

summary judgment.” Anderson, 477 U.S. at 248. The issue here is

whether either the Government or Kalle is entitled to summary

judgment. The analysis turns on the meaning and scope of the rel-

evant tariff provisions. See Wilton Indus., 741 F.3d at 1266–67; Carl

Zeiss, Inc. v. United States, 195 F.3d 1375, 1378 (Fed. Cir. 1999);

Bausch & Lomb, 148 F.3d at 1365–66.

3. Tariff Classiﬁcation under the General Rules of Interpre-

tation HTSUS

“In a classiﬁcation case, the court construes the relevant (compet-

ing) classiﬁcation headings, a question of law; determines what the

merchandise at issue is, a question of fact; and then determines ‘the

102

CUSTOMS BULLETIN AND DECISIONS, VOL. 51, NO. 46, NOVEMBER 15, 2017

proper classiﬁcation under which [the merchandise] falls, the ulti-

mate question in every classiﬁcation case and one that has always

been treated as a question of law.’” Bausch & Lomb, 148 F.3d at 1366;

see Wilton Indus., 741 F.3d at 1266. When there is no factual dispute

regarding the merchandise, the resolution of the classiﬁcation issue

turns on the ﬁrst step, determining the proper meaning and scope of

the relevant tariff provisions. See Wilton Indus., 741 F.3d at 1266–67;

Carl Zeiss, 195 F.3d at 1378; Bausch & Lomb, 148 F.3d at 1365–66.

“The HTSUS scheme is organized by headings, each of which has

one or more subheadings; the headings set forth general categories of

merchandise, and the subheadings provide a more particularized

segregation of the goods within each category.” Alcan Food Packaging

(Shelbyville) v. United States, 773 F.3d 1364, 1366 (Fed. Cir. 2014)

(quoting Wilton Indus., 741 F.3d at 1266). The Court considers chap-

ter and section notes of the HTSUS in resolving classiﬁcation dis-

putes because they are statutory law, not interpretative rules. See

Arko Foods Intern., Inc. v. United States, 654 F.3d 1361, 1364 (Fed.

Cir. 2011) (citations omitted). As such, they are binding on the Court.

See Park B. Smith, Ltd., 347 F.3d at 929.

Tariff classiﬁcation is determined according to the General Rules of

Interpretation (“GRIs”), and, if applicable, the Additional U.S. Rules

of Interpretation (“ARIs”). The “General Rules of Interpretation gov-

ern classiﬁcation of merchandise under the HTSUS, and are applied

in numerical order.” Honda of Am. Mfg. v. United States, 607 F.3d

771, 773 (Fed. Cir. 2010) (internal quotations and citations omitted).

Under GRI 1, “classiﬁcation shall be determined according to the

terms of the headings and any relative section or chapter notes.”

See

Faus Grp., Inc. v. United States, 581 F.3d 1369, 1372 (Fed. Cir. 2009)

(citing Orlando Food Corp. v. United States, 140 F.3d 1437, 1440 (Fed.

Cir. 1998)). Unless there is evidence of “contrary legislative intent,

HTSUS terms are to be construed according to their common and

commercial meanings.” La Crosse Tech., Ltd. v. United States, 723

F.3d 1353, 1358 (Fed. Cir. 2013); Russell Stadelman & Co. v. United

States, 242 F.3d 1044, 1048 (Fed. Cir. 2001). In ascertaining a term’s

common meaning, the court may “consult lexicographic and scientiﬁc

authorities, dictionaries, and other reliable information” or may rely

on its “own understanding of the terms used.” Baxter Healthcare

GRI 1 provides that:

The table of contents, alphabetical index, and titles of sections, chapters and sub-chapters

are provided for ease of reference only; for legal purposes, classiﬁcation shall be deter-

mined according to the terms of the headings and any relative section or chapter notes

and, provided such headings or notes do not otherwise require, according to the following

[GRI] provisions.

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Corp. v. United States, 182 F.3d 1333, 1337–38 (Fed. Cir. 1999); see

Millennium Lumber Distrib., Ltd. v. United States, 558 F.3d 1326,

1328–29 (Fed. Cir. 2009) (citation omitted); Carl Zeiss, 195 F.3d at

1379 (citation omitted). “Where a tariff term has various deﬁnitions

or meanings and has broad and narrow interpretations, the court

must determine which deﬁnition best expresses the congressional

intent.” Richards Med. Co. v. United States, 910 F.2d 828, 830 (Fed.

Cir. 1990). Although not binding law, courts also look to the Explana-

tory Notes (“ENs”) to the Harmonized Commodity Description and

Coding System, maintained by the World Customs Organization, as

persuasive authority on how to interpret and apply HTSUS provi-

sions. See Home Depot, 491 F.3d at 1336 (“Although the Explanatory

Notes ‘do not constitute controlling legislative history,’ they are none-

theless intended to offer guidance in clarifying the scope of HTSUS

subheadings.” (citing Mita Copystar Am. v. United States, 21 F.3d

1079, 1082 (Fed. Cir. 1994))); Deckers Outdoor Corp. v. United States,

714 F.3d 1363, 1367 n.1 (Fed. Cir. 2013); see generally Alcan Food

Packaging (Shelbyville) v. United States, 37 CIT ___, 929 F. Supp. 2d

1338 (2013) (relying extensively on the guidance provided by the ENs

to resolve the case under GRI 1), aff’d, 771 F.3d 1364 (Fed. Cir. 2014).

“The HTSUS is designed so that most classiﬁcation questions can

be answered by GRI 1.” Telebrands Corp. v. United States, 36 CIT___,

___, 865 F. Supp. 2d 1277, 1280 (2012), aff’d, 522 Fed. App’x 915 (Fed.

Cir. 2013). “What is clear from the legislative history of the World

Customs Organization and case law is that GRI 1 is paramount. . . .

The HTSUS is designed so that most classiﬁcation questions can be

answered by GRI 1, so that there would be no need to delve into the

less precise inquiries presented by GRI 3.” Id.

A product is classiﬁ-

able under GRI 1 if it “is described in whole by a single classiﬁcation

heading or subheading” of the HTSUS; however, “[w]hen goods are in

character or function something other than as described by a speciﬁc

statutory provision--either more limited or more diversiﬁed--and the

difference is signiﬁcant, then the goods cannot be classiﬁed” pursuant

to GRI 1. La Crosse Tech., 723 F.3d at 1358 (quoting CamelBak

Prods., LLC v. United States, 649 F.3d 1361, 1364 (Fed. Cir. 2011)).

DISCUSSION

Applying GRI 1, the court concludes that Customs correctly classi-

ﬁed the G1 and G2 casings under heading 6307.90.98 (“Other made

up articles, including dress patterns: . . . Other . . . Other,” subject to

duty at 7% ad valorem) rather than under heading 3917.39.0050

(“Plastics and Articles thereof . . . Tubes, pipes and hoses and ﬁttings

Regarding GRI 3 and sequential antecedent GRI 2, see infra n.7.

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therefor (for example, joints, elbows, ﬂanges), of plastics: . . . Other

. . . Other,” subject to duty at 3.1%). Heading 6307 covers “made up”

articles of textiles. 6307; Chapter 63, Note 1. Given that G1 and G2

casings are composed of a plastic-coated textile assembled into a

casing by gluing, they meet the requirements of heading 6307. JSUF

¶¶ 5–6, 15. Kalle argues that the casings instead fall into heading

3917 because (1) Section XI, Note 1(h) automatically excludes textile-

plastic composites from Chapter 63; (2) even if Note 1(h) does not

exclude them, Chapter 59, Note 2 places them in Chapter 39; and (3)

gluing the ends of the textile-plastic sheeting together to make a tube

does not meet the deﬁnition of “made up” under Chapter 63. The court

concludes that (1) Section XI, Note 1(h) does not automatically ex-

clude the casings from Chapter 63; (2) none of the provisions in

Chapter 59, Note 2 that place products in Chapter 39 apply to the

casings; and (3) the gluing process does ﬁt the requirements for “made

up” as deﬁned by the HTSUS provisions and case law. Thus, the

casings were properly classiﬁed under 6307. Because this case can be

resolved under GRI 1, resort to the subsequent sequenced GRI pro-

visions, to which the parties refer in their alternative arguments, is

unnecessary.

Kalle argued in the alternative that, should GRI 1 not resolve the case, the casings would

be classiﬁed under heading 3917 according to GRI 3(a). The Government, for its part,

contended that GRI 3(a) could not resolve the case and that the casings should be classiﬁed

under heading 6307 according to GRI 3(b).

GRI 2(b) provides that principles of GRI 3 should be applied to classify composite

products like the G1 and G2 casings when GRI 1 does not resolve the issue. See GRI 2(b).

GRI 3(a) states that:

The heading which provides the most speciﬁc description shall be preferred to headings

providing a more general description. However, when two or more headings each refer

to part only of the materials or substances contained in mixed or composite goods or to

part only of the items in a set put up for retail sale, those headings are to be regarded

as equally speciﬁc in relation to those goods, even if one of them gives a more complete

or precise description of the goods.

Kalle argues that 3917 is more speciﬁc because, according to Chapter 39, Note 8, heading

3917 explicitly includes sausage casings and other lay-ﬂat tubing, while heading 6307

broadly covers “other made up articles.” Pl.’s Br. at 18–19. The Government contends that

the two provisions are equally speciﬁc because (1) only headings themselves, and not

chapter notes, are considered under GRI 3(a); (2) the G1 and G2 casings can be used for food

products other than sausage, and thus are not “sausage casings;” and (3) GRI 3(a) explicitly

states that “when two or more headings each refer to part only of the materials or sub-

stances contained in mixed or composite goods or to part only of the items in a set put up

for retail sale, those headings are to be regarded as equally speciﬁc in relation to those

goods, even if one of them gives a more complete or precise description of the goods.” Def.’s

Br. at 24–26.

The Government further argues that, because GRI 3(a) could not resolve the issue, the

casings should be classiﬁed under heading 6307 according to GRI 3(b), which states pro-

vides that:

Mixtures, composite goods consisting of different materials or made up of different

components, and goods put up in sets for retail sale, which cannot be classiﬁed by

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1. Application of GRI 1

GRI 1 requires that the classiﬁcation be determined “according to

the terms of the headings and any relative section or chapter notes.”

The court thus ﬁrst considers the headings identiﬁed by the parties

and any additional headings that might merit consideration. See

Park B. Smith, 347 F.3d at 928; Gerson Co. v. United States, 41 CIT

___, Slip Op. 17–96 (Aug. 2, 2017) (citing GRI 1), appeal ﬁled, No.

18–1011 (Fed. Cir. Oct. 4, 2017). Given that the casings are composed

of textile and plastic components, the court here considers provisions

covering each type of material. Kalle and the Government have iden-

tiﬁed 3917 and 6307, respectively, as the HTSUS headings under

which they believe the casings should be classiﬁed. Because the texts

of headings 5407 and 5903 also appear to address materials con-

tained in the casings and are relevant for analyzing the applicability

of 6307 (discussed infra), the court considers those headings in its

analysis as well. See Value Vinyls, 568 F.3d at 1377 (citing Jarvis, 733

F.2d at 878) (stating that the court has an independent duty to arrive

at “the correct result, by whatever procedure is best suited to the case

at hand” (emphasis in original)). These headings are listed in numeri-

cal order and with the heading terms relevant to the classiﬁcation

issue presented by this case:

3917 Tubes, pipes and hoses and ﬁttings therefor (for example, joints, el-

bows, ﬂanges), of plastics.

5407 Woven fabrics of synthetic ﬁlament yarn, including woven fabrics

obtained from materials of heading 5404.

5903 Textile fabrics impregnated, coated, covered or laminated with plas-

tics, other than those of heading 5902.

6307 Other made up articles, including dress patterns.

Heading 3917 is part of Section VII of HTSUS, and headings 5407,

5903, and 6307 are within Section XI. The court now turns to a

consideration of the relevant section and chapter notes for the head-

ings.

reference to 3(a), shall be classiﬁed as if they consisted of the material or component

which gives them their essential character, insofar as this criterion is applicable.

The Government claims that the “essential character” of the casings is imparted by the

textile component because the textile performs the indispensable function of absorbing and

transferring dyes, aroma, and ﬂavoring to encased food--which is marketed by Kalle as a

primary advantage of the G1 and G2 casings--and because the textile ensures mechanical

stability. Def.’s Br. at 27–28. Kalle, however, contends that the classiﬁcation issue cannot be

determined under GRI 3(b), because both the textile’s transfer qualities and the plastic’s

moisture control property are equally indispensable to the casings’ function, and thus,

equally essential aspects of its character. Def.’s Reply Br. at 11.

As suggested by both parties and noted in the text supra, however, the court can resolve

this case according to GRI 1, and thus does not reach the parties’ arguments under GRI 2(b),

3(a), and 3(c).

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a. Relevant Section, Chapter, and Explanatory Notes

The court ﬁnds the following notes to be particularly relevant to the

candidate headings and to the court’s analysis overall.

i. Chapter 39, Note 1

[In relevant part:]

“[t]he expression [plastics], however, does not apply to ma-

terials regarded as textile materials of section XI.”

ii. Chapter 39, Note 2(p)

“2. This chapter does not cover:

(p) Goods of section XI (textiles and textile articles).”

iii. Chapter 39, Note 8

“For the purposes of heading 3917, the expression “tubes,

pipes and hoses” means hollow products, whether semi-

manufactures or ﬁnished products, of a kind generally

used for conveying, conducting or distributing gases or

liquids (for example, ribbed garden hose, perforated

tubes). This expression also includes sausage casings and

other lay-ﬂat tubing.”

iv. Chapter 39, Explanatory Notes

[In relevant part:]

“Plastics and textile combinations

Wall or ceiling coverings which comply with Note 9 to this

Chapter are classiﬁed in heading 39.18. Otherwise, the

classiﬁcation of plastics and textile combinations is essen-

tially governed by Note 1 (h) to Section XI, Note 3 to

Chapter 56 and Note 2 to Chapter 59.”

v. Section XI Note 1(h)

“This section does not cover:

(h) Woven, knitted or crocheted fabrics, felt or nonwo-

vens, impregnated, coated, covered or laminated with

plastics, or articles thereof, of chapter 39.”

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vi. Section XI, Note 7(e)

“For the purposes of this section, the expression “made

up” means:

(e) Assembled by sewing, gumming or otherwise (other

than piece goods consisting of two or more lengths of iden-

tical material joined end to end and piece goods composed

of two or more textiles assembled in layers, whether or

not padded).”

vii. Section XI, Note 8

[In relevant part:]

“[f]or purposes of Chapters 50 to 60 . . . except where the

context otherwise requires, Chapters 56 to 59 do not ap-

ply to goods made up within the meaning of [N]ote 7

above.”

viii. Chapter 54, Note 1

“Throughout the tariff schedule, the term “man-made ﬁ-

bers” means staple ﬁbers and ﬁlaments of organic poly-

mers produced by manufacturing processes, either:

(a) By polymerization of organic monomers to pro-

duce polymers such as polyamides, polyesters, poly-

oleﬁns or polyurethanes, or by chemical modiﬁcation

of polymers produced by this process (for example,

poly(vinyl alcohol) prepared by the hydrolysis of poly-

(vinyl acetate)); or

(b) By dissolution or chemical treatment of natural

organic polymers (for example, cellulose) to produce

polymers such as cuprammonium rayon (cupro) or

viscose rayon, or by chemical modiﬁcation of natural

organic polymers (for example, cellulose, casein and

other proteins, or alginic acid), to produce polymers

such as cellulose acetate or alginates.”

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ix. Chapter 59, Note 1

“Except where the context otherwise requires, for the pur-

poses of this chapter the expression “textile fabrics” ap-

plies only to the woven fabrics of chapters 50 to 55 and

headings 5803 and 5806, the braids and ornamental trim-

mings in the piece of heading 5808 and the knitted or cro-

cheted fabrics of headings 6002 to 6006.”

x. Chapter 59, Note 2

“Heading 5903 applies to:

(a) Textile fabrics, impregnated, coated, covered or lami-

nated with plastics, whatever the weight per square me-

ter and whatever the nature of the plastic material (com-

pact or cellular), other than:

(3) Products in which the textile fabric is either

completely embedded in plastics or entirely coated or

covered on both sides with such material, provided

that such coating or covering can be seen with the

naked eye with no account being taken of any result-

ing change of color (chapter 39);

(5) Plates, Sheets or strip of cellular plastics, com-

bined with textile fabric, where the textile is present

merely for reinforcing purposes (chapter 39).”

xi. Chapter 63, Note 1

“Sub-Chapter I [63.01–63.07] applies only to made up ar-

ticles, of any textile fabric.”

xii. Chapter 63, Explanatory Notes

[In relevant part:]

“This Chapter [63] includes:

(1) Under headings 63.01 to 63.07 (sub-Chapter I) made

up textile articles of any textile fabric (woven or knitted

fabric, felt, nonwovens, etc.) which are not more speciﬁ-

cally described in other Chapters of Section XI or else-

where in the Nomenclature. (The expression “made up

textile articles” means articles made up in the sense de-

ﬁned in Note 7 to Section XI).” (emphasis in original).

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b. Analysis

The G1 and G2 casings are composite products of textile and plastic

materials. JSUF ¶¶ 5–6. Although a “GRI 3(b) analysis is often

applied to resolve classiﬁcation disputes involving composite goods

. . . here it is not necessary because both tariff provisions [3917 and

6307] contemplate goods that have been combined with other mate-

rials.” Alcan Food, 929 F. Supp. 2d at 1348; see Chapter 39, ENs;

Chapter 59, Note 2; Chapter 63, ENs.

The Government argues that Customs correctly classiﬁed the G1

and G2 casings under heading 6307--“other made up articles” of

textiles--because the casings are created by gluing the ends of sheets

partially composed of textiles together, as described supra. 6307;

JSUF ¶ 15. Kalle contends that the casings cannot be classiﬁed under

heading 6307 for essentially three reasons. First, Kalle argues that

Section XI, Note 1(h) excludes the casings from any consideration

under Section XI because it states that Section XI does not include

“fabrics...impregnated, coated, covered or laminated with plastics, or

articles thereof, of chapter 39.” Section XI, Note 1(h). Kalle advances

a theory that “a section note would trump the chapter note[,]” and

cites Mita Copystar, 160 F.3d at 714, for support. Pl.’s Br. at 11–12.

Second, Kalle contends that, even if Section XI, Note 1(h) does not

automatically exclude them, the casings fall within one of the exclu-

sions to heading 5903 and therefore are properly classiﬁed in Chapter

39. Finally, Kalle submits that the casings are not “made up” and

therefore cannot be covered by 6307.

The court concludes that the G1 and G2 casings are made up

articles composed of a textile fabric under the HTSUS, and therefore

are properly classiﬁed under heading 6307, for the reasons stated

below.

i. Section Notes Are Not Entitled to Greater Weight than

Chapter Notes

The court is not persuaded by Kalle’s assertion that section notes

always trump chapter notes in a classiﬁcation case. The court does

not read Mita Copystar as standing for that proposition, although the

Court of Appeals for the Federal Circuit happened to analyze Note 2

of section VI before analyzing Note 2(b) of Chapter 90 in that case.

160 F.3d at 711–14. Additionally, such an assertion is unsupported by

the text of GRI 1, which does not state that a section note trumps a

chapter note, or indicate any preferential treatment for section notes

over chapter notes. Instead, GRI 1 requires that the court apply “any

relative section or chapter notes.” (emphasis added). Further, Chap-

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ter 59, Note 2

and Chapter 56, Note 3

--which address chapters

contained within Section XI--distinguish, in detail, between products

that belong in Chapter 39 and in Chapters 56 or 59. If Section XI,

Note 1(h) excluded all such textile-plastic composite products, as

Kalle suggests, then these provisions detailing how to determine

which textile-plastic composites are excluded from chapters within

Section XI would serve no purpose. Adopting Kalle’s interpretation

would thus render these provisions surplusage. Finally, the ENs to

Chapter 39 instruct that, for products such as the sausage casings

which are combinations of plastics and textiles, “the classiﬁcation of

plastics and textile combinations is essentially governed by Note l(h)

to Section XI, Note 3 to Chapter 56 and Note 2 to Chapter 59,”

indicating that these three notes should be considered together when

Customs, or this Court, is making a classiﬁcation determination. See

ENs to Chapter 39. In sum, the court ﬁnds Kalle’s section note

primacy argument unavailing.

Assuming arguendo that section notes had priority over chapter

notes, however, Section XI, Note 1(h) would not automatically pre-

clude the casings from being classiﬁed in Chapter 63. Note 1(h) only

states that Section XI does not include “fabrics... impregnated,

coated, covered or laminated with plastics, or articles thereof, of

chapter 39,” not that all such products are excluded. Section XI, Note

1(h) (emphasis added). Thus, a product which is not classiﬁable under

Chapter 39 would not be excluded from Section XI under Note 1(h).

The question remains: do the casings fall under Chapter 39? Kalle’s

argument seems to presume that, because heading 3917 covers

“tubes, pipes and hoses...of plastic,” including “sausage casings and

other lay-ﬂat tubing” and the casings here are ﬂattened, hollow tubes

partially made of plastic, they must be classiﬁed under 3917 and are

Chapter 59, Note 2 is set forth supra at pp.15–16.

Chapter 56, Note 3 provides:

“Headings 5602 and 5603 cover respectively felt and nonwovens, impregnated, coated,

covered or laminated with plastics or rubber whatever the nature of these materials

(compact or cellular).

Heading 5603 also includes nonwovens in which plastics or rubber forms the bonding

substance.

Headings 5602 and 5603 do not, however, cover:

(a) Felt impregnated, coated, covered or laminated with plastics or rubber, containing

50 percent or less by weight of textile material or felt completely embedded in

plastics or rubber (chapter 39 or 40);

(b) Nonwovens, either completely embedded in plastics or rubber, or entirely coated or

covered on both sides with such materials, provided that such coating or covering

can be seen with the naked eye with no account being taken of any resulting

change of color (chapter 39 or 40); or

nonwovens, where the textile material is present merely for reinforcing purposes

(chapter 39 or 40).

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therefore excluded from Section XI by Note 1(h). Pl.’s Br. at 8; see

3917; Chapter 39, Note 8; JSUF ¶ 17. However, not all such plastic

tubes are classiﬁed under Chapter 39; in fact, Chapter 39, Notes 1

and 2(p) state explicitly that Chapter 39 excludes goods covered by

Section XI, indicating that some textile-plastic composite products

are classiﬁable under Section XI and not categorically excluded by

Section XI, Note 1(h). Chapter 39, Note 1; Chapter 39, Note 2(p).

Further, as noted, supra, the Chapter 39 ENs indicate that the court

should look to not just Section XI, Note 1(h), but to Chapter 56, Note

3 and Chapter 59, Note 2 as well to distinguish between goods of

Chapter 39 and Section XI. Indeed, based on an analysis of these

provisions, the court concludes that the casings do not belong in

Chapter 39, but rather, under the Government’s proffered heading

6307. As required for a product to be classiﬁed under 6307, the

casings are (1) of any textile fabric and (2) made up, as discussed

below. Chapter 63, Note 1; ENs, Chapter 63.

ii. The Plastic and Textile Sheeting is a “Textile Fabric”

According to the undisputed facts, the woven portions of the G1 and

G2 casings are textiles created from, respectively, man-made viscose

rayon and polyester ﬁbers and a polyester fabric that is part acrylic

and part polyvinylidene chloride. JSUF ¶¶ 25, 26, 38, 41. The G1 and

G2 casings are also coated in plastic. JSUF ¶ 6. Heading 5903 con-

tains “textile fabrics impregnated, coated, covered or laminated with

plastics,” including “the woven fabrics of chapters 50 to 55.” 5903;

Chapter 59, Note 1. Heading 5407 contains “woven fabrics of syn-

thetic ﬁlament yarn, including woven fabrics obtained from materials

of heading 5404.” 5407. Further, woven textiles composed of the

man-made materials such as those contained in the woven portion of

the G1 and G2 casings are considered textile fabrics under Chapter

54, as explicitly stated in Chapter 54, Note 1:

Throughout the tariff schedule, the term “man-made ﬁbers”

means staple ﬁbers and ﬁlaments of organic polymers produced

by manufacturing processes, either:

(a) By polymerization of organic monomers to produce poly-

mers such as polyamides, polyesters, polyoleﬁns or polyure-

thanes, or by chemical modiﬁcation of polymers produced by

this process (for example, poly(vinyl alcohol) prepared by the

hydrolysis of poly(vinyl acetate)); or

(b) By dissolution or chemical treatment of natural organic

polymers (for example, cellulose) to produce polymers such as

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cuprammonium rayon (cupro) or viscose rayon, or by chemical

modiﬁcation of natural organic polymers (for example, cellu-

lose, casein and other proteins, or alginic acid), to produce

polymers such as cellulose acetate or alginates.

Chapter 54, Note 1 (emphasis added). Thus, the textile component in

the G1 and G2 casings appears to fall under heading 5903.

Heading 5903 does not contain all textile fabrics coated in plastic,

however, as Section XI, Note 1(h), and Chapter 59, Note 2, make clear.

Note 1(h) states that woven fabrics coated with plastic and articles

thereof that belong in Chapter 39 are excluded from all of Section XI,

which includes 5903. Section XI, Note 1(h). Chapter 59, Note 2(a)

provides the exclusions relevant to 5903, two of which could poten-

tially apply to the textile and plastic sheeting at issue here:

(3) Products in which the textile fabric is either completely

embedded in plastics or entirely coated or covered on both sides

with such material, provided that such coating or covering can

be seen with the naked eye with no account being taken of any

resulting change of color (chapter 39);

(5) Plates, Sheets or strip of cellular plastics, combined with

textile fabric, where the textile is present merely for reinforcing

purposes (chapter 39).

Chapter 59, Note 2(a).

The court turns ﬁrst to Note 2(a)(3). Under this provision, products

must be (1) completely embedded in plastics or (2) entirely coated or

covered on both sides with plastic. As has been noted, courts give all

terms “their common commercial meaning,” relying on their own

understanding of the terms used, lexicographic and scientiﬁc authori-

ties, dictionaries, and other reliable information sources. Millennium

Lumber Distrib., 558 F.3d at 1328–29 (citation omitted); Carl Zeiss,

195 F.3d at 1379 (citation omitted).

Webster’s New World Dictionary deﬁnes “embedded” as “set or

ﬁx[ed] ﬁrmly in a surrounding mass” and “completely” as “full[y],

whole [ly], entire[ly].” Webster’s New World Dictionary, Third College

Edition 285, 442–443 (1988). Thus, for a textile to be completely

embedded in plastic, it must be entirely ﬁrmly ﬁxed in the plastic.

Here, it is undisputed that the G1 and G2 casings are only coated on

one side and that the coating material only ﬁlls the interstitial spaces

between the textile ﬁbers. JSUF ¶¶ 6, 13. Thus, the textile is not

embedded in the plastic for the purposes of 2(a)(3).

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Kalle, citing the McGaw-Hill Dictionary of Scientiﬁc and Technical

Terms (Fifth Ed. 1994) and the Shorter Oxford English Dictionary, vol

1, A-M (Fifth Ed. 2002), provides a slightly different deﬁnitions of

“embed”--“[t]o enclose in a matrix; to surround” and “to ﬁx ﬁrmly in a

surrounding mass of solids or semi-solid materials,” respectively--and

argues that the casing’s one-sided coating ﬁts these deﬁnitions. Pl.’s

Suppl. Br. 1 at 8–9. However, as the Government points out:

to “surround” means “to form an enclosure around; encompass”

or “to be present on all or nearly all sides of; encircle.” Webster’s

New World Dictionary (Third College Ed. 1988) (emphasis

added). Here, it is undisputed that the textile fabric of the

casings is coated with a thin layer of plastic on only one side.

JSUF at ¶¶ 6, 12; see also Kalle Supp. Br. at 1, 9. Thus, the

textile fabric is not “completely embedded” in plastics – i.e., fully

ﬁxed on all sides in a surrounding mass of plastics.

Def.’s Suppl. Reply Br. 1 at 6 (emphasis original).

“Coated” means having “a layer of some substance, as paint, over a

surface,” while “covered” means “to place something on, over, or in

front of, so as to conceal, protect, or close.” Webster’s New World

Dictionary at 267, 320. So, for a textile to be “entirely coated or

covered on both sides” with plastic, it must be completely coated or

covered with the plastic material on each side.

Although Kalle provides very similar deﬁnitions of “coated” and

“entirely,” it suggests that because “the plastic completely and en-

tirely coats one side of the textile fabric,” it is “coated” for purposes of

5903, Note 2(a)(3), and therefore should be properly classiﬁed in

Chapter 39. Pl.’s Suppl. Br. 1 at 10–11. But products must be coated

on both sides, not just one, as shown by reading the plain text of the

provision: “(3) Products in which the textile fabric is either completely

embedded in plastics or entirely coated or covered on both sides with

such material.” Chapter 59, Note 2 (emphasis added); see Bradford

Indus., Inc. v. United States, 21 CIT 665, 668, 968 F. Supp. 732, 733,

736 (1997), aff’d, 152 F.3d 1339 (Fed. Cir. 1998) (ﬁnding, when ad-

dressing the related provision for nonwoven fabrics, that “Plaintiff

failed to demonstrate that the nonwoven component of the subject

merchandise is ‘completely embedded’ or ‘entirely coated or covered’”

because only one side of the fabric was coated or covered in plastic).

Here, it is undisputed that the G1 and G2 casings are only coated on

one side and that the coating material only ﬁlls the interstitial spaces

between the textile ﬁbers. JSUF ¶¶ 6, 13. So, the casings are neither

embedded nor covered or coated on both sides, and therefore do not

fall within the Note 2(a)(3) exclusion.

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Turning to Chapter 59, Note 2(a)(5), the court must interpret the

meaning of “merely for reinforcing purposes.” Something “reinforc-

ing” is “designed to provide additional strength (as in a weak area).”

Webster’s Third New International Dictionary (unabridged) at 1915

(1993). “Merely” means “no more than: barely, only, simply, solely.” Id.

at 1413. Taken together, the phrase means that the textile must have

no other purpose beyond strengthening the plastic.

The court ﬁnds that the textile component serves purposes beyond

merely reinforcing the plastic. Here, it is undisputed that the textile

also serves to “absorb dyes and aroma substances and transfer these

substances to the encased [food] product.” JSUF ¶ 8. According to the

G1 patent, the textile “directly stores the dyes, aroma substances

and/or ﬂavorings and can release them to a food situated therein. In

contrast to [previous casings], the textile material simultaneously

ensures the mechanical stability of the casing.” Patent 1. The absorp-

tion and transfer properties conferred by the textile material are

discussed extensively in the patent and Kalle’s advertising materials

as one of the most important features of the product. Patent; Pl.’s Br.

Ex. E, Kalle Marketing Literature Pertaining to the NaloProtex G1;

Pl.’s Br. Ex. D, Kalle Marketing Literature Pertaining to the Nalo-

Protex G2. Thus, since the casings serve more than a reinforcing

purpose, the casings also do not fall within the 2(a)(5) exclusion.

The Bradford case further supports the court’s interpretation of

these provisions. The court in Bradford interpreted the nearly iden-

tical HTSUS provisions and notes regarding nonwoven textile fabrics

coated in plastic, and came to the same conclusions regarding the

meaning of the terms.

Bradford Indus., Inc. v. United States, 152

F.3d 1339 (Fed. Cir. 1998). In addition, that court classiﬁed the prod-

ucts at issue there--imitation leather articles composed of a nonwoven

textile component and polyurethane on one side--under the textile

provision. Id. at 1342.

For these reasons, the casings are composed of a textile fabric, as

required for classiﬁcation under 6307.

iii. The Casings Are “Made Up”

The second requirement for classiﬁcation under 6307 is that the

article is “made up.” Section XI, Note 7(e) deﬁnes “made up” for the

purposes of Chapter 63 as “[a]ssembled by sewing, gumming or oth-

erwise.” Section XI, Note 7(e); ENs, Chapter 63.

Heading 5603 covers nonwoven textiles coated in plastic. The exclusions contained in

Chapter 56, Note 3--which is interpreted by the court in Bradford --are nearly identical to

those in Chapter 59, Note 2, at issue here. See supra n.9.

Chapter 59 does not include “made up” articles. Because the court ﬁnds that the casings

are made up, see infra, they cannot be classiﬁed under 5903. Section XI, Note 8.

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According to Kalle, “[t]he gluing of one edge of the sausage casing to

the other edge to form a tube is not an assembly, as that term involves

two or more components being joined together, and does not apply to

operations involving only one component.” Pl.’s Br. at 8. Kalle cites

The American Heritage Dictionary of The English Language, 110 (3rd

Ed. 1992) (deﬁning assemble as “[t]o ﬁt together the parts or pieces

of”) and ABB, Inc. v. United States, 421 F.3d 1274, 1276 (Fed. Cir.

2005) for support. ABB states that:

[b]ecause the term “assemble” is not deﬁned in the HTSUS, “its

common or dictionary meaning” governs. Rohm & Haas Co. v.

United States, 727 F.2d 1095, 1097 (Fed. Cir. 1984). According to

Webster’s Third New International Dictionary 131 (1993), ‘as-

semble’ means “to ﬁt together various parts of [sic] so as to make

into an operative whole.” (Emphasis in original).

ABB, 421 F.3d at 1276.

Kalle also claims that L’Eggs Products, Inc. v. United States, 13 CIT

40, 704 F. Supp. 1127 (1989) and Peg Bandage, Inc. v. United States,

17 CIT 1337 (1993) (not reported in the Federal Supplement) buttress

its argument concerning the deﬁnition of assembled, because both

cases, in addition to ABB, use the same deﬁnition. Pl.’s Reply at 7–8.

The court is not persuaded by Kalle’s argument that the casings are

not “made up,” and therefore cannot be covered by 6307. Pl.’s Br. at 8.

Here, the tubes are manufactured using two components: the textile-

plastic sheeting and glue. Kalle’s argument based on L’Eggs and Peg

Bandage is unavailing: the court instead ﬁnds that those cases sup-

port the conclusion that the casings are “made up.” In those cases,

thread used to sew together a stocking leg and a cloth bandage,

respectively, was considered a second component for purposes of as-

sembly under 6307. L’Eggs, 13 CIT at 49–50; Peg Bandage, 17 CIT at

1348–49. The court does not see how this principle is any different

when considering the glue and the textile/plastic sheet in this case.

Further, the court is not persuaded that “assembly,” which is not

deﬁned by the HTSUS or legislative history, requires the joining of

two separate components. Although Kalle does rely on one dictionary

deﬁnition of assembly, Kalle ignores other deﬁnitions which make no

mention of two different parts. See, e.g., Webster’s Third New Inter-

national Dictionary, 131 (2002) (deﬁning “assemble” as “2: to bring

together: as a: to put or join together, usu. in an orderly way with

logical selection or sequence”); The Random House Dictionary of the

English Language, 89 (1969) (deﬁning “assemble” as “2. to put or ﬁt

together”). Additionally, the Federal Circuit in ABB focused its deﬁ-

nition of “assembl[ed]” on the creation of an “operative whole:” a

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“distinct and separate commercial entity” that, regardless of the

number of parts, is “complete in itself” and capable of performing its

function. ABB, 421 F.3d at 1276–77. Here, as the patent and undis-

puted record establish, one of the casings’ purposes is to encase food.

See Patent; JSUF ¶ 4. As deﬁned by The Oxford English Dictionary

Online, available at http://www.oed.com/view/Entry/61610?

redirectedFrom=encase#eid (last visited Oct. 30, 2017), something is

encased if it is “put into or enclose[d] within a case or receptacle” or

“overla[id], surround[ed], or hem[med] in as with a case.” The textile-

plastic composite material cannot do that until it is transformed from

a ﬂat sheet into a tube--a receptacle capable of surrounding or en-

closing the food products--by the gluing process. Thus, the textile-

composite sheeting can only function as a casing--as an “operative

whole”--once its sides are glued together. Therefore, the casings fall

within the deﬁnition of “assembled” and “made up” under Section XI,

Note 7(e).

CONCLUSION

Given that the casings are made up articles of textile fabric, they

are properly classiﬁed under heading 6307. Further, since goods of

Section XI--which includes heading 6307--are excluded from Chapter

39, they cannot be classiﬁed under heading 3917. Accordingly, the

court denies Kalle’s motion for summary judgment and grants the

Government’s cross motion for summary judgment.

So Ordered.

Dated: November 2, 2017

New York, New York

/s/ Gary S. Katzmann

GARY S. KATZMANN, JUDGE

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