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Administrative Law

: Customs Law

A Material Question

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A problem with which I have been grappling lately is how to advise clients on when raw materials are processed far enough to be considered unfinished articles. Sometimes it is a tough call. In Canex Int'l Lumber Sales v. U.S., the Court of International provided a good review of the law.

The issue in Canex was whether certain sawn lumber was classifiable as wood in 4407 or as builders' joinery in 4418. In other words, is the merchandise wood, a basic material, or parts suitable for use in assembly. To cut to the chase on Canex, Customs and Border Protection won this one. The goods are not advanced enough to be considered dedicated to use in trusses (the apparent intended purpose) and the documentation did not show how the individual pieces would be assembled into a truss.

More relevant to my question is the general discussion on differentiating materials from articles. On this point, I will rely on the text from the decision:

Heading 4418, HTSUS covers ?[b]uilders? joinery and carpentry of wood.? It ?applies to woodwork . . . used in the construction of any kind of building, etc., in the form of assembled goods or as recognisable unassembled pieces (e.g., prepared with tenons, mortises, dovetails or other similar joints for assembly).? Explanatory Note 44.18, at 686. ?[U]nassembled pieces must be more than just basic material generally suitable for use in the finished article.? Millenium II, 558 F.3d at 1329. ?To qualify as recognizable unassembled pieces of particular articles, the subject merchandise must be dedicated solely or principally for use in those articles.? Id. (internal quotation marks and citation omitted); see also Finn Bros. v. United States, 454 F.2d 1404, 1406 (CCPA 1972) (?[I]f an item in its imported condition has been so far advanced beyond the stage of materials as to be dedicated to and commercially fit only for use as a particular article, it is properly classifiable, albeit in an unfinished condition, under the eo nomine designation for that article.?). Additionally, ?if the item as imported can be made into multiple parts of articles, the item must identify and fix with certainty the individual parts that are to be made from it.? Millenium II, 558 F.3d at 1329 (internal quotation marks and citation omitted); see also Millenium I, 2007 WL 1116148, at *3 (holding that unassembled pieces must be ?discernable as pieces of specific product structures, not just ?the making of [the products] in the abstract? (quoting Bendix Mouldings, Inc. v. United States, 388 F. Supp. 1193, 1194 (Cust. Ct. 1974)).

That is all well and good. The hard part is applying that law in the specific context of the HTSUS. What happens, for example, to rubber parts of machinery in light of the note to Section XVI excluding articles of Chapter 4016 (certain rubber)?

The rule states that the Section does not cover: "Transmission, conveyor or elevator belts or belting, of plastics of chapter 39, or of vulcanized rubber (heading 4010); or other articles of a kind used in machinery or mechanical or electrical appliances or for other technical uses, of vulcanized rubber other than hard rubber (heading 4016) . . . ."

Does that mean that no article of 4016 rubber for use in machinery, no matter how far advanced or how dedicated to a specific use can ever be classified in Section XVI? Given that 4016 is a basket provision only loosely describing merchandise, it seems wrong to not have the more specific parts provision in Section XVI apply.

What if the rubber article is so far advanced that it is not only a part of some Section XVI article but is actually an unfinished, essentially complete example of the Section XVI article? Does GRI 2(a) trump the Section Note?

Obviously, it does not. The Section Note is applicable via GRI 1, which has precedence over GRI 2(a). So, that is not the answer to this problem. Similarly, one can never get to comparing relative specificity if GRI provides the correct classification. It would seem that the Section Note works to move all articles of 4016 out of Section XVI, no matter how advanced or dedicated to use they may be.

Still, at some point, applying GRI 1 would, in my view, result in rubber articles remaining in Section XVI. That would be when the article is not "used IN machinery" but IS machinery or is an essentially complete but unfinished machine. I'm not sure there is a real example of this other than the one I am contemplating for work, which I will not discuss here. But, as a law school hypothetical, assume there were a pump of some kind wholly made out of rubber. Simple pumps like that are often used on machines with small engines as a means of priming the engine to start. That pump is, I think classifiable as a pump in Section XVI, not as a 4016 other article of rubber because it is a machine in and of itself, rather than being used in a machine. I would venture that the same applies to a nearly complete rubber pump for the same reason, plus GRI 2(a).

Give me feedback on this. Am I off base? Seriously, I need to know.

Full post as published by Customs Law on July 06, 2010 (boomark / email).