[Updated because sometimes proofreading is useful. I corrected some typos and clarified a bit.]
The Court of International Trade has been asked to decide the classification elfa-brand racks and hanging standards made of epoxy-bonded steel for the Container Store. No, this is not a repeat and you are not experiencing legal Deja vu. The issue has been raised again. The interesting point is that the result has changed, so read on.
Before we get too far down this rabbit hole, re-read this post on stare decisis at the Court of International Trade. It is useful background. Then, here is my post on the prior Container Store case.
There are two items at issue in this case. elfa top tracks and hanging standards. The top tracks look like this:
The hanging standard lets consumers attach components such as shelves, baskets, and other items in customized configurations. In my garage, this is what keeps hoses, rakes, and lawn chairs off the ground.
This case follows the prior Container Store decision in which the CIT held that the merchandise was properly classified in HTSUS Heading 9403.90.80 as parts of furniture. That decision, in turn, relied on a Federal Circuit decision in a case called storeWall, LLC v. United States. An important distinction is that the merchandise in storeWall was plastic. The merchandise here is steel.
Here, Customs and Border Protection liquidated the entries classifying the merchandise in HTSUS item 8302.41.60, as base metal mountings and fittings for building. In Court, Customs asserted that the correct classification is 8302.42.30 as mountings and fittings suitable for furniture (3.9%). Container Store argued for 9403.90.80, other parts of furniture (Free).
The first thing Container Store requested is an order requiring that Customs apply the prior Container Store and storeWall decisions to all of its pending cases and protests. I like the chutzpah. But, the only thing before the Court is the summons in this case. That summons identified two denied protests as subject to the challenge. Pending protests, unliquidated entries, and cases on the Court's reserve calendar are not before the Court. Thus, the Court declined the request to issue a blanket order.
Plaintiff next raised the question of whether Customs is required to follow the court decisions by virtue of 19 CFR 152.16(e), which states:
Other decisions adverse to Government. Unless the Commissioner of Customs otherwise directs, the principles of any court decision adverse to the Government (except for a decision upholding an American manufacturer's petition as covered in paragraph (d) of this section) shall be applied to unliquidated entries and protested entries which have not been denied in whole or in part and in which the same issue is involved as soon as the time within which an application for a rehearing or review may be filed has expired without such application having been made. See § 176.31 of this chapter for the treatment of entries which are the subject of a court decision.This is the regulation that tells Customs when it has to start following a court decision that goes against it. According to the regulation, the decision applies to unliquidated entries and pending protests after the time runs for an appeal. So, if the case goes to the Federal Circuit, the decision is not applied to unliquidated entries until the Federal Circuit decides the case and the time to appeal to the Supreme Court runs out. The regulation was no help to Container Store because the entries on the summons before the Court were both liquidated and the subject of denied protests.
That brings us to stare decisis. Stare decisis is the legal principal that makes a court's judgment a statement of the applicable law. In other words, it is a precedent. Future decisions by the same court (read that as "judge") and lower courts should be consistent with the precedent. Container Store pointed to stare decisis as requiring that the Court of International, as embodied in Judge Barnett, follow the prior Container Store decision issued by Judge Ridgway and the Federal Circuit decision in storeWall.
The easier issue is the precedential impact of storeWall. The problem for Container Store is that Judge Barnett is not facing the same set of facts as was presented to the Federal Circuit in storeWall. The product in storeWall was plastic, and that distinction matters. HTSUS Section XV, which contains Heading 8302, covers base metals and articles of base metal. These provisions were not in play in storeWall. In particular, Chapter 94, Note 1(d) excludes from that Chapter "parts of general use" of Section XV. When it decided storeWall, the only competing headings were the basket provisions for other articles of plastic (Heading 3926) and parts of furniture (Heading 9403). Thus, storeWall does not control the outcome here.
What about the prior Container Store decision? First off, judges of the same court are not bound by each other's decisions. The duty of each judge in each classification case is to find the correct result. Presented with new arguments or new evidence, the subsequent judge can reach a different conclusion. Unfortunately for Container Store, that is what happened here.
Which brings us to the actual classification analysis. The government conceded that the elfa products are prima facie classifiable in Heading 9403 as parts of furniture. That means the question is whether the merchandise is also prima facie classifiable in Heading 8302. If so, the exclusionary note will kick the merchandise out of 9403, landing it in 8302.
Heading 8302 includes base metal mountings, fittings and similar articles suitable for furniture. Base metal is defined to include iron and steel. Although bonded with epoxy, the merchandise is steel and, therefore, base metal. The merchandise serves as a support frame for various components and is, therefore, mountings.
With respect to 9403, the Court applied the definition of "furniture" from storeWall. Under the definition, the versatility and adaptability of the system are consistent with "unit furniture." So, 9403 remains in play.
Looking to the relevant legal notes, as is required under General Rule of Interpretation 1, there are several relevant considerations. Section XV, Note 1(k) excludes from 8302 articles of Chapter 94. Further, Note 2(c) defines the term "parts of general use" for the entire tariff schedule as including articles of Heading 8302.
As an aside, the United States raised an interesting issue with respect to Note 1(k). When a note excludes "articles" of a certain heading, does "articles" refer to all products of that heading, including parts or only to finished articles, exclusive of parts? I read it as the latter, but that issue need not be resolved to decide this case.
Chapter 94, Note 1(d) excludes parts of general use. The top racks and standards are parts of general use and are, therefore, not classifiable in 9403. This is consistent with Additional U.S. Rule of Interpretation 1(c), which says that a provision for parts will not prevail over a specific provision for that part. Heading 8302 is the specific provision for these parts. That makes the correct classification 8302.42.30.
That is a reasoned and reasonable result. But, I have a question. Based on this, was storeWall decided correctly? Chapter 94, Note 1(d) excludes parts of general use of base metal "or similar goods of plastic." The racks and standards in storeWall were apparently similar in design and use, but were made of plastic. Should they have been excluded as plastic parts "similar" to based metal articles of 8302? If the analysis in storeWall touches on this issue, then that analysis might be binding on the CIT, in which case this decision would be in conflict with a binding precedent. My assumption is that storeWall does not address parts of general use and since this post is already too long, I am not going to check right now. What I will do is bet that the Federal Circuit will have another opportunity to address this issue when Container Store appeals (again).
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