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CBP Proposal To Limit Court Decision Regarding Classification Of Holiday Articles - Short Public Comment Period

July 15, 2005

In the June 29, 2005, issue of the Customs Bulletin, U.S. Customs and Border Protection ("CBP") published a Notice proposing to limit the application of a recent court decision regarding a significant classification issue regarding holiday articles. Specifically, under 19 U.S.C. §1625, CBP proposes to limit the decisions of the Court of Appeals for the Federal Circuit ("CAFC") and Court of International Trade ("CIT") in Park B. Smith v. U.S. to the specific entries before the courts in that litigation. The Customs Bulletin publica­tion is significant because interested parties have until only July 29, 2005, to submit comments to CBP Headquarters.

The Park B. Smith case involves the importer's challenge of CBP's classification of certain linens as "table linens" under heading 6302, HTSUS, and rugs as "woven textile floor coverings" under heading 5702, HTSUS. Because the articles were decorated with festive holiday symbols (Santa Claus and ghosts), and were sold during the respective holiday seasons, the importer claimed the articles should instead be classifiable as duty-free "festive articles" under heading 9505, HTSUS.

In the initial litigation, the CIT agreed with the importer that the merchandise (except for four articles) should be classified as duty-free festive articles. In doing so, the CIT relied on an earlier CAFC case, Midwest of Cannon Falls, Inc. v. U.S., which held that in order to be classified as festive articles, the merchandise must 1) be closely 'associated with' a festive occasion, and 2) be displayed and used by the consumer only during the festive occasion. In using this test, the CIT grouped the articles into three groupings: 1) articles bearing "festive symbols," 2) articles in "festive color schemes" and 3) articles in solid colors and a green, red and blue plaid. The CIT ruled that the third grouping would not be classifiable as festive articles.

Both parties appealed the decision to the CAFC and, in October of 2003, that court agreed that articles in the third grouping should not be classified as festive articles. However, the CAFC sent the case back to the CIT for reconsideration of the articles bearing festive symbols (grouping 1), and articles in festive color schemes (grouping 2). In doing so, the appellate court noted that the CIT did not divide the goods before it with sufficient precision, and the CIT was directed to segregate the articles based on whether, by their design or symbols, the articles were directed to a specific holiday and whether their use at other times would be aberrant. If the CIT determined that use of the articles at times other than a specific holiday would be aberrant, those articles would be classifiable as festive articles of heading 9505, HTSUS

On April 6, 2005, before the CIT issued a decision based on these instructions from the appellate court, the importer and government reached an agreement as to the classifica­tion of the merchandise covered by the entries at issue, and the court approved the stipulated agreement. Thus, the CIT did not independently rule as to the classification of the articles in question.

In the Customs Bulletin Notice, CBP notes that the initial CIT ruling as to festive articles did not take into account the Explanatory Notes regarding Heading 9505 (which say that Congress did not intend that heading to include all manner of festive articles), nor did the court have the opportunity to consider the fact that the Explanatory Notes were in fact amended during the course of the litigation to specifically exclude articles containing a festive design that also have a utilitarian function, such as tableware and kitchenware.

For these reasons, CBP now seeks to limit the decision in the Park B. Smith case to the entries specific to that case. CBP's position is that the court should have the opportunity to examine the scope of Heading 9505 regarding festive articles, in concert with the amended Explanatory Notes. CBP reasons that failure to do so will present the agency with extraordinary administrative difficulties, and that importers and CBP will be forced to examine designs on a multitude of articles which are utilitarian, and not, in and of themselves, festive (like cups or sweaters) to determine if trees, for example, are merely trees or are holiday Christmas trees.

Thus, under 19 U.S.C. §1625(d), CBP has published the Customs Bulletin Notice proposing to limit the application of the court decision to the specific articles under litigation in the subject case. Before making this decision final, CBP will give consideration to any comments by the general public received on or before July 29, 2005.

This is a significant matter and importers may wish to set forth their views and concerns for CBP Headquarters' consideration before the proposed action becomes final.

If you have any questions regarding the Bulletin Notice, the comment period, or any of the issues and cases discussed above, contact George R. Tuttle at (415) 288-0425 or grt@tuttlelaw.com.

George R. Tuttle is an attorney with the Law Offices of George R. Tuttle in San Francisco. The information in this article is general in nature, and is not intended to constitute legal advice or to create an attorney-client relationship with respect to any event or occurrence, and may not be considered as such.

Copyright 2006 by Tuttle Law Offices.

All rights reserved. Information has been obtained from sources believed to be reliable. However, because of the possibility of human or mechanical error by our offices or by others, we do not guarantee the accuracy, adequacy, or completeness of any information and are not responsible for any errors, omissions, or for the results obtained from the use of such information.

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