June 11, 2009
When is a bolt not a bolt? “Never,” said the Court of International Trade in Honda of Am. Mfg., Inc. v. United States, Slip Op. 2009-51 (Ct. Int'l Trade, June 5, 2009), even if the bolt is specially designed and dedicated to a particular purpose.
What makes this case of interest is that it is one of the first instances in which the court discusses Note 2 to Section XV of the Harmonized Tariff Schedules (HTS) and the classification of “parts of general use.”
In Honda the merchandise consisted of a bolt. This was no ordinary bolt, however, as this was an “oil bolt” and had specialized features that dedicated it for use in automobiles. The oil bolt was hollow throughout its length and had cross-sectional holes through it so that it could permit the unimpeded passage of fluids from the brake or transmission lines.
Honda challenged an administrative ruling in which CBP said; “[although] it may be a specialized screw for use in a part of an automobile, it is nonetheless a screw that meets the terms of and is classifiable in heading 7318.”
Heading 7318 encompasses screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotter pins, washers (including spring washers) and similar articles.
Because of the unique nature and design of the oil bolt, Honda argued that the bolt should be classified under HTS Headings 8708 or 8714 as parts or accessories of motor vehicles.
Note 2 to Section XV and “Parts-of-General-Use”
According to the HTSUS General Rules of Interpretation, classification shall be determined according to the terms of the headings, and any relative section or chapter notes.
Note 2(b) to Section XVII (in which headings 8708 and 8714 are found) provides that the provisions for "parts" and "parts and accessories" do not apply to “[p]arts of general use,” as defined in Note 2 to Section XV that are of base metal or plastics. Other sections and chapters of the HTSUS provide a similar note. (For example, Note 1(g) in Section XVI, which covers chapters 84 and 85, is identical to Note 2(b) to Section XVII).
Note 2 to Section XV provides that “[t]hroughout the tariff schedule, the expression "parts of general use" means: Articles of heading 7307, 7312, 7315, 7317 or 7318 and similar articles of other base metals”, as well as: Articles of heading 8301, 8302, 8308 or 8310 and frames and mirrors, of base metal, of heading 8306. “This approach,” said the court “does not generally make an exception for specialized parts when considering parts of general use imported separately.”
Honda argued that CBP made exceptions in the past to the rule regarding the classification of “parts of general use” when the article is designed and dedicated for a specific end use, and cited several rulings as examples. The court, however, distinguished the rulings cited by Honda, noting that for several of them, CBP was following the Harmonized System amendments of the Explanatory Notes.
The court also noted that the traditional parts cases of Bauerhin Technologies Ltd. Partnership v. United States, 110 F.3d 774 (Fed. Cir. 1997), United States v. Pompeo, 43 CCPA 9 (1955), and United States v. Willoughby Camera Stores, Inc., 21 CCPA 322, Treas. Dec. 46851, T.D. 46851 (1933), did not deal with a defined parts-of-general-use provision such as Note 2(b) to Section XVII and Note 2 to section XV. Finally, the court looked at two administrative rulings where CBP classified specialized bolts in accordance with the “[p]arts of general use” rule, even though the bolts were dedicated for use in automobiles. The court therefore found that Customs’ ruling for Honda was consistent with its previous treatment of similar articles, and that the specialized bolts were classifiable under Heading 7318, as bolts.
Lessons to Be Learned
The Honda case reminds us of an important rule of tariff classification. Articles of base metal or plastics that fall under the headings referenced in Note 2 to section XV are classified therein, even if they have unique or specialized features, or are otherwise dedicated to a particular use.
If you have any questions on the issues raised in this newsletter, please contact George R. Tuttle, III, at (415) 986-8780 or at firstname.lastname@example.org.
George R. Tuttle, III, 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.
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