A complaint filed in the United States Court of International Trade (“CIT”) late last week highlights the practical challenges and frustration that come from delayed resolutions and parallel proceedings between federal courts and agencies, such as US Customs and Border Protection (“CBP”). In the Complaint, One World Technologies, Inc. (“One World”), a manufacturer of garage door openers sought injunctive relief and declaratory judgment against CBP for its continued detention of One World’s products contrary to the CIT’s prior order.

This dispute originally began in July 2016, when another garage door manufacturer filed a complaint alleging that One World’s wireless garage door model infringed on their patents.  As part of the litigation that ensued, One World changed redesigned its garage door openers to resolve the infringement claims.  One World sent shipments of the redesigned products which CBP detained in light of the ongoing infringement dispute.

On December 14, 2018, the CIT entered an order in which it found that One World’s redesigned products did not infringe the patent at issue.  The CIT, however, declined to exercise jurisdiction over the pending protest before CBP in which One World sought approval to import the products. This left One World in a position where the CIT had determined that the products were not infringing, but the CBP proceedings had not yet progressed to their own determination.  The practical reality being that One World’s non-infringing products remain in CBP detention.  Accordingly, One World filed its new complaint urging the Court to intervene and direct CBP to release the products.

While the Court’s reluctance to interfere with administrative proceedings is certainly reasonable, the practical effect for companies can be frustrating.  Here, a federal court had made a determination as to the question of infringement, but the parallel proceeding before CBP rendered the CIT’s order all but ineffective. There is no simple resolution when these unfortunate systemic inefficiencies arise, but experienced counsel can help anticipate potential periods of delay and find the most efficient path forward – even if the path is fraught with frustration.

In a recent Opinion, the United States Court of International Trade denied cross motions for summary judgment filed by Ziploc bag producer S.C. Johnson & Son (“S.C. Johnson”) and the U.S. government which sought competing classifications for the well-known plastic bags.

S.C. Johnson argued that the 6 1/2 inch by 5 7/8 inch version of its polyethylene zipper-sealed bags should be classified under HTSUS Subheading 3924.90.56 covering “tableware, kitchenware, other household articles and hygienic or toilet articles, of plastics: other: other” which can be imported duty free. The government asserted that the bags were properly classified under Subheading 3923.21.00 covering: “articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps, and other closures, of plastics: sacks and bags (including cones): of polymers of ethylene” which would be subject to a 3% ad valorem duty.

The CIT found that neither party had presented sufficient undisputed factual support for their proposed classification.  The CIT set forth its two-part classification analysis. First, determining the legal question of the proper meaning of the terms of the tariff provisions and; second, determining the factual question of whether the product at issue falls within that provision.

Accordingly, the CIT examined the terms definitions of the terms “conveyance” and “packing” in defining the scope of Heading 3923 and determined that the principal use of that provision is “goods of plastic used to carry or to transport other goods of any kind.” The CIT also examined the words”household” and “article” which a central terms under Heading 3924 and determined that the heading encompasses “plastic goods of or relating to the house or household.”

Having dispensed with the first step in its analysis — determining the proper meaning of the prospective tariff provisions — the CIT found that it could not go further because issues of fact remained as to under which heading the bags fell.  Specifically, while acknowledging that the physical characteristics of the bags and customers uses and expectations with respect to the bags were uncontested, the CIT found that neither party had provided sufficient undisputed facts to permit a full analysis under the factors set forth in Carborundum.

Under Carborundum, the Court looks at factors including: [1] use in the same manner as merchandise which defines the class; [2] the general physical characteristics of the merchandise; [3] the economic practicality of so using the import; [4] the expectation of the ultimate purchasers; [5] the channels of trade in which the merchandise moves; [6] the environment of the sale, such as accompanying accessories and the manner in which the merchandise is advertised and displayed; and [7] the recognition in the trade of this use.

Therefore, with the proper definition of each proposed heading now established, the parties must move forward to trial to finally determine the proper classification of the bags and the resulting tariff.

 

 

 

In a recent opinion, the US Court of International Trade (CIT) found that certain fabric covered pool floats should be classified as plastics — not textiles — for tariff purposes.  Despite the textile elements of the floats, the sequential application of the General Rules of Interpretation led the CIT to find that the air-filled plastic bladder which allowed the product to float in water gave the floats their “essential character.”

The products at issue are floats for a swimming pool which a generally designed with an outer perimeter containing a plastic bladder which is covered with fabric.  Inside the perimeter is a fabric mesh which “suspends” the user’s body at or just below the water’s surface.  The floats also contain a flexible steel rod around the perimeter which allowed the floats to be folded neatly for storage and then “sprung” into a usable position. US Customs and Border Protection (CBP) had classified the floats as textiles under subheading 6307.90.98 for “[o]ther made up articles, including dress patters: Other: Other” and subject to a 7% duty.  The producer of the floats asserted that the products should be classified under subheading 3926.90.75 for “[o]ther articles of plastics and articles of other materials of headings 3901 to 3914: Other: Pneumatic mattresses and other inflatable articles, not elsewhere specified or included” and subject to 4.2% duty.

At the core of the dispute was the intersection of the textile and plastic elements of the the products. The CIT began its analysis under General Rule of Interpretation (GRI) 1 and determined that neither proposed heading, 6307 or 3926, fully described the floats which contained significant components of both textile and plastic.  CBP argued that, like life jackets which are classified as textiles, the were no separate components to the textile floats which required evaluation beyond GRI 1. Nevertheless, the Court found the textile and plastic components to be distinct and, therefore, pursuant to GRI 2, the mixed-material products were to be evaluated in accordance with GRI 3. Under GRI 3(b), if a material or component of the imparts the “essential character” of the good, then product should be classified based on that defining material or component.

CBP argued that the product was entirely covered in textiles and, significantly, without the textile mesh which suspends the user, the float would not function as intended.  The CIT, however, determined that the air-filled plastic bladders around the perimeter where the component which gave the floats their essential character.  As the Court found, even if one conceded that the mesh component is necessary for proper function, without the bladders, the mesh would lack support to help the user float. Accordingly, the CIT determined that heading 3926 was the correct heading.

In a separate part of its opinion, the CIT declined to classify certain floats designed for babies as general exercise equipment in part because the packaging lauded the products ability to keep babies “comfortable and happy.”

 

On November 13, 2015, the United States Food and Drug Administration (FDA) finalized three new rules designed to increase foods safety in the wake of recent food-borne illness outbreaks. Significantly, as part of this expansion of the Food Safety Modernization Act (FSMA), the FDA has created new obligations for food importers to verify that foreign suppliers are complying with U.S. safety standards.

32805478_s
Copyright: ewastudio / 123RF Stock Photo

The Foreign Supplier Verification Programs (FSVP) for Importers of Food for Human and Animals sets forth substantial obligations for food importers to help minimize risks to food safety throughout their supply chain. Under the FSVP, food importers are required to develop and maintain procedures to ensure that their foreign producers are abiding by the same levels of public health standards which would be applicable in the United States.  To comply with the FSVP, importers must maintain detailed records of thier supply chain protocols and preventative controls in addition to conducting audits and evaluations of each of their foreign producers.

In addition, importers must also evaluate any known or foreseeable hazards associated with specific foods they import.  This ‘hazard analysis’ is designed to evaluate all of the potential areas where food-borne illness may arise; from the harvesting of raw materials and food formulation, to transportation, storage, and final distribution.  Importers may rely on third-party auditors to evaluate the foreseeable risks in their supply chain, however, the importer must review and assess any evaluations from foreign producers or third-party auditors.

The FSVP is set to take effect in 18 months. The first step for U.S. importers is evaluate the supply chain policies they have in place and to develop and test additional ‘risk analysis’ protocols.  The FDA is in the process of creating additional guidance for importers, but knowledgeable counsel will likely be an invaluable resource when navigating these new and potentially onerous provisions of the FSMA.