The Harmonized Tariff System of the United States (“HTSUS”) governs the classification of merchandise imported into the United States. The HTSUS scheme is organized by Headings, each of which has one or more Subheadings. The Headings set forth the general categories of merchandise, and the Subheadings provide a more particularized segregation of the goods within each category.
Tariff classification is determined according to the General Rules on Interpretation (GRIs) and Additional U.S. Rules of Interpretation. GRI Rule 1 is that classification is to be determined according to the terms of the Headings and any relative section or chapter notes. Unless there is evidence of contrary legislative intent, tariff terms are to be construed according to their common and commercial meanings. After consulting the Headings and relevant section or chapter notes, the Explanatory Notes of the relevant HTSUS headings may be considered (but are not binding)2.
In cases involving a disputed tariff classification, the reviewing court considers whether the Government’s classification is correct, both independently and in comparison to the importer’s alternative. Although a plaintiff has the burden of showing that the Government’s classification is incorrect, the court has an independent duty to arrive at the correct result, by whatever procedure is best suited to the case at hand.
The court’s determination of the correct classification is a two step process. The first step addresses the proper meaning of the relevant tariff provisions, which is a question of law. The second step involves determining whether the merchandise falls within a particular tariff provision as construed, which is a question of fact.
To interpret a Heading, it must first be determined whether the Heading is an eo nomine or Use provision, because different rules and analysis apply depending on the heading type. An eo nomine provision describes articles by a specific name, whereas a Use provision describes articles according to their principal or actual use.
In denying Schlumberger’s Protests and finding that classification under HTSUS subheading 6909.19.50 was appropriate, Customs relied primarily on a May 2007 ruling letter to Schlumberger concerning artificial proppants. The U.S. Supreme Court has held that a classification ruling by Customs is accorded respect proportional to its “power to persuade” based on the “thoroughness, logic, and expertness.” United States v. Mead, 533 U.S. 218, 235 (2001). Thus, the Supreme Court found that Customs ruling letters are not entitled to deference under the principle of Chevron v. Natural Resources Defense Council, 467 U.S. 837 (1984). Before the Court of International Trade (“CIT”) and the Federal Circuit, the Government argued that bauxite proppants were intentionally formed into spheres, and thus were ceramic wares. The CIT concluded that HTSUS heading 6909 covering ceramic wares did not describe a semi-processed substance such as an ore that has been milled, granulated, and fired but not advanced to a state that was correctly described as an item, article, or ware. See Schlumberger Technology Corp. v. United States, Slip. Op. 15-78 (Ct. Int’l Trade 2015).According to the principle of ejusdem generis, the merchandise in question must possess the same essential characteristics or purposes that unite the listed exemplars. The CIT found that the merchandise was not like the other items identified in Heading 6909. Moreover, the court found that the proppants were bulk substances that were not individual articles in the normal sense of the word.3 The CIT found that the bauxite proppants were properly classified in HTSUS heading 2606, an eo nomine classification covering calcined bauxite, which carries a duty rate of free.
As a result of the court decisions, Schlumberger’s imports of bauxite (ceramic) proppants will enter duty free, instead of being subject to a duty rate of 4 percent.
1All proppants serve to keep fissures in oil and gas wells open after fracking. Ceramic proppants are best for drillers looking for uniform size and chemical consistency. Ceramic proppants can withstand high temperatures and pressures and work well either in conjunction with sand or as a substitute for sand.
2The World Customs Organization publishes the Explanatory Notes as its official interpretation of the Harmonized Commodity Description and Coding System, the global system of trade nomenclature on which the HTSUS is based.
3To discern the common meaning of a tariff term, a court may consult dictionaries, scientific authorities, and other reliable information sources