1 Formerly the U.S. Customs Service.

Slip Op. 04 – 24 

## UNITED STATES COURT OF INTERNATIONAL TRADE

: DAL-TI LE CORPORATION , : : Plaintiff, :

: v. : Before: M USGRAV

E, JUDGE : THE UNI TED STATE S, : Court No. 95-05-00679 : Defend ant, : : [On class ifica tion dispute over whether imported wall tile from Mexico meets statutory test for “ceramic” and is entitled

to duty-free

entry under

the Generalized System of Pre ferences, judgment for the plaintiff.] Decided: March 16, 2004 McGuire Wood

s LLP ( Joseph S. Kaplan ), New York City, Ne w York, for the plaintiff. Peter D. Keisler , Assistant Attorney Gene ral , Barbara S

. Wil liams , Attorney in Charg e, International

Trade F ie ld Off

ice , Commercial Litigation Bra nch, Civil Division, United States Department

of Justice ( Saul Davi

s ); Beth C. Brotman , Office of Assistant Chief Coun sel, Inte rnationa l Trade L itigation, Bure au of Customs and Border Pro tection, for the d efenda nt. Howrey Simon Arno ld

& White LLP ( John F. Bruce ), Washington, D.C., for amicus curiae Tile Council of America. OPINION Following trial of the issues, the parties entered into mediation with the assistance of another judge o f this Cour

t. The att empt was u

ltimately unsucce ssful. Dal-Tile disputes the classification of 1984, 1985 and 1988 entries of wall tile from Mexico. The imports were classified by the predecessor of the Burea u of Customs and Border Pro tect ion, 1Court No. 95-05-00679 Page 2

along with other

Dal-Tile entries between 1984 and 1993, as “ceramic articles” under item 532.24 of the Tariff Schedules of the United States. They were also denied duty-fr ee treatment under the Generalized System of Pre ferences. Dal-Tile contends that clas sificati on is appropriate under item 523.94, TSUS (“other articles of stone or of other mineral s ubstance s . . . not el sewher e specif ied”). I n 1993 and

1994, Dal -Tile filed protests o f all entr

ies for the 1 984-1993 period. A fter co nsiderin g the pr otests, Cus toms changed the classification of all the 1987 entries and some of the 1988 entries from TSUS 532.24 to Dal-Tile’s claimed classification and refunde d all custo ms duties for those entries, which were liquidated as Mexica

n produc ts pursua

nt to the GSP . Dal-Til e’s cla ims with respect to a number of other shipments were also settled prior to this action. Cf

. Dal-Tile Corp. v. United States , 24 CIT 939, 116 F.Supp.2d 1309 (2000) . Subse quently, however , Customs reverted to its original classification

under 532.24, and Dal T ile sues to have its other entries also classified, like its earlier ones, under 523.94. This test case covers the classification o f the remaining cont ested Dal-Tile entries. Dal-Tile’s claim concerns Headnote 2(a) to Part 2 of Chapter 5 of the TSUS, which defines a “cera mic article”

as

a

shaped article having a g lazed or unglazed b ody of cr ystalline or substantia lly crystalline structure , which body is compo sed ess entially of inorga nic nonmetallic substances and . . . is forme d and subs equently hardened by such heat tre atment that the body, if re heated to pyrometric cone 020, would not become more dense, harder, or less porous, but does not include any glass article. TSUS, Ch . 5 , P ar t 2 , N ot e 2 (a ). Th e l an gu ag e o f t hi s s ta tu te is cl ea r ( al th ou gh th e h is to ry o f the

reason for its having been promulgated is not). Pyrometric cone 020 is the state of energy requiredCourt No. 95-05-00679 Page 3

2 The r elative difference in absorption between wall and f loor tiles can apparently

be ascertained

withoutthe use

of scien tific tes ting. Whe

n asked to

do so by counsel, two forme

r DalTile officers were able to tell the differ ence between a wall and a floor tile – and even the difference inabsorpti on betwe en two wa ll tiles – by

touching their tong

ues to the ung lazed bac

k of the til es. When they

perfor med this te st at tria

l, both witnesses sta

ted that their tong

ues st uck to the more absorptive wall tile, but would not stick to the floo r ti le. Each witness pe

rformed this test in de pe nd en tl y; one had been excluded from the courtroom during the other’s testimony and had not observe d the othe

r perform this tes t or testif y a bout the r elative a bsorption of the tile s. to deform a cone of a particular c omposition and size, and it may beachiev ed thr ough differe nt time and temperature combinations. The question here is simply wh ich of th e partie s’ proff ered te st methodologies proves the presence or absence of c hange in samples of

wall tile u

pon rehe ating to pyr ometric cone 020. If D al-Tile p

revails o n its class ification claim, the Court mus talso consider whether the wall tile is entitled to duty-free entry under

the GSP. For the reasons set forth below, judgmen t will ente r for Da l-Tile on both issue s. Findings Wal l tile is unlike floor tile. Floor tiles are typic ally installed with more g ro ut and wide r space betwee

n them tha

n wall tile s, which a

re norma lly f it ted clo se toge

ther with minimal g

rout. Therefore, flatness and uniformity in size andshape are less important for floor tiles than for wall tiles, which must be pleasing to the ey e when installed. Floor tile must a

lso resist prolong ed conta

ct with water and

be more scratch resistant. They

are therefore composed of differe nt materi als tha n wall tile and are fired to a more “stable” or “mature” state. By contr

ast, a degree

of absorption is desirable in wall tile, because this allows the back of the wa

ll tile body

, which is u

nglazed , to abso rb mois ture from the adhesive used for installation and stick to it w hile it cur es. To ac hieve the desired absorpti veness, 2 wall tile b ody

is fired at a compara tively lower temperature than floor tile body, which results in what Dal-Tile aversCourt No. 95-05-00679 Page 4

3 For example, the pyr

ometric cones used by

both Dal-Tile and Custom s to monito r the reheating of the t ile s in this matter were manufactured accor ding to a formula controlling the variabi lity

of the raw materials used from batch to batch. The other method co mmonly

in use among manufacturers is to prepare very lar ge amounts of wall tile body in advance in order

to have a large, uniform supply of wall body on hand. is a not completely mature body that tends to further harden upon subsequent firings as it becomes more fully mature. American National Standards Institute (ANSI ) 6.1.1.3.1, the industry standard fo r absorption in wall tile, specifies that wall tile should have between 7 and 20 percent body

weight absorption. Dal-Tile requires between 12 and 16 pe rcent a bsorption for its wa

ll tile. Thi s is achiev ed thr ough the use of formula “1776,” which was intro duced int o produc tion at its ma

nufactu ring fa cility in Mo nt er re y, Mexico, in 1976. The use of manufacturing formulas, and their variations, is standard practice in the industry as a means of mai n taining consistent production. 3 In a ddition to compensatingfor

natural ly occurr ing che mical dif ferenc es and imp

urities in the raw material s DalTile uses, most of

the 13 var

iations of formula 1 776 to compensate for different amounts of scra p to be incorporated into the mixture of mat erials f or wall til e body . The same basic ma

terials comprise each va riation of formula 1 776: clay

, talc, wo llastonite

and scrap tile, i.e. , bisquet (fired scrap, which is usually ung lazed) or desperdi

cio (unfired “green” sc

rap, which may

or may not be glazed). Talc, also known as soapstone, is used to ma intain consistent porosity . The Texa s talc used inthe 1776 formula is very stable and

has low shrinkage. The Tennessee ball clay used in the 1776 formula adds plas ti city and keeps the other materials together during f orming. Wollastonite (calcium silicate) helps maintain stability of size and porosity. Bisquet helps with deg assing during firing, and the use of both bisquet and desperdi cio allow re

use of scrap tiles

.Court No. 95-05-00679 Page 5

At trial, Dal-Tile demonstrated its process of wall tile manufacture with the aid of a videotape shotat Ceramica Regiomontana, its plant in Monterrey . The raw materials are obtained from the

same mines thatDal-Tile’s factory has used for over 50 y

ears. The mined raw

materia ls for the tile body are br

ought into the plant in their lump or crude state, checked for quality, separ

ately g round to 200 mesh si ze, and stored in silo s. At this point, the precise formulation of the wa ll tile body

is determined

dependin

g on the propert ies of ea ch of the raw mate

rials. On

ce the f ormula is determined, the raw material s are we ig hed, ground, and mixed together with a precise amount of ground scrap tile. After mixing, removal of iro n and drying , the procedure results in spray dried body , which ha s the cons istency of instan t coffe e gran

ules. Dal-Tile does not se ll to others the spray dried body manufactured in M onterre y, s ince it is all used in t he manuf

actu re of Da l-Tile tile . Spray

dried bod

y is bought a nd sold on the market, however, since many

other tile manufacturers do not make their own tile body. The equipment used to make tile comes from only a few manufacture rs in

Italy and is used throughout the tile-making in du st ry. Since all

manufacturers use the same or similar equipment, any tile manufac turer who used spray dried body

manufactured at the Monterrey plant could create a substantially similar tile. The cha racter istics of D al-Tile’ s tunnel- kiln fire d wall tile have not

changed over time. The

rawmateria

ls for wa ll tiles ha ve come from the same mines, the manufacturing process has rema ined essentia lly unchanged, Ceramica Regiomontana has used the same or more modern versions of the basic tile-mak

ing equ ipment ( e.g. , mills, pressing equipment, dryers, except for one of the 14 tunnel kilns whichhas not been updated since it was first put into use in 1955), and the 1776 formula has been employe d since 1976 to create consistent end product. I t is therefore reasonable to infer thatCourt No. 95-05-00679 Page 6

4 The only

exception

to this inference would be for wall tile fire d in 1990 or

therea bouts in one of Dal-Tile’s three fast-firing kilns, which w ere acquired i n that year. Dal-Tile was able to produce wall tile meeting the 7-20 % ANS I spe cificat ion on thes e kilns, bu

t they were unable to con sistently

produce wall tile according to the stricter 12- 16% Dal-Tile standard. Dal-Ti l e eventua lly abandoned the effort. No tests of fast-fi red wall tile samples were involved in this action.

5 It was averre d at trial that responsibility for testing wa ll tile devolved from

Customs’ Los Angeles laborat

ory to its New Orleans la

borat ory in 1988 and that the Customs’ Los Angeles laboratory

had tested samples of wall tiles produced for 1984, 1985, and 1988 entries (among other years’ entries). wall tile produced

in 1976 is comparable to wall tile produced in 19 86 , 1 99 6, or to da y. 4 Inde ed, DalTile’s protests for 1984, 1985 and 1988 entries r esulted in reliance upon tests of samples produced from1988 an d lat er by C us to ms ’ N ew Or le an s l ab or at or y, 5 since tiles for most of the challenged shipments were no longer available. ASTM C-373 is a t

est which is routine ly e

mploy ed in the t ile industr y to determine the water absorptionof wall til e; howev er it is no t t yp ically used in the industry to compare the absorption before and after

an event such as reheating. The manufac ture of wall tiles does not require that they be reheat ed to cone 020, a nd no A STM s pecifi catio n for w all t ile re quire s rehea ting. The la nguage of the statut e is a “be fore” a

nd “afte r” test. Theref

ore, Da l-Tile submits, even

if an item is c eramic inthe commo nly

accept ed sense , it would not fit the Cus toms defin ition of a “ ceramic

article ” if it becomes harder, more dense, or less porous upon r eheating to py

rometric cone 020. Neither the statute nor the C-373 standa rd provi de guidance on how to perform a c omparative test using C-373 or on how to achieve py rometric cone 020. The Customs Service does not have a writte n protoc ol in pl ac e t he re fo r. Th e C us to ms ma nu al fo r c er am ic s t es ti ng co nt ai ns on ly a descriptionof ASTM C-373. Thus, the New Orleans laboratory w hich tested the tile developed its own methodology f

or performing the testing.Court No. 95-05-00679 Page 7

The Ne w O rl ea ns la bo ra to ry m ethod invol ved taking one tile, cutting it into at least five pieces, subjecting the pieces to the five-hour boil and 24-hour soak specified in C-373, testing for absorption, and then reheating those pieces to py rometric cone 020. The laborator y used the time/temperature ramp of 60 o /hour until cone deformation at 625 o Celsius. This time/temperature ramp was selected from

charts o f temper

ature e quivalen

ts include d in the lite

rature in the packaging of the pyrometric c ones manufactured by Orton, which are used by both Customs an d Dal-Tile. Included are da

ta for reaching py

rometric cone 020 at 635 o Celsius. Ms. Jacqueline Simoneaux, a quality control manag er and former

senior analyst at the N ew Orl ea ns Laboratory

testifying for

the government, stated she was not aware of any ra

tionale for taking one tile a

nd cutting it into five

samples, other than

usually having one

tile to test and needing at least fiv e sample s in accordance with ASTM C-373. ANSI also specifies that whole glazed tiles

are preferre d for testing over unglazed, fracture d specimens (in addition to specifying that water absorption testing is destructive). After the Customs samples were reheated, they were a gain sub jected to the C-373 process and again measured for absorption. Ms. Simoneaux testified that she elected to perform a second C-373 test on the same

samples b ecause

of the pos sible var

iations wi thin a single tile, w

hich she f elt made comparisons between tiles diff icult. The results w ere inc oherent

. After the Customs samples had been subjected to a 29-hour boil/soak, reheating, a nd another 29-hour boi l/soak, they showed that the absorptionof the samples either increased, decre ased, or staye d the same, depending upon interpre tation. Th e Customs la

borator y di d not use a

ny c ontrol sa

mples.Court No. 95-05-00679 Page 8

6 The rela

tionship be

tween ha rdness, d ensity , porosity

and abso rpti on is tha t as hard ness (continued...) After conduct ing physical experimentation to determine the a ppropriate cy

cles (temperature/time) to achieve cone 020, Dal-Tile determined to test at the extremes (the slowest and fastest rates the Dal-Tile kiln could achieve cone 020), w hich were 575 o at 5 o /minute and 700 o at 50 o /minute. Dal-Tile also conducted tests at 625 o at 60 o /hour (the rate Customs sel ected from the Ortonliterature) and 635 o at 50 o /hour, whichare intermediate temperature equivalents that achieve cone 020. For each te mperatu re equiv alent, Da

l-Tile br oke 15 tile s into halves. D al-Tile then took one half from each

sample and subjected each to the C-373 procedure . Rather than reheat these sa mples, Dal-Tile used their absorption measurements as a baseline, and t hen reheated the other remaining halves which had not

been subj ected t o dest ructi ve tes ting t o pyromet ric con e 020. After r eheati ng, the laboratory took the r

eheated halves and

ran them through the ASTM C-373 procedure, and the n compared the data from these halves to their counterparts which ha d been soaked but not reheated. As a populat

ion, when compare d again st the samp les which were no t rehea

ted, the w all tile samples becam e less absorbent after reheating to cone 020. Samples which had been reheated a t different temperatures were not compared to ea ch other. The absorption of a few ind ividual tiles appeared to incre ase or st

ay the same , but such r

esults re flected

variations with in the tiles, not variations in the behavior of the tiles: the overall trend was toward lowe r absorption. Dal-Tile also performed density

and a p parent p orosity

testing on the sam

ple tiles. The resu

lts showed that as the water a

bsorption of the spe cimens de crease d, the app arent porosity decreased and the a pparent density incr eased. 6 These results were confirmed by Dal-Tile through analysis ofCourt No. 95-05-00679 Page 9

6 (...continued) increa ses, so does density, while porosity and absorption both decrease. The rev erse isalso true: as hardness and density

decrease, porosity

and absorption increase. variance (ANOVA), a standard statistical technique. Theoretically , ANOVA should revealwhether any observed changesc aused by re heating to py

rometric cone 020 were statistically significant or merely appare nt. Statisti cal sig

nificance is def

ined as a result in which the F factor, an average of certain values, is greater than the F c ritical (or stati stically

signific ant) fa

ctor, in th is instanc e to DalTile’s proffer of a confidence le vel of 95 percent. Specifi cally, ANOVA examined whether the changes observed were the differenc es in the mean values of the properties of absorption, apparent density and appa rent por osity within a population of

tiles, half of which had been subjected to ASTM C-373 only, and the

other half of which had been subjec ted to reh eat in g an d t hen AS TM C -37 3. In the testing Dal-Tile performed, the ANOVA showed tha t the changes observed

at the extreme 700 o test and at the intermediate 625 o and 635 o tests were statistically sig nificant, but that

the obser vable changes at the extreme 575 o test wer e not stati stically

signific ant. Dal-Tile also contacted Richard Haber, a prof essor of cera

mic s engineering at Rutger s Un iv er si ty, for assistance. Without telling him anything concer ning the test methodolo gies Da

l-Tile and Customs had separately de termined, Dal-Tile presented him with tile manufactured in 1985 and asked him to construct a test methodology a ccording to the statute. Prof. Haber testi fied that the metho dolo gy

he worked out was to split the tiles into four pieces and run ASTM C-373 on half the samples after reheating to cone 02 0 and then perform ASTM C-373 testing on the other halves withoutsubj ectin g them t o rehea ting. Except for the numbe

r of samp les used, this was id entical t o the methodology Da

l-Tile had constructed, and he, too, te stified th at he fe lt it was re asonable to useCourt No. 95-05-00679 Page 10

a control a nd to split a tile

intwo before reheating half. H is results showed that on average, the 1985 tiles became more absorptive, more dense, and less porous, upon r eheating to cone 020. When Prof. Haber was then informed of Dal-Tile’s results, he performed another se ries of tests on tile manufac

tured in 1 997, using

the same methodolo gy , to corr

oborate Dal-Tile ’s result s. His testing differed from Dal-Tile’s in that the temperature ramps used to reach cone 020 at 710 o Celsius was not a s rapid a s that achieved by Dal-Tile because his kiln wa s unable

to heat at the same rate. He alsoused a greater number of tile sa mples (50) than

did Dal-Tile. Otherwise, Prof. Haber’s metho dolo gy

was ide ntical to that used by Dal-Tile. H is results in the 575 o and 710 o tests were consistent with those observed by Mr. Cornia and the Dal-Ti le laboratory a s well as with his own results f rom the e arlier t

ests on the

1985 tiles

. Prof. Haber testified that he felt ver y c omfortab le that the

Customs tes ts procee ded from a faulty hyp othesis wh

ich assum es that the

initial C-3 73 test

does not inherently cha

nge the nature of the tile. He t

estified that the A

NSI and the industry rec ognizes that C-373 is a destructive test, even if whole tiles are used to perform the testing. I n order to test the hypothesis that C-373 wa s destructive because it changed the nature of the tile itself and not simply because the tile had

to be broken in order to perform the test, Prof. Haber also perf ormed a multiple soak

test in which he sub jected 15 tiles to a

success ion of C-37 3 tests. Hi s results f or the pop

ulation we

re that the ti le s changed between soak one and soak two, and betwee n soak one and soak thre e, confi rming hi s hyp othesis. Both Prof. Hab er

and the government’s expert, Dr. Denis A. Br osnan, a professor of ceramics engineering

at Clemson University, discussed the published moisture e

xpansion the ory

during t heirCourt No. 95-05-00679 Page 11

te st im on y. Prof. Haber testified that the results he observed are consistent with the findings of Dr. Richa rd Bowman of SCI in Australia, who published pee r-reviewed articles on the the or y o f moisture expansion i

n tiles, which holds that items which are ceramic (in the ge neral sense) t

end to expand when exposed to moisture which increases their porosity , either over time or when subjected to a C-37 3 boi ling an d soak ing. Dr. Brosnan did not perform his own tes ting on a

ny o f the wal l tile produced at the Monterrey

plant; however he theorized that any expansion, e.g. from C -373 t estin g,

can be reversed by

subjecting the expanded tile to a heat treatment of about 600 o Celsius, which would likely return the tile to a

state clo se to its state at manufacture. Dr. Brosnan diff ered with Prof. Haber about whether this sort of heat treatment, which is approximately the same temperature used during the Customs testing, would affect the results of any subsequent testing on the same tile. Prof. Haber testified that

the tile may lose de minimi s mass due to tile

materia l likely being d issolved in the water. The government also presented the testimony of Robert

Daniels, the Executive Director of the Tile Council of America. Mr. Daniels testified that although the Tile Council’s labor ato ry per forms in dependent ASTM testing for its members nearly continuously, it has never bee n requested to do any comparison testing for changes in porosity, density or absorption before and after reheating to pyrometric cone 02 0, and that he himself has never tested tile for chang es in water absorption, porosity

or density

to determine if they a

re ceramic articles under the tar iff definition. Inresponse to questioning by the Court, Mr. Daniels stated that he did not know why the statutory definition was drafted the way that it was, and could only spec ulate as to the reason.Court No. 95-05-00679 Page 12

Withrespect to the issue of whether Dal-Tile’s imports ma y be entere d duty

-free subject to GSP, Dal-Tile

present ed the te stimony

of Delfi na Estra da, the c hief fina ncial of ficer f or Dal-T ile de Mexico, formerl

y Ce ramica R egio mont ana. Mrs. Estrada testified that the value of materials of Mexican origin plus the direct costs of Ceramica Regiomontana ’s processing operations accounted for more than thirty- five percent of the appraised value of the merchandise at issue in this case. Inaddi tion, Mrs. Estrada has been the custodian of Ceramica Reg iomontana’s books and record s since 19 90. At tria l, she testified as to Ceramica Regiomontana’s rec ord retention po li cy, stating that the c ompany

was req uired by Mexican ta

x authoritie s to keep t

he books and re cords underlying

its tax returns and certified financialstatemen ts for a pe

riod of te n ye ars. Eve

ry six months, Ceramica Regiomontana destroy s the oldest six months’ worth of underlying financ ial papers which are at least 10 y ears old. For

this reason, Ceramica Regiomontana no longe r has the underlying

journals, ledgers and working pape rs which support the company ’s certified financial statements and inventory r econciliations from 1978 to 1989. Mrs. Estr ada test

ified tha t the fina ncial sta tements a nd inventory

reconc iliations that Dal-Til e presented at trial contain the particular costs of the actual materials used in the pr oduction of the tiles at issue in this case. Ceramica Regiomontana no longer has the underlying

jour nals, led gers and working papers which support the certified f inancial statements from

1984 to 1988, because

these materia ls were de stroy

ed in the n

ormal co urse of b usiness. Mrs. Estrada

concluded that Ceramica Regiomontana

met the 35% GSP standard by adding the cost of r

aw mater ials, dire ct labor

costs, p arts andpackaging, and fixed and varia ble manufacturing expenses, as reflected in the annualCourt No. 95-05-00679 Page 13

figure s. The value of raw materials used by Ceramica Regiomontana to produce glaze and spray dried body – two sepa

rate and distinct components of wall tile – was included in this calculation. Cerami ca Regiomontana manufactures gla ze in Mexico from several ingredients, some o f whichare imported from the United States. Glaze is compose d of frit, clay , silica a nd zinc. F rit, whichis the main

ingred ient in g laze and g

ives it its e ither g lass or ma tte appe arance , is manufactured

by Ceramica

Regiomontana’s sister company , Materiales Ceramicos. The clay used to make the glaze is imported from the United States, however the glaze Ceramica Regiomontana manufacturers in Mexico is a good capable of being boug ht and sold in the marketplace. Specifically, thre e witnesses, all officers or former office rs of Dal -Tile, e ach test

ified tha t glaze is bought and so ld commerc ially, and Dal-Tile’ s former CEO and board chairman testified that Ceramic a Regio montana r egular ly s ells gla

ze to other

companie s. Discussion In a challeng e to the government’s classification of article s for import duty, a presumption of correctn ess attaches to the government’s classification; the importer ha s the burden of demonstrating that the classification is incorrect. Jarvis Clark Co. v. United States , 733 F.2d 873, 876 (Fed. Cir. 1984). Jarvis Cla rk instructs that a dua

l burden i s overbro ad: a cou rt “must consider whether the government’s classification is correct, both independently and in c o mparison to the importer’ s alternative . . . the importer’s alternative may have faults and y

et still be a better classification

than the government’s.” 733 F.2d at 878. I n other w ords, a c ourt must determine the correct classification from the evidence presented.Court No. 95-05-00679 Page 14

7 Herein, the volume s of the At lanta an d Dallas oral records are indicated by “A” or “D” respectively

followed by the re levant volume number (Roman). The pri ma ry

issue her e is whether the su

bject ar ticles ar e proper ly c lassifie d as “ce

ramic article s” as C ust om s ha s cl ass ifi ed t hem . If the article s are not

“cera mic artic les” but a

re clas sifiable

as “other art icles of stone or mineral substances,” the subsidiary issue is whether they qua lify fo r duty-free entry under

the Generalized System of Pre ferences (GSP). I Interpreting Headnote 2(a) The inquiry into theclassification issue begins with the language of the statute at issue. The parties agree that the applicable statutory definition of

ceramic articles is found in TSUS Chapter 5, Part 2, Headnote 2(a). See Def. Br. at 30; TCA Br. at 11. Asmentione d, Headn ote 2(a) defines a “ceramic article” as “a

shaped article having a g lazed or unglazed body . . . [which] is formed and sub sequentl

y hardened by

such heat treatment that the body , if reheated to py rometric cone 0 20 , would not become more de

nse, har der, or l ess porou s . . . .” The TSUS further specifies that the method for testing the absorption

of a ceramic body

is ASTM C-373. TSUS Ch. 5, Part 2, Note 2(k). ASTM C-373 d irects that a samp le of tile be weig hed, then subjecte d to a five -hour boi l and a n additional 24-hour soak before being weighed ag ain to determine how much water the sample has absorbed. Appar ent density and porosity are measured by

comparing the wet suspended and dry weight of the sample before and a fter soaking. There is no standard methodology for performing

ASTM C-373 as a

comparative test, i.e. , after re heating

an artic le to cone 020, and ASTM has not developed a protocol for comparing water

a bso rption before and after rehea ting. See A-II 7 at 147, 155-156, A-IV at 475, D- II at 83-84.Court No. 95-05-00679 Page 15

8 Reheating was not done on Dal-Tile tiles until 1993 when it began filing protests. On the other hand, Dal-Tile’s representation that the paperwork was filled out by staff in the business office, who relied upon

a more general understanding of ceramic s and dec lared th at the wa ll tiles we re to be classifi able as c eramic a rticles, might re asonably

be interpre

ted as an admission a

gainst i nterest, inlight of

the fac t that Dal -Tile als o submitt ed at tria l th at the technical staff of Ceramica Regiomontana

and Dal- Tile were aware of the statutory definition of

“ceramic articles” and knew by their na ture the wall tiles would not me et that de fin ition. See A-V at 57 0-572. Nonethele ss, Jarvis Cla rk

compels f

inding th e corre ct classi fication , whatev er the pa rties’ r eprese ntations. Reheatingis la rg el y i rrelevant in the commercial context unless gold or decora tion is applied. No rm al ly, once tiles ar e fired and samples tested for water absorption, they are shipped and consumed

as is. Nonetheless, the TSUS specifies C-373 as the sole acceptable me tho d to t est for water absorption in conjunction with reheating to py rom etric cone 020. Compare

ASTM C-373 with TSUS Ch. 5, Part 2, Notes 2(a) and (k). The C-37 3 test portion of the statut ory test for c eramic articles is not in question – C-373 is widely known and is perf ormed on a

nearly daily basis in the industry – but neither the TSUS nor ASTM provide direction on how to perform comparative testing to determine the cha

nge or non-cha nge in a bsorption , densit

y an d porosity

after r eheatin g to pyr ometric cone 020. See TSUS Ch. 5, Pa rt 2, Note 2(k). Nor, prior

to Dal-Ti le’s cha

llenge to the classifi cation of

wall tiles as cera mic artic les, did

the Customs

Service have a protocol in

place to perform this testing. See A-II

at 155-156. 8 The parti es hav e there fore ea ch dev elope d a met hodol ogy for using C-373 in the

cont ext of a comparative test. I

n light of case law establishing the factors by whichcourts are to evaluate the reliability of scientific evidence and the weig ht to be accorded that evidence, the Court must determine which of the two produces the reliable and probative re sults: the double-soak

me th od em pl oye d b y Cu st om s o r t he sp li t- ti le me th od em pl oye d b y Dal-Tile. See Anhydrides & Chemic

als, Inc. v. United States , 130 F.3d 1481, 1486 (Fed. Cir. 1997); Jarvis Cla rk, supra , 733 F.2d at 876.Court No. 95-05-00679 Page 16

The government contends it is entitled to deference on two broad arg uments to suggest that Headnot e 2(a) should be interpreted to classify as ceramic some articles which become de nser and less porous up on rehea

ting. F irst, it ar

gues tha t the statu te was meant to classify as “ ceramic” all or most wall tiles considered commercially to be ceramic. S econd, it argues it would be an absurd result if many wall tiles consider ed in the c omme rcial w orld to be ceramic are det ermined to fall outside the stat utory classifica tion for ceramic tiles. In addition, the g overnment argues that the changes in the tile demonstrated by Dal-Tile are de minimi

s and should be ignored. Tile Counsel of America

(TCA), amicus curiae , supports the gov ernment ’s position . TCA asserts that it is “uniquely qualified to provide the Court with an accurate understanding of w hat the domestic tile indu stry cons iders to be c erami c wall tile ” and agr ees with the government that the statute was inten ded to encompa ss all items consider ed comme

rcially to be cer amic wal l tile. TCA Br. at 5-8. TCA would simplify the statute, reasoning that if an article is fired

to cone 020 or higher during man ufacture, it cannot (by definition) become more dense, harder or le ss porous upon reheat ing. TCA explains that tiles not heate d to that po int during manufacture ar

e not stab le and wil l notbe durable for a “ceramic” -intended application. TCA Br. at 11-12. TCA arg ues that under the plain meaning of Head note 2(a ), the sta tutory reheat test is used only to determine whe ther the article is a finished, usable product. TCA Br. at 12. Theref ore, according to TCA, the sole purpose of the statutory test is to de

termine w hether a n article had been fired to cone 020 when manufactured, i.e. , whether it had become “stable,” an d i f it had, then any increa se in dens ity or decre ase in por osity should be r

egard ed as de minimi

s . See TCA Br. at 11-13.Court No. 95-05-00679 Page 17

A. Deference The arguments presented implicate pure questions of

law. The government is therefore not entitled to defer ence wi threspect thereto. See , e.g. , Mead Corporation v. United States , 185 F.3d 1304 (Fed. Ci

r. 1999). Only

appropr iately authorita tive rule s and reg

ulations which in

terpret customs classification statutes “warrant judicial deference.” See United States v. Haggar Apparel Co. , 526 U.S. 380, 390 (1999). Although the statute does not state whether the same articles areto be tested for water

absor ptio n befo re and a fter re heati ng, or whether a control group may be used, the government has failed to issue a regula tion that w ould

provide a legally

binding interpretation

on that issue. In addition, there is no evidence that the government “utilized the notice and comment rule-making

process” in order t o issue re gulations, as was evident in Haggar Apparel (where in Customs se t forth its i

nterpre tation in 19CFR 10.16( C) of “op eration s inciden tal to the a ssembly process ” in HTSUS Subheading 9802.00.80 to exc lude per ma-pre ssing, with which t he Supre me Courtagreed). 526 U.S. at 380-381, 390. The government’s interpretation of the statute, therefore, does not meet the standard for deferenc e. B. Ambiguity Headnot e 2(a) r equires that in ord

er to be c onsidere d “cera mic ” for TSUS classification purposes , articles may not become more dense, harder or less porous if “reheated to py rometric cone 020.” The language chose n by C ongre ss refers to a sp ecifi c and d eterm inabl e stat e of ene rgy achieved by v ary ing times and tempe

rature combinat

ions and is

unique to c

ustoms classif

ication, because reheat ing to test for changes in density , hardness or porosity is not per formed for commercial purposes. See A-II at 281-282.Court No. 95-05-00679 Page 18

Inother words, classification is to be based on testing which pr oduces e mpirical results. The meaningof Headnote 2(a) is plain and unambiguous: it bases classific ation on the effect of reheating subject articles to pyr

ometric cone 020. As a general rule, where

the meaning of the statute is plain and unambiguous, that meaning prevail s. See Muwwakkil v. Office of Personnel Management , 18 F.3d 921 (Fed. Cir. 1994). If the statute’s text answers the quest ion of Cong

ress’ int ent, “that is the end of the matter” and the Court should not examin e legislat ive history or employ other means of statutory interpretation. International

Business M

achine s Corp. v. United States , 201 F.3d 1367, 1372 (Fed. Cir. 2000); TimexV.I., Inc ., 157 F.3d 879, 882 (Fed. Cir. 1998); Brookside Veneer s, Ltd. v. United States , 847 F.2d 786, 788 (Fed. Cir . 1988); Koyo Seiko Co., Ltd. v. United States , ___ CIT ___, ___, 110 F.Supp.2d

934, 936 (2000). Moreover, if a statute contains a speci f ic definition, that definition “excludes any meaning

that is not stated.” Colautti v. Franklin , 439 U.S. 379, 392 & n.10 (1974) (citing 2A Sands, Statutes and Statutory Construction § 47:07 (4th ed. Supp. 1978)). Her e, th e statute plainly permits c lassific ation of a rticles a s ceram

ic only if they

do not become more dense, harder or less porous after they are reheated to py

rometric cone 020. Inan analo gous ca se, this Cou rt’s pre decessor requir

ed a pre cise def

in it ion of “artificial flowers ” even thou

gh that e xcluded me

rchandi se gen erally

understo od in

the indust

ry to be artificial flowers from classification under the relevant provision. Armbree Corp orat ion v. United States , C.D. 3278 p. 105 (1968). T he plain m eaning

of the ar ti ficial flower p

rovision e xcluded al l items except those assembled

by one or mor

e specif ic method s. The subject articles in that case were not assembled

by any of the enume

rated me thods and were the

refore excluded. Testimony

in the ca seCourt No. 95-05-00679 Page 19

suggested that the definitionif read literally would exclude most artificial flowers, however the court refused to depart fr om the plain meaning of the statute, since courts are “bound to determine the intent of Congress by

the language which wa s actually used.” Id . at 110-111. The government argues that eve n where the statute appears unambiguous, a court may alter the statute’s plain mea

ning ba se d upon an examination of legislative history. H owever, the governm ent

fails to point to any ambiguity or imprecision in the statute. Rather, the gove rnmen t appare ntly objects to the statut e’s pre cision an

d seeks to byp ass it in order to obtain a

more fa vorable result. The government also relies on United Sta tes v. Turk ette , 452 U.S. 576 ( 1981) for th e proposition that leg islative i ntent may trump the p lain

language of the statute. Def. Br. at 25. The Supreme Courtin Turkette , howeve r, reve rsed an a ppellate court’s decision in order to adhere to the plain language of the statute. 452 U .S. at 580 -593. As the Supreme Court noted on several occasion s in that decision (and as the CCPA noted in Nippon Kogaku , 873 F.2d at 383), ai ds o r guides to statutor

y in terpretation ar

e only to be relie d upon to re solve amb iguity, not to cr eateit. 452 U.S. at 581 & 587 n.10. T here is no basis todisregard the plain languag e of the statute and decline to apply an objective stand

ard to the classifi cation of

ceramic s. TCA’s description of a “classical” meaning of ceramic or the “stability ” of the fired

materia l, whichTCA points to as indicative of comme rcial usa ge, do n ot appea r in the statute and are at odds with a plain meaning interpretation. L ikewise, TCA’s assertion that an initial treatment to cone 020 and a negative result after rehe ating are functional equivalents is unsupported by the e vidence and the plain lan

guag e of Hea

dnote 2(a) does not mention the initial heat treatment, only the ef

fect onCourt No. 95-05-00679 Page 20

the body of rehe ating. TCA’s interpretation of Headnote 2(a ) would substitute a standard based upon heat treatment at manufacture. Congr ess expressly rejected such a standard. “Alth ough it is unnecessary to c onsider the legislative history because the statutory

langua ge is clear,” International Business Machines , 201 F.3d at 1373, the legislative history of Headnote 2(a) supportsthe statut

e’s plain and unamb iguous r

equirem ent to use

an objective test to determine which tiles become more dense, harder or less porous after r eheatin g to cone 020

and are not class ifiable

as ceramic articles. As the gover nment points out, the original dr aft of Headnote 2(a) proposed basing classification upon the initial he at treat ment appl ied durin

g the ma nufactu ring pr ocess. The proposal was for any

item hardened by

“heating to a temperature of ove r 1200 o F” (equivalent to 649 o C) and which met the other criteria to be classified as c eramic. See Def. Br. at 29. But that standard

was deleted in favor of the standard now before the C ourt – an article is not ceramic for tariff purposes if its dens ity, hardnes s or poros ity changes as stated after reheating to py rometric cone 020. See Tariff Classification Study, F irst Supp l. R ep. (Jan. 1962) at 40 (“TCS”). The intent of the legislature could not be clearer: it has based cl assific ation on th e phy sical pro perties o f the item s measured by the eff

ects of reheating to cone 020, and it re jected the temperatureachie ved by the initial heat treatment as a basis of classification. On this point, the TCS First Supplemental Report

removes doubt: It can be d

etermine d if an article is a ceramic article by measuring the ph ys ical properties of pieces of the body of such article before and afte r reheating them to cone 020. If the body of the article has not previously had sufficient heat treatment to qualify it as a cer am ic article, the density and hardnes s of the pie ces will in crease and their ab sorptivity

and volume

will decrease. Id

. See Def. Br. at 30 ( quot ing id .).Court No. 95-05-00679 Page 21

C. Absurdity The government

also a rgues t hat ap plying th e plai n langu age of Headnote 2(a) leads to the absurd result of items commonly

called c eramic

tiles being c lassifie d elsewh ere. Av oiding a lleged ly absurd resul ts in inter pretat ion o f stat utory lan guage is appropriateonly to resolve ambig uities, not to jus tify di sregard of plain langua ge. See , e.g. , Commission er of Inte rnal Reve nue v. As phalt Products Co., Inc. , 482 U.S. 117, 121 (1987); 2A Sutherland, Statutes and Statutory Construction § 45:12 at 102 (6th ed. 2000) (statutor y “ interpre

tation ca nnot be jus tified on t

he gro und that a result

wou ldbe unreasonable when the langua ge of Congress would have to be disre garded”). I n any event, the gov ernment

does not po int to ambig uity in the language of Hea

dnote 2(a) or offer an alternative reading; rather, the arg ument is premised on the ground that it would be absurd to exclude fromHeadnote 2(a) items which demonstrate “slight” changes in porosity

and density. Def. Br. at 27-31. The cases r

elied upon for tha

t propositi on are inappos ite. They involve obvious or patent absurdit ies. For example, in United States v. X-Citement Video , 513 U.S. 6 4 (1994), the Supre me Courtrejecte d the most natural g rammatic al read

ing of a statute pr

ohibiting distributi on of chil d pornography

and adopted a construction that avoided cr iminalizing the tran sportation of items containing child pornography withoutknowledg e of the i tems’ con tents. Under a strict grammatical readin g, for example, a retail druggist who shipped an unde veloped roll of film could face severe penaltie s. 513 U.S. at

69. This result would not only have bee n absurd, it would have been contrary to settled principles of criminal law requiring scienter a nd would have put the statutes’s constituti onality

into question. 513 U.S. at 69-78. The Supreme Court thus resolved an obviousCourt No. 95-05-00679 Page 22

absurdit y resulting from a purely g rammatical reading

of the statute which Congress could not have intended. Here, the statutory language was clea

rly and deliber

ately inserted, the

applicationof the plain meaning is not absurd, and the government fa ils to propose a workable alternative. Al te rn at iv el y, the government argues that finding for Dal-Tile would render super fluous the specific reference in the tariff

schedule to ceramic wall tiles. I t reasons that

few wall tiles meeting the commerc ial defin

ition would

be so cla ssifie d. The Court considers this mere speculation, howev er . There was no testimony to the effect that the Dal-Tile test would result in exclusion of “all”commerc ial-stan

dard ce ramic wa ll tile from such classification, and the matter here concerns only Dal-Tile ’s slow-f

ired 4 1/4 x 4 1/4 wall

tile and associated trim. It is true that a construc tion whichrenders words superfluous in a statue is to be avoided, but a word is not rendered superfluous unless it ceases to have application altogether. In NEC America, Inc. v. United States , 11 CIT ___, 681 F.Supp. 862 (1987 ), for example, the plaintiff in that ca se propos ed an inte rpreta tion whic h would have re ndered t he custom s classification “radiographic and r adiotelephonic transmissionand reception apparatus” superfluous as no items would be c lassifia

ble under that description that were not also specifically listed following that description. 681 F.Supp. at 865. Indeed, it is rather the government’s and amicus TCA’s inte rpreta tions that would

render the testing provision of Headnote 2(a) superfluous. The provision of Headnote 2(a) requir ing that the relevant propert ies do not c

hange after r eheatin g is just that – a re quireme nt, one of several that

must be satisfied for an item to be classified as ceramic. There

is no exception. The government argues that Congre ss’ objective stand ard shoul d

be ignored for

items fired in compliance with the subjective industry standards for ceramic s, see Def. Br. at 31, a standard which Cong ress eschewed. TheCourt No. 95-05-00679 Page 23

government

further claims that any

tiles that were improperly fired would be too fragile to have commercial value. Id . But broadening the “cera mic articles” definitions to include any article having “commercial value,” as the government sugg ests, would render the reheating test super fluous and introduce a completely subjective test in its place. T he Cou rt will not supplant the plain and objective standard embodied in the statute. D. Method Not Mandated by Statute or Legislative Intent The government also argues that its double soa k method is m andated as a matter of legislative intentand must be followed notwithstanding its lack of adherence to sc ientific method. Def. Br . at 36-37 . The por tion of He adnote 2( a) relie d upon by the gov ernment

states:

a “ceramic article” is a shaped or unshaped body of c

ry stalline or substantia lly crystalline structure , which body

. . . , if re heated t o py rometric cone 020, would not become more dense, harder or less porous . . . . Def. Br. at 36 (emphasis added by the government). Neither Headnote 2(a) nor the legislative history the gover nment cite s requir

e that the same piece of the same tile be tested for densi ty, hardn ess an d abso rptiv ity both before and aft er rehe ating, and both metho ds may

argua bly be said to fallwithin the langua

ge of the statute . There

is no disput

e that each party ’s method purports to test for changes in den sity and a bsorp tivi ty after re heati ng; the government’s method doe s so by testing the same piece a nd Dal-T ile’s doe s so by

compari son with a control group. The government further arg ues that Headnote 2(a)’s legislative history requires testing

to be performed

on the same tiles. Def. Br. at 36. The government notes that Congress stated: “‘ It can be determined

if an ar ticle is a cer

amic article by mea suring the phy sical properties of pieces of the bodyCourt No. 95-05-00679 Page 24

of such an article before and after r

eheating them to cone 020.”’ Id. (quoting TCS First Suppl. Rep. at 41). Bot h methodolo gies, ho we ve r, me as ur e t he de ns it y an d a bs or pt iv it y of “p ie ce s o f t he bo dy” of the same tile before and after rehe ating. The government does so by testing the same piece before and after reheating whe

reas Dal-Tile’s method tests one piece of the tile bef ore reheating and the other afterwards. Again, neither me thod is prohibitedby the legislative history provided it is capa ble of producin g the data Congress has require d. Dal-Tile’s method is not barred and it is up to th e Court to determine which method is more reliable. E. De Minimis Changes Dal-Tile demonstrated at

trial that the subject articles, when reheated, bec ome more dense and less porous. See Pl. Br. 1 7-18. The results of Dal-Tile’s test were observable and were confirmed

throu gh analysis of var

iance (ANOVA) to be statistically significant

to a confidence level of 95%. See Pl. Br. at

19. These results were corroborated throug h further testing and statistical analy sis by Dal-Tile’s e

xpert, Professor Haber. Th e government contends that the demonstrated changes in the relevant properties of t he s ubject articles are de minimi s trifles which should be disregarded

under the statute. Def. Br. at 32-35. The government also contends, essentially, that any articles that fall within the commercial standard for ceramic wall tiles must be classified as ceramic,

no matter how great the magnitude of change after rehe ating. Id . The government’s position is overbro ad for th

ree re asons. First, as above mentioned , the statute does not reference commerc ial definitions, it bases classification

on a before-and-after c o mpariso n whic h meas ures t he effe cts of reheat ing. Classification is notachieved on the basis of referenc e to commercial definitions but pursuant to anCourt No. 95-05-00679 Page 25

objective test, one

that is u nique in th e TSUS. Nothing in the statute implicates a basis for comparingany cha

nges produced by

reheating to “ commercially- accepted variations” among the properties of wall tiles considered “cera mic” in the industry. Second, the gov ernment

relies up on the CAF C’s d ecision in A lcan Aluminum Corp. v. United States , 165 F. 3d 898 (19 99) for t he propo sition that

Dal-Tile ’s result s should be ignore d as de minimis . The Alcan court held, however, that the de minimi

s rule only applies whe

re a standard’s purpose would otherwise be defeated. 165 F.3d at 903. Da l-Tile do es not argue that even the slighte st chang e should c ontrol, it argues that the subject a rticles a re not “c eramic a

rticles” because the observed changes of Dal-T ile’s methodology w ere proven to be st atistically significa nt. The purpose of Headnot e 2(a)’ s objectiv e standa

rd is to cla ssify

as cera mic only those articles which do not exhibit the relevantchanges after being reheated to c one 020. The statute’s purpose would be defeated if, as the gover nment pro

poses, ti les demonstr

ating si gnific ant chan

ge are nonethel ess classified as ceramic. Third, as descr

ibed more fully below, th e chang es are n

ot de minimi

s even under the ASTM C-373 specifications relied upon by the government. C-373 states that the test is accurate to +/-0.1%

on measurements made by a single o perato r and to + /-0.2% f or testing involving

multiple laborat ories. Pl. Ex. 12. The change s observe d throug h Dal-Til e’s metho d conduc ted by a single operator exceeded 0.2%, thus exceeding the C-373 threshold for accuracy . The results obtained by Dal-Tile are the refore reasona ble as they

are pro duced by

close ad herenc e to the sta

tute and do not contradict the statute’s purpose.Court No. 95-05-00679 Page 26

II Test Meth odology P

robative ness – Whe ther the S

ubject Articles Meet the Statutory Definition of “Ceramic Articles.” Inthe context of

a challenge to a scientific testing me thod used by the

government to classify imported merchandise, our

appellate court has addressed cer tain factors to be considered in deciding how much weight to give scientific testimony

. Libas, Ltd. v. United States , 193 F.3d 1361 (Fed. Cir. 1999). In Libas , an importer of textiles challenged the governme nt’s classification

of certain textiles

as machine-loomed rather than hand-loomed. 193 F.3d at 1363. The CAFC found error in accepting

a gover nment test

method wit

hout examin

ing its re liability

, althoug h the imp orter had presented sufficient evidence to destro y th e presum ption of c orrect

ness atta ching to the government’s testing method. 193 F.3d at 1366-68. Libas held that the admissibility of the gover nment’s test could not be challenged because the test ha d become part of the official recor d, and it concluded that the trial court should have, at lea st, applied t he four factors enumerated in Daubert v. Merrell Dow Pharmace

uticals, Inc. , 509 U.S. 5 79 (1993)to assess the reliability of the e vidence and the weight to be accorded to it. Those four factors a re: (1) the testability of the hypothe sis; (2) whether the theory or technique has been subject to peer revie w and publication; (3) the known or potent ial rate of error and the existence or maintenance of standa rds controlling the technique’s operation; and (4) whether the technique is genera lly acce pted. Id . at 13 66-67 (citi ng Daubert, 509 U.S. at 593-94). The purpose behind the Daubert factors is to assess the s cie ntific va lidity , trustwor

thiness and evidentiary r

eliability of

a scientific theory

. Daubert, 509 U.S. at 589-90 & n.9. “[I]f a trial court relies upon exper

t testimony

, it should determine that the expert testimony is reliable.” Libas , 193 F.3d at 1366. Reliability, in turn, is the touchstone for expert tes t imony on scientific knowledg e.Court No. 95-05-00679 Page 27

Daubert, 509 U.S. a

t 589; Libas , 193 F.3d

at 1365-6 6. Where t

he relia bility of scien tific or technical testing is in dispute , reliab ility becomes a “key consider ation” in the weight

to be accorded to the scientif ic evidence by

the court sitting as the finder of fact. Libas , 193 F.3d at 1366 ( citi ng United States v. Velazquez , 64 F.3d 844, 848 (3d Cir. 1995)). Dau bert and Libas thus plac e scient ific method at the heart of the reliability inquiry. See Daubert, 509 U.S. at 590 (“in order to qualify

as ‘scienti fic knowledge’ an inference or assertio n mu st be der

ived by the scie ntific me thod”); id . at 594-95 (“[t]he focus . . . must be solely on principles and me thodology”)

. (1) Testability

of the Hyp othesis The first Daubert

factor, the testa

bility of the hypothesis behind the methodolog y, includes determining whether

the hy pothesis c an be fa

lsifie d. Daubert, 509 U.S. a t 593. The

hyp othesis underlying

the Customs test is that the ASTM C-373 procedure and the subsequent heat treatment do not alter the tile, so that the second C-373 procedure can be performed on the very

same sample. By contras t, the hy

pothesis u

nderly ing the s pli t ti le-metho d is that the ASTM C-373 procedu

re is itself destructive to the tile and that the heat treatment called for in the statute will confound the resultsof any subseque

nt test on the same piece of tile because it will return the tile to its original state. Dal-Tile

and Prof. Haber

tested bo th of thes e hy

potheses , by

replica ting the Customs tes t, by analyzing the results of the New Orlea ns lab tes ts as well as those done in Los Ange les, and by performing

a multiple-soak test to measure the effec t of the C- 373 proc edure on a single piece of tile. The Cust oms l aborat ory in New O rleans appear s to h ave dev elope d its doubl e-soak metho dolo gy withoutattempting to test its hypothesis: the expert for the g overnment assumed that C-373 wasCourt No. 95-05-00679 Page 28

destructive only because

the tile was broken into pieces, not because boiling a tile for five hours and thensoaking it for another 24 might affect the tile. A-VI

at 844-845. Likewise, Dr. Brosna n never performed

any testing on the wa

ll t iles in an attempt to confirm the Customs hypothesis or the scientif ic soundness of the Customs method. A-VI at 881-884. I t is significant, however, that Dr. Brosnan did not disa

gree w ith the sci entific v alidity

of the pa rticular elements that make up the splittile techn ique, such a s taki ng a large sample population and using control samples against which to check the results. A-VI at

870-74. He also agreed that ANOV A is an important

techniqu e used to val idatethe results of research. Id . On the other hand, he indicated that the large r sampl e populations that Dal-Tile and Prof. Haber used are not required under the terms of C-373, whic h he termed a practical test, and that ANOVA is likewise not ca lled for under the statute. See id

. It is true tha t some of the steps th at Dal-T ile and itsexpert took in order to check and doublecheck the re sults of their methodology a re not required by

the statute. Such steps would n ot , however, be requi

red of Cu stoms by

this decis ion in

routine c eramics

testing practic e. But in

this instant matter, a

t least, it is very the prec ision of su

ch steps w

hich conf irm the re liability

of DalTile’s split-tile method. Dr. Brosnan testified that a heat treatment of 600 o Celsius (pyrometric cone 020 was reached at 625 o Celsius in the Customs test) on a tile which had been subjected to a C-373 soak would return to its original state. A-VI a t 844. This directly undermines the Customs hy pothesis that the same tile would be unaffected by moisture expansion during the 29-hour soak, could be tested before and after reheat ing, an d that the results w ould be a r

eli able indicator of change or its absenc e. Dr.Court No. 95-05-00679 Page 29

Brosnan also testified that he had heard this at a presentation the wee k before his testimo ny i

n April 2000, which is not likely enough time to absor b all the nuances of the theory

. Id

. (2) Peer Review and Publication The second Daubert

factor considers whether a method has been published and subjected to peer r eview. At trial, the government criticized Dal-Tile’s methodolog y for not having

bee n subjected to either and argued agains t the a dmission of Dal-Tile’s expert testimony and the plaintiff’s test evidence. Both Daubert

and Libas emphasize d repea tedly that the f actors t o be considered

in evaluating the reliability of scientific e vidence are flexible. “There is no iron law that the Daubert factors be applied in Customs classification cases,” the Daubert factor s are me

rely repres enta

tiv e of the matters whichshould be taken into account when a court assesses reliability, a matter of discretion. Libas , 193 F.3d at 1367. A rigid approach to the admissibility of scientifi c evidence is at odds with the “liberal thrust” of the Federal Rules of Evidence and their g eneral approach to relaxing traditional barriers to the admission of scientific evidence, particularly w hen based on innovative, but reliable, theorie s. Daubert, 509 U.S. at 588. Cf. Frye v. United States , 293 F. 1013, 1014 (App. D.C. 1923). Daubert further cautioned against rea ding into the decision a

“definitive checklist.” Daubert, 509 U.S. at 593. Publication is not the “ sine qua non ” of rel iability and pee r revie w is a relevant but not dispositive factor

in assess ing rel iability . 509 U.S. at 59 3-94. “Some propositions . . . are too particular, too new, or of too lim ited inter est to be published.” Id .; see also Libas , 193 F.3d at 1366- 67 ( Daubert factor s do not exha

ust t he list of possible factors to be considered when assessing reliability, and the Daubert factors may

not be applicable to every Customs case).Court No. 95-05-00679 Page 30

9 Prof. Ha

ber testi fied tha

t he intended to pub lish his fin dings. The evidence presented at trial established that a methodolog y fo r a test wh ich is only performed

for purposes of Customs c lassific ation of c eramic tile is of interest only to Customs and to those who might import tile to the United States. It is “too particular . . . or of too limited interest to be published.” Moreover, when C u stoms beg an to test wall tiles to determine their c onformity with the statutory definition of “c eramic articles,” there was no standa rd prot ocol developed by Customs Headquarters. See A-II at 155-156. The New Orleans laboratorydeveloped the doublesoak methodology on a

n ad hoc basis, and it, too, has not been publishe d or peer-reviewed for reliabil ity by other sc ientists or by the cour ts in light of the standards for determining the evidentiary reliabil ity of scientific evidence. See A-II at 152. The govern ment’ s own d oubl e-soak metho dolo gy suffers from at le ast the same “d ef ic ie nc ie s” th at th e g ov er nm en t a sc ri be s t o D al -T il e’ s m et ho do lo gy. Alth ough neither

the split- tile metho d nor the C ustoms do uble-soak method had been published or peer reviewe d at the time of tria l, 9 the purpose of the requirement for peer review is that submission to scrutiny “increases the likelihood that substantive flaws in the methodology w ill be detected.” Daubert, 509 U.S. at 593. Dal- Tile cont

ends this w as prec isely

what hap pened when it and an outside

expert re plicated th e Custom s tests in their own laboratories – they found the flaw inthe Customs hypothesis. Dal-Tile contends that the split-tile test was designed to eliminate that flaw, and to ensure that what was being measure d was re ally

a chang e due to reheat

ing, not d ue to any alteration of the tile by the earlier C-373 testing. A-II at 285-287; A-IV at 436-440, 468-475. Dal-Tile argues that the split-tile test itself has not been peer reviewed, but the individual elements whichmake up the split-tile test (ASTM C-373, the sampling technique, the use of control s amples)Court No. 95-05-00679 Page 31

have all been accepted as part of sound scientific technique. Moreover, Dal-Ti le points o ut, the moisture expansion theory – w hich led Mr. Cornia and Prof. Haber to question the reliability of a technique which sub

jects the same tile twice tothe same test and which has been deemed destructive by ANSI – has been widely

published. See , e.g. , A-VI at 844-848, 851-855 (te stimony mentioning paper on moisture expansion delivered the previous week a t the Southeastern Section of the American Ceramics Society), A-V at 732 (testimony mentioning various pa pers on moisture expansion authore d by

Dr. Richa

rd Bowma

n); see also Pl . Ex s. 4 4-4 8. In other words, Dal- Tile argue s, the work done by Dr . Bowman c onfirms what has been known by ANSI, an association whichsets standards for

industry acce

ptance: that C-373 is a destructive test and so alters thenature of the tile that it cannot be sold after testing, even if it is tested whole. See Pl. Ex. 1. The Court

concurs . (3) Known or Potential Rate of Error The third Daubert

factor looks at the kn ow n o r p ot en ti al ra te of er ro r. On e o f t he wa ys this rate of error can be dete

rmined is through analy sis of variance, or ANOVA. Dr. Brosnan testified that ANOVA is

not only an importa

nt techni que in sci entific r esearc h but is a commonly acce

pted statistical method, although it is not called for in the statute or in the C-373 t est method. A-VI at 870 -871. ANOVA was employ ed by both Dal-Tile a

nd Prof. Haber to check the statistica l significance of the results of their testing and of the results of testing performed by the New Orleans and Los Angeles labor

atories. Although not required by the statute to be employ ed in every

day use, the method provides a further check on the reliability of the testing methodologies being presented.Court No. 95-05-00679 Page 32

T he analysis of the split-tile method showed that the re sults were reliable to a 95 percen t

co nfidence level (a level commonly used in research) and that the chang es observe d in the til e populations were statistically sig nificant. Pl. Exs. 17, 43. The analysis of the Customs

method – in tests perfor

me d bot h by the New Orleans lab and the Los Ang eles lab – showed that the changes observed in the tile s were not statis ti ca ll y significant because in each ca se the F factor was signific antly

below the F critical factor, and that the results were incoherent, reg ardless of how long after manufacture the tiles were tested. Pl . Ex. 51; App. B. In other words, the Customs method apparently de

monstrates a high potential rate of error. Another element of the third Daubert factor is the existence and maintenance of standards controlling the operation of the technique. This factor became important in Libas , where the court found that the f

ailure o f Customs t o employ the “obvious and natural” method of double-blind testing (in whichthe testers would perform the comparison without the knowledge of which fabric was hand-loomed and which was machine-loomed) cast doub t upon the r eliability of the Cust

oms testing metho d. Libas , 193 F.3d at 1368. Here, Customs failed to employ – or apparently

eve n consid er – the equ ally “obvious and natura l” technique of comparing a specimen w hich has been subjected to rehea ting ag ainst con

trol sampl es, which may

not be re quired by

the la nguage of

the statute but is required by g ood scientific practice. See id. According ly, the Court accords the reliability of the Customs methodology little weight. See Libas , 193 F.3d at 1366. (4) General Acceptance The fourth Daubert

factor is general

acceptance. Genera

l acceptance is the former standard for admissibility of scientific evidence unde r Frye

. Perhaps recognizing that gene ral accept ance isCourt No. 95-05-00679 Page 33

10 Libas , 193 F.3d at 1368 “an imper fect proxy for re liability,” 10 the Supreme Court stated in Daubert that Rule 7 02 of th e Federal Rules of Evidence permits but does not require the ident ification of the r

elevant scientif ic community

and an express determination on the degree of acceptanc e w it hi n t ha t c om mu ni ty. Daubert, 509 U.S. at 594. Inthis matte

r, to the e xtent that g eneral

accept ance is a pplicabl e to either

method as

a whole, the re le va nt co mm un it y ( i.e. , the tile- making i ndustry exporting

tiles to the United

States) has not had much of an opportunity to absorb the methods. On the other hand, t he particul ar elements of each methodology c an be scrutinized for general ac ceptance or widespread use, e ve n if the techniques as a whole are not well known bey ond a very sma

ll circle. The individual elements of the split-tile

method ar

e well-k nown and g eneral ly a

ccepte d by

the scie ntific community . The only

newpart of the split-til e methodology is the means of making the comparison, which is itself based upo n the sou nd scient

ific pra ctice of using a c ontrol. Al

though the case l aw expre ssly counsels agains treadin g Daubert

as a rigid checklist or test for reliability of scientific e

vidence, it is at lea st clear that the split-tile technique developed by Dal-Tile comes closer

to satisfying the

four Daubert factors than does the method developed by Customs. Consideration of the Daubert principles thus

su pp or ts fi nd in g i n f

av or of Da l- Ti le ’s me th od ol og y ov er Cu st om s’ me th od ol og y.

III The Split- Tile Metho d Produce s a Reliabl

e Reading O

f Change or

Non-Chang

e In a Tile

Sample

. The evidence presented at trial demonstrates that Da l-Tile’s split-tile method pr oduce s consistently reliable and pr obative results at severaldifferent temperatures and rates used to reac hCourt No. 95-05-00679 Page 34

pyr ometric cone 020. See Pl. Exs. 17, 43. Those results show that, with very f ewexceptions, when compared to the cor respondi ng half which ha d not been

treated with heat the samples of tile halves whichwere reheated to cone 020 at 700 o , 710 o , 635 o or 625 o Celsius became less absorptive, more de nse, and le ss po rous, to a st atist icall y signifi cant d egree. P l. Ex . 17 an d 43. T estif ying for th e gover nment, Ms. Simonea

ux agree d that Custo ms would not c lassify a tile as a ceramic article under TSUS 5 32.24 if testing shows that it becomes harder, more dense, or less porous as a result o f reheating. A-II at 143. Since the results of the split-tile method show that the tiles teste d became

more dense and less porous upon reheating to py rometric cone 020, it is thereforeunnecessary also to show that the tile has become harder. The results of the split-tile method were confirmed by a st andard s tatistica

l analy sis technique. See Pl. Ex. 17 and 43. In contrast, the government’s double- soak method pro duced inconsistentand incoherent results and employ ed no controls. In its post-trial brief, the g overnment

now suggests that because Daubert and Libas are applied f

le xibly, the Daubert

factors may

be ignored. Def. Br. at 35-36. Inde ed, the c ase for the relia bility of the g overnme

nt’s test r ests on two propositions that require the Court to ignore the Libas inquiry altoge ther. First, the government argues that Headnot e 2(a )’s legislative history mandates the government’s double soak method regar dless of its reliability. Def. B r. at 36-37. Second, the government and TCA ar gue that the Customs method, which involves soaking the same pieces o f tile both

before and afte r rehea ting to

cone 020, is mor

e reliab le than Da

l-Tile’s split-tile method wh

ich emplo ys a

control g roup. I n so arguin g, they ask the Court to by pass a proper Libas inquiry on two es sential po ints: (1) the government

and TCA ask the Court to credit the government’s expert’s opinion testimony that theCourt No. 95-05-00679 Page 35

initial soak performed under the C-373 procedure d oes not affect the tile for purposes of the subsequent

reheating and soak, rather tha n crediting the experiment conducted by Dal-Tile’s expert whichdemonstrated the existence of suchan effect and the evidence of other experiments including published resear ch, which support t

hese fin dings; ( 2) the g overnme

nt and TCA

ask th is Court to

acc ept the gov ernment ’s expert o pinion tha

t normal variations in densi

ty, hardnes s and wat

e r absorptionwithin a given tile undermine the reliability of Dal-T ile’s results rather than cre dit solid evidence that the potential for such an effect was neg ated by Da l-Tile’s use of standard research techniques including the use of a sufficiently large sample population and statistical checks for the signific ance of

its result s. The government

cannot sq uare its reliability claim with the methodologica l inquiry required by Libas on such ba ses. None of the fa ctual ar guments put forth by

the government either in support of its test or in oppositio

n to Dal-Tile ’s addre ss reliab ility as it is to be considered under Libas . DalT ile de mo ns tr at ed , a pa rt fr om th e t wo ma nd at ed co mp on en ts , t ha t o nl y Da l- Ti le ’s te st em pl oye d general ly ac cepted methods of scientific inquiry . Only Dal-Tile’s me thod employed a control sample. Only Dal-Tile tested a larger sample population. Only Dal-Tile tested

the hypothesis that the first soa

k affected subse quent re sults. And o nly Dal-Tile subjecte d i ts results to analysis for statistical significance using an analy sis of variance. The government doe s not dispute that methods employed in Dal-Ti le’s test

– such as a

large r sample s iz e, use of a cont rol group, the testing of hyp otheses, and the use of statistical analy ses to test the si gnific ance of results – a

re generally accepted methods routinely employ ed in scient ific research inquiry that aid in establishing the reliabil ity of results. Nonetheless, the government arg ues that two aspects of D al-Tile’s testCourt No. 95-05-00679 Page 36

undermine its reliability: Dal-Tile’s use of a control group an d Pr of. Hab er’s us e of lo w and h igh temperature extremes for reheating to cone 020. As discussed below, the elements of Dal-Tile’s method which the government challenge s actually make D al-Tile’s test more reliable, not less so. By contrast, the government’s test fail s to meet any of the Daubert criteria or employ

basic principles

or methods of scientific inquiry, such a s using a rep resentat ive sample population, using control groups, or testing the hy

potheses via, e.g. , statistical checks. The government has not offered any methodolo gical b asis to sup port the r eliability of its own t

est or offered appropriate arg

uments for the abandonment of the Daubert / Libas analysis in favor of other indicia of reliability. There is no disput

e that Libas guides this Court’s fact finding with resp ect to the

reliabil ity of the tests put forth by the respe ctive parties. But, none of the arguments offered by the government

or by TCA are supported by

the analysis of scie

ntific methods required under Libas . Alt hough Libas does not require the application of each Daubert factor in every customs c ase, the

factor s ar e applica ble where, as here, the question i nvolves the reliab ility

of scien tific or t echnica l proces ses. See Libas , 193 F.3d at 1367. The evidence presented by Dal-Tile in support of its split-tile method clearly de monstrated the reliabil ity

of the results under a variety of conditions. The split-tile methodolo gy

that Dal- Tile performed

in preparation for trial involved far m ore measur es to determine the accuracy of the method and of the data than would be required of or by Customs in everyday

application; however inthis matter, at least, these measures demonstrate that the split-tile method produce s results

which are a more reliable reading of change or non-chang e than the Customs double-soak method.Court No. 95-05-00679 Page 37

A. Sample Po

pulation Si

ze The parties d

ispute the sufficie ncy of the sa mp le size necessary

for reliable testing (thus implicating the fourth Daubert factor ). It is a well-known proposition in science that the greater the number of samples chosen from a population, the greate r the likelihood that the samples tested will be representative of the population as a whole. The g overnment’s witness who performed the test, Ms. Simoneaux, accepted this proposition. See Def. Br . at 35- 41; A-II at 177, 185-86. She testified that one reason she began using five sam ple s from one tile was simply that she often ha d just one tile to work wi

th, and tha

t as soon as more tiles became available to her, she used a g reater population of t il es. A-II a t 1 77, 185 -18 6. In addition, she stated explicitly that the r eason she chose 10 to 20 indentation sites on each sample on which to perform hardness testing was that she felt she could get a more accura

te result with a greater number of sites. Id

. In this matter, Dal-Tile used 15 samples in ea ch of its four

tests while Prof. Haber used 50 samples per test. Dal-Tile confirmed the sufficiency of its sample size of

15 in two wa

ys. First, its expert, Prof. Ha

ber, re plicated two of Da

l-Til e’ s four tests using 50 split tiles instead of 15 and obtained striking ly s imilar re sults. Sec ond, Dal- Tile teste d its resul ts f or statistical signifi cance using ANOVA. By

contrast, the government’s tests used a sample population of five pieces taken

from

a single tile. It is true, asthe government points out, that the statute calls for “at least” five samples to be used, but that is only the minimum number. Whether it is considered reasonably

representative of the shipment being classified is a question of fact. Arg uing in support of the g o vernment’s position, TCA conte

nds that f ive sa mp les are sufficient because it repre sents standard industry practice for eve

ryday testi n g under

ATM C-373 . TCA Br. at 33-34. Howeve r, the contention isCourt No. 95-05-00679 Page 38

irre levant because the issue here is the sample size needed for reliable comparisons between differen t sets o f C-37 3 resu lts t o meas ure th e effect s of reh eatin g. Tile-making is not an exact scie nce, and there a

re nece ssarily

variations within

tiles and from tile to tile. The greater the number of samples use d, the more representative the sample population will be of the true population, and the

less likel y will the re sults be sk

ewed due to varia tion within and among tiles. See A-II

at 290-291. A tile may

have internal variations of absorption of 10 or 20 percent from one spot to another, however these variations tend to fall into a predic table pattern. This was evident in Prof. Haber’s observation that he was ge tting “u nusual” d ensity resultsand his subseque nt discove

ry that the ti les he wa s using w ere all denser on one side than the other: he had inadver tently split the tile at the line of demarcation. A-V at 620-623. Moreover, it is important not to take such variations out of context, where the overall absorption of the t ile stil l falls within the range of absorption acceptable to Dal-Tile. Even thoug h a particular spot on a tile may have 15 percent absorptionand be 25 percent more absorbent than anothe r spot on the same tile, which has only 12 percent absorption, such variability is narrowed a s m ore observations are compared, eventua lly reaching the point of irrelevanc y as the perspective becomes the averag e a bsorptio n of the entire tile. The same is true when considering a n entire shipment or tile population. Thus, where the government is deciding the classification of an entire shipment of tiles based

on five samples from a single tile, it is incorrect to arg ue that the population of tiles (of the shipment

as a whole) is less important than a single tile. TheCourt therefore concludes that Customs’ use of the statutory minimum does not undermine Dal-Tile’s c ontention that its la rger s ample size is more representative of an entire shipment of tile than samples of a single tile, and the gove rnment doesCourt No. 95-05-00679 Page 39

nototherwise argue the implications of each pa rty’s sam p le size with

respec t to the re lative re liability of the tests. Def. Br. at 4, 3 5-41; Pl. Ex. 1 2 (“at le ast 5”). Further , the Cour t conclud es that on ly Dal-Tile used a sa mple suff iciently large enough to produc e reliab le result s. B. Baseline Measurement Dal-Tile’s method em

plo yed a c ontro l group consisting of half of each tile tested, w hich served as a baseline against which to measure c hanges in the subject articles propert ies after reheating to cone 020. Pl. Br. 49-50. By contr ast, the government’s method involved subjecting the

same pieces of

tile to the C-373 soaking procedure both before and after reheating. I

n setting aside half of each tile , Dal-Tile isolated the sole variable relevant to classification, namely the effect of reheating the tile to pyrometric cone 020. The use of control groups is standard scientific pra ctice, just the kind of “obvious and natur al” techniqu e that a fact-finder would expect to see when assessing reliability. See Libas , 193 F.3d at 1368. The government

does not di spute that the c ontrol g roups ar e gene rally accept ed in scie ntific experimentation as ai di ng re li ab il it y; rather, the government makes the unusua

l content ion that thi s gener ally accepted aspect of scientific experiment design should

be abandoned in this instance. The government

argue s that ea

ch piece tested should

be subjec t to C-373 bo thbefore and after rehea ting because, the gover

nment con

tends, the rele

vant prop erties of

a contro l sample ta

ken from the same tile is not r

eliable. The gov ernment

is wrong for at le ast two re asons. First, the government’s failure to use a c ontrol g roup intr oduces e rror an d uncert ainty into its own test. In the gover nment’s tes t, the e ffect of the subject tile’s phy sical properties resulting fromreheat ing th e samples to cone 020 cannot be viewed separa tely from the ef

fect of subjectingCourt No. 95-05-00679 Page 40

11 See Def. Br. at 6. the samples to C-373 before reheating. The government contends that the effe ct of soaking the tiles before reheat

ing is nonexis tent or is reversed by reheating to 600 o C, 11 however neither the government

nor Dr. B rosnan te sted eithe r hy pothesis on repre sentative samples o f the s ubject article s. A-VI at

881-84. For that matter, unrebutted evidence indica tes that the tiles must be reheated to a temperature greater

than that prescribed by

Dr. Brosnan

to fully revers e the ef

fects of the soak. See Pl. Exs. 54, 48, and A-V at 732-33. Rather, the government relies on its expert ’ s opinion as to the likely effe ct of the C-373 test on ceramic tiles generally . But that merely begs the question: are the

subject ti les “ce

ramic articles” under the statute if (and asapparently de monstrated by Pro f. Ha be r) the y ar e i nde ed

al te re d by

the C-3 73 pro ce dur

e? See Def. Br. at 39. Second, D al-Tile’ s test is de signed t o minimize the

effec t of any

variations within a

single tile on the overall results. By testing a large sample, Dal-Tiles method accoun ts for the possibility that variances may

exist among different pieces taken from the same tile. Dal-Tile tested sufficien

tly large quantitie s of piec es such that a ge neral tr end emer ged de spite var

iances w ithin indivi dual tiles

. As an additional control, Dal-Tile tested and established the statistical significance of its results by employing a

n analysis of var

iance (ANOVA). Thus, as Dal- Tile has shown, the government’s method does not reliably test the effect of reheating the subject articles bec ause the government’s method introduces another variable which confounds the resu

lts. This Cou

rt there fore ca

n be cer ta in onl y that Dal-Tile’s te st measures the effect of reheating to cone 020, because only Dal-Tile identifie d and add

ressed t he possibl e effect of other variables. Any

alleged ill effects resulting fr om potential nonrandom selection of the controlCourt No. 95-05-00679 Page 41

group are neg ated through other gener ally acc epted elements of scientific technique, e.g. , sample s iz e and ANOVA. Ms. Simoneaux, the Customs analyst, and Dr. Brosnan (Customs’ expert) contradicted one another regarding the varia

tions within a single tile and the impact of these variations on the metho dolo gy

chosen. While Ms. Simoneaux testified that there was too much var iation with

inany individual tile to do a

split-tile test and co mpare two halves of the same tile to one another, Dr. Brosnan testified that there was too much va riation f rom tile to

tile to com

pare one tile to another. A-II at 163-164; A-VI at 855-859. B oth, however, came to the conclusion that the remedy for these variations was to subject in dividual ti le specimens to two rounds of testing, without using control samples which we

re not sub ject to heat treatment to determine if the observed chang e or non-c hange was really

due to the reheating or was due to another factor. Id

. By contras t, the split-tile method compares two halves of the same tile, one of which has been subjected to reheating, the other which has not. Even though there may

be varia tions within

a tile, thesetend to fall into predictable patterns and can be acc ounted for. A-V at 622. These variations cannot be accounted for when the same tile is putthrough a series of destructive tests which ef fect the tile. Dr. Brosna

n stated that the first C-373 te st and the reheat i ng h ave the effect of cance ling each other out. See A-VI at 844-847 (testimony that a heat treatment of 600 o Celsius after a C-373 test would return a tile

to its original state ). The a ssertion e ither co ntinues to presume that C-373 had no effect whatsoe ver on the til e prior to

reheat ing, whi ch is not pr

oof of tha t hy pothesis, or it admits that C-373 altered the tile prior to reheating. Either way, the double-soak method itself is not sufficient proo f of the hypothesis that C-373 does not eff ect the tile. The double-soak method,Court No. 95-05-00679 Page 42

12 Dal-Tile’s and Prof. Haber’s tests at 575 o were bo th consiste nt i n the sens e that bot

h achieve d statistic al insig

nificance, eve

n if they did not pro ve chan

ges in po rosity and hard ness. therefore, does not provide a reliable baseline from which measur ement may

be made, and it comes as no surprise that

the data theref rom prove d incoher

ent. C. Consistency of Results at Different Reheating Ramps to Cone 020 The split-tile method was shown to produce consistent and reliable results at differen t temperature equivalents for pyr ometric cone 020 – both at the slowest and fastest cy cles and inthe middle. Althoug

h the go vernmen

t focuse d on the extr

eme tempe

rature s and reheatin g ramps to whichDal-Tile and

Prof. Haber had subjected their tested samples, Dal-T ile also tested to cone 020 at 625 o and 635 o , the very tempe rature equivalents listed

in the Orton Literature. Dal-Tile ’s result s

were consistent with the results achieved at the temperature extremes. Pl. Ex. 17. Dal-Tile and Prof. Haber explained

that the reason he did not perform such intermediate testing was that his results at 575 o and 710 o – the slowest and fastest cy cles possible with Dal-Tile’s equipment – confirmed the reliabil ity of the re sults Mr. Cornia had achieve d at those

extremes. 12 Witn esses for Dal-Tile and Prof

. Haber r eprese nted that due to the

expense a

nd time-c onsuming

nature o f the C-37 3 testin g , additional testing by Prof. Ha ber at 625 o and 635 o was determined unnece ssary

because the resu lts were bound to fall between those observed at 575 o and 700 o . Pl. Exs. 17, 43; A-V at 720. The gover

nment and

TCA sugg est that D al-Tile’ s method should be reje cted bec ause Prof. Haber used an allegedly

less reliable heat cy

cle for reheating to cone 020 than the government

did. Def. Br. at 1 0; TCA Br. at 38-39. This suggestion is misleading in that it sugg ests that Dal-Tile’s method rests on the test pe

rformed by i ts expert, Prof. Ha

ber, and not the te sts performed by Dal-Tile itself. TCA attem

pts to discredit Prof. Haber’s testimony on the grounds that the tests he conductedCourt No. 95-05-00679 Page 43

did not conform to industry standards or were not the subject of pu blication . TCA Br. at 14. However, Prof. Haber, like the government, used the standard C-373 procedu

re and in depende ntly constructed

a methodology

similar to what Dal-Tile had constructed to accomplish a rehe at test that is unique to t

he statute and not the

su bject o f industry standards. More over, no method for conductinga rehea

t test for customs c lassific ation pur poses has been pub lished. However, DalTile’s claim in th

is protest is based on the tests

that Dal- Tile it self conducted , the results and metho dolo gy

of which Prof. Haber confirmed. The g overnment and TCA ignore the uncontroverted testimony that Dal-Tile used the same heat cyc le for one of its tests as the government used. It is und isputed tha t bot h the go vernm ent an d Dal- Tile c onduc ted te sts u sing a time/temperature ramp of 60 o /hr unt il the proper cone deformed at 625 o . See Dal. Br. at 16 (Government

test), 18 (Dal-Tile test). Dal-Tile also conducted tests at 635 o , 575 o and 700 o C using different rates of heat increase. All four tests involved reheating to cone 020. Dal. B r. at 17. As Mr. Cornia testified, he chose to t

est at extr eme as we ll as intermediate firing rates to obtain results that would be r

eprese ntative o f allpossible firing rates of Dal-Tile’s kilns. Id. Mr. Cornia testified that the results of

all four D al-Tile

tests showed a trend towards lower absorption. Dal. Br. at 18. Further, theseresults were statistical ly sign ificant at all temperatures with the exception of 575 o

. Id. However, it is also of some significance that Dal-Tile and Prof. Haber each independently observed

no statistical ly significa

nt change at 575 o . Since the government also reheated to 625 o C and concedes that

reheating to cone 020 at 635 o C is acce ptable, only

the tests of reheating to cone 020 at 575 o C and 700 o C are disp uted by the gov ernment
.Court No. 95-05-00679 Page 44

Prof. Haber conducted additional tests which confirmed Dal-Tile’s results at 575 o and 710 o

. Prof. Haber testified that the results of reheating at the intermediate heating rates would produce resultsbetween those of the two extremes he tested, mirroring the r esults obtained by Dal-Tile. See Dal. Br. at 21. Although Prof. Haber stated thatthe results he obtained at 575 o and 700 o C were d ifferent than those he would expect at the intermediate rates used by Dal-Tile, his results at the extreme r ates ag reed wit h those Da

l-Tile ac hieved a t the same

rates. H is testimony is unequivocal that he confirmed the soundness of Dal-Tile’s method and results. TCA makes much of Prof. Haber’s “admission” that r eheatin g to con e 020 using

differe nt reheat ing r ates would produce different results. TCA Br. at 39. Prof. Haber did not suggest that results of reheating to cone 020 at 625 o or 635 o C would fa

il to show a change in water absor ption. Dal. Br. at

22. Thus, the fact that Prof. Haber did not conduct additional tests at 625 o and 635 o does not

undermine the reliability of the tests D al-Tile c onducted at those te

mperatu res. The government and TCA also imply that the time/temperature ram p e mployed in the g ove rnment’s test (and one of Dal-Tile’s tests) is “prescribed” or “recommended” by

the manufacturer

and that the rates employ ed by Dal-T ile in addition to those rates are someho w no t “permitted.” See , e.g. , Def. Br. at 4. Ho wever, none of the witness es who ha d experie nce with pyr ometric cones wo

uld agr ee with th e gove

rnment’s statemen t that t he manu facturer of the pyr ometric cones “recommended” any particular temperatureor rate of heati ng to re ach py

rometric

cone 020. A-V at 759. Even Dr. Brosna n testifie d that the

re are many differe nt ways to reach cone 020 and that

the temperature equivalents listed in the Orton literature – 625 o and 635 o Celsius – had been observed over the decades to produce reliable de formati on of the cone and that any of theCourt No. 95-05-00679 Page 45

reliabil ity of deformation was not as well observed for any other temperature or rate. A-VI at 862- 864. Research papers prepare d by the Orton Foundation, which

manufacturers the cones, make clea r that each of the Ortoncones measures various time/temperature ramps produc ing deformation. See Exhibit 20 at 107 & Table 1 (data available showing deformation produced by various heating rates exists for most Orton cones). As Table 1 of Exhibit 20 shows, a given cone will deform diffe rently dependingupon the he ati ng rate used and maximum temperature achieve d. In fact, the Tar iff Classification Study cited by the defendant and TCA recognizes that 020 cones deform at different heatingrates. See 1962 TCS First Suppl. Rep. at 41. As the Report notes, the temperature at which

cone 020 deforms depends in part upon the rate at which tem

peratur e is incre ased. Ne ither He adnote 2(a) nor the legislative history indicates the angle of deformation of cone 020 that should be use d inreheating. Thus, the re is no requirement that a particular heating rate be used to conduct the statutory test, so long as it produc es a deformation in the cone. D. Testing Hypotheses Daubert identifies the testability of the hypotheses as the f

irst of four factors to be considered with re sp ec t t o t he re li ab il it y of an y scientif

ic evide nce. 509 U.S. at 593 . In p articula r, Dal-T ile hypothesized

that C-373 is a destructive test that alters the density , hardness and absorptivity of the subject articles. By

contrast, the government’s method assumes that C-373 is non-destructive. Dal-Tile tested a nd prove d the hy

pothesis that C-373 is

a destru ctive tes tin that it causes the subject merchandise to absorb water. See Pl. Br. at 22, 40 . This hypothesis is supported by the research of R. Bowman who, in peer reviewed ar ticles, established that tiles must be re heated t o approxima

tely 900 o C (well in excess of pyrometric c one 020) in order to revers e f ully the eff ectsCourt No. 95-05-00679 Page 46

of moisture absorptionresulting from soaking the tiles in a manner similar to C-373. See Pl. Exs. 45, 48, A- V at 732- 33. Dal- Tile’s hy pothesisis fur th er s upp ort ed b y ANS I, which has designated C-373 as a destructive test. The government’s a rgument that ANSI desig nated C-373 as “destru ctiv e” sole ly b ecause

tiles are split, and

not beca use the til es are b oiled and soaked, is incorre ct, since the

ANSI materia ls state that C-373 should

be performed on whole tiles. See Ex. 1 (“use uncut, unbroken glazed samples in lieu of unglazed fractured specimens a s called for in ASTM C-373”). Since, as Prof. Haber demonstrated, the C-373 test alters the tile, A-V at 608-13, and, as Dr. Brosnan testified, reheating re verses the water absorption that took place dur ing C-373, A-VI at 844-45, the effect of reheating the tiles to cone 020 is masked. As noted above , the government never tested its hy pothesis on the subject articles, and instead relies upon the opinion testimony of Dr. Brosna n. A-VI at 881-84; Def

. Br. at 39. Since the government’s test

neither isolates nor disproves the existence of any effect produced by

the initial soak on the subj ect articles, it is impossible to know how the initial soak affected the pieces the government

tested a nd how tha

t might ha

ve affe cte d th e results of the government’s test. The government’s method is unreliable a s a test of the effect of rehea ting to cone 020 on the relevant properties of the subject

article s, becau se the effect of reheating was not isolated as a variable. As the Libas court noted, “[t]o assess a test’s reliability, it is necessary to know what it tests.” 193 F.3d at 1367. TCAincorrectly

suggests that Prof. Haber did not establish that the initial soak a lters the subject tiles. See TCA Br. at 27-28. TCA so argues on the ground that the cha nges were not uniformfrom tile to tile and that some individual tiles showed changes after soa ki ng that wereCourt No. 95-05-00679 Page 47

inconsistentwith the hypothesis. While Prof. Haber’s experiment showed that the effect of soaking under the C-373 procedure was not uniform on every tile tested, he testified that, in subjecting 50 tiles to multiple

soaks und

er the C- 373 proc edure, he obtaine d statistic ally signific ant resu

lts showing changes in the tiles’ relevant proper ties after an initial soak. See A-V at 692-700. Again, individual results vary, wh ich is why

good re search

practic e uses suf

ficientl y la rge sa mple popula tions and ana

lyze s variance, as D al-Tile d id here. Thus, Prof

. Haber ’s concl

usion that t h e initial soak affects the tile rests on the application of sound scientific research methods and is here accorded such credit as is due. Prof. Haber’ s conclus io n that thein itial soak affects the tiles is further supported by the published research of Richard Bowman. See Exs. 44-48. Dr. Bowman demonstrated, inter alia , that the tiles exposed to a 24-hour soak, even after reheating , will expand. Ex. 48. Dr. Bowman’s articles were published, thus meeting the second Daubert factor . Dal-Til e’s hy

pothesisthat the tiles

are affec ted by

the C-373 procedu

re is supported by both Prof. Habe r’s analysis of the

subject articles and published research. The government’s assertion that C-373 would not alter the subject tiles’ properties because “tiles were made for long-term use in water without any

meaningful deterioration,” see Def. Br. at 6, is incorrect for several reasons. F irst, the testimony upon which the gove rnment relies related

to the potential impact of steam from a bath or shower on wall tiles, not the effect of their immersion inwater f

or 24 hours a fter 5 h ours in boiling water. Wall tiles are not intended for long-term immersion in water and are therefore not designed with the same structural stability that characterizes stable c eramic a rticles. Pl. Br. at 4. Second, only the glazed side of

wall tiles (or floorCourt No. 95-05-00679 Page 48

tiles) is exposed to water in commercial use, whereas the C-373 proc edure exposes the entire body of the tile to water. T hi rd, the commercial conditions cited by the government, unlike the C-373 procedure, do not expose the tiles to prolonged boiling. Thus, the general performanc e of tiles when exposedto moisture under commercial conditions cannot suffice as proof of the effect of the C-373 boil/soak procedure on the subject articles. Fi na ll y, TCA argues that Prof. Haber, in running ANOVA on the government ’s result s, somehow admitted that the government’s test proved that the tiles did not change. TCA Br. at 30-31. Prof. Haber, however, observe d that the Dal-Tile test demon strat ed a st atist icall y signifi cant ch ange while the government’s test demonstrated a statistically significant

lack of change, and he concluded that the diffe rent re sults could

only be attrib ute d to the d iffere

nce in the

two method

ologies

. Sp ec if ic al ly, Prof. Haber attributed the lack of chang e or incoherence found in the customs method to be due to the destructive effect of C-373 on the sample popula tion, which hypothesis Prof. Haber tested and proved. Restated, Prof. Haber theorized that under the government’s testing method the tiles changed twice – once by soaking, and on ce by h eating; he did not testify that C-373 did not chang e the tile

samples a

t all. E. Analysis and Confirmation by Statistical Method Inorder to check the accurac y of its results, Dal-Tile subjected the d ata gathered from the split tile tests to a standard statistical technique, analy sis of variance, or ANOVA. ANOVA is not

a measure of

absorption but is merely a method for determining the statistical significance of data collected. Dal-Tile and Prof. Haber d emons trate d thro ugh ANOVA t hat th e spli t-ti le met hodol ogy had a low potential for error to within a confidence level of 9 5%, the mo st common st andard i nCourt No. 95-05-00679 Page 49

scientif ic and aca

demic contexts. A NOVA also demonstrated that the potential for error in the government’s method is much greater. See Dal. Br. at 43-44. The ANOVA on the Customs

testing inthe New Orleans la

borator y of th e tile s from 1994 and on tests performed by the Los Angeles laboratory

of tiles from each of the y ears for which a

protest had been filed showed that the changes observed are not statistically significant and a re consistently incoher

ent regardless of which y

ear the tiles were produced. ANOVA’s g eneral acceptance as a statistical check on the significance of an empirica l study ’s result s is not in

dispute. I ts purpose

and acti on is to test for potential error in the underlying

experiment. As such, it meets both the third and fourth Daubert factor s. Contrary to the government’s assertion, ANOVA do es not supp lant or su persede the resu lts of the phy sical tes t but mere ly h elps to expla in whethe r the re sults – i .e. , the changes measured between the control and experimental samples – are statistically significant. See Dal. Br. at 19. The government’s argument that Dal-Tile failed to mai ntain “testing controls over the statistical analysis,” Def. Br. at 38, reflects a misunderstanding of research method. Statistical analyses like ANOVAare themselves testing controls. Dal. Br. a t 43-44, 52. ANOVA in this insta nce mer ely assists the Court in determining that Dal-Tile’s results can be relied upon. T he government, by contras t, failed to subject

its result s to any test for statistical sig nificance. This does not advance the probativ eness of

the double -soak te st method b efore t he Court. The government does not dispute that ANOVA is an acce pte d test for the significance of empirical results nor does it c ontest Da l-Tile’s ANOVA f

indings or asse rt that ANOVA was improper ly done. Thu s, the government does not dispute that the A

NOVA pe

rformed by D al-Tile

on its results was a valid test of statistical significance. I nstead, the government disputes ANOVA’sCourt No. 95-05-00679 Page 50

explanatory

power. It arg

ues tha t Dal-Tile “failed to demonstrate how using ANOVA statistical analyses will obviate” the effect of difference s between two pieces of thesame split tile. Def.’s Br. at 38. However, ANOVA’s very purpose and

function is to determine whether a grou p of resu lts is significant

despite any potential anoma lies contained in individual results. See , e.g. , Dal. Br. at 19. ANOVAperforms this function by providing a statistical comparison of two or more means. Since individual factors may

affect individual results, ANOVA helps determine whether, overall, the resultsof a scie

ntific te st or proc edure a re gro uped aro und a nor m, su ch that variations can be discounted. The ANOVA would not have demonstr

ated sta tistical si gnific ance for Dal-Ti le’s res ults if the intra-tile variations at the heart of the gove rnment’s concern prevented observa tion of a significant

trend. Thus, Dal-Tile’s use of ANOVA f urther supports the reliability of Dal-Tile’ s method, and

the gov ernment ’s failur

e to test it s results for statistical significance casts doubt on the reliability of the g overnment’s method. TCA’s suggestion that use of ANOVA is improper because ASTM rejected use of statistical

m ethods to analy

ze the phy

sical pro perties o f tile spe cimens un der the C- 373 proc edure is als o withoutmerit. See T CA Br. at 4,23- 25,3 1. As noted above, ANOVA does not measure phy sical propert ies, it merely chec

ks the statistical significance of the results of a given study. At issue is not the accuracy

of C-373, but of a comparison betwee n t he means produced by two separate tests of samplepopulations under C-373 to measure the effect of re heating the subject

article s to py

rometric

cone 020. I

t would be inappropriate to use ANOVA to analy ze individual results of C-373, because ANOVAinvolves a comparison of means. It is furthe r of no significancet hat C-373 has a known rate of error (

see TCA Br. at 25,29-30) because the Court need not determine the reliability of C-373,Court No. 95-05-00679 Page 51

13 As an asid

e, Dal-T ile submits

that the sp lit-tile te chnique would not place any additional burden upon Customs, as it

would not require any

new equipment nor would it require any additional tests to be per

formed. The Court

agree s that the s

plit-tile test actually appe ars less burdensome and time-consuming than the Customs method, since it eliminates a step – instead of performing a 29- hour soak foll owed by

reheat in g and then another 29-hour soak, the 29-hour soak could be performed

on half the samples at the sam e time as the other half are being he ated to cone 020. Further more, it ha s not been

sugge sted that A

NOVA must

be performed in connection with every test conducted under Headnote 2(a). Here, D al-Tile merely bolstere d its position using A NOVA to demonstr ate that the physical prope rties of the subject articles change ba sed on a comparison of the mean results of the C-373 tests of the reheated and control sample g roups. ANOVA is not necessary to reach this conclusion, however Dal-Tile’ s use of ANOVA to demonstrate the statistical significance of its results aids the Court in determining that Dal-Tile’s test prod uced re liable re sults. whichis not in disp

ute. TCA’ s a ssertion t

h at the customs test was shown at the hearing to be “accur ate and precise” (TCA Br. at 4) refers only to the C-373 procedure, and that is a component of both parties’ methods and is not in disput e. R ather, the reliability of each party ’s method of comparingdifferent sets of C-373 r esults to measure the effect of rehe ating must be determined. TCAalso errs in arguing ag ainst use of ANOVA here on t he gro und that A

NOVA is no t used in testing tiles for service. See TCA Br. a t 31. The p

urpose of the tests a

t issue is to deter

mine their customs classification, not their quality for se rvice. 13 F. Relevance The government

points out that the tiles tested in Dal-Tile’s laboratories and by Prof. Haber whichgenerated evidence of inc reased density and diminished poro sity

upon reh eating

to py rometric

cone 020 were not

produced in the ye ars of production of the entries in issue. Def. Br. at 3, 31. The government

ar gu ed th at be ca us e t hi s i s t ru e, Da l- Ti le ’s ev id en ce of in cr ea se d d en si ty and diminish ed porosity is not probative of the tile inissue. De f. Br. a

t 31. The governme

nt is incor rect. As Messrs. Turk, Orrell, and Cornia testified, (B3-19 at 62-63, S7-58,70-73, 84-85,88; A-IV 1 at 404-06) the wall tile bodies in issue have been produced in accordanc e with the same fo rmulas fr om t heCourt No. 95-05-00679 Page 52

commencement

of production upon the opening of the factory until today. The rea son there are several formulas for producing wall tile body is to account for naturally occurring difference s in the materia ls used and to permit the efficient recy cling of production

wast e whether generate d before firing ( desperdi

cio ) or after firing (b isque). See Da l. Br. at 7-8. The raw materials continue to be produced at the same mines as the inc ep tion of pr oduction, but are natural products s ubject to variation. (A-II

at 275) By

itself, thi s requires that several formulas exist in order to assure as uniformas possible an end product. A-II , at 270-71. When desperdicio and bisque are tak en into account and consideration

is given to the fact

that bisque has been glazed, it is obvious even to nontechnical people that formul as must be adjust ed for th e sake of

achievi ng a uni form end

product. The government

suggestion that several formulae pr oduced differ ent end products is therefore speculative. G. Reliability of the Double-Soak Method Once the plaintiff has made out a prima faci e case in a challe nge to a Customs classification, the government must come forward with proof of the correctness of its method; the Court is then required by 2 8 U.S.C. § 26 43(b) to“consider whether the gov ernment ’s classi fication is corre ct, both independ ently and in comparison

to the importer’s alternative.” Jarvis Clark , 733 F.3d at 878. The government

in thi s case ha s not demonstrated the correctness and reliability of its method, either in de pe nd en tl y or in co mp ar is on to Da l- Ti le ’s me th od ol og y. As discussed more fully above , using the same pieces to run two subsequent destructive tests and then comp aring t

he resul ts is inher ently unrelia ble beca use ther e is no con

trol to whi ch resul

ts

can be compared. Inde ed, the government’s ownexpert witness, Dr. Brosnan, testified that the veryCourt No. 95-05-00679 Page 53

temperature at

which the tiles were subjected to reheating after the first C-373 test had the effect of returningthe tile to its original state. A-VI at 844-84 7. If

it is true that the pie ce is returne d to its original state by

heat t reat ment before the second C-373 test is conducted, the results cannot be a reliable indicator of change or

non-change brought about by such heat treatment: by

definition, the results will show no change. But that is plainly not the case, given the incoherenc e of the doublesoak results, which bear out the flaws in the Customs methodology

. In some cases, the absor ption goes up after

reheat ing, in some cases it goes down, and in some cases it stay s the same. Pl. Ex. 51. The data for

porosi ty and dens ity are similarly scattershot, showing no clear pattern. Id . It is this very typ e of data

distributi on – a sca

ttered, unfocuse d patte rn of cha nge – about which the government’s witness, Mr. Daniels, testified that “one could not draw any

valid conclusion as to the characteristics of the tile.” A-VI at 917. Therefore, the incoherence of the behavior of the specimens within each l aboratory

tes t batch and the inconsistency of these results – confirmed by Dal-Tile’s ANOVAof the New Orleans and Los Angeles Customs results – render the Customs double-soak method an unreliable means of t est in g. It cannot prove that upon reheating the tile did chang e, and it cannot prove tha t it did not. H. Applicabi lity The government also argues in fa vor of limiting the merchandise in issue to 4 1/ 4 x 4 1/4 square wall tiles . Def. B r. at 19. T he denie d protest

giving rise to this litigation covere d all wall

tile contained in the entries, but Dal Tile decided not to proceed with its claims on 6 x 6 wall tile. Both the g overnment and

TCA argue that this Court should accept ANSI parlance in judging this case. InANSI parlanc e, “4 1/4 x 4 1/ 4” is a nom inal desig nation re ferring

not only to square tile but toCourt No. 95-05-00679 Page 54

other shapes ( e.g. trim sized for same). See Exhibit 1 at ¶ 6.1.1.1. Perforce of the abandonment of 6 x 6 wall tile clai

ms, entrie s of trim f

or 6 x 6 wall t

ile are n o longe r an issue , but the c laims concerning

4 1/4 x 4 1/4 wall tile t

rim rema in in issue. This conclusi on is consi stent not only with ANSI parlance, butcomports with logi c while th e opposite conclusi on does no t. The tile products inissue are those produced with the use of the materials and f ormulas in evidence and fired in slow fired kilns; more over, no

evidenc e exists in

the record of an intention of the parties to interpret the phrase “4 1/4 x 4 1/4 tile ” in the na rrow man ner that the gov ernment

now propo ses. IV Duty-free Treatment under the Generalized System of Preferenc es Anarticle must be classifiable in a GSP-eligible provision in order to enter duty-free. “Eligib le article s” may be imported into the United Sta

tes duty -free if they meet thre e requir

ements: (1) the artic le must be the “growth, product or manufacture ” of a beneficiary developing country (“BDC”); (2) the article must be imported directly from a BDC into the customs territory of the United States; and (3) the sum of (a) the cost or value of the material produced in the BDC plus (b) the direct costs of processing operations perf ormed in the BDC must not be less than 35% o f t he appraised value of such article at

the time of

its entry into the c ustoms ter

ritory of the Un ited State s. See 19 U.S.C. § 2463(b); 19 C.F.R. § 10.177(a)(2). The sole issue here is whethe r the 35% require ment has b een met. There is no dispute

that Mexico was a BD C during the peri od at issue , that t he subj ect merchandise was a product of and imported from Mexic o direct

ly in to the cus toms territory of the United States, and that the claimed tariff provision , TSUS item 5 23.94, wa s a GSP-el igible provision d uring th e relev ant peri od. Dal-Court No. 95-05-00679 Page 55

Tile argues that the non-Mexican components of the direc t proces sing cos ts were s ubstantia lly transformed

into new and different articles of commerce , namel y g la ze and spray drie d body, and that these constituent p arts bec ame, whe n combine d, products wholly of Mexico. Pl.’s B r. at 28 , referencing

D-II at 38-52 & Pl. Ex. 8. It further argue s that eve

n if the non-Mexica

n compone

nts are excluded from the c osts of processing, the dutiable Mexican value of the wall tiles meets the GSP threshold. A. Substantial Transformation Before a material of non-Mexican origin can be re garded as the “ product o r manufacture” of Mexico for

GSP purpose s, there

must first be a “substan tial tran sformati on” of tha t materia l into

a “new and different article of c ommerce.” 19 C.F.R. § 10.177(a)(2). A substantial transformation

occurs when a product

has “l ost t he ide ntifyin g charact erist ics of its co nsti tuent mater ial” t hrough “a processing that results in a new article having a distinctive name, chara cter, or use.” Torrington Co. v. United

States , 8 CIT 150, 154, 596 F. Supp. 1083, 1086 (1984), aff’d 764 F.2d 1563 (Fed. Cir. 1985) Each of these elements need not be satisfied before a court finds that a material results from substantial transformation. See, e.g., SDI Technologies, Inc. v. United States , 21 CIT 895, 897, 977 F. Supp. 1235, 1239 (1997); Koru North America v. United States , 12 CIT 1120, 1126, 701 F. Supp. 229, 234 (1988), aff’d 155 F.3d 568 (Fed. Cir. 1998 Relevant to this matte

r, an ea rlier ca se conte sted the d

enial o f GSP e ligibility for “ca sting slip,” a mix ture cr eated b y blendin g dry ingr e dients, deflocculant, and dispersants in water with a blun ger. Zuniga v. United States , 16 CIT 45 9, aff’d 996 F.2d 1203 (1993). There, the plaintiff failed to demonstrate that casting slip was either a “new a nd different” article of comme rce orCourt No. 95-05-00679 Page 56

“commer cially recognized.” The plaintiff had failed to provide any evidenc e of actual commercial sales of castingslip. On the basis of the evidence presented, the Court deemed th e p ro du ct “c le ar ly”

rec ognizabl e as a “simple blend” of its dry ingredients. 16 CIT at 465-66. The govern ment her e argues that Zunega is dis p ositive, w hile Dal- Tile arg

ues that the eviden

ce it pro vided is distinguishable from that offered in Zuniga

. Inthe recent case of Drexel Chemical Co. v. United States , Slip Op. 03- 60, 2003 WL 21302955 (CIT June 5, 2003) the Court found that there had been substantial transformation of an herbicide exported t

o the United Sta

tes which had bee n imported

in cake f orm into a B DC where

it

was pulverize d throug

h a comple

x air mill ing pr ocess. As in Zuniga , the government had argue d that the air milling process had not changed the “identify

ing characteristic” of the c hemical which gave the molec ule it s herbicidal properties. The Court disagree d and found “that the air milling process causes not o nly a physica l chan ge in the size of the particle, but also a chemical change as valance bonds are freed, enabling the D iuron molecule to adsorb to a plant leaf.” Slip Op. 03-60 at 11. The Court thus found that the transformation of herbicide from cake form to powde

r was ak in to the s ubstantial transformation of wire into “swage,” i.e. , “sewing machine needle blanks,”

c onsider ed

in Torrington to be “new and different article[s] of commerce” that would undergo a second substantial transformation when processed into finished sewing nee dles. Torrington , 8 C IT at 154, 596 F. Supp. at 1086. Here, the wall t

ile components satisfy

not only the “articles of

commerce” requirement but also the “new and d ifferent” requirement of the statute. The Zuniga Court found no market for casting slip, which had no f urther p urpose ot h er than to be ca st and used as kiln furniture. TheCourt No. 95-05-00679 Page 57

Zuniga Court was thus unconvi nced tha t sl ip was any diffe

rent than a mix of its component ingred ients. By c on tr as t, in th is ma tt er th e r el ev an t a rt ic le s o f c om me rc e a re sp ra y d ried body and glaze, notcasting slip, and the Court concludes that the spray dried body and g

laze at issue are new and different articles of commerce. The y are not “ simple blends,” like casting slip. The process of producingspray

dried bod y is similar in c omplexity

to the air milling pr

ocess considere d in Drexel

. There was less e

vidence proffe red on the complexity

of the pr ocess toproduce glaze, however it is evident that both spray dried body

and glaze require extensive analy sis, processing and refinement inorder to

go from raw mate

rials to us able, sa

leable articles of commerc e. Moreover, g laze is bought and sold in

commerc e. Sever

al witnes ses in this matte r testified t hat gla ze is sold

co mm er ci al ly, that Cera mica Regiomontana

has in the

past sold a

nd now sel ls the gl aze it manufactures from frit produced in Mexico by Materia les Cera micos, its s ister Comp any . Dal-Til e also proved that spray

dried body ca

n be pulled from the production line and sold to an othe r

co mp an y, which may pre ss it into tiles or into some other article of commerce. A-VI at 922. Several witnesse s, including Robert Daniels, a witness for the government, testified that spray dried tile body is an a rti cle of c om mer ce p urc has ed b y man y sma ll er t il e ma nuf act ure rs. D-I a t 1 2-1 9, 9 9-1 01; A-IV at 488-95; A-VI at 922. Althoug h the Monte

rrey plant doe s not sell

the spra y dr ied body it produc es, since it uses all that it manufactures in its own production, the Court concludes that the spray dried body that it produces is the “functional equivalent” of the spray dried body reg ularly sold by

other manufacturers, whichin turn is of the “same general class or kind” as the spray

dried body produc ed by Ceramica

Regiomontana.Court No. 95-05-00679 Page 58

The Court f

inds that the constituent parts of the wall tile, the dried body and the glaze, repres e nt 100 percen t of the subject merchandise and are both of Mexican origin. The subject mercha ndise is of 100 percent Mexican origin and “wholly the growth, product, or manufacture of

a [BDC].” 19 C.F.R. § 10 .176(c) . The wal l tile manufactur ed from these cons tituent pa rts is therefore entitled to a pre sumpt ion that it meets the requirements of the GSP. Even were that not the case, the evidence amply demonstrates that the 35% t hreshol d of Mexican-origin value in the subject articles is amply met. The Court also notes that the purpose of the GSP statute is to “encourage BD C’s to produce goods for expor

t, there by f ostering economic

div e rsification and industrialization.” SDI Technolo gies, Inc. v. United States , 21 CIT at ___, 977 F. Supp. at 1242 (citing S.Rep. No. 93-1298 at 5, 1974 U.S.C.C.A.N. at 7187). See also Torrington , 764 F.2d at 1563. That purpose is furthered by the growth of jobs

requirin g high er or te chnical

skills, a groundwork for

building additiona l skills and developing more self-sufficiency . The “GSP program, therefore, is not meant to encourage an incr easein the number of simple labor intensive jobs within a BDC.” SDI Technologies , 977 F

. Supp. at 1242 (finding that the purpose of the GSP not met by stere o rack systems claimed to be the product o f Mexico whe re complex manufacturing took place in China and the finishing w hich occurred in Mexico – placing components in a wooden cabinet – required only a

basic education

and did not ch ange th e charac ter of the pr oduct ) (cit ing Texas Ins truments, Inc. v. United States , 681 F.2d 778, 785 (Fed. Cir. 1982)). The testi mo ny of sever

al witnesses establishes that the tilemaking process at Ceramica Regiomontana

meets the purposes of the GSP program. This is not a mere finishing ; CeramicaCourt No. 95-05-00679 Page 59

Regiomontana

as well as its sister company Ma teriales Ceram icos e ach enga ge in a compl ex proces s whichrequires the chemical analy sis of the rawmateria

ls, the ca reful ble nding of the ingr edients to achieve a con sis te nt ou tc om e, th e u se of st at e- of -t he -a rt eq ui pm en t f

or cr ea ti ng th e t il e b od y, including s p ray

drie rs, st rict cont rols on size

and s hape , car

eful matc hing

of the body and g laze formulas , inspection of

th e ti les , an d da il y ana lysi s i n t he l abo rat ory t o co nfi rm a bso rpt io n. D -II at 38-52; Pl. Ex. 8. The

testimony

establishes that t

he proce ss would be done substantially no differe ntly ina non-B DC, since

the equipment, mate

rials and process are nearly the same throughout the industry, and indeed, the Cer amica Regiomontana plant has both the skill and the equipmen t to manufacture its own tile body (something even many A

merican tile manufacturers do not have). AVI at 920-922. The purposes of the GSP are served in this instance. B. Direct Costs of Processing Neither statutory lang

uage nor the legislative history on the law elaborates on the term “direct costs of proce ssing ope

rations. ” 13 Cust. B ull. 1270, C .S.D. 79-1 99 (1979) . Howeve r, cert ain costs have been gener ally recog nized as di

rect co sts of proce ssing ope rations, including

direct la bor costs , overhead, su pe rv is io n, in te re st in cu rr ed in ac qu ir in g m ac hi ne ry, packaging and assists. Id .; 18 Cust. Bull. 1085, C.S.D. 84-104; 14 Cust Bull. 1085, C.S.D. 80-208 (1980); 13 Cust. Bull

. 1464, C.S.D. 1464, C.S.D. 79-312 (1979); 13 Cust. Bull. 1355, C.S.D. 79-242 (1979). In determining the dire ct costs of proce ssi ng operati ons, Ceramica Regiomontana took into account raw material consumption, direct labor costs, parts and packaging used and fixed and variabl e manufa cturing expenses. Ceramica Regiomontana’s chief financial office r, Mrs. Delfina Estrada, testified that the cost system that Ceramic a Regio montana u sed to calculate the direct costs of processing operations was basedCourt No. 95-05-00679 Page 60

upon generally

accepted accounting

principles of Mexico (to which Ceramic a Regio montana s trictly adhered) and that she took a conservative approach whe n calculatingmanufactur ing costs by omit ting, inter alia , applica ble deprec iation and taxes. A- I at 1 16-117A- I at 1 17. These accounting principles were a

lso reli ed upo n by Dal-Tile Corpora tion in the United States to prepare consolidated

financi al statements. A-I at 116. Al l of Cera

mica Regiomontana ’s cost figures appear on the certified financial statements submitted in evidence. Ms. Estrada testified that Ceramica Regiomontana used the f ull assertion method

to calcula te the costs for

the tile in issue, a m ethod con sistent wit h generally

accepted accounting

principle s in Mexico. A-II

at 137-138. By

this method, Ceramica

Regiomontana calculated its costs by

month rather than calculating costs for each tile manufa ctured. She also stated that the latter method was notavailab le to Cera

mica Regio mon tana bec ause the company

does not id

entify each spe cific invoice or expense on a specific tile. A-II at 139. As to the value of materials of Mexican origin plus the direct costs of the process ing operations, Ms. Estrada attested that they accounted for 68% in 1984, 62% in 1985, 49% in 1986, and 70% in 1988, i.e. , more than 35% of the appraised value of the subjec t merchandise in tho se ye ars. A-I at 111-25. See 19 U.S.C. § 2463(b)(1)(B); Pl Ex. 40. She further testified that it was not possible that the value of Mexican origin materials and the direct c osts of processing was less than 35 percent of the value of the subject mercha ndise in any month during 1984, 1985, 1986, or 1988. A-I at 118-12 5. Moreov er, the t estimony was to the

effect that eve

n if the va

lue of dr ied body is dedu cted, the respective per centag es of val

ue of Mexic an orig in materi als only drops by , at most, a few percentage

points – far

above the

35 perce nt threshold set fo rth in

the GSP. A-I at 120-129.Court No. 95-05-00679 Page 61

The Court cre dit s her testimony and finds that eve n if the non-Mexican components are exclude d from the value of the wall tile the remainder still exceeds the require d 35% minimum threshold. The government argue s thatthe value of the tile bodies may not be taken into account under the double substantial transformation rule, but the Court concludes that the total value of the material inputs may be taken into acc ount. The testimony of Mr. Cornia (A- IV at 494-95) that the gla ze of the type used

to glaze Dal Tile’s 4 1/4 x 4 1/4 wall tiles and dry body similar to that used inthe production of Dal Tile’s 4 1/4 x 4 1/4 wall tiles are finished intermediate products which are bought and sold in the marketplace is unrefuted by any probative e

vidence. The existence of tariff provisions for gla

ze establi shes the f

act that g laze is a recognized commercial product. See items 540. 21 and 540.27, TSUS. The court therefore takes judicial notice of the commercial stat

us o f glaze. Labor and g laze alone amount to more than 35% of dutiable value of the mercha ndi se in issue. A-I at 120-21. As to dry body, the facts are similar. See A- IV at 49 2-94. In TCA’s effort to explain that there is a commercially

recognized

group o f clay

products which it c oncede s would not be cera mic for tariff p urposes, it

cites exam

ples of un fired or

lightly fired bo dy. TCA Br. a

t 18. While T CA is nota party, it proc lai ms its exper tise with regard to commerce in clay products. For its part, the gover nment def

ers to TCA

for this purpose. Therefore, in addition to undisputed proofs of record, defendant and TCA mu st be held

to have admitted the facts necessary for the Court to determine that the double substantial transformation rule applies to the dry body as well.Court No. 95-05-00679 Page 62

Similarly, the use of equivalenc es to reflect extra labor

or production costs to manufacture non-rectangular

tile or to account for the use of more expensive glazes is a reasonable acc ounting practic e which the gove

rnment ha s failed t

o demonstr

ate is ca pricious

. C. Admissibility of Certain Records The gover

nment see

ks to deny

the admiss ibility

of four t ype s of busine ss recor

ds: yearly certified financi al statements, end of year inve

ntory reconc iliations, “Counter vailing Tax Report s” submittedto the U.S. Commerce Department and statistics for the sale of tile prepar ed by Dal-T ile’s accountingteam

in the ordin ary cour se of

busin ess. The g over

nmen t seeks to exc l ude these docum ents on the grounds that they are summaries of voluminous records and are ther efor e inadmissib le under Rule 1006 of the Federal Rules of Evidence because the government did not have the opportunity to review the unde rlying doc

uments. Dal-Tile argues that the

Court should not consider the government’s argument unde r Rule 1006 because the documents are admissible in their ow n right u nder the Rule 803(6) hearsay exception for bu sines s recor ds, no twit hstan ding t he government’s right to examine the sources underlying

summary financi al statements (

see VWP of

America v. United States , 25 CIT ___, 163 F. Supp. 2d 645 (2001), opinion after remand, 27 CIT ___, 259 F. Supp. 2d 1289, appea l docketed, Ct. No. 03-7347 (Fed. Cir., Apr. 28, 2003)). The Courtnotes that Ms. Estrada is Dal-Tile’s Chief Financial Officer and the custodian of the company’s books and

records. She authenticated the certified f inancial statements and inventory reconciliations as company business r

ecords p repare d in the or

dinary course o f busines s. A-I at 10- 25. (There

is appar ently no dispute

with resp ect to the admissibility of the tax returns.) The certifiedCourt No. 95-05-00679 Page 63

financial statements are prepared annually by Dal-Tile’s e xternal public accountant from information contained in the company’s g eneral ledgers and journals. A-I at 10-11. The accountant prepares the certified financial statements regularly each year after Dal-Tile’s tax returns are complete. The certified f inanc ial statements are prepared to satisfy the requirement under Mexican law that the accuracy of the company’ s financials be independently certified for subm ission to the Mexican taxing authorities. A-I at 10. Si mi la rl y, Mrs. Estrada’s uncontroverted testimony establishes that

the other doc

uments in question are business record s of the company. Da

l-Tile prepares its inventory reconciliations annually when Da l-Tilecloses its calendar y ear. The purpose for

which the inventory r

econciliations

are prepared is to support various financial information contained in the tax returns and c e r tified financial statemen

ts. A-I at 12-13. Dal-Tile

prepar ed the thr ee annu al c ounterva

iling dut y r eports (Exhibits 36-38) for administrative verification by the U.S. Department of Commerce in connection with a counte rvailing duty case. These documents were duly filed with the Commerce Department after they were

prepared and were, in fac t, obtained from

the Commerce Department for production inthis litigation A-I at 22-24, 27-32. Finally , Mrs. Estrada testified that Exhibit 39 contains statistics of tile sales broken down by market that were prepared in the ordinary c ourse of business. A-I at 24. At trial, the government objected to the adm

ission of the certif

ied fina ncial sta tementsand the inventory

reconc iliations u

nder Rule 1006 on g

rounds tha

t the gov ernment

was not given acc ess to the underlying

documentation when it existed. Mrs. Estrada testified that the company’s ledgers that are more than ten y

ears old are de stroyed at regular intervals. A-I at 11-12. The government does not suggest that destruction of these underly ing documents was impr oper, on ly that theCourt No. 95-05-00679 Page 64

government

did not hav e the opportunity to revie w them. Th e gove

rnment did

not obje c t with respect to their admissibility under Rule 803(6). The government also obje cted to th e admissib ility of Exhibits 36- 39 under

both Rul e 1006 an

d 803(6). The Court

admitted t

he docume

nts

co nd it io na ll y, reserving reconsideration for the end of trial. A-I a

t 38. In its brief, the gov ernm ent reiterates its objection on Rule 1006 grounds, but does not address and apparen tl y has abandoned its Rule 803(6) objection to the admissibility of Exhibits 36-39. Def. Br. at 44-45. Based on Mrs. Estrada’s uncontroverted testimony , the Court conclude s the financial statemen ts and inven

tory reconc iliations a

re admiss ible unde

r Rule 803(6) and the government has waived any such objection. Accord F

ord Motor Company v. Auto Supply Company, Inc., 661 F.2d 1171, 1175-76 (8th Cir. 1981) (admission of end-of-y ear financialstatemen

ts and pro fit

analyses); Gerling International Ins. Co. v. Commissioner of Internal Revenue, 98 T.C. 640,652-5 4 (1992) (admission of end

of year financial s tatement s). Their admissibil ity

under Rule 803(6) obviates any need for cons ideration of their admissibil ity u

nder Rule 1006. See Ger

ling Inter national, 98 T.C. at 654. The parties do not dispute that the f inancia l stateme nts are prepared from other infor mation contained in the company’s ledg ers and other business records. Thus they may be reg arded in

some

senseas summarizing some of the infor mation contained in those records. That fact does not preclude their admission under Rule 803(6), however, as that rule does not require that the opposing party have access to underly

ing documentation as a basis for admission. Even where a document

is inadmissib le under Rule 1006, that rule does not bar admission where the require ments of another rule, such as Rule 803(6) are satisfied. See Gerling International, 98 T.C. at 654. Rule 1006 merelyCourt No. 95-05-00679 Page 65

provides an exception to the best evidence rule allowing for use of summaries prepared

for trial in lieuof orig inal docu

ments; whe

re as he re, the d ocuments themselve s are or

iginal docum ents (or photocop ies) admissible under another rule, the Rule 1006 exception is irrelevant. Thus, there is no

reason for the Court to reverse its decision admitting the certified financial stateme nts and the inventor y su mmaries. Simila rly Exh ibits 36-39 are admissible under the Rule 803(6) hearsay exception. The evidence is uncontroverted that the data com piled i n these reports, which were prepar ed for government

verification, were kept

in the ordinary c ourse of a business activity . A-I at 22-24. It was Dal-Tile’s regular practice – as required by

law – to prepare such reports wheneve r so requested

by the Commerce Department. Id. Moreover, there is no evidence in the record that would cast doubt

on the trustworthiness with respect to the circumstances under which the r eports were prepared, as the information they containe d was subsequ ently ve rified by the Commerc e Department. Further,

none of the documents at issue were prepared in c onnection with the present dispute, which did not arise until the countervailing duty case had ended, and there is nosuggestion that they might have been prepared to advance D al-Tile’s position in this case. Fi na ll y, Dal-Tile a rgues, and the Court agree s, that to the extent any of the Rule 803(6) require ments are not met, the documents are admissible under the residual hearsay

exception found in Rule 807 (formerly Rule 803(24) ). Giventheir close scrutiny

by the Commerce

Department, this Co

urt finds t hat the do cuments

were prepared under c ircumstances providing equivalent guar antees of trustwo rthiness to those unde r the other hearsay

exceptions of Rule 803. They are the only recor

ds available with respect to theCourt No. 95-05-00679 Page 66

points for which they

are offered and there is no dispute as to their pr obative value. The notice requirement

of Rule 80 7 does not b ar the do cume nts’ admission because the government was on notice months before the hearing of Dal-Tile’ s intent to introduce the documents into evidence. The government

was not harmed because it had ample oppo rtunity to examine and respond to the evidence during discovery a fter the documents were obtained from the Commerce Department and turned over to th e gove

rnment, a nd it could

have de posed Mrs . Estrada

on their tr

ustw ort hiness between the Dallas and Atlanta trial sessions but chose instead to object

to their admission at trial withouthaving conducted such discovery . Even if the documents were not admissible

intheir own right under Rul e 803(6), it is preferable to consider Rule 807’s notice require ment flexibly so as not to bar admission in the absence of prejudi ce. See 5 Weinstein’s Evidence 9 807.04[2] (noting flexible approach to notice requirement). There fore, t he Court accepts into evidence all of the fo re go in g d oc um en ts , w hi ch ha d b ee n a dm it te d c on di ti on al ly. D. Domestic Versus Export Product Last ly, the gov ernment

argue s that Dal

Tile has f

ailed toprove GSP e ligibility because the evidence in issue does not distinguish between product manufactured

for the domestic market and that manufactured for export. Def. Br. a t 46-49. The Court disagrees. The only testimony of recor

d of arguable support for the gove rnment’s contention was brief discussion concerning “seconds” of wall tile that were sold on the Mexican market, but there was no indication that such seconds were

o f signific ant volume

or intenti onally

produce d. While it ma

y be true tha t dutiable value mus t b e calculated

as accurately

as necessary , the overwhelming evidence indicates that pro r ating would not alter the result.Court No. 95-05-00679 Page 67

Conclusion The articles are to be classified under item 523.94, TSUS. They are also entitled to duty-f

ree

en tr y un de r t he GS P. Ju dg me nt wi ll en te r a cc or di ng ly.

/s/ R. Kenton Musgrave R. KENTON MUSGRAVE, JUDGE Dated: March 16, 2004 New York, New York