Opinion ID: 677923
Heading Depth: 2
Heading Rank: 2

Heading: Proper classification.

Text: 28 While the meaning of a classification term is a question of law, the issue of whether merchandise comes within the definition of a classification term is a question of fact subject to the clearly erroneous standard of review. Simod America Corp. v. United States, 872 F.2d 1572, 1576, 7 Fed.Cir. (T) 82, 86 (Fed.Cir.1989). Customs' classification of imported merchandise is presumed to be correct, 28 U.S.C. Sec. 2639(a)(1) (1988), and the party challenging the classification has the burden of overcoming this presumption. Id. To overcome this presumption, the court must consider whether the government's classification is correct, both independently and in comparison with the importer's alternative. Jarvis Clark Co. v. United States, 733 F.2d 873, 878, 2 Fed.Cir. (T) 70, 75 (Fed.Cir.1984). Whether the court remands, conducts its own hearing, or simply examines the law and the tariff schedules on its own initiative, it is required to reach a correct result. Id. [T]he court's duty is to find the correct result.... Id. (emphasis in original). 29 If the Pathfinder satisfies the requirements of 8703 HTSUS, there is no need to discuss 8704 HTSUS because under the General Rules of Interpretation (GRI) when an article satisfies the requirement of two provisions, it will be classified under the heading giving a more specific description, here 8703 HTSUS. GRI 3(a). Conversely, if the Pathfinder does not fall within 8703 HTSUS, it falls into 8704 HTSUS. 30 The CIT conducted a three week trial de novo, pursuant to 28 U.S.C. Sec. 2640, to determine whether the Pathfinder was principally designed for the transport of persons or goods. The CIT looked at both design intent and execution, evaluating both structural and auxiliary design features. The CIT limited evidence to the vehicle models in the entries currently under consideration with the exception of evidence that was provided for comparison with vehicles that were readily accepted as trucks or passenger cars. These included the Nissan Hardbody truck and the Nissan Maxima sedan. 4 31 It is evident that the CIT carefully applied the proper standards in making its decision. In reaching its conclusion, the CIT evaluated the marketing and engineering design goals (consumer demands, off the line parts availability, etc.), the structural design necessary to meet both cargo and passenger carrying requirements for both on- and off-road use, as well as interior passenger amenities. 32 The CIT also recognized that the Pathfinder was basically derived from Nissan's Hardbody truck line yet, the Pathfinder was based upon totally different design concepts than a truck. The CIT correctly pointed out these differences and more importantly, the reasons behind the design decisions, including the need for speed and economy in manufacturing to capture the changing market, a market into which Nissan was a late entrant. Specifically, the designers decided to adopt the Hardbody's frame side rails and the cab portion from the front bumper to the frame just behind the driver's seats so that they could quickly and economically reach the market. The front suspension system was also adopted from Nissan's truck line but the rear suspension was not. The fact that a vehicle is derived in-part from a truck or from a sedan is not, without more, determinative of its intended principal design objectives which were passenger transport and off-road capability. 33 Substantial structural changes were necessary to meet the design criterion of transporting passengers. The addition of the rear passenger seat required that the gas tank be moved to the rear and the spare tire relocated. This effectively reduces the cargo carrying capacity. Of particular importance was the design of a new rear suspension that was developed specifically to provide a smooth ride for passengers. New and different cross beams, not present on the Hardbody frame, were added to the Pathfinder's frame to accommodate the above changes. 34 Other design aspects that point to a principal design for passengers include: the spare tire and the rear seat when folded down intrude upon the cargo space; the cargo area is carpeted; a separate window opening in the pop-up tailgate accommodates passengers loading and unloading small packages without having to lower the tailgate. In contrast, the Hardbody truck bed can accommodate loading with a fork lift, clearly a design feature for cargo. The CIT also found that the cargo volume is greatly reduced when the rear seat is up to accommodate passengers. Moreover, the axle and wheel differences are minor and consistent with the Pathfinder's off-road mission, particularly in the loaded condition. 5 The Pathfinder has the same engine size as the Maxima passenger car. 35 Auxiliary design aspects, in addition to those merely relating to the structural derivation of the Pathfinder, that indicate passenger use over cargo use include: vehicle height was lowered 50 millimeters; the seat slides were improved yet similar to those on two door passenger sedans. Other auxiliary design features that point to transport of passengers include: rear seats that recline, are comfortable, and fold to make a fairly flat cargo bed but are not removable; rear seat stereo outlets, ashtrays, cubbyholes, arm rests, handholds, footwells, seat belts, child seat tie down hooks and operable windows. The CIT noted that there is not much more that can be done to accommodate passengers in the rear seat. Moreover, the testimony of the three primary design engineers as well as the contemporaneous design development documents support the finding that the Pathfinder was principally designed for the transport of persons. 36 The non-tariff regulations (NHTSA and EPA regulations) are not dispositive for purposes of tariff classification. See International Spring Mfg. v. United States, 85 Cust.Ct. 5, 8, C.D. 4862, 496 F.Supp. 279, 282 (1980), aff'd 68 CCPA 13, C.A.D. 1257, 641 F.2d 875 (1981). The government concedes this point. Nonetheless, the government goes on to argue that the fact that safety, emission and fuel design changes required by those regulations are an element of the design process ... should afford greater import to Nissan's decisions of what features to incorporate under the ... regulatory schemes and that these regulations are in accord with the motor vehicle industry. As noted by the CIT, the government's assessment that these regulatory schemes contain language that is substantially the same as the statutory language in the HTSUS, therefore affording these regulations greater relevance, is misplaced. The reasoning is baseless because those regulations include a category for Multipurpose Passenger Vehicles (MPV), a category that is not specifically delineated in the HTSUS. 37 In its March 1, 1989, memorandum referred to above, Customs has drawn what appears to be a line between two door and four door versions of sports utility vehicles. Customs' conclusion, however, that vehicles that lack rear side passenger access doors are to be classified under 8704, is de facto affording determinative weight to this feature. This line, classifying two door dual-purpose vehicles for the transport of goods while classifying the four door version as principally designed for transport of persons, appears to be arbitrary. 38 Passenger cars with two doors also have restricted entry into the rear seat but this fact does not take these vehicles out of 8703 classification. Two door passenger cars are equipped with a seat slide mechanism that effectively slides the front seat forward to provide easier access to the rear seat. The doors of two door passenger cars are generally wider as well. The CIT found that the Pathfinder has both of these features so that passengers can be easily accommodated. Therefore, the two door Pathfinder accommodates passengers in the rear seat as well as two door passenger cars, if not as easily as four door sports utility vehicles. Consequently, the number of doors on a vehicle should not be determinative.