Court Opinion

ID: 9495200
Source: CourtListenerOpinion
Date Created: 2023-08-05 15:57:17.901239+00
Date Added: 2024-06-11T17:56:53.242828
License: Public Domain

GAJARSA, Circuit Judge,
dissenting.
I respectfully dissent. The panel majority affirms a decision by the United States Court of International Trade allowing the United States Customs Service (“Customs”) to reclassify Jewelpak’s presentation boxes as “jewelry boxes” under subheading 4202.92.90 of the Harmonized Tariff Schedule of the United States (“HTSUS”) and ordering Customs to liquidate that merchandise at a rate of 20 percent ad valorem. In my judgment, Customs was required to provide notice by publication in the Federal Register of its decision to reclassify this merchandise under subheading 4202. Section 1315(d) of Title 19 of the United States Code requires publication in the Federal Register of notice of a ruling when, as here, the decision departs from an established and uniform practice (“EUP”) and will result in the imposition of a higher tariff rate. Under such circumstances, § 1315(d) provides that the administrative ruling imposing the higher duty rate will be ineffective “prior to the expiration of thirty days after the date of publication in the Federal Register of notice of such a ruling.” 19 U.S.C. § 1315(d) (2000). Customs'failed to provide the statutorily required public notice. I would therefore reverse and remand for classification of Jewelpak’s merchandise at the tariff rate Customs initially assessed.
*1338This court’s decision in Hemscheidt Corp. v. United States, 72 F.3d 868 (Fed.Cir.1995), should control the outcome of this case. In Hemscheidt, we held that “[rjeclassifications under the HTSUS that nullify established and uniform TSUS classifications are subject to the notice requirements of section 1315(d), unless the reclassification is itself compelled by the terms of the HTSUS statute.” 72 F.3d at 871.
Reclassification under the HTSUS that nullified an established and uniform practice, or EUP, that was in place Under the former statute, the Tariff Schedule of the United States [“TSUS”], is precisely what occurred with respect to Jewelpak’s presentation boxes. Under the TSUS, Jewelpak’s boxes were consistently classified as packaging according to their component of chief value. Thus, under Hemscheidt, unless the reclassification of Jewelpak’s boxes under Heading 4202 was mandated by the HTSUS, Customs was required to provide public notice pursuant to § 1315(d).
The HTSUS did not mandate reclassification of Jewelpak’s merchandise as jewelry boxes under Heading 4202. For at least one year after the HTSUS became effective on January 1, 1989, Customs continued consistently to classify boxes such as those at issue as packaging. Under the packaging classification that was in place under the TSUS and for at least one year under the HTSUS, the duty rate. varied from three percent ad valorem to zero. It was not until several years later, in 1993, that Customs reclassified Jewelpak’s merchandise under Heading 4202, and liquidated it at a rate of twenty percent ad valorem. That similar boxes were consistently classified as packaging for at least one year under the HTSUS strongly suggests that the terms of the HTSUS mandated neither the reclassification of Jewelpak’s boxes as jewelry boxes under Heading 4202, nor the resulting imposition of the higher duty rate.
An examination of the text and legislative history of the HTSUS confirms that the statute did not mandate this reclassification. The text of the HTSUS and its legislative history fail to define the phrase “jewelry box,” and the phrase does not clearly encompass presentation boxes such as those at issue. Rather, as the Court of International Trade noted, the meaning of “jewelry box” is ambiguous. Jewelpak Corp. v. United States, 97 F.Supp.2d 1192, 1195 (Ct. Int’l Trade 2000) (“Clearly the spectrum ranging from any box that holds jewelry to chests that hold multiple pieces is broad. The common meaning is therefore not clear to the Court.”). Prior to the amendment to the explanatory notes, which took effect on January 1, 1990, one year after the enactment of the HTSUS, the statutory phrase “jewelry box” was implicitly construed to exclude boxes such as Jewelpak’s presentation boxes, which are not sold to consumers for the primary purpose of storing jewelry. At the very least, the statutory text of the HTSUS did not mandate a broader definition. By reinterpreting the meaning of “jewelry box” according to the amended explanatory note, Customs expanded the definition beyond the statutory mandate. According to the amended explanatory note, “jewelry box” means any box that both holds jewelry and is suitable for long-term use.
Although the explanatory notes are not binding, Customs is certainly permitted to consult them. The criterion proffered in the note may be the correct interpretation — or at least, a permissible interpretation — of the phrase “jewelry box.” Nevertheless, although the classification of any boxes designed to hold jewelry and suitable for long-term use may be a correct classification, Custom’s decision to reclassify Jewelpak’s boxes because they met Cus*1339toms’ revised interpretation of the scope of the statutory phrase “jewelry box” was a reclassification under the HTSUS that nullified an established and uniform TSUS classification.1 Because the reclassification was not compelled by the terms of the HTSUS, the notice requirements of § 1315(d) apply. See Hemscheidt, 72 F.3d at 871.
The majority distinguishes Hemscheidt on the grounds that in that case, the importer lacked actual notice of the reclassification. It then holds that where the Secretary of the Treasury has failed to issue a ruling, and therefore an EUP exists, if at all, only by defacto court recognition, actual notice directed only to the importer of Customs’ intent to reclassify the merchandise at issue satisfies the notice requirement of § 1315(d). To support this holding, the majority relies on this court’s pre-HTSUS decision in Heraeus-Amersil, Inc. v. United States, 795 F.2d 1575 (Fed.Cir.1986).2 I would not distinguish Hem-scheidt on the basis that the importer in that case lacked actual notice, because the court’s rationale in Hemscheidt was unrelated to the particular importer’s actual notice or the putative lack thereof. See 72 F.3d at 872 (stating that common sense and legal sense supported the court’s interpretation of § 1315(d) and that “[t]he loss of income to the federal treasury from the ‘free levy,’ in the large, must be small compared to the price of destruction of established and uniform classification practices upon which predictable international trade depends”). Moreover, Heraeus-Amersil, which created the actual notice exception on which the majority relies, is both erroneous, and inapplicable to the present case.
In Heraeus-Amersil, this court found that § 1315(d) imposed no requirement of notice in the Federal Register for a reclassification that altered an EUP because the practice at issue had not been recognized as an EUP by the Secretary of the Treasury and because the importer had actual notice of the proposed reclassification. 795 F.2d at 1582-83. The court created an “actual or constructive notice” exception to § 1315(d) for EUPs that exist by de facto judicial recognition rather than by a formal finding by the Secretary of the Treasury. In so doing, the court reasoned that:
[I]t was not the intent of Congress when it enacted the § 1315(d) notice provision that, where the Secretary (though requested) failed to decide whether an established and uniform practice existed and that determination had to be made by the court, the lack of a published notice in the Federal Register would bar *1340the application of an administrative change in rates even though the affected importer was specifically informed that Customs had changed its practice. The words of § 1315(d) — which relate solely to a change in duties found by the Secretary to have been imposed under an established and uniform practice — do not so provide, and we know of no sufficient reason why Congress would have desired substantially to prolong use of a formerly-employed rate known by the particular importer to have already been abandoned by Customs (which has not itself acknowledged the existence of that practice).
Heraeus-Amersil, 795 F.2d at 1583. The court went on to state that requiring notice in the Federal Register would be improper because the importer “could receive a windfall” because the lower duty rate would apply despite the importer’s actual knowledge of Customs’ reclassification. Id.
This reasoning is unpersuasive. Where the Secretary has found an established and uniform practice, § 1315(d) explicitly requires Customs to provide notice in the Federal Register notwithstanding any potential windfall to an importer who possesses actual knowledge of the impending reclassification. Section 1315(d) provides that:
No administrative ruling resulting in the imposition of a higher rate of duty or charge than the Secretary of the Treasury shall find to have been applicable to imported merchandise under an established and uniform practice shall be effective with respect to articles entered for consumption ... prior to the expiration of thirty days of publication in the Federal Register of notice of such ruling.
19 U.S.C. § 1315(d) (2000) (emphasis added). The statute contains no “actual' or constructive notice” exception. The resulting potential “windfall” is largely contained, because “if Customs wishes to levy at the increased rate, it is burdened only by the making of a classification according to the rules and giving 30 days notice of its decision.” Hemscheidt, 72 F.3d at 872. Thus, the resulting burden on Customs, if any, is minimal.
In contrast, there is a substantial benefit to the international trade community from Customs’ compliance with the public notice requirement of § 1315(d). The community benefits from the efficient trade that results when the investing community relies on established and uniform practices, knowing that Customs will provide public notice prior to imposing higher duty rates. See id. (noting that the purpose of § 1315(d) was to protect reliance interests). The international trade community premises its actions and decisions on the expectation that Customs will conform to its established .and uniform practices. Section 1315(d) facilitates such reliance by requiring Customs to provide notice before departing from its EUPs in order to assess higher tariffs. The public notice requirement of § 1315(d) also serves the critical function of promoting uniformity in the duty rates assessed to like goods. This ensures fairness to the importing community.
In Heraeus-Amersil .the court recognized that these interests are implicated when Customs engages in established and uniform practices, even when the Secretary of the Treasury fails formally to recognize them as such. Heraeus-Amersil, 795 F.2d at 1582. This determination was correct. The reliance and fairness interests of the international importing community are implicated by the practices in which Customs uniformly engages. This is so regardless of whether the Secretary formally deems Customs’ practice established and uniform. Moreover, the statu*1341tory language does not exclude courts from determining that Customs engaged in an EUP where the Secretary should have made such a finding but declined to act in response to a request. See 19 U.S.C. § 1315(d) (2000) (“No administrative ruling resulting in the imposition of a higher rate of duty or charge than the Secretary of the Treasury shall find to have been applicable to imported merchandise under an established and uniform practice shall be effective_”). Thus, the decision in Heraeus-Amersil was correct insofar as the court determined that de facto EUPs implicate § 1315(d).
In contrast, the reasoning employed by the court in Heraeus-Amersil in allowing actual or constructive notice to suffice when Customs departs from a judicially recognized de facto EUP is inconsistent with the court’s recognition that § 1315(d) may encompass de facto EUPs in the first instance. In creating an actual or constructive notice exception for de facto EUPs, the Heraeus-Amersil decision sacrificed the reliance and fairness interests served by § 1315(d) for the sake of rigid textualism. The court held that, in the event of de facto EUPs, actual or constructive notice to the particular importer was sufficient because the statutory text failed to mandate publication in the Federal Register unless the Secretary found an established and uniform practice. Heraeus-Amersil, 795 F.2d at 1583. It then stated that it knew of no reason to impose a public notice requirement where the importer had actual notice that Customs was abandoning its previous practice. Id. But earlier in the opinion, and despite explicitly noting the reference in the statutory text to a higher duty rate “than the Secretary of the Treasury shall find to have been applicable to the imported merchandise under an established and uniform practice ...," id. at 1582, the court stated that:
In enacting [§ 1315(d) ], Congress recognized that the importing community relies upon the existence of established and uniform practices in conducting their business.... Similarly, where an established and uniform practice has been judicially found (because Customs refused to pass- on that issue) to classify particular merchandise under a specific tariff provision, the importing community should be afforded a grace period to permit it to make business decisions in light of any new agency action changing that practice.
Id. (emphases added). The Heraeus-Amersil decision was correct to recognize that § 1315(d) applies where the court finds that Customs had an established and uniform practice, even if the Secretary of the Treasury has failed to do so. The court recognized that importers rely on established and uniform practices regardless of the Secretary’s willingness to acknowledge them formally, and that § 1315(d) protects this reliance interest. The decision also correctly recognized that the importing community has an interest. in receiving public notice.
The Heraeus-Amersil decision erred, however, in failing to ensure that Customs provide notice to the entire importing community. Either § 1315(d) applies to de fac-to EUPs or it does not. When it applies, whether by virtue of a de facto EUP or one formally recognized by the Secretary, the notice requirement of the statute is triggered. The notice requirement is satisfied- only by publication in the Federal Register of the administrative- reclassification for at least thirty days prior to the effective date the reclassification. Instead of following its initially sound reasoning to this logical conclusion, the Heraeus-Amer-sil court focused on the lack of textual support for the imposition of a public notice requirement where “the affected importer was specifically informed that Customs had changed its practice.” Id. at 1583. Were the question before us in the *1342first instance, I would not have imposed this “actual or constructive notice” exception to § 1315(d). The same reasons that prompted the Heraeus-Amersil court to recognize that § 1315(d) encompasses judicially recognized de facto established and uniform practices counsel in favor of applying the statute’s public notice requirement. “Actual or constructive notice” is insufficient to protect the interests of the importing community. Section 1315(d) was intended to protect their interests as a community, not merely the interests of a particular importer. The statute admits of a reasonable interpretation that is consistent with this purpose. The court, in Heraeus-Amersil, should have held that § 1315(d) requires public notice in the event the court recognizes that Customs intends to depart from an EUP that the Secretary should have-recognized but did not.
This panel, of course, cannot overrule Heraeus-Amersil, see Tate Access Floors, Inc. v. Interface Architectural Res., Inc., 279 F.3d 1357, 1366, 61 USPQ2d 1647, 1653 (Fed.Cir.2002) (citing Vas-Cath Inc. v. Mahurkar, 935 F.2d 1555, 1563, 19 USPQ2d 1111, 1117 (Fed.Cir.1991); Kimberly-Clark Corp. v. Ft. Howard Paper Co., 772 F.2d 860, 863, 227 USPQ 36, 37 (Fed.Cir.1985)); however, Heraeus-Amersil is clearly distinguishable. This court decided Heraeus-Amersil more than two years before the HTSUS went into effect. The statutory shift is significant because the differences in tariff rates between the TSUS and the HTSUS were supposed to be minimal. The change from the TSUS to the HTSUS was intended to be essentially revenue-neutral. See President’s Guidelines for Converting the Tariff Schedules of the United States to the Harmonized System, 46 Fed.Reg. 47897-02, 47897 (Sept. 30, 1981) (instructing Commission to avoid “to the extent practicable and consonant with sound nomenclature principles, changes in the rates of duty on individual products”); H.R. Conf. Rep. No. 100-576, 100th Cong., 2d Sess. 548 (Apr. 20, 1988), available in 1988 USCCAN 1547, 1581 (“The conferees believe that the HTS fairly reflects existing tariff and quota treatment and that the conversion is essentially revenue-neutral.”). In fact, Conversion Reports issued by the International Trade Commission provide a strong indication that the transition from the TSUS to the HTSUS was intended to be revenue-neutral with respect to the particular merchandise at issue. See, e.g., U.S.I.T.C., Conversion of the Tariff Schedules of the United States Annotated Into the Nomenclature Structure of the Harmonized System, Rep. on Investigation No. 332-131 Under § 332 of the Tariff Act of 1930, Annex II: Cross-Reference From Present TSUSA to Converted Tariff Schedule' (June 1983) (showing all goods previously classified under TSUS Item 640.30.10, duty free, reclassified under Heading 7310, duty free, not under Heading 4202).
Ensuring that the HTSUS remains revenue neutral is more than a “sufficient reason why Congress would have desired substantially to prolong use of a formerly-employed rate known by the particular importer to have already been abandoned by Customs” absent compliance with the public notice requirement of § 1315(d), that the court found absent in Heraeus-Amersil. I would therefore limit the actual or constructive notice exception to those de facto established and uniform practices that were established entirely under the HTSUS, not to those that were in place under the TSUS. The enactment of a new statutory regime, the HTSUS, that Congress intended to be essentially revenue neutral, provides a strong rationale for adhering to the rule announced in Hem-scheidt, namely, that “[r]eclassifieations under the HTSUS that nullify established and uniform TSUS classifications are sub*1343ject to the notice requirements of section 1315(d), unless the reclassification is itself compelled by the terms of the HTSUS statute.” 72 F.3d at 871. Section 1315(d) requires notice by publication in the Federal Register; actual notice to the particular importer is insufficient to satisfy the requirements of the statute.
Under the TSUS, Jewelpak’s presentation boxes were consistently classified as packaging according to their component of chief value, and were imported at substantially lower duty rates. Customs’ reclassification of Jewelpak’s boxes as “jewelry boxes” under Heading 4202 was not mandated by the terms of the HTSUS. That reclassification resulted in a higher duty rate, which Customs imposed without providing 30 days of prior public notice in the Federal Register. Customs violated § 1315(d) by so doing. Because Customs failed to provide public notice in the Federal Register for thirty days, this reclassification, and the accompanying imposition of the twenty percent duty rate, should have been ineffective. I therefore respectfully dissent.

. The government disputes the existence of an EUP for the period beginning in 1990, hut ''[i]t is uncontested that under the [TSUS], the boxes were classified according to their component of chief value.” Jewelpak, 96-189. The government's arguments regarding the absence of an EUP are directed entirely to liquidations occurring more than one year after the effective date of the HTSUS. The government does not contest that for more than two decades during which the TSUS was in effect, boxes such as those at issue were classified as packaging. As Jewelpak contended in its opening brief, this constitutes an established and uniform practice. The government's failure to argue to the contrary is a concession that Customs had an established and uniform practice under the TSUS. In this respect, this case is identical to Hemscheidt.

. I share the majority’s conviction that counsel, as court officers, must call our attention to precedent of which they are aware when it is so relevant as to be potentially controlling. They must do so even -if that precedent is harmful to their position. I am less dismayed than the majority in this case, however, because Jewelpak included Heraeus-Amersil in the Table of Authorities in its opening brief, and also mentioned the case on page 15 of its opening brief in the context of admitting that the requirements for showing an established and uniform practice are “stringent.”