Court Opinion

ID: 2713690
Source: CourtListenerOpinion
Date Created: 2014-08-05 20:52:39.444266+00
Date Added: 2024-06-11T13:16:18.234666
License: Public Domain

Slip Op. 14 -22

     UNITED STATES COURT OF INTERNATIONAL TRADE

                                                     :
BEST KEY TEXTILES CO. LTD.,                          :
                                                     :
                                       Plaintiff,    :
                                                     :
                            v.                       : Before: R. Kenton Musgrave, Senior Judge
                                                     : Court No. 13-00367
UNITED STATES,                                       :
                                                     :
                                       Defendant.    :
                                                     :
                                                     :

                                             OPINION

[Granting motion for reconsideration and dismissing complaint.]

                                                                         Decided: February 25, 2014

      John M. Peterson, Maria E. Celis, Richard F. O’Neill, George W. Thompson, and Russell
A. Semmel, Neville Peterson LLP of New York, NY, for the plaintiff.

        Marcella Powell and Beverly A. Farrell, Trial Attorneys, Commercial Litigation Branch,
Civil Division, U.S. Department of Justice, of New York, NY, for the defendant. With them on the
brief were Stuart F. Delery, Assistant Attorney General, Jeanne E. Davidson, Director, and Amy M.
Rubin, Acting Assistant Director, International Trade Field Office. Of counsel on the briefs were
Claudia Burke and Tara K. Hogan, U.S. Department of Justice, and Paula S. Smith, Attorney, Office
of the Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection.

               Musgrave, Senior Judge: Considering the plaintiff’s motion for reconsideration of

that part of the prior opinion on this matter (familiarity with which is here presumed) that addresses

jurisdiction under 28 U.S.C. §1581(i)(4), see Slip Op. 13-148 (Dec. 13, 2013), as well as the

plaintiff’s alternative motion for transfer to the U.S. District Court for the District of Columbia

pursuant to 28 U.S.C. §1631, the court concludes that quality of the briefing obviates the plaintiff’s
Court No. 13-00367                                                                             Page 2

motion for oral argument thereon. Opposition from the defendant U.S. Customs and Border

Protection (“Customs” or “CBP”) contends that the prior decision is correct on the plaintiff’s lack

of prudential standing to raise the claims it attempts to advance here. The court agrees it is “highly

questionable” whether a Customs’ ruling that lowers the rate of duty on a product the plaintiff has

no expressed intention of importing can result in aggrievement or adverse effect to the plaintiff,1

either directly or under a “zone of interests” analysis, as intended under the Administrative Procedure

Act (“APA”). See 5 U.S.C. §702; Clarke v. Securities Industry Ass’n, 479 U.S. 388, 395 (1987) (“it

was [never] thought . . . that Congress, in enacting § 702, had . . . intended to allow suit by every

person suffering injury in fact”). While the court stands by its prior ruling in general, it is,

nonetheless, the plaintiff’s product that is the subject of the ruling at issue, and the court has

undoubted exclusive jurisdiction over the general administration and enforcement of this type of

matter in 28 U.S.C. §1581(i)(4). The court will therefore presume Customs’ ruling “reviewable,”

see Clarke, 479 U.S. at 399, and the complaint’s allegation of “aggrievement” sufficient to invoke

jurisdiction under section 1581(i)(4). See 5 U.S.C. §702; 28 U.S.C. §2640(e); see also id. The prior

judgment and that portion of the opinion addressing jurisdiction under section 1581(i)(4) are

therefore vacated and hereby replaced, and the motions for transfer and oral argument are denied as

moot. This opinion addresses the merits of the plaintiff’s complaint.

                                I. Background; Standard of Review

               By way of brief background, Customs conducted a revocation ruling proceeding in

accordance with 19 U.S.C. § 1625(c). The proceeding resulted in issuance of Headquarters Ruling

       1
          The court remains unaware of any other suit brought against the government on the claim
that the plaintiff or its property should be assessed a higher rate of tax or duty.
Court No. 13-00367                                                                              Page 3

Letter HQ H202560, dated September 17, 2013 (“Revocation Ruling” or “RR”), which revoked New

York Ruling Letter (“NY”) N187601 (Oct. 25, 2011) (“Yarn Ruling”). The Yarn Ruling had

classified the plaintiff’s proprietary “BKMY” yarn under heading 5605, Harmonized Tariff Schedule

of the United States (“HTSUS”), as “metalized” yarn dutiable at 13.2% ad valorum. The Revocation

Ruling’s replacement of the Yarn Ruling holds that BKMY is not a metalized yarn of heading 5605

but a polyester yarn dutiable at 8% ad valorum.

                The issue before Customs, during the formal notice-and-comment revocation

proceeding and the less formal Yarn Ruling request, was the proper statutory classification of the

imported yarn for customs duty purposes. This inquiry required (1) ascertaining the proper meaning

of specific terms in relevant tariff provisions, which is a question of law; and (2) determining

whether the article comes within the description of such terms as properly construed, which is a

question of fact. See, e.g., Park B. Smith, Ltd. v. United States, 347 F.3d 922 (Fed. Cir. 2003).

These questions implicate the proper standard of judicial review on the matter as it now stands.

                On an ordinary sui generis classification question, by trial before the court, Customs

is entitled to a presumption of correctness on its findings of fact, and review of its interpretation of

relevant statutes is de novo. 28 U.S.C. § 2639(a)(1); see, e.g., Jarvis Clark Co. v. United States, 733

F.2d 873 (1984). The plaintiff argues that even though this case involves a pre-importation ruling,

it is the court’s obligation to find the “correct decision” to its product’s classification pursuant to

Jarvis Clark,2 which it avers “does not involve or change the standard of review, but is merely a

        2
          Jarvis Clark involved an appeal on a protest of a classification, pursuant to which the
importer had traditionally borne a so-called dual burden that “apparently arose out of the formalities
of pleading: an importer could prevail in a protest only if it pleaded the proper alternative
                                                                                        (continued...)
Court No. 13-00367                                                                               Page 4

matter of procedure and remedy.” Pl’s Reply at 11. The court always endeavors to reach the

“correct decision” -- even apart from Jarvis Clark -- but be that as it may, this is not an “ordinary”

classification case. It is, of course, a review of an administrative record involving the administrative

interpretation of the tariff statutes and the facts as they have been mustered before the agency. Such

a proceeding is clearly governed by the scope and standard of judicial review of the Administrative

Procedure Act (“APA”) applicable to the court’s residual jurisdiction rather than the evidentiary

burdens of proof allocated in 28 U.S.C. §2639. See 5 U.S.C. § 706; 28 U.S.C. § 2640(e); Shakeproof

Indus. Prods. Div. of Ill. Tool Works v. United States, 104 F.3d 1309, 1313 (Fed. Cir. 1997).

                Section 706 of the APA provides in relevant part that “[t]o the extent necessary to

decision and when presented, the reviewing court shall decide all relevant questions of law, interpret

constitutional and statutory provisions, . . .” and “hold unlawful and set aside agency action, findings,

and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law.” 5 U.S.C. §706.3 An agency rule would “normally” be arbitrary and capricious

“if the agency has relied on factors which Congress has not intended it to consider, entirely failed

to consider an important aspect of the problem, offered an explanation for its decision that runs

        2
          (...continued)
classification, and the importer carried the burden of proving the facts pleaded.” 733 F.2d at 876.
The resolution involved the interpretation of 28 U.S.C. §2643(b), which provides that if the court
“is unable to determine the correct decision on the basis of the evidence presented in any civil action,
the court may order a retrial or rehearing for all purposes, or may order such further administrative
or adjudicative procedures as the court considers necessary to enable it to reach the correct decision.”
        3
          Thus, to the extent Jarvis Clark has any applicability here, “the basis of the evidence
presented in [this] civil action”, 28 U.S.C. §2643(b), can only be construed as being on the basis of
the administrative record, and the “correct decision” is whether Customs’ ruling thereon is arbitrary,
capricious, an abuse of discretion, or not in accordance with law.
Court No. 13-00367                                                                             Page 5

counter to the evidence before the agency, or is so implausible that it could not be ascribed to a

difference in view or the product of agency expertise.” Motor Vehicle Mfrs. Ass’n. v. State Farm

Mut., 463 U.S. 29, 43 (1983). In such a review, factual assertions in pleadings and briefs that are

not a part of the administrative record must be ignored by the court. See, e.g., Jinan Yipin Corp.,

Ltd. v. United States, 35 CIT ___, 800 F. Supp. 2d 1226, 1264 n.48 (2011).

               The “arbitrary and capricious” standard of review is “highly deferential,” as the

parties agree. Def’s Resp. at 17, Pl’s Reply at 9. See, e.g., Boltex Mfg. Co. v. United States, 24 CIT

972, 978, 140 F. Supp. 2d 1339, 1346 (2000) (“[i]t is well-settled that the arbitrary and capricious

standard of review is not merely deferential to agency action, but the most deferential of the APA

standards of review”) (italics in original), referencing In re Gartside, 203 F.3d 1305, 1312 (Fed. Cir.

2000). Pursuant to this standard, the court must (1) consider whether the agency’s decision was

based on a consideration of relevant factors and whether there has been a clear error of judgment,

and (2) analyze whether a rational connection exists between the agency’s fact findings and its

ultimate action. See Consolidated Fibers, Inc., v. United States, 32 CIT 24, 33-36, 535 F. Supp. 2d

1345, 1353-54 (2008) (comparing Consolidated Bearings Co. v. United States, 412 F.3d 1266, 1269

(Fed. Cir. 2005) with In re Gartside, 203 F.3d at 1312-13); see also 3 Charles H. Koch, Jr.,

Administrative Law and Practice §§ 10.1[1], 10.3, 10.4, 10.6 (2d ed. 1997 & Supp. 2006).

               As above indicated, Customs’ revocation rulings are conducted through formal notice

and comment procedure. They therefore would appear to be not simply “interpretations contained

in policy statements, agency manuals, and enforcement guidelines”4 beyond the “pale” of the

       4
         United States v. Mead Corp., 533 U.S. 218, 234 (2001), quoting Christensen v. Harris
County, 529 U.S. 576, 587 (2000).
Court No. 13-00367                                                                             Page 6

Chevron deference generally accorded to agency interpretations of statutes the agency is charged

with administering. Cf. Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837 (1984)

with Cathedral Candle Co. v. U.S. Intern. Trade Comm’n, 400 F.3d 1352, 1361 (Fed. Cir. 2005)

(“[n]ormally, courts accord Chevron deference when Congress has authorized the administrative

agency ‘to engage in the process of rulemaking or adjudication that produces regulations or rulings

for which deference is claimed’”), quoting Mead, 533 U.S. at 229; see also 5 U.S.C. §§ 551(4)&(5)

(defining “rulemaking” as the “agency process for formulating, amending, or repealing a rule,” and

a rule is defined as “an agency statement of general or particular applicability and future effect

designed to implement, interpret, or prescribe law or policy”).

               However, the court remains mindful of Heartland By-Products, Inc. v. United States,

264 F.3d 1126 (Fed. Cir. 2001), which essentially declared that revocation rulings are in the same

class of Customs’ “rulings” that are to be afforded the so-called “deference” of Skidmore v. Swift &

Co., 323 U.S. 134 (1944). 264 F.3d at 1135. See Mead, 533 U.S. at 228, 235; see, e.g.,

Warner-Lambert Co. v. United States, 425 F.3d 1381, 1384 (2005); Rocknel Fastener, Inc. v. United

States, 267 F.3d 1354, 1357 (2001). Skidmore requires “respect” for the thoroughness evident in the

administrative ruling, for the validity of the reasoning that led to the ruling, for the evident

consistency of the ruling with earlier and later pronouncements, for the formality with which the

particular ruling was established, and for other factors that supply a “power to persuade, if lacking

the power to control.” Skidmore, 323 U.S. at 140; see Mead, 533 U.S. at 235; see, e.g.,

Warner-Lambert Co. v. United States, 407 F.3d 1207, 1209 (Fed. Cir. 2005). In other words,

Skidmore provides a neat restatement of the obvious, i.e., the proper consideration that is, or should

be, attempted as a matter of course on judicial review of any administrative proceeding.
Court No. 13-00367                                                                                                          Page 7

                                        II. Summary of Revocation Ruling

                 As described in the previous opinion, the Yarn Ruling and the Revocation Ruling

address the classification of the plaintiff’s BKMY yarn product. BKMY is produced from polyester

chips melted into a slurry to which aluminum or zinc powder and titanium dioxide (a delusterant)

is added. The slurry is then “fired’ through a spinneret to create the yarn.

                 The Yarn Ruling that was revoked allowed BKMY classifiable as a “metalized yarn”

of subheading 5605.00.90, HTSUS (2011):

       Metalized yarn, whether or not gimped, being textile yarn, or strip or the like of
       heading 5404 or 5405, combined with metal in the form of thread, strip or powder
       or covered with metal:
              Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.2%

The referenced headings, 5404 and 5405, HTSUS, cover “synthetic” and “artificial” (respectively)

“monofilament of 67 decitex or more and of which no cross-sectional dimension exceeds 1 mm; strip

and the like (for example, artificial straw) of synthetic textile materials of an apparent width not

exceeding 5 mm”. Decitex refers to the articles’ linear mass density, or fineness.

                 The Revocation Ruling concluded that the Yarn Ruling was issued erroneously and

that BKMY is classifiable under a lower duty rate in subheading 5402.47.90, HTSUS (2011):

       Synthetic filament yarn (other than sewing thread), not put up for retail sale,
       including synthetic monofilament of less than 67 decitex:
              Other, of polysters:
                      Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8%

                 Customs began its analysis in the revocation proceeding by setting forth the standard

legal construct for customs classification, to wit: Merchandise is classifiable under the HTSUS in

accordance with the General Rules of Interpretation (“GRIs”). GRI 1 provides that classification

shall be determined according to the terms of the headings and any relative section or chapter notes
Court No. 13-00367                                                                              Page 8

and, provided such headings or notes do not otherwise require, according to the remaining GRIs 2

through 6. GRI 6, HTSUS, requires that the GRI’s be applied at the subheading level on the

understanding that only subheadings at the same level are comparable. The GRIs apply in the same

manner when comparing subheadings within a heading. RR at 2.

              After summarizing the relevant HTSUS provisions at issue, Customs quoted the

relevant Harmonized Commodity Description and Coding System Explanatory Notes (“EN”) to

heading 5605, HTSUS. Customs noted that the ENs are neither legally binding nor dispositive, but

constitute “official interpretation of the Harmonized System at the international level” as

“commentary on the scope of each heading of the HTSUS and . . . are generally indicative of the

proper interpretation of these headings.” Id. at 3 (citation omitted). The EN to heading 5605,

HTSUS, is as follows:

       This heading covers:

       (1) Yarn consisting of any textile material (including monofilament, strip and
       the like and paper yarn) combined with metal thread or strip, whether obtained
       by a process of twisting, cabling or by gimping, whatever the proportion of the metal
       present. The gimped yarns are obtained by wrapping metal thread or strip spirally
       round the textile core which does not twist with the metal. Precious metals or plated
       metals are frequently used.

       (2) Yarn of any textile material (including monofilament, strip and the like, and
       paper yarn) covered with metal by any other process. This category includes yarn
       covered with metal by electro-deposition, or by giving it a coating of adhesive (e.g.,
       gelatin) and then sprinkling it with metal powder (e.g., aluminium or bronze).

       The heading also covers products consisting of a core of metal foil (generally of
       aluminium), or of a core of plastic film coated with metal dust, sandwiched by means
       of an adhesive between two layers of plastic film.

       The heading covers multiple (folded) or cabled yarn containing plies of the yarn
       referred to above (e.g., fancy cords as used by confectioners, obtained by twisting
       together two or more metallised yarns as described above). It further includes certain
Court No. 13-00367                                                                              Page 9

       other forms of yarn made in the same way and used for similar purposes, consisting
       of two or more parallel metallised yarns held together with a binding of metal thread
       or strip, and yarn or bundles of yarn gimped with yarn of this heading.

       Metallised yarn may be gimped. It is used in the manufacture of trimmings and lace
       and of certain fabrics, as fancy cords, etc.

       The heading does not include:
       (a) Yarn composed of a mixture of textile materials and metal fibres conferring on
       them an antistatic effect (Chapters 50 to 55, as the case may be).
       (b) Yarn reinforced with metal thread (heading 56.07).
       (c) Cords, galloons or other articles having the character of ornamental trimmings
       (heading 58.08).
       (d) Wire or strip of gold, silver, copper, aluminium or other metals (Sections XIV
       and XV).

Id. at 3-4 (as quoted in RR).

               Based on the foregoing, when considering the plaintiff’s argument that BKMY

satisfies the terms of heading 5605 notwithstanding the “extremely minute amount of metal” and

lack of description of the plaintiff’s process of manufacture in the ENs, Customs agreed “that it is

the nature of the product rather than the process of manufacture which is the key consideration in

determining whether the product is classifiable in heading 5605.” Id. at 4. After restating the

definition of “metalized yarn” in heading 5605 (“being textile yarn, or strip or the like of heading

5404 or 5405, combined with metal in the form of thread, strip or powder or covered with metal”),

Customs concluded that BKMY did not meet that definition as it was not “combined” with metal.

Customs also considered “[w]hether a polyester slurry falls within the meaning of ‘or the like’” and

concluded that “is unclear from the legal text alone.” Customs then looked to the ENs for heading

5605 for “guidance”. Customs found that those ENs

       clearly contemplate that not every product combining yarn and metal in some fashion
       will be considered a metalized yarn for tariff purposes. The ENs specifically describe
       two types of products covered by heading 5605, HTSUS: 1) Yarn consisting of any
Court No. 13-00367                                                                            Page 10

       textile material (including monofilament, strip and the like and paper yarn) combined
       with metal thread or strip, and 2) Yarn of any textile material (including
       monofilament, strip and the like, and paper yarn) covered with metal by any other
       process. The ENs further emphasize that metalized yarn of heading 5605 is used for
       decorative purposes, for example “in the manufacture of trimmings and lace and of
       certain fabrics, as fancy cords, etc.”. The ENs specifically exclude yarns composed
       of a mixture of textile materials and metal fibres [sic], and yarns reinforced with
       metal thread from classification in heading 5605, HTSUS. Thus, while heading 5605
       may allow for new methods of production of metalized yarn, the mere presence of
       metal in the yarn does not automatically result in classification in heading 5605,
       HTSUS.

Id.
               Customs concluded the description of “metalized yarn” in the ENs to heading 5605

was “also consistent with the common and commercial meaning of the term.” Id. at 5. Examining

dictionaries and other lexicographic materials to determine the common meaning of the term as well

as consulting with industry sources, Customs confirmed that the extent of the commercial meaning

of “metalized yarn” does not encompass every possible form of yarn with metal added but has a

specific meaning consistent with the ENs to heading 5605 “which does not encompass the Best Key

yarns at issue.” Id. Commerce found that the common and commercial meanings of the term

“indicate that ‘metalized yarn’ is commonly understood to mean either a pre-existing yarn consisting

of any textile material combined with metal, or a plastic film deposited with metal and slit into yarn,

generally used for decorative purposes.” Id. Customs noted that the Federal Trade Commission

definition of “metallic” is consistent with its conclusion, see 16 C.F.R. §303.7(o) (“A manufactured

fiber composed of metal, plastic-coated metal, metal coated plastic, or a core completely covered by

metal”) and it found no “similar products” described as metalized yarns among the “numerous

technical sources on metallic yarns and fibers” it consulted. Id. at 5-6. Rather, these “technical
Court No. 13-00367                                                                           Page 11

sources on metalized yarn noted that metallic yarns consist of pre-existing yarn or plastic film

bonded to metal”, and they also “stress that they are used primarily for decorative purposes.” Id.

               “Similarly,” Customs reasoned,

        textile industry experts consulted by CBP from the American Fiber Manufacturers
        Association [AFMA] and the National Council of Textile Organizations [NCTO]
        were in agreement that the textile industry considers a metalized yarn to be either a
        textile yarn covered or coated with metal, or a plastic film deposited with metal and
        slit into yarn. This is consistent with what CBP has classified in heading 5605 in the
        past, and consistent with the Explanatory Notes to heading 5605, HTSUS. Thus, we
        conclude that the term “metalized yarn” as commonly and commercially understood,
        is a manufactured fiber composed of metal, plastic-coated metal, metal-coated
        plastic, or a core completely covered by metal, including metal sandwiched between
        layers of plastic, as in Lurex yarns, having a visible metallic effect or appearance.

Id. at 6.

               Customs then responded to the plaintiff’s comments submitted in opposition to the

proposed revocation. Addressing the affidavit opinion of Ingrid Johnson, the plaintiff’s authority

on textiles who had opined that BKMY is a “metalized yarn” according to a then-forthcoming

definition of metallic yarn in the latest edition of a Fairchild dictionary,5 Customs noted that the

Fairchild definition “is completely consistent with” the definitions of the technical sources Customs

had summarized and “does not reference any method of production similar to that used by Best

Key”. Id. at 7. Customs further noted that “[a]lthough this definition allows for the possibility of

other combinations of textile and metal, not specifically mentioned, being a metallic yarn, it does

not state that any textile yarn containing metal must automatically be considered a metallic yarn” as

argued by the plaintiff. Customs thus reasoned that regardless of whether the Fairchild definition

        5
         See Phyllis G. Tortora and Ingrid Johnson, The Fairchild Books Dictionary of Textiles, p.
383 (Bloomsbury, 8th ed., 2013). The Revocation Ruling refers to this as “Fairchild’s Dictionary
of Fashion.”
Court No. 13-00367                                                                              Page 12

is intended to include such products or not, the definition does not support the argument that BKMY

should be considered metalized yarns for customs duty purposes, as

        [s]uch an interpretation would be far more expansive than the plain text of the
        heading, the ENs[,] or the technical definitions would support. Indeed, it is difficult
        to imagine what woudn’t fall within the scope of metalized yarn based on such a
        reading.

Id. (noting antistatic yarns, and yarns reinforced with metal thread, as examples of articles coming

within the Fairchild definition but which are specifically excluded from heading 5605 pursuant to

its ENs). Customs did not find the “Angelina” fibers analogous because they “have a distinctive and

notable metallic, luminescent sheen.” Id.

                Customs then considered the more expansive claim, beyond visibility, to wit, that “in

a metalized yarn, the metal is added for a specific purpose, to add desirable characteristics to a fabric

such as . . . antimicrobial properties, or UV protection” as claimed by the plaintiff. Id. at 7-8.

Customs rejected the argument in this instance for four reasons. First, Customs found that the

plaintiff had provided no evidence to prove that the BKMY, for which the original Yarn Ruling letter

had been sought, in fact held the “desired characteristics” claimed of its metals, namely “that the

aluminum or zinc added to the instant yarns impart any microbial properties of UV protection to the

fiber, or even that they could have such an effect in such low concentrations.” Id. at 8. Second,

Customs found that adding metal before extrusion “is not itself a new procedure” and that

“[h]eretofore, such products have not been considered metalized yarns.” Id. (references omitted).

Third, Customs found that the various Customs rulings the plaintiff claimed as classifying yarns

having no metallic appearance in heading 5605 in fact are all described as “decorative” or “metallic”

or are used in decorative applications such as decorating packages. Id. Fourth, Customs noted that
Court No. 13-00367                                                                            Page 13

while it “does not impose a strict requirement with respect to the amount of metal that must be

present in order for a yarn to be considered metalized, tests conducted by the [Customs] Laboratory

indicate that the samples of Best Key’s yarns submitted for analysis contain only trace amounts of

metal.” Id. at 9. In sum,

       [g]iven that many products and preparations used in textiles, such as those of heading
       3809[ ], contain metallic substances, and even natural fibers may naturally contain
       trace amounts of metal absorbed from the soil, many yarns may consequently have
       traces of metal simply as a result of common treatments such as dye fixing or
       delustring. To classify any fiber with as little metal as is present in the instant yarn
       in heading 5605 would expand the heading far beyond its current scope, to include
       any yarns which contain trace amounts of metal as a byproduct of common textile
       treatments and which have never been considered metalized yarn. As noted above,
       by contrast, the products recognized as metalized yarns in the textile industry have
       much higher concentrations of metal, with the result that the metal is immediately
       apparent.

Id. (footnote omitted).

                                           III. Discussion

               As indicated above, heading 5605 addresses the imported state of textile yarn, or strip

or the like of heading 5404 or 5405, combined with metal. The obvious question Customs had to

address was whether the product contemplated for importation is a textile-yarn-metal combination

in the sense contemplated by heading 5605.

               Both parties acknowledge the axiom that it is a product’s “nature” upon importation

that controls its classification. They also agree it is not the process of manufacture that is “key” in

determining whether a yarn is properly entered as “metalized yarn.” Where they differ is not only

over Customs’ legal interpretation of the language of heading 5605 but also Customs’ factual

findings and conclusions in the Revocation Ruling. On review of an administrative record, of
Court No. 13-00367                                                                            Page 14

course, the court is precluded from substituting judgment on facts with “two fairly conflicting views”

in the absence of showing that a finding is arbitrary, capricious or an abuse of discretion, Universal

Camera Corp. v. NRLB, 340 U.S. 474, 488 (1951), but the plaintiff argues that the language of

heading 5605 is “clear,” and that since the heading is eo nomine, it covers “all forms” of the article

including BKMY. See Carl Zeiss, Inc. v. United States, 195 F.3d 1375, 1379 (Fed. Cir. 1999).

               The government is correct, however, that an eo nomine provision does not cover all

forms when such coverage is contrary to legislative intent or when the articles are limited by the

terms of the statute. In such a case, the provision only includes those articles embraced by the

provision’s language. Def’s Resp. at 20, referencing United States v. Charles R. Allen, Inc., 37

CCPA 110, C.A.D. 428 (1950); RMS Electronics, Inc. v. United States, 83 Cust. Ct. 37, 43, 480 F.

Supp. 302, 306 (1979). Further, although the “clarity” of heading 5605 literally covers all forms of

yarn-and-metal combinations, Customs implicitly found that the language cannot be interpreted

literally, because it was not, in fact, intended to cover all forms, as evident in heading 5605’s ENs’

specific exclusion of four classes of articles from coverage (e.g., antistatic yarns). See RR at 4.

Customs’ research and consultation with industry sources also confirmed that the commercial

meaning of “metalized yarn” does not encompass every possible form of yarn with metal added. Id.

at 5. Customs’ conclusion that heading 5605 does not in fact cover “all forms” of yarn-and-metal

combinations is persuasive, and the plaintiff’s arguments to the contrary are not.

               The plaintiff also disagrees with the Revocation Ruling’s holding (assuming that is

what it amounts to) that heading 5605 requires the combination of two distinct intermediary

products, namely (i) a pre-existing yarn or strip “or the like” of heading 5404 or 5405, and (ii) metal
Court No. 13-00367                                                                             Page 15

in the form specified in heading 5605. However, the plaintiff does not persuade that Customs’

interpretation is unlawful or should be regarded as unpersuasive. As employed in heading 5605,

“being textile yarn” etc. “combined with metal” obviously alludes to the state (i.e., as imported) of

“being” a metalized yarn intended to be encompassed by heading 5605 (i.e., of unity or coalescence),

but it may also encompass the process by which such a yarn is brought into “being” (i.e., the result

of which two or more substances are joined to make a single substance). Since either interpretation

is possible, the statute is ambiguous to that extent. See, e.g., Rifkin Textiles Corp. v. United States,

62 Cust. Ct. 316, 297 F. Supp. 1127, 1134 (1969) (the court “find[s] the term ‘ornamented fabrics’

to be ambiguous, taking that word in the sense that the court is not entirely certain of the meaning

of the statutory language when applied to the particular facts of this case” and therefore “resort to

pertinent authoritative materials to ascertain the meaning of the term is permissible”). The plaintiff

opted for this route of administrative and judicial process, and it is not the court’s function in this

proceeding to resolve that ambiguity but only determine whether Customs’ ruling has “power to

persuade” in accordance with Mead and Skidmore. Customs emphasized on the record that it is the

nature of the product upon importation that is determinative, see RR at 4, and contrary to the

plaintiff’s contention, the court is not persuaded that the process of “being . . . combined” is

“irrelevant” to that determination and an erroneous interpretation of the statute.

                The plaintiff further argues Customs “seeks to engraft” the exemplars of the ENs to

heading 5605 “as limitations on the construction of heading 5605 itself”, which type of “reasoning

was explicitly rejected by the Federal Circuit in Midwest of Cannon Falls, Inc. v. United States, 122

F.3d 1423 (Fed. Cir. 1997)”. Pl’s Br. at 22. This appears to misinterpret Customs’ analysis, supra,
Court No. 13-00367                                                                             Page 16

and the Cannon Falls decision. Customs did not “engraft” from the ENs to heading 5605 but looked

to them for guidance. The process of that interpretive guidance is in contrast with the Cannon Falls

case, which involved Customs’ reading into the HTSUS provision for “Christmas ornaments” the

limitation “tree.” The term was clearly not present in the relevant tariff provision. The “tipping

point” for the Federal Circuit on the issue, however, was not Customs’ interpretation of the ENs

therefor, but the apparent fact that “tree” had been explicitly excluded by Congress upon supersedure

of the prior tariff provision of the Tariff Schedules of the United States, in which the term “tree” had

appeared. See 122 F.3d at 1429 (“The examples in the Explanatory Notes, however, cannot control

here, particularly in light of the congressional omission of the word ‘tree.’”) (italics added).

               Continuing, the plaintiff makes the parallel argument that a tariff provision will

encompass a future-developed version of a product if the product bears an “essential resemblance”

to the goods (or, where applicable, exemplars) identified in the tariff heading. Pl’s Br. at 27-28,

referencing Brookside Veneers, Ltd. v. United States, 847 F.2d 786, 789 (Fed. Cir. 1988). The

government’s position is that “because the language of heading 5605, HTSUS, makes clear that

Congress intended that the statute be limited to only those products embraced by its language”, the

“essential resemblance” doctrine is inapplicable to the instant goods. Def.’s Resp. 26-27. The

plaintiff contends the government is implying, in effect, that heading 5605 is an evolutionary “dead

end” that cannot be stretched to embrace newly-developed products.

               Here, the plaintiff overstates the government’s position. Nowhere does Customs

contend that a “newly developed product” would not be a product of heading 5605 “embraced by

its language”. The plaintiff asks why would the combination of metal powder with plastic in liquid
Court No. 13-00367                                                                              Page 17

polymer form (i.e., the plaintiff’s process) “be something prohibited or unanticipated under the

statute?”,   Pl’s Reply at 17, but it is the “nature” of the product, not the newness of its

“development” (or technical production process), that drives its classification. Customs simply

found the plaintiff’s product classifiable under a different heading (5402.47.90, HTSUS), and the

plaintiff’s rhetoric does not render Customs’ Revocation Ruling unreasonable or unpersuasive.

                The plaintiff next accuses Customs of “substantial ex parte communications between

Customs and domestic industry lobbyist groups and competitors of Best Key for the purpose of

soliciting their comments” which “is ‘intolerable’ and alone renders the proceedings arbitrary.” Pl’s

Reply at 20, referencing Home Box Office, Inc v. FCC, 567 F.2d 9, 54 (D.C. Cir. 1977). See also

id. at 24. However, there is no indication from the record that the individuals involved in the

communications were with “competitors” of the plaintiff or “lobbyists” on the issue, let alone that

this is an instance where domestic industry representatives “described the kind of . . . regulation that,

in their view, [they] ‘could live with.’” 567 F.2d at 53. Nor does the plaintiff persuade that there

is a “possibility that there is here one administrative record for the public and this court and another

for [Customs] and those ‘in the know’”. Id. at 54. Cf. Slip Op. 13-145, 37 CIT ___ (Dec. 4, 2013).

It is plain from the record that during Customs’ internal debate, prior to deciding whether the Yarn

Ruling should be revoked or was correct, it simply reached out for help informing its own expertise.

See, e.g., Administrative Record Document (“AR”) at 539-42. That is not unlawful.

                Nonetheless, the plaintiff also takes issue with what it claims is the government’s

“conclusory” characterization of the plaintiff’s “expert-opinion” affidavit on the record (which

source avers that BKMY “bears an essential resemblance to metalized yarns known to commerce
Court No. 13-00367                                                                               Page 18

and science”) by attempting to disparage the level of expertise and opinions of the head of AFMA

and the vice-president of NCTO. For example, the plaintiff claims the record “certainly” establishes

that the opinion of the plaintiff’s supporter “is much more reliable than the supposed ‘industry

experts’ consulted by Customs.” However, Customs appears to have adequately considered the

opinion of the plaintiff’s expert in its ruling construing the relevant statute. Customs’ construction

is not unlawful, and the court must defer to the agency’s reasonable factual conclusion on whether

the BKMY does or does not meet the statutory definition of “metalized yarn” as lawfully construed.

                The plaintiff further contests the Revocation Ruling’s statement that AFMA and

NCTO “were in agreement that the textile industry considers a metalized yarn to be either a textile

yarn covered or coated with metal, or a plastic film deposited with metal and slit into yarn” as a

misrepresentation of the substance of Customs’ communications with NCTO, and assignment to that

group and others positions not reflected in the administrative record. If the plaintiff is correct on this

latter point, it has not been prejudiced by Customs’ arguably erroneous characterization. See 5

U.S.C. §706 (requiring “due account . . . of the rule of prejudicial error”). Whether it is an arguable

“stretch” to characterize NCTO’s communications with Customs, on behalf of itself and also in

expressing the “view” of the head of AFMA, as those organizations’ “agreement” with Customs’

interpretation of heading 5605, those communications do, however, express the organizations’

representatives’ understanding of the question, and there is no indication on the record that those

representatives or organizations held or would have held views significantly different than as stated

by Customs. The court’s role in this record does not involve re-weighing the evidence, choosing
Court No. 13-00367                                                                            Page 19

between fairly competing alternatives, and substituting its own factual findings or judgment therefor.

Universal Camera Corp., supra.

               The plaintiff also argues that the Revocation Ruling evinces a “lack of thoroughness”

because Customs never “followed up” on information received from industry officials indicating that

BKMY was in fact not a product unknown to the “metalized yarn industry.” Pl’s Reply at 22. Even

if Customs was required to follow up on that line of thought, it is unclear what additional

information, if any, would have necessitated a different or contrary analysis or interpretation of

heading 5605. In any case, it is evident that Customs considered the addition of “chemicals [like

metal] before extrusion”, see, e.g., AR at 541, in making its Revocation Ruling, as outlined above.6

               On a different tack, the plaintiff contends the Revocation Ruling arbitrarily applies

an “unstated and ambiguous” de minimis standard of metal content “for the purpose of” revoking the

Yarn Ruling. Pl’s Br. at 40-43, referencing Del Monte Corp. v. United States, 730 F.3d 1352 (Fed.

Cir. 2013); Pl.’s Reply at 25-29. Del Monte involved “a century of tariff enforcement to the effect

that ‘in oil’ signifies any amount of such substance” for purposes of classifying fish packed “in oil.”

36 CIT ___, 885 F. Supp. 2d 1315, 1320 (2012) (italics added). That is not this case. Further, the

plaintiff’s argument relies on the false premise that Customs set a de minimis standard for heading

5605, which the record does not support, and which the plaintiff itself recognizes. See Pl’s Br. at

       6
           The court merely notes in passing that the plaintiff ascribes nefarious and “disturbing”
motives to Customs’ internal discussion of “policy concerns” to argue that the Revocation Ruling
is results-oriented. The argument fails. Nothing on the record indicates that Customs’ discussions
were results-oriented, and Customs’ “policy” is precisely what 19 U.S.C. §1625 rulings are all about,
at least in part. Customs’ free and unfettered discussion thereof, internal or otherwise, albeit with
notice and comment as circumstances may require, at any time is to be encouraged. See, e.g.,
International Custom Products, Inc. v. United States, 32 CIT 302, 307, 549 F. Supp. 2d 1384, 1391
(2008).
Court No. 13-00367                                                                           Page 20

40 (the Revocation Ruling “does not impose a strict requirement with respect to the amount of metal

that must be present in order for a yarn to be considered metalized”), citing AR at 9. The absolute

amount of a substance’s presence does not determine the applicability of the de minimis rule, the

intent of its introduction to serve a definite and useful purpose does, in which case the rule is

inapplicable. See, e.g., Canada Dry Ginger Ale, Inc. v. United States, 43 Cust. Ct. 1, 8-9 (1959).

In any event, Customs did not conclude during the revocation proceeding that the subject yarn was

not a metalized yarn “due” to an insufficient amount of metal, Customs determined that the yarn did

not qualify as a metalized yarn because it did not fall as a matter of fact within the scope of the

statutory language of heading 5605 and within the meaning of the term “metalized yarn.”

               Continuing on this point, the plaintiff argues that the tariff definition of “metalized

yarns” covers articles with any proportion of metal present, and it points to the ENs to heading 5605

for “support” because the ENs contain no language which requires a minimum threshold amount of

metal in the yarn. All the same, it cannot be concluded that the Revocation Ruling was arbitrary or

capricious in concluding that the mere presence of metal in yarn does not automatically result in

classification in heading 5605.

               In its motion for judgment, Pl’s Br. at 41, the plaintiff cites to the Informed

Compliance Publications (ICPs) “Classification: Apparel Terminology under the HTSUS” (June

2008) (“ICP I”) and “Classification of Fibers and Yarns” (Sep. 2011) (“ICP II”), to support its

contention that any presence of metals in textile yarn would qualify the product as a metalized yarn

of heading 5605. These ICPs do not appear to be part of the administrative record before the court

but are included (albeit improperly, the government contends) in full in the plaintiff’s Appendix of
Court No. 13-00367                                                                              Page 21

Documents. The plaintiff cited to the February 2009 version of the latter in its request for

reconsideration (see AR 394 n.2), and it here argues that ICP II states that while the actual amount

of metal present is typically quite small, “any of these yarns that have metal present, whatever the

portion of metal present, is classified as a metalized yarn under heading 5605.” See ICP II at 17

(italics added). But as the government points out, when examined in context this single phrase

recited in the plaintiff’s submission to Customs clearly speaks to “those” yarns that are included in

subsection (1) of the ENs to heading 5605, i.e., yarns combined with metal thread or strip, and/or

refers to Note 2(B)(a) of Section XI, HTSUS.7 The ICPs do not discuss the issue addressed in the

Revocation Ruling, which is whether a product made by adding nanometals to polyester slurry

results in a metalized yarn in the first instance.

                Nonetheless, the plaintiff argues that prior rulings have “uniformly” and “correctly”

stated that a yarn that contains any amount of metal is considered in its entirety as a metalized yarn

for tariff purposes, and that Customs only considers whether the yarn contains any metal. Pl’s Br.

        7
           The plaintiff also claims to take issue (Pl’s Reply at 17-18), but in reality agrees, with the
defendant’s interpretation of Note 2 of Section XI, HTSUS :
         (A) Goods classifiable in chapters 50 to 55 or in heading 5809 or 5902 and of a
         mixture of two or more textile materials are to be classified as if consisting wholly
         of that one textile material which predominates by weight over each other single
         textile material. . . .
         (B) For the purposes of the above rule:
         (a) metalized yarn (heading 5605) [is] to be treated as a single textile material the
         weight of which is to be taken as the aggregate of the weights of its components; for
         the classification of woven fabrics, metal thread is to be regarded as a textile
         material.
In particular, the plaintiff proposes that a yarn composed of 90% polyester and 10% metal would be
classified as a polyester yarn if the “10% metal” component is actually a “non-metalized” yarn, and
note 2(A) applies, whereas note 2(B) applies if the product as a whole is a metalized yarn. But that
still begs the question of whether BKMY is or is not classifiable as a “metalized yarn.”
Court No. 13-00367                                                                            Page 22

at 41. The plaintiff complains that Customs has arbitrarily “separated” its yarn from all other

“metalized yarn” products in holding that its yarn alone is not metalized yarn. Contrary to such

hyperbole, however, Customs did not act arbitrarily and capriciously in holding that the yarn was not

“metalized” or in treating it differently from the products included in rulings cited by the plaintiff.

As discussed in the Revocation Ruling, the rulings the plaintiff referenced are distinguishable from

the plaintiff’s yarn because they are rulings in which yarns were described as “decorative” or

“metallic” or were used in decorative applications. See RR at 8, citing NY N062518, NY L82752,

NY R00713, NY J84177, NY J82793 (revoked by HQ 967829), NY I80137, NY J84274, NY

B89028, NY B89130, NY B89128, NY N062518 and NY R00713. None of the “decorative” or

“metallic” yarn rulings involve a product created with the plaintiff’s metal-in-the-slurry technique,

which the plaintiff describes as a “new and unique nanometal process.” The cited rulings are for

statutory metalized yarns, primarily yarns plied with metallic strip.         See, e.g., NY J82790

(“decorative metallized yarn” comprised of polypropylene yarn mixed with metallic strip); NY

L86561 (polyester yarn “in the form of metallic strips”); NY F83891 (aluminum-coated polyester

strip); NY N034758 (metalized yarn comprised of acrylic and polyester coated with metal). These

products clearly have metallic or metalized fibers or strip in them and were not produced through

the addition of nanometals to a slurry. BKMY was not classified in the same manner as these

products because it is not of the same nature.

               Furthermore, it is incorrect to state that Customs has never considered any yarn

containing metal to be anything other than “metalized” for tariff purposes. In HQ 952934 (July 19,

1993), Customs’ Headquarters ruled on the classification of a fabric comprised of 45% cotton, 47%
Court No. 13-00367                                                                               Page 23

polyester and 8% stainless steel. See AR at 511-516. The yarns from which the fabric was

constructed were characterized by a core of polyester fibers mixed with micro fiber stainless steel

surrounded by cotton fiber. The fabric was used to manufacture garments that provide protection

from microwave radiation. Customs sought to determine whether the metal fiber incorporated in the

fabric could be characterized as “metalized yarns” or “metal thread.” Citing the ENs to heading

5605, HTSUS, Customs concluded that “[i]t is our position that the stainless steel fibers that are

combined with the textile fibers to compose this fabric are not considered ‘metalized yarns’

classifiable in heading 5605.” Customs found that the fabric did not consist of yarns combined with

metal thread or strip, nor was it a yarn covered with metal by any process. Unlike the rulings cited

by the plaintiff, which concern products that are decorative and/or that involve textile items

comprised in part of metal fiber, this ruling may be more directly on point. Although the stainless

steel was present in substantial quantities, the yarn was not “metalized” because it did not fit within

the products described in the ENs, which is similar to Customs’ holding in the Revocation Ruling.

                For the purpose of addressing the plaintiff’s arguments in the revocation proceeding,

Customs assumed, but did not concede, that yarns “metalized” for a specific, practical, non-

decorative purpose are within the scope of heading 5605. Customs then bolstered its ultimate

conclusion that the Yarn Ruling should be revoked by noting that its laboratory analysis had found

only a “trace” of metals in the plaintiff’s yarn at a level apparently consistent with naturally occurring

content or leftover intermediate processes (e.g. dye fixing or delustring).8 Customs observed that

“the actual amount of metal present is quite small in relation to the weight of the textile fibers” and

        8
          The plaintiff argues that the metal introduced into the polyester slurry should not be
considered “trace”, but the plaintiff points to nothing in the record to the contrary.
Court No. 13-00367                                                                            Page 24

it thus found that the record lacked evidence to support that the metals in the BKMY provided the

specific, practical, non-decorative purposes claimed even assuming the hypothetical that heading

5605 encompasses non-decorative metal properties.

               The plaintiff argues that analysis is legally irrelevant insofar there is no explicit

“requirement” in heading 5605 that the metal of the metalized yarns thereof perform any specific

function, and thus the plaintiff argues that it did not have to prove anything other than the fact that

it intentionally added a quantum of metal to its polyester slurry in order to qualify the product as a

metalized yarn of heading 5605. But again, the plaintiff’s literal reading of heading 5605 cannot be

the case. Even “whimsy” is motivated by desire -- all metal is sought (or introduced) for its specific,

desired properties, cf., e.g., Wacker Chemical Corp. v. United States, 78 Cust. Ct. 113, 117 (1977);

E. Taranger, Inc. v. United States, 51 Cust. Ct. 298, 300 (1963); C.J. Tower & Sons v. United States,

32 Cust. Ct. 339, 344 (1954); C.J. Tower & Sons v. United States, 26 Cust. Ct. 284, 290 (1951) --

and the plaintiff’s claim to Customs, that it added nanometal particles in BKMY intentionally for

specific properties (aluminum or zinc for ultraviolet protection, silver or copper for antimicrobial

applications and the like),9 belies the argument it would make here.

               Customs’ analysis of the hypothetical, of the claim that any amount of metal added

to impart some desirable quality beyond visibility qualifies the product as a “metalized” yarn of

heading 5605, clearly indicates that if the claimed quality is not obviously discernable, it must at

least be measurable, which implies at least a minimum threshold or quantum of proof that the

       9
         Notwithstanding its assertions here on what was before Customs, at least for purposes of
the Yarn Ruling it appears the plaintiff claimed that the antimicrobial properties of its BKYM (at the
time) are imparted by titanium dioxide added to the polyester slurry, not silver.
Court No. 13-00367                                                                            Page 25

imparted, desired quality is in fact imparted. Cf. United States v. American Shipping Co., 15 U.S.

Cust. App. 249, T.D. 42261 (1927) (the term “however small” added nothing to the specificity of

paragraph 1430 of the Tariff Act of 1922). In the end, Customs reasoned that to classify in

accordance with the logic of the plaintiff’s argument any fiber “with as little metal as is present in

the instant yarn in heading 5605 would expand the heading far beyond its current scope, to include

any yarns which contain trace amounts of metal as a byproduct of common textile treatments, and

which have never been considered metalized yarn.”

               This logic holds especially persuasive power. By the plaintiff’s literal reasoning, even

a barely measurable amount of metal -- a couple of atoms? -- “intentionally” introduced and

dispersed into a slurry would suffice for a “metalized” yarn of heading 5605. That is, quite literally,

reductio ad absurdum.

               The plaintiff points to no statutory language in heading 5605 or otherwise that would

indicate Congress intended that heading to apply to any product containing any amount of metal, no

matter how minute, and regardless of its effect or purpose, and unlike Dal Tile, this statue is not

“plain” regarding the amount of metal necessary to make a “metalized” yarn. Cf. Dal-Tile Corp. v.

United States, 424 F.3d 1286, 1290 (Fed. Cir. 2005), referencing Public Citizen v. United States

Dep’t of Justice, 491 U.S. 440, 471 (1989) (Kennedy, J., concurring) (absurdity excepts “plain”

meaning where it is “quite impossible” Congress intended the result). The court, thus, is not

persuaded that “whatever the proportion of the metal present” (see ENs to heading 5605; cf. ICP

I & ICP II), which is not a part of the language of heading 5605 itself, was written with an intent to
Court No. 13-00367                                                                           Page 26

encompass the minute “proportion” to which nanoparticulate metal may theoretically be reduced and

“intentionally” introduced into a product resulting from the likes of the plaintiff’s process.

               During the revocation proceeding, the plaintiff did not persuade Customs that heading

5605 actually encompasses any non-decorative properties of metal as well as decorative properties.

No opinion here need be expressed on whether that is a correct reading of heading 5605, because in

the final analysis the plaintiff failed to prove to Customs that even if heading 5605 does encompass

non-decorative metal properties, the BKMY considered for purposes of the Yarn Ruling in fact

exhibits the specific properties claimed to be provided by the “combined” metal. Custom’s factual

finding on this issue in the Revocation Ruling, and more broadly that the BKMY is not a metalized

yarn of heading 5605, was therefore not arbitrary or capricious, and the court may not substitute

judgment therefor.

               The plaintiff has failed to persuade that the Revocation Ruling, as a whole, is

arbitrary, capricious, an abuse of discretion, or not in accordance with law, and the court finds that

the Revocation Ruling has the power to persuade, and also that the plaintiff’s remaining arguments

are without merit.
Court No. 13-00367                                                                        Page 27

                                           Conclusion

               In view of the foregoing, the plaintiff’s motion for judgment is denied. The

defendant’s USCIT Rule 12(b)(1) motion to dismiss is converted into a cross-motion for judgment

pursuant to USCIT Rule 56.1. See, e.g., Carl v. U.S. Secretary of Agriculture, 36 CIT ___, 839 F.

Supp. 2d 1351 (2012). Upon consideration in accordance with the foregoing, that motion is granted,

and the defendant’s alternative motion for further discovery, and the plaintiff’s motion for oral

argument, are hereby dismissed as moot.

So ordered.

                                                    /s/ R. Kenton Musgrave
                                                    R. Kenton Musgrave, Senior Judge

Dated: February 25, 2014
       New York, New York