CAFC Decision in Heartland By-Products

August 2001

On August 30, 2001, the Court of Appeals for the Federal Circuit reversed the decision of the U.S. Court of International Trade in Heartland By-Products v. United States. The decision is important because it is the first time the Federal Circuit has been required to determine whether a classification decision by U.S. Customs is entitled to deference under the Supreme Court's earlier decision in U.S. v. Mead. In that case, the Supreme Court held that classification rulings are to be examined for thoroughness, logic, "expertness," fit with earlier decisions and other sources. Based on these factors, the Court is to decide if the decision is persuasive. This is a major change from prior decisions in which the Court made an independent judgment as to classification.

Another issue in the case involved the traditional rule that goods are to be classified in the condition in which they are imported. In this case, Heartland added molasses to sugar syrup to adjust the classification of the syrup and removed it after importation. The U.S. argued that process was a scheme to avoid the application of a quota and should not be permitted. Instead, the U.S. argued that it should classify the merchandise as if the molasses was not present. The Federal Circuit did not reach this issue in its decision. As a result, the principal appears to remain intact. Nevertheless, a dissenting judge of the Court would have accepted this argument. As a result, importers fashioning their merchandise to arrive at a particular classification should be aware that this practice may entail more risky than in the past.