Industry News
Common & Commercial Interpretation Leads to 25% Section 301 Duty
TweetOct. 24, 2024
By:
Pietro N. Bianchi
In Shamrock Building Materials, Inc., vs. United States, the U.S. Court of Appeals for the Federal Circuit (“C.A.F.C.”) ruled that Shamrock Building Materials’ (“SBM”) imports were subject to a 25% Section 232 duty based on an advertising brochure and the common and commercial meaning of a tariff term. To lay the groundwork, SBM imported steel tubing with a thin interior coating of epoxy, melamine, and silicone additives. The interior coating was designed to protect electrical wires from abrasion and tears when pulling them through the tubing. The coating also provided a minimal but nonzero amount of resistance to electrical flow. A brochure advertised how the insulation was designed for a mechanical rather than an electrical benefit, stating the “[s]mooth interior coating insulates wall to provide easy installation of wire.”
Classification is determined according to the terms of the headings and any relative section or chapter notes. First the meaning of tariff terms must be ascertained. It is not uncommon for lexicographical authorities (dictionaries) to be cited as support for arguments. Then one determines whether the subject goods fit within the description of those terms. CBP had determined that the tubing should be classified under subheading 7306.30, which covers “[o]ther tubes, pipes and hollow profiles. . ., of iron or steel” and has a 25% Section 232 duty. SBM argued that the tubing should have been classified under subheading 8547.90, which covers “electrical conduit tubing. . . with insulating material” and does not have a Section 232 duty. The lower court, the Court of International Trade, opined that “electrical conduit tubing. . . with insulating material” requires that the insulating material related to the electrical conduit function, “i.e., it must impede electrical current or isolate the heat from the wire from the inside surface of the steel conduit.”
The C.A.F.C. agreed and ruled that “insulating” read in the context of “electrical conduit tubing” limits the definition of insulating to “protection against the passage of current (and/or heat) from an electricity-conducting wire through the lining to the metal tubing.” The Explanatory Notes, which are not legally binding but can be persuasive in interpreting the tariff, for each heading draw distinctions between insulated and uninsulated electrical conduit that further supported C.A.F.C.’s interpretation of the tariff terms.
Then came the time when the C.A.F.C. had to ask, what is this thing, really? That might appear like a simple question. However, with a tariff attempting to describe everything and anything descriptions can split hairs. The Court turned to what commercial marketplace deems significant when determining whether SBM’s tubing, which provided a minimal but nonzero amount of resistance to electrical flow, were insulated electrical conduit tubing described under heading 8547. Because the advertising brochure indicated that the insulation was designed to protect wires from abrasion and tears and there was no indication that SBM’s tubing was purchased for its electrical insulation properties, the C.A.F.C. ruled that the merchandise was not covered by subheading 8547.90.
Unfortunately for SBM, this split hair subjected its tubing to 25% Section 232 duties. If you have questions about tariff classification, common and commercial meaning, or Section 232 duties do not hesitate to contact an attorney at Barnes Richardson, & Colburn LLP.