CIT Finds Plastic Coated Sausage Casings Classifiable as Textiles in HTS
Sausage casings made of plastic-coated textiles are classifiable as made-up textiles in the tariff schedule, the Court of International Trade said in a decision issued Nov. 2. Contrary to the arguments of the importer, Kalle USA, CIT found section notes don’t supersede chapter notes, so a section note that Kalle argued puts coated plastics in Chapter 39 must instead be read in combination with chapter notes that leave open the possibility of plastic coatings in the textile chapters of the tariff schedule. CIT also held the single piece of cloth glued together on a seam may be considered “made up” for classification purposes.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
Kalle’s casings consist of a man-made textile fabric, coated in plastic on one side, which becomes the outside of the casing. The inner textile layer, besides giving the casing stability, strength and shape, also allows the casing to absorb dyes and aroma substances and transfer those dyes and aromas to the encased product, which can also include hams and cheeses. The plastic coating prevents moisture from entering or escaping the casings. After the casings were imported from Germany in 2010, CBP liquidated them as “made up articles” of textiles in subheading 6307.90.98, dutiable at 7%. Kalle argued they should have been classified as tubes of plastics in subheading 3917.39.0050, with a 3.1% duty.
Kalle partly based its argument on Note 1(h) to Section XI, which covers textiles, arguing the note excludes all textile-plastic composites from classification as textiles by saying the section doesn’t cover “woven, knitted or crocheted fabrics, felt or nonwovens, impregnated, coated, covered or laminated with plastics, or articles thereof, of chapter 39.” Though several chapter notes in Section XI mention textile-plastic composites, those are trumped by the section note, Kalle said.
CIT disagreed, finding no reason to give section notes more prominence than chapter notes. “Such an assertion is unsupported by the text of GRI 1, which does not state that a section note trumps a chapter note, or indicate any preferential treatment for section notes over chapter notes,” it said. “Instead, GRI 1 requires that the court apply ‘any relative section or chapter notes,’” the trade court said. Kalle’s reading of the section note would also render meaningless chapter notes in Section XI that distinguish between textile-plastic composites in chapters 56 and 59 from those in Chapter 39. Instead, the section notes means that textile-plastic composites of Chapter 39 can't be classified in Section XI, CIT said.
Kalle also argued that, as the textile component is man-made fiber, the casings are excluded from classification as textiles by Note 2(a) to Chapter 59, which says textiles completely embedded or coated on both sides with plastics, and plastics where a textile is present for merely reinforcing purposes, are classifiable in Chapter 39. But CIT found that the note isn’t applicable to the casings, because the material is only coated on one side, and the textile component also serves to transfer dyes and aromas to the encased product, not just reinforce the material.
Finally, Kalle argued that the casing cannot be considered a made up article in Chapter 63 because the casings are not “assembled,” as required by the tariff schedule’s definition of “made up.” The importer said the gluing of one edge is not an assembly, because assemblies require two or more components being joined together. CIT was “not persuaded,” finding the tubes are made of two components: the textile-plastic sheeting and glue.
Nor do assemblies necessarily require two or more components, CIT said. The U.S. Court of Appeals for the Federal Circuit has found that assembly means creation of an operative whole that is a “distinct and separate commercial entity” and is “complete in itself.” Once glued, the casings change from a flat sheet into a tube capable of encasing food. “Thus, the textile-composite sheeting can only function as a casing -- as an ‘operative whole’ -- once its sides are glued together,” CIT said. “Given that the casings are made up articles of textile fabric, they are properly classified under heading 6307,” the court concluded. “Further, since goods of Section XI -- which includes heading 6307 -- are excluded from Chapter 39, they cannot be classified under heading 3917,” it said.
(Kalle USA, Inc. v. U.S., Slip Op. 17-149, CIT # 13-00003, dated 11/02/17, Judge Katzmann)
(Attorneys: Frederic Van Arnam of Barnes Richardson for plaintiff Kalle USA; Hardeep Josan for defendant U.S. government)