«[On classification of screening product used in greenhouses, summary judgment for the Plaintiff.] Decided: August 17, 1999 Simons & Wiskin (Philip ...»
Slip Op. 99-82
UNITED STATES COURT OF INTERNATIONAL TRADE
Ludvig Svensson (U.S.) Inc., :
Plaintiff, : Court No. 97-03-00475
Before: Barzilay, Judge
United States of America, :
[On classification of screening product used in greenhouses, summary judgment for the Plaintiff.] Decided: August 17, 1999 Simons & Wiskin (Philip Yale Simons, Jerry P. Wiskin), for Plaintiff.
David W. Ogden, Acting Assistant Attorney General of the United States; Joseph I. Liebman, Attorney-in-Charge, International Trade Field Office; Commercial Litigation Branch, Civil Division, United States Department of Justice (Barbara S. Williams, Aimee Lee); Office of Assistant Chief Counsel, United States Customs Service, (Sheryl A. French), of counsel, for Defendant.
OPINION BARZILAY, JUDGE: Plaintiff, Ludvig Svensson (U.S.) Inc. (“Svensson”), commenced this action challenging the classification of its imported merchandise by the United States Customs Service (“Customs”). This Court has jurisdiction under 28 U.S.C. § 1581(a) (1994). The parties have cross-moved for summary judgment. For the reasons set out in the opinion which follows, the Court grants Plaintiff’s motion for summary judgment.
I. Background This case involves the classification of several different types of screening product Court No. 97-03-00475 Page 2 manufactured in Sweden and imported in large rolls. The imported screening product is used solely in the construction of greenhouses to control the environment through shade and heat retention systems, and to control insects. Svensson claims that the imports should be afforded duty free treatment as parts of agricultural products. Customs classified the screens under various dutiable provisions based on component materials. The case turns on whether the screening product in its condition as imported has been advanced sufficiently to become a part and is therefore entitled to classification as parts of agricultural equipment or whether it remains a material subject to classification based on component materials.
A. Undisputed Facts The following material facts are not in dispute.
There are three types of screens in question: (1) environmental screens manufactured in two ways, either with or without backed aluminum foil strips; (2) insect screens, known as Econet screens; and, (3) plastic laminated screensused as greenhouse roofs, called QLS Ultra or Solarwoven screens. Pl.’s Response to Def.’s Statement of Undisputed Facts at 9 (“Pl.’s Response”). Def.’s Response to Pl.’s Statement of Undisputed Facts at 9 (“Def.’s Response”).
Environmental screens are parts of shade and heat retention systems and are used to control the environment within a greenhouse. Pl.’s Response at 10. Def.’s Response at 10. The only commercial use of environmental screens is as part of a shade and heat retention system. Pl.’s Response at 23. Def.’s Response at 23. The screen is the most important part of a shade and heat retention system since it is this part which allows a greenhouse operator to modify the environment of a greenhouse. Pl.’s Response at 31. Def.’s Response at 31. In any shade and heat retention
aluminum foil strips are essential to the proper functioning of the complete system. Pl.’s Response at 32. Def.’s Response at 32. Without the backed aluminum foil strips, the environmental screens at issue could not be manufactured. Pl.’s Response at 29. Def.’s Response at 29.
Insect screens are used to control the insect population within a greenhouse. Pl.’s Response at 11. Def.’s Response at 11. It is their only commercial use. Pl.’s Response at 24. Def.’s Response at 24.
The QLS Ultra screens are specifically manufactured to function as greenhouse roofs, and, therefore, parts of shade and heat retention systems. Pl.’s Response at 12. Def.’s Response at 12.
This is the only commercial use of these screens. Pl.’s Response at 25. Def.’s Response at 25.
At the time of manufacture, the shade factor and energy savings properties of the screens, whether or not containing backed aluminum foil strips, are fixed and not altered by any postimportation processing. Pl.’s Response at 14-15. Def.’s Response at 14-15. In fact, each individual screen cut from a particular roll will have the same shade factor and energy savings properties as any other screen cut from the same roll. Pl.’s Response at 16. Def.’s Response at
16. Moreover, the post-importation processes of adding reinforcing tape, plastic hooks, or sewing of two lengths of screen together to obtain a specific width as requested by the customer, do not alter the shade factor or energy savings properties of the screens. Pl.’s Response at 17-18. Def.’s Response at 17-18.
At the time of importation, the use of the screens is known to be as part of shade and heat retention systems. Pl.’s Response at 34. Def.’s Response at 34. Moreover, the use of the screens is uniform throughout the United States. Pl.’s Response at 35. Def.’s Response at 35. In addition, shade and heat retention systems are agricultural machinery or equipment. Pl.’s Response
The brief technical descriptions which follow are necessary to present a complete picture of the screens at issue. Svensson manufactures three types of environmental screens: (1) those consisting of strips of backed aluminum foil and plastic, incorporated in a network of longitudinal and transverse connection yarns, comprised of polyester, acrylic or high density polyethylene; (2) those consisting of strips of backed aluminum foil without the plastic, incorporated in a network of longitudinal and transverse connection yarns; and (3) those consisting of plastic strips incorporated in a network of longitudinal and transverse connection yarns. Pl.’s Br. Supp. Summ. J. (“Pl.’s Br.”) at 5.
Within each type of environmental screen with backed aluminum foil strips, the number of those strips varies according to the amount of shade and heat which a greenhouse operator may need.
A greenhouse operator chooses the appropriate screen depending upon a variety of factors, including the crop grown and regional climactic conditions. Id. at 14. In certain instances, no backed aluminum foil is necessary in a screen if maximum sunlight, humidity and heat are required. Id.
Environmental screens are incorporated into shade and heat retention systems. These systems consist of the screens along with drive motors, cables, aluminum and steel supports, brackets, pulleys, fasteners, and support wires. Id. at 12. Shade and heat retention systems are installed inside almost all commercial greenhouses. Id. Greenhouse manufacturers either produce greenhouses with the shade and heat retention system installed as original equipment or build greenhouses with enough space in the roof area to accommodate such a system should the
Insect screens, known as Econet screens, are made of high density polyethylene yarn and ultra violet stabilized acrylic yarns. Id. at 15. Svensson manufactures six types of insect screens, each with rectangular openings of a different size. Id. At the time of manufacture, some screens have loops woven into the screen, while others are attached to a frame. Id. These screens are used to regulate the presence of insects and are manufactured on conventional weaving machinery. Id. at
5. These screens are not parts of shade and heat retention systems.
There are two types of plastic laminated screens used as greenhouse roofs: QLS Ultra and Solarwoven screens. Id. at 15. The QLS Ultra screen is made of woven monofilament yarn and polyolefin strips laminated with low density polyethylene with hanging wire woven into the screen for installation on hooks. Id. The Solarwoven screens are made of woven polyethylene strips laminated with polyethylene and are used as a roof, a side wall, or in roll up applications. Id. These screens are incorporated into shade and heat retention systems, and may be used alone as roofs where there is no need to closely regulate nighttime temperatures or as part of retractable roofs. Id.
All environmental screens and all plastic laminated screens used as greenhouse roofs are manufactured on a machine which was specially designed by Göran Henningsson of AB Ludvig Svensson, and is described in United States Letters Patent 4,399,671 of August 23, 1983. Id. at 9.
In the production of these screens, the yarns, backed aluminum foil sheet (when applicable), plastic sheet, polyester hanging wire, and the hinge yarn are simultaneously fed into the screen-making machine. Id. This specially designed machine both cuts the plastic and backed aluminum foil sheet into strips, and also knits the yarn resulting in finished product. Id.
The screens are imported in rolls which are several hundred feet long. Id. at 16. Svensson
cutting the screens to length to meet customers’ specifications. Id. Where the width of a customer’s greenhouse is greater than standard, Svensson sews two pieces of screen together by machine along the length and then cuts the sewn screen as required. Id. Plastic hooks may also be installed if a customer’s greenhouse requires. Id. Svensson adds the hooks and an off-the-shelf thermally setting reenforcing electrical tape. The tape is placed on the screen by a machine and the process takes a few seconds. Id.
C. Harmonized Tariff Schedule of the United States (“HTSUS”)
The following are the HTSUS subheadings under consideration:
Customs’ classification of QLS Ultra screens; duty assessed at 8.3% ad valorem1:
Svensson argues that the imported screens are properly classified as parts of agricultural equipment under HTSUS 8436.99.00 because at the time of import the screens are in an advanced state of manufacture; their identity is fixed with certainty; the screens are dedicated to use; and the post-importation processing is insignificant and part of the installation.
Svensson explains that the screens are in an advanced state of manufacture because they are manufactured on specially designed machines and are made from various materials. Pl.’s Br. at 32.
These screens are cut to length in the United States, but no further processing is carried out that would increase the products’ ability to provide shading, energy savings, or protection against weather
Svensson asserts that the identity of the screens is fixed with certainty and that they are dedicated to a single commercial use as parts of shade and heat retention or insect control systems.
Id. With regard to the environmental screens used in either stationary or retractable roof greenhouses the number of strips of backed aluminum foil in each screen determines the level of shade and heat retention necessary for a particular greenhouse. Id.
Svensson argues that the post-importation processing is insignificant and is part of the installation process of the shade and heat retention system. Svensson asserts that the principal postimportation processing consists of cutting the material to the length specified by the customer. Id.
at 36. On rare occasions, a customer’s greenhouse is wider than the standard screen and Svensson sews two pieces of screen together to achieve the correct width. Id. Only.5% of Svensson’s sales require this type of post-importation processing. An additional step in its post-importation processing is the addition of hooks to the screen. Id. Svensson explains that such a process is accomplished by running the screen material through a simple machine to apply off-the-shelf electrical tape and by manually attaching plastic hooks. Id. According to Svensson, the relative cost and time spent to perform this operation is not significant. Id. at 37.
Svensson further argues that its insect screens should not be classified as “other knitted or crocheted fabrics” under HTSUS 6002 because this subheading is a basket provision. Id. at 38.
Svensson asserts that when a product comes within the ambit of both a basket and a use provision, the use provision takes precedence and, therefore, the insect screens should be classified under HTSUS 8436, a use provision for machinery used on farms, including agricultural schools, cooperatives or testing stations, in forestry, market gardens, or poultry-keeping or bee-keeping farms.
Customs argues that the screens are not classifiable as parts of agricultural machinery under HTSUS 8436.99.00. Def.’s Br. Supp. for Summ. J. (“Def.’s Br.”) at 7. Customs asserts that the imported rolls of screening are nothing more than materials and are classifiable under HTSUS 6002, as other knit fabrics, under HTSUS 7616, as other articles of aluminum wire, or under HTSUS 5903.90.25, as other textile fabrics impregnated, coated, covered or laminated with plastics. Id.
Customs contends that the cutting to length, sewing and attaching of hooks is a significant post-importation process. Id. at 9. Customs also contends that the screens themselves cannot be used to control the environment of a plant or vegetable without undergoing such processes. Id.
Thus, Customs argues that the imported rolls of screening are nothing more than simple screens. Id.
Customs also argues that the screens do not have the essential character of a part of an agricultural machine because one of the crucial dimensions of the product is not set upon importation. Id. Customs asserts that material may be classified as an unfinished article only when the fabric in its imported condition has been so far advanced beyond the stage of materials as to be dedicated to and commercially fit for use as that article and incapable of being made into more than one article or class of articles. Id. Customs points out that there are no cutting lines or marks set on the screens and that the length of the screen is not known until after importation. Thus, Customs argues, the screens are not parts, but unfinished materials. Id. at 11.