CAFC Reverses CIT, Rules Wall Panel and Tabs Are "Duty Free" Unit Furniture
The Court of Appeals for the Federal Circuit has ruled in StoreWALL, LLC, v. U.S., that plastic home organization and storage systems designed to be hung or fixed to the wall that provide end users with the option to add or subtract accessories, are classifiable as unit furniture under HTS 9403.90.50 (duty-free), and not in Chapter 39, even if the only components at issue are wall panels and locator tabs (mounting hooks) without any other accessories.
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StoreWALL Protested CBP’s Classification of Panels & Hooks in Chapter 39
StoreWALL separately imports plastic wall panels and specially designed plastic mounting hooks1 (HangUp locator tabs) manufactured in Taiwan that are used in conjunction with home organization and storage systems.
In 2004, U.S. Customs and Border Protection liquidated the wall panels under HTS 3916.20.00 (5.8%) for certain monofilaments of polymers of vinyl chloride, and the mounting hooks under HTS 3926.90.98 (5.3%) for other articles of plastics and articles of other materials of headings 3901 to 3914.
StoreWALL filed three protests, requesting that CBP reclassify its wall panels and mounting hooks as duty-free unit furniture or parts thereof under HTS 9403.70.80 and 9403.90.50, respectively. CBP denied the protests. Both parties filed cross-motions for summary judgment.
CIT Ruled Panels & Hooks Were in Chapter 39, Only a Complete System Was Furniture
The CIT stated that although the HTS does not explicitly define the term furniture, Chapter 94 Note 2 clarifies that items which are designed to be hung, to be fixed to the wall or to stand one on the other (such as cupboards, other shelved furniture, and unit furniture) are classifiable under duty-free heading 9403.
Based on the Explanatory Notes (ENs), the CIT defined “unit furniture” as an item that fits with other pieces to form a larger system, is designed to be hung or stand, is assembled to suit the consumer’s needs, and excludes wall fixtures such as coat racks and similar racks.
Using this definition, the CIT determined that a completed storeWALL system may be classifiable as unit furniture. However, if an end user decided to accessorize the wall panels only with hooks, as opposed to shelves, then the completed storeWALL system would merely be a rack, which is expressly excluded from the definition. The CIT concluded that because a completed storeWALL system is not always "unit furniture," the articles are not prima facie classifiable under heading 9403, as imported parts must be dedicated solely or principally for use with the classified item. The CIT ruled that CBP had properly classified the articles as other articles of plastics under Chapter 39. StoreWALL appealed.
CAFC Ruled CIT Properly Relied on ENs to Include “Rack Exclusion” in Definition
The CAFC stated that although the ENs are not binding, the CIT properly relied on them to define unit furniture, reasoning that where a tariff term is ambiguous the ENs may provide persuasive and relevant guidance to the meaning of the term. Therefore, the CAFC holds that the CIT's exclusion of racks from its definition of unit furniture based on the ENs does not contradict the common commercial meaning of unit furniture, but instead clarifies the scope of the term.
However, CAFC Ruled that StoreWALL’s Versatility Makes it Unit Furniture
Despite upholding the CIT’s definition, the CAFC ruled that the lower court erred in its determination that a completed storeWALL system utilizing only hooks is merely a rack, and therefore, excluded from the CIT's definition of unit furniture. The CAFC reasoned that an end user may add shelving, cupboards, etc. to a storeWALL system initially equipped only with just hooks, or may remove all of the hooks and replace them with other accessories, however, a coat rack, a hat rack, etc. does not possess that same flexibility.
The fact that the end user has the option to add or subtract accessories is the very reason why any such system is dissimilar to wall fixtures (such as coat, hat, and similar racks) and is classifiable as unit furniture under the CIT's definition. The CAFC states that even if equipped only with hooks, the storeWALL system retains the essential versatility and adaptability that is the very essence of unit furniture. Therefore, CAFC rules that the CIT erred by not classifying the products as “parts” of unit furniture under duty-free HTS 9403.90.50, and reverses and remands CIT's judgment.
1StoreWALL constructs the wall panels from rigid extruded polyvinyl chloride (PVC) plastic, and the HangUp locator tab mounting hooks are made of acrylonitrile butadiene styrene (ABS) plastic.
(See ITT's Online Archives or 12/28/09 news, 09122835, for BP summary of the CIT ruling that plastic wall panels are not furniture.)
(Appeal Number 2010-1193, dated 03/31/11)