CAFC Clarifies Meaning of ‘High Proportion’ in Tariff Schedule
Provisions of the tariff schedule referencing a “high proportion” of one component mean there is a “high ratio of that component compared to the other components,” the U.S. Court of Appeals for the Federal Circuit said on Nov. 18 (here) as it affirmed a lower court ruling finding Tyco’s glass bulbs filled with liquid are articles of glass for tariff classification purposes. For Tyco’s glass bulbs, which have only two component parts and are mostly glass by weight, a high proportion is more than 50 percent, meaning the bulbs are glass articles for tariff classification purposes.
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Tyco had imported the glass bulbs from Germany for use in sprinkler systems and water heaters. The bulbs are filled with a liquid that expands and breaks the bulb when it gets too hot, allowing valves to open and close and causing the desired action (activating a sprinkler system or stopping air from getting to a fire in a water heater). CBP classified the bulbs as articles of glass under heading 7020. Tyco filed suit to argue they should have been classified as parts of machinery under chapter 84 of the tariff schedule. The Court of International Trade had affirmed CBP’s classification, though for slightly different reasons than the Federal Circuit (see 1507130061).
The case centered on the interpretation of U.S. Note 1(c) to chapter 84, which excludes “articles for technical uses or parts thereof, of glass (heading 7019 or 7020).” As explained by the World Customs Organization's explanatory notes to chapter 84, an item “ceases to be ‘of glass’ when it is combined with a ‘high proportion of other materials.’” Tyco argued the liquid content of the glass bulbs -- which ranges from 16 to 31 percent -- means it is not an article of glass and is not excluded by the note to chapter 84.
The Federal Circuit looked to dictionary definitions to determine what a “high proportion” means, finding the liquid is present in a high proportion and the bulbs are articles of glass not classifiable in chapter 84. “Absent clarifying context, a ‘high proportion’ of one component of a greater whole means that there exists a high ratio of that component compared to the other components. Where, as here, there are only two components, (i.e., the liquid component and the glass component), a high proportion or ratio of one component generally means that the component accounts for more than 50% of the whole,” it said. With less than 50 percent liquid, the glass bulbs are not disqualified from classification as articles of glass unclassifiable in chapter 84 under note 1(c), it said.
A “high proportion” doesn’t mean more than 50% in all situations, however. “This would not be the case where there are more than two components,” the appeals court said. “There are also situations where comparison to past or common practice would support an interpretation of ‘high proportion’ meaning something less than 50% for a two-component whole,” such as for rubber with a higher proportion of sulfur content than normal rubber, it said.
With classification under chapter 84 ruled out, the court turned to whether they should be classified according to the glass or the liquid. While the liquid plays an important role in expanding to break the glass and actuate a valve, the glass is important as well because it keeps the valve open or closed in normal operation, the Federal Circuit said. The glass is also the heavier and more expensive component, so it imparts the essential character of the bulbs, the appeals court said, finding Tyco’s glass bulbs are classifiable in heading 7020.
(Tyco Fire Products v. U.S., CAFC # 2015-1968, -1969, dated 11/18/16, Judges Prost, Dyk and Stoll)
(Attorneys: Michael Roll of Pisani & Roll for plaintiff-appellant Tyco Fire Products; Amy Rubin for defendant-appellee U.S. government)