from the United States Court of International Trade in No.
1:13-cv-00291-MAB, Judge Mark A. Barnett.
D. Keisler, Sidley Austin LLP, Washington, DC, argued for
plaintiff-appellee. Also represented by Richard M. Belanger,
Barbara Guy Broussard, Daniel J. Feith, Erika Maley, Gordon
Michael Shih, Appellate Staff, Civil Division, United States
Department of Justice, Washington, DC, argued for
defendant-appellant. Also represented by Jeanne Davidson,
Matthew James Glover, Joseph H. Hunt; Beverly A. Farrell,
Jason M. Kenner, Amy Rubin, International Trade Field Office,
Commercial Litigation Branch, Civil Division, United States
Department of Justice, New York, NY; Yelena Slepak, Office of
the Assistant Chief Counsel, United States Bureau of Customs
and Border Protection, United States Department of Homeland
Security, New York, NY.
Dyk, Wallach, and Hughes, Circuit Judges.
Wallach, Circuit Judge.
Ford Motor Company ("Ford") sued Appellant United
States ("the Government") in the U.S. Court of
International Trade ("CIT"), challenging U.S.
Customs and Border Protection's ("Customs")
classification of its model year ("MY") 2012
Transit Connect 6/7 vehicles under Harmonized Tariff Schedule
of the United States ("HTSUS")Subheading
8704.31.00, which bears a duty rate of 25% ad
valorem. Ford and the Government filed cross-motions for
summary judgment, with Ford contending that its subject
merchandise is properly classified under HTSUS Subheading
8703.23.00, which bears a lower duty rate of 2.5% ad
valorem. The CIT denied the Government's
Cross-Motion and granted Ford's Cross-Motion, thereby
holding that Ford's proposed classification under HTSUS
Subheading 8703.23.00 is correct. Ford Motor Co. v.
United States, 254 F.Supp.3d 1297, 1333 (Ct. Int'l
Trade 2017); see J.A. 75- 76 (Judgment).
Government appeals. We have jurisdiction pursuant to 28
U.S.C. § 1295(a)(5) (2012). We reverse.
appeal involves a single entry of subject merchandise,
"which entered at the Port of Baltimore on December 26,
2011." Ford, 254 F.Supp.3d at 1303 (citation
omitted). Ford originally began importing its line
of Transit Connect 6/7s into the United States in 2009.
Id. at 1302. Ford also produces a similar vehicle
called the Transit Connect 9. See id. at 1304
n.13. Ford based the design of both types of
Transit Connect vehicles on its then-existing European V227
line of vehicles and imported the Transit Connects from its
factory in Turkey. See id. at 1305. Specifically,
"Ford's European V227 line included" (1)
"the double-cab-in-van (DCIV)" and (2) "the
Cargo Van." Id. (internal quotation marks and
citations omitted). "Ford based the subject merchandise
on its European V227 DCIV, not its Cargo Van."
Id. (citations omitted).
importation into the United States, Ford avers that it
"modified the European V227 DCIV to comply with all
relevant U.S. safety standards," including the Federal
Motor Vehicle Safety Standards ("FMVSS").
Id. (citations omitted). For instance, Ford
redesigned the second row of seats' underbody support
structure; added side-impact beams and foam blocks for
protection; and changed the vehicle's lighting, labels,
and turn signals. Id. at 1306. Moreover, "Ford
designed the Transit Connect on the Ford Focus platform,
which means that" the two vehicle lines share similar
features, specifically, "[the Transit Connect] has the
same chassis and drivetrain as the Ford Focus passenger
vehicle." Id. (internal quotation marks,
brackets, and citations omitted). Ford designated its Transit
Connects in the United States as part of the V227N line,
which includes the Transit Connect Van (i.e., the Transit
Connect 6/7) and the Transit Connect Wagon (i.e., the Transit
Connect 9). See id. at 1307 & n.18. Ford
displayed its Transit Connect models at auto shows and
advertised "in magazines and on auto shopping
websites." Id. at 1306 (internal quotation
marks and citations omitted). "Each Transit Connect was
built to order," with all available customization
options identified in an online brochure. Id.
(internal quotation marks and citations omitted).
time of importation, the subject merchandise had several
relevant characteristics. Ford specified the subject
merchandise's Gross Vehicle Weight Rating
("GVWR") as 5, 005 pounds. See id. at
1307; see also 49 C.F.R. § 523.2 (2011)
(explaining that GVWR refers to "the value specified by
the manufacturer as the loaded weight of a single
vehicle"). The Transit Connect 9, by contrast, had a
GVWR of 4, 965 pounds. See Ford, 253 F.Supp.3d at
1307. The Transit Connect 6/7s had a "four
cylinder gasoline engine, . . . a steel unibody
construction[, ] . . . front-wheel drive[, ] rear passenger
seats with seat anchors[, ] . . . underbody bracing[, ] . . .
front suspension[, ] . . . and over [fifty] inches of space
from floor to ceiling in the rear." Id.
(citations omitted). The subject merchandise "had
swing-out front doors with windows, second-row sliding doors
with windows," and "swing-out rear doors, some of
which had windows." Id. (internal quotation
marks and citations omitted). "[N]o Transit Connect 6/7s
had a panel or barrier between the first and second row of
seats." Id. (internal quotation marks and
citation omitted). When imported, the subject merchandise had
"second row seats; seat belts for every seating
position; permanent bracing in the side pillars of the car
body," as well as "child-locks in the sliding side
doors; dome lighting in the front, middle, and rear of the
vehicle; a full length molded cloth headliner; coat hooks in
the second row; and a map pocket attached to the front driver
seat." Id. (citations omitted). The vehicles
also had "front vents and front speakers," cup
holders in the center and rear console, and "carpeted
foot-wells in front of the second row seat."
Id. at 1307, 1308 (internal quotation marks and
citation omitted). However, the vehicles "did not have
rear (behind the front seats) vents, speakers, . . .
handholds"; "side airbags in the area behind the
front seats"; or "a cargo mat." Id.
at 1308 (citations omitted). "[T]he painted metal floor
of the cargo area was left exposed." Id.
to the underlying dispute were the Transit Connect 6/7s'
second row seats. "[T]he second row seats . . . did not
include headrest[s], certain seatback wires, a tumble lock
mechanism, or accompanying labels, and were wrapped in
cost-reduced fabric." Id. (internal quotation
marks, brackets, and citations omitted). When Ford began
importing MY 2010 Transit Connect 6/7s (as opposed to the MY
2012 versions at issue here), it used rear seats similar to
those that were eventually used in the MY 2012 Transit
Connect 9s. See id. at 1308-09. To reduce costs,
Ford created, "[i]n mid-MY[ ]2010," its "first
cost-reduced seat ('CRSV-1')," which
"resulted in the removal of the head restraints, torsion
bar assembly and mount, tumble lock mechanism and associated
labels, and backrest reinforcement pad from the MY[ ]2010
Transit Connect 6/7 rear seat." Id. at 1310
(citations omitted). Ford subsequently created its second
cost-reduced seat ("CRSV-2"), which are the seats
that were used in the subject merchandise. See id.
at 1311. These seats "incorporated the following changes
from CRSV-1": (1) "removal of four of the seven
seatback wires," (2) "wrapping of the seat in a
cost-reduced fire-resistant grey woven cover[, ] . . . which
is not the same as the fabric used to cover the front
seat," (3) "replacement of the front leg seat
anchor cover, which was designed to attach to the tumble lock
mechanism, with a cover that did not contain a space for the
tumble lock mechanism," (4) "removal of the red
indicator flags and housings associated with the tumble lock
mechanism to leave a bare metal lever," (5)
"removal of the small rubber pad from the rear seat leg
intended to decrease noise and vibration from around the rear
floor latches," (6) removal of "the fabric mesh
covering the rear seat bottom," and (7) discontinuation
of the application of the "black paint to the visible,
metal portions of the [rear] seat frame." Id.
(internal quotation marks, brackets, and citations omitted).
Although Ford's "engineers concluded that the fabric
change and removal of seatback wires did not affect the
CRSV-2's FMVSS compliance," "Ford did not
conduct consumer testing or surveys before implementing the
CRSV-2." Id. (internal quotation marks and
importation, Ford made several changes to the subject
merchandise once the merchandise cleared Customs, but while
the imported merchandise "w[as] still within the
confines of the port." Id. at 1312. For
instance, all Transit Connects underwent processing, such as
"removing . . . a protective covering,"
"disengaging Transportation Mode," and
"checking for low fuel." Id. (internal
quotation marks and citations omitted). The Transit Connect
6/7s underwent "additional" processing
("post-importation processing"). Id.
Specifically, "the second-row seat[s were] unbolted and
removed, along with the associated second row safety
restraints. A steel panel was then bolted into the second row
footwell to create a flat surface behind the first rows of
seats." Id. (footnote and citations omitted).
"A molded cargo mat was placed over the floor behind the
first row," "[s]cuff plates were added inside the
second-row doors," and "[i]n some vehicles the
sliding door windows were replaced with a solid panel."
Id. (citations omitted).
"[a]ll Transit Connects are imported with second row
seats, but the Transit Connect 6/7s are delivered to the
customer as a two seat cargo van." Id. at 1307
(citations omitted). "The removed seats were recycled or
otherwise disposed of." Id. at 1312 n.36
(citation omitted). Following this additional
post-importation processing, the Transit Connect 6/7s
maintained the following features: "underbody second-row
seat support; anchors and fittings for the second-row seat[;]
permanent bracing in the side pillars to support the removed
safety restraints; and the beam and foam in the side sliding
doors for rear passenger crash protection." Id.
at 1312 (footnote and citations omitted). However, during the
post-importation processing, "[t]he anchor holes for the
second row seat are plugged and no longer readily
accessible." Id. at 1312 n.38.
February 2012, "the Port of Baltimore notified Ford that
[Customs] had initiated an investigation into Ford . . .
importations." Id. at 1314 (internal quotation
marks and citations omitted). Following the investigation, in
January 2013, Customs found that the subject merchandise was
properly classified under HTSUS Heading 8704, specifically
HTSUS Subheading 8704.31.00. Customs Ruling HQ H220856 (Jan.
30, 2013), 2013 WL 1793233, at *11. Accordingly, Customs
liquidated the subject merchandise at the 25% duty rate
associated with HTSUS Subheading 8704.31.00. Ford,
254 F.Supp.3d at 1303. "Ford timely and properly
protested" this decision. Id. Customs denied
Ford's protest. Id.
filed a complaint with the CIT, alleging Customs improperly
denied its protest. J.A. 98. The CIT held that the subject
merchandise should have been classified under HTSUS
Subheading 8703.23.00. Ford, 254 F.Supp.3d at 1333.
The CIT evaluated the subject merchandise's condition at
the time of importation, see id. at 1316-17, and
concluded "the Transit Connect 6/7's structural and
auxiliary design features point to a principal design for the
transport of persons," id. at 1328. The CIT
explained that "because [HTSUS H]eading 8703 is not
controlled by use, and an assessment of intended use is not
necessary to distinguish [HTSUS Heading] 8703 from
8704," it found "it unnecessary to consider
principal or intended use, or the [relevant use] factors, to
define the tariff terms." Id. at 1332.
Furthermore, the CIT rejected the argument that Ford's
post-importation processing constituted a disguise or
artifice, determining instead that Ford's removal of the
rear seats "after importation is immaterial" and
that Ford engaged in legitimate tariff engineering.
Id. at 1324 (footnote omitted).
Standard of Review and Legal Framework
review the CIT's decision to grant summary judgment de
novo, applying the same standard used by the CIT to assess
Customs' classification. See Otter Prods., LLC v.
United States, 834 F.3d 1369, 1374-75 (Fed. Cir. 2016).
"Although we review the decision of the CIT de novo, we
give great weight to the informed opinion of the CIT and it
is nearly always the starting point of our analysis."
Schlumberger Tech. Corp. v. United States, 845 F.3d
1158, 1162 (Fed. Cir. 2017) (internal quotation marks,
alterations, and citation omitted). Pursuant to U.S. Court of
International Trade Rule 56(a), the CIT "shall grant
summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law."
classification of merchandise involves a two-step
inquiry." ADC Telecomms., Inc. v. United
States, 916 F.3d 1013, 1017 (Fed. Cir. 2019). First, we
ascertain the meaning of the terms within the relevant tariff
provision, which is a question of law, and, second, we
determine whether the subject merchandise fits within those
terms, which is a question of fact. See Sigma-Tau Health
Sci., Inc. v. United States, 838 F.3d 1272, 1276 (Fed.
Cir. 2016). "Where, as here, no genuine dispute exists
as to the nature of the subject merchandise, the two-step
inquiry collapses into a question of law we review de
novo." ADC, 916 F.3d at 1017 (internal
quotation marks and citation omitted).
HTSUS governs the classification of merchandise imported into
the United States. See Wilton Indus., Inc. v. United
States, 741 F.3d 1263, 1266 (Fed. Cir. 2013). The HTSUS
"shall be considered . . . statutory provisions of law
for all purposes." 19 U.S.C. § 3004(c)(1) (2012);
see Chemtall, Inc. v. United States, 878 F.3d 1012,
1026 (Fed. Cir. 2017) (explaining that "the tenth-digit
statistical suffixes . . . are not statutory," as those
suffixes are not incorporated in the HTSUS's legal text).
"The HTSUS scheme is organized by headings, each of
which has one or more subheadings; the headings set forth
general categories of merchandise, and the subheadings
provide a more particularized segregation of the goods within
each category." Wilton Indus., 741 F.3d at
1266. "The first four digits of an HTSUS provision
constitute the heading, whereas the remaining digits reflect
subheadings." Schlumberger, 845 F.3d at 1163
n.4. "[T]he headings and subheadings . . . are
enumerated in chapters 1 through 99 of the HTSUS (each of
which has its own section and chapter notes) . . . ."
R.T. Foods, Inc. v. United States, 757 F.3d 1349,
1353 (Fed. Cir. 2014). The HTSUS "also ...