US Says GRI 2(a) Inapplicable to Classification of Importer's Chemical Products
The U.S. argued on Jan. 12 that the "undisputed facts" show that importer Lanxess' polymerization accelerator -- a substance used to speed up the chemical process of plastic manufacturing -- can't accelerate a chemical reaction "in its condition as imported," thus removing it from Harmonized Tariff Schedule heading 3915 as a "reaction accelerator" (Lanxess Corporation v. United States, CIT # 23-00073).
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Responding to Lanxess' arguments at the Court of International Trade, the government said Lanxess can't "salvage" its argument by urging the court to look to the product's "essential character," since this claim refers to the product's "post-importation role in a completed 'supported catalyst' system." Instead, the product, Axion CA 1330, should be classified in its condition as imported under heading 3924 as a product prepared by the chemical industries, the U.S. said.
The government also defended its ability to claim a subheading different from the one under which CBP liquidated the goods for the imports at issue in its cross-motion for judgment. The U.S. said, per the U.S. Court of Appeals for the Federal Circuit's decision in Jarvis Clark v. U.S., the court "has an obligation to consider all possible classifications for Axion CA 1330 regardless of whether a particular classification was raised by a party in a pleading." In addition, CIT has held that "asserting a counterclaim is not necessary to advance a different classification and that the Government may raise it as a defense."
Lanxess also argued that CBP had to undergo notice-and-comment rulemaking before advocating for a new classification for the importer's Axion CA 1330 after the agency issued a "binding ruling" where it classified Lanxess' predecessor's products consisting of methylaluminoxane and toluene. The U.S. said this argument "fails," since the notice and comment procedures "are not at play" and the trade court isn't bound by "CBP's administrative rulings" and instead "decides the classification question de novo and can order all appropriate relief."
Regarding the classification of the product at issue, the U.S. said proper classification of Axion CA 1330 is reached by applying General Rule of Interpretation (GRI) 1, which requires classification per the "terms of the headings and any relative section or chapter notes." Lanxess, on the other hand, argued that proper classification is reached by applying GRI 1 and 2(a). GRI 2(a) "extends the scope of a heading to encompass incomplete, unfinished, unassembled, and disassembled goods," the U.S. said.
However, the government argued that this rule "only applies where the plain language of the headings can accommodate incomplete, unfinished, unassembled, and disassembled goods." The rule's Explanatory Note says that it doesn't normally apply to the "headings of Sections I through VI, of the HTSUS (that is, Chapters 1 through 38)." That's because certain provisions of the HTS "are simply not susceptible to being 'unfinished' products because in their unfinished condition they are fundamentally different goods."
The U.S. said that's "precisely the case with heading 3915," since this heading "identifies goods by function and does not contemplate 'unfinished' goods." The government argued that a "reaction accelerator" can't exist in an "unfinished state." The brief said that unless a "product actually accelerates a reaction, it simply does not satisfy that tariff term." And, as is undisputed, the imported Axion CA 1330 can't accelerate a chemical reaction in its imported state and can only do so after further incorporation in a more advanced system post-importation.
The government also argued that even if GRI 2(a) applied to heading 3915, "it only serves to expand the scope of the heading to include disassembled, unassembled, incomplete, and unfinished goods." Here, "GRI 2(a) would only extend the scope of the term 'reaction accelerator,'" the brief said. The analysis would then require looking to the essential character of a "reaction accelerator" and an "assessment as to whether Axion CA 1330 possesses that character."
However, "Lanxess makes no effort to show that, in its condition as imported, Axion CA 1330 possesses the essential character of a 'reaction accelerator,'" the government argued. Instead, the importer's analysis "improperly" looks to Axion CA 1330's "post-importation role in a completed 'supported catalyst' system," the brief said.