CLASSIFYING THE LOCH NESS MONSTER

Let's talk monsters, Nessie to be specific, the cutesy nickname for the Loch Ness Monster. Ok, I don't really mean the Loch Ness Monster. I mean NESI, a rule of interpretation for classifying imported goods under the Harmonized Tariff Schedule of the US. NESI stands for not elsewhere specified or included. Because I've never actually heard anyone say it out loud (I try to avoid social gatherings that would permit such unseemly language), my guess is that NESI is pronounced the same as Nessie. Even if it is not pronounced the same way, but is instead enunciated letter by letter, like F-B-I, as we shall shortly see, NESI shares spooky similarities with Nessie, the reclusive Scottish plesiosaurus.

Did I get you in the proper Halloween spirit? Good.

But why even talk about NESI or rules of interpretation?

Because you will find them everywhere when classifying imports or exports.

Rules of interpretation help you classify things, to distinguish why something belongs here and not over there. The classification and naming process in science is called taxonomy and there is no doubt (climate change deniers are excused from the room at this point) that science advances dramatically and consistently thanks largely to its taxonomy. The law is altogether a different universe. In the law, the rules are called canons of construction or rules of interpretation. These rules don't even come close to being absolute; they're not even consistent. Heck, they are meant to be used as contrarian weapons, such is the beauty of our adversarial system. For each rule of interpretation that points you in one direction, you will find another one, equally valid, that points you in the opposite direction. Think of original intent vs the plain meaning. If you think the original drafters of a law favor your side, and especially if they look and act like you, you will argue original intent. But if that vantage is not to your liking, you'll claim that there is no reason on earth that anyone should ever go beyond the four corners of the text. Or you may want to be invoke a rule that requires you to go outside the text to elucidate the true meaning or contemporary relevance. Dictionary definitions are the most common manifestation of this tactic. I haven't even gotten to exceptions and exemptions, the "wait a minute, this rule doesn't apply if..." get-out-jail cards that lawyers and judges keep in reserve if cornered. The law also accommodates tie breakers, like course of dealing and usage of trade, which would seem to be helpful in choosing between competing sides, but tie breakers are just as prone to abuse and subjectivity as any of the other rules.

Which brings us to classification of exports and imports. There is a great deal riding on your product's classification. On the export side, it determines whether you need a license or whether you can even ship. On the import side, it will determine how much you pay in duties and whether your product can be held up at the border for using someone else's classification without their permission, in other words, whether you are infringing. Given the huge stakes, the law dedicates a ton of grey matter arguing over classification. A government agency will issue a written classification ruling if properly asked before the shipment is made and if the requesting party truthfully discloses all pertinent facts. These rulings tend to be peppered with rules of interpretation, sometimes even italicized Latin ones like ejusdem generis to add legal gravitas to the agency's pronouncements. While I may be cynical about the over reliance on rules of interpretation, I concede that they can sometimes be helpful. There is value to their existence. Most of them, anyway.

But NESI and its NES, its counterpart when classifying exports under the Commerce Control List (NES stands for not elsewhere specified) are pointless. I don't get why they even exist. I can't find one ruling or court case that uses them. They are as camera shy as the real Nessie. And why should the courts or agencies use them? NESI and NES literally mean, "don't classify your stuff here if you can find a better classification elsewhere." That's helpful. Not. That's like being lost in the woods and coming across a sign that reads, "don't stick around here if you can find a better place." At least the Loch Ness Monster is fun to think about. Not so NESI or NES. In seasonal parlance, NESI and NES are pure trick without the slightest trace of treat.

However, there is a bright side to these two rules and to the other rules of interpretation. They reveal that classifications are not set in stone. There is almost always room for interpretation. There is usually an opportunity to advocate for a classification that benefits you even in the face of legal precedent to the contrary. Just because the federal agency has rulings in one direction does not mean those rulings aren't prone to legal challenge. Federal agencies and the courts make mistakes. That is why U.S. Customs and Border Protection issues and publishes revocations of earlier classification rulings. The agency is simply confessing error.  

Audit your current classifications to find hidden opportunities. You must audit your classifications anyway to ensure reasonable care, why not go a little beyond? When asking a federal agency to classify your products, consider it as a opportunity to argue for the classification that you want. Treat your classification request like a brief in a lawsuit, full of arguments and evidence to advance your cause. Consider tariff engineering your product to take advance of lower or no duty rates. Don't be immediately dissuaded by previous rulings that do not seem to favor you. Hire a lawyer who knows how to advocate on your behalf. You'll find it's worth the effort and investment. You can make NESI, NES, and the other rules of interpretation work in your favor if you are smart. You may one day echo Boris Karloff's sentiment when he said, "The monster was the best friend I ever had."

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