Spooky Classification Cases

Halloween is as American as pumpkin pie. If you are anything like this writer, and given the explosion of all things Halloween, your house will soon be decorated with ghosts, witches, and monsters. You may even be seen wearing clothing with a Halloween theme. Some people are so overwhelmed by the spirit of the season that they put themselves at risk.

Though an American tradition, most of our Halloween gear is manufactured overseas and then imported for domestic consumption.

Classifying merchandise, almost by its definition, is a dry, painfully esoteric exercise, which explains why some people have a hard time passing the customs broker exam. But classification is the lynchpin of all import laws. Wars have been fought because of tariffs, or at least in large part because of tariffs. Tariffs emerge when diplomacy fails. Tariffs (how much in taxes you pay to the Government) are determined by the classification of your imported products. You classify products under the Harmonized Tariff Schedule of the United States. In printed form, the HTSUS makes the Yellow Pages (remember those?) look like a comic book. Its heft is explained by the thousands of pages that list the tens of thousands of items. It is a "harmonized" schedule because our country coordinates with other countries on a model tariff schedule, thereby giving much predictability to both exports and imports regardless of which country you are doing business in. Predictability while classifying merchandise, that is. While tariffs have fallen a great deal worldwide in recent decades and tariff rates are increasingly determined by treaty, tariff rates can still vary wildly. Countries often use tariffs to protect domestic companies and even in this era of free trade are loath to open domestic markets to the vicissitudes of laissez faire.

Rules of interpretation, both unique to the country to which the merchandise is being imported, and more general rules that cut across jurisdictions, parse the whole mess out.

When you have tens of thousands of classifications and several ways, or rules of thumb, to determine the most accurate classification, there are bound to be disagreements. Which opens the system to an inevitable struggle between importers, who argue for classifications with the lower tariff rate, and Government, who argues the exact opposite because it feels its coffers threatened. That is why the court cases have the federal government on one side and the importer on the other side: US vs. Importer.

The courts have decided several Halloween classification cases.

What adds color and makes these cases almost tolerable and even fun to read is how the courts try to sound austere and formal while discussing the finer legal points of ghost bracelets, Frankenstein costumes, and jack-o-lanterns.

Here are a couple of the more notable Halloween classification cases:

Russ Berrie & Company vs. US - The Court of Appeals for the Federal Circuit is about as high as classification cases go (the next level up is the US Supreme Court). In this opinion, the Federal Circuit Court of Appeals reversed the Court of International Trade and sided with US Customs and Border Protection. The controversy revolved around Halloween and Christmas earrings with the following motiffs: a Santa Claus; a snowman decorated with holly, wearing a top hat and holding a snowball; a teddy bear dressed in red and white Santa outfit and holding a present; red, green, gold bells with/or without red or green bows; a ghost; a jack-o-lantern; a Frankenstein monster; and a witch. The proper classification of these trinkets, according to the Court of Appeals for the Federal Circuit, is "imitation jewelry" under heading 7117 of the HTSUS, not "[f]estive ··· articles" under heading 9505.

Rubie's Costume Company v. US - While deciding the classification of Halloween merchandise, this case laid down an important rule with a much broader affect. The Court of Appeals for the Federal Circuit again slapped down the Court of International Trade and the Importer in favor of US Customs and Border Protection. The importer claimed that courts should give no deference to tariff classifications from CBP. Not so fast, said the Federal Circuit Court of Appeals. CBP may not be the final word on classification, but courts must pay attention and be guided to some degree by the agency's expertise -- sometimes. The level of deference courts give to CBP's classification decisions depends on how well CBP did its job, i.e., "The weight of such a judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give power to persuade, if lacking power to control." In this case, the Court of Appeals for the Federal Circuit found that it should defer substantially to CBP's classification ruling. Thus, court concluded that children's costumes of "Witch of the Webs", "Abdul Sheik of Arabia," "Pirate Boy," "Witch," and "Cute and Cuddly Clown" are properly classified as "festive articles" and not "wearing apparel," an obvious outcome if you are parent.

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