CLEVENGER, Circuit Judge.
This customs case concerns the proper classification of ten styles of CamelBak Products, LLC's ("CamelBak") back-mounted packs ("subject articles").
The subject articles are imported back-mounted packs used for outdoor activities and athletics, including cycling, running, hiking and skiing, and are designed to deliver water to the user in a "hands-free" fashion, allowing the user to consume water on-the-go without having to interrupt activity. Each of the subject articles is a textile bag with padded adjustable shoulder straps and features: (a) a polyurethane reservoir or bladder surrounded by a closed-cell polyethylene foam compartment designed to carry and maintain the temperature of water or another beverage; (b) a hydration delivery system composed of flexible tubing attached to the reservoir, a bite valve and a shut-off valve; and (c) a cargo compartment designed to hold food,
Between August 6, 2004 and August 27, 2004, U.S. Customs and Border Protection ("Customs") liquidated and classified the merchandise at issue under subheading 4202.92.30, HTSUS, as "Trunks, . . . traveling bags, insulated food or beverage bags, . . . knapsacks and back-packs, . . . sports bags . . . and similar containers . . . of textile materials: . . . With outer surface of sheeting of plastic or of textile materials: . . . travel, sports and similar bags" at a rate of duty of 17.8% ad valorem, based on a prior Customs ruling.
The parties filed cross-motions for summary judgment at the trial court addressing the proper classification of the subject articles. In its motion for summary judgment, CamelBak argued that the subject articles constituted "composite goods" made up of two components—the cargo component, which was prima facie classifiable as a "travel, sports, [or] similar bag[ ]" and the hydration component, which was prima facie classifiable as an "insulated beverage bag." CamelBak contended that the subject articles had to be classified pursuant to General Rule of Interpretation ("GRI") 3(b)'s essential character test because the two applicable subheadings refer to part only of the subject articles. Specifically, CamelBak argued that the following portions of HTSUS heading 4202 were relevant to the analysis:
The government argued that the subject articles were not composite goods, but rather that a single tariff provision—the "travel, sports, and similar bags" provision—applied to the articles in their entirety. Thus, the government contended that Customs properly classified the subject articles as a whole as "travel, sports, and similar bags" under subheading 4202.92.30, HTSUS, through a straightforward application of GRI 1.
The Court of International Trade upheld Customs' classification decision concerning the subject articles and granted judgment for the government. CamelBak appeals, and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5).
We review the grant of summary judgment by the Court of International Trade without deference. See, e.g., Structural Indus., Inc. v. United States, 356 F.3d 1366, 1368 (Fed.Cir.2004). We review questions of law de novo, including the interpretation of the terms of the HTSUS, whereas factual findings of the Court of International Trade, including which heading the merchandise falls within, are reviewed for clear error. Home Depot U.S.A., Inc. v. United States, 491 F.3d 1334, 1335 (Fed.Cir.2007). "A finding is clearly erroneous when, although there is evidence to support it, the reviewing court is left with a `definite and firm conviction that a mistake has been committed.'" Timber Prods. Co. v. United States, 515 F.3d 1213, 1220 (Fed.Cir.2008) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)).
A classification decision involves two underlying steps: (1) ascertaining the proper meaning of the tariff provisions, which is a question of law; and (2) determining which heading the particular merchandise falls within, which is a question of fact. Cummins Inc. v. United States, 454 F.3d 1361, 1363 (Fed.Cir.2006). The GRIs govern classifications of imported goods under HTSUS and we apply them in numerical order. BASF Corp. v. United States, 482 F.3d 1324, 1325-26 (Fed.Cir. 2007).
"Under GRI 1, the court must determine the appropriate classification `according to the terms of the headings and any relative section of chapter notes' with all terms construed to their common commercial meaning." Millenium Lumber Distrib., Ltd. v. United States, 558 F.3d 1326, 1328-29 (Fed.Cir.2009). We apply GRI 1 as a substantive rule of interpretation, such that when an imported article is described in whole by a single classification heading or subheading, then that single classification applies, and the succeeding GRIs are inoperative. See Mita Copystar Am. v. United States, 160 F.3d 710, 712 (Fed.Cir.1998). With regard to assessing an imported article pursuant to GRI 1, we consider a HTSUS heading or subheading an eo nomine provision when it describes an article by a specific name. Carl Zeiss, Inc. v. United States, 195 F.3d 1375, 1379 (Fed.Cir.1999). Absent limitation
However, as we held in Casio, Inc. v. United States, 73 F.3d 1095 (Fed.Cir. 1996), when an article "`is in character or function something other than as described by a specific statutory provision—either more limited or more diversified—and the difference is significant,'" it is not properly classified within an eo nomine provision. 73 F.3d at 1097 (quoting Robert Bosch Corp. v. United States, 63 Cust.Ct. 96, 103-04, 1969 WL 13787 (1969)). In order to determine whether the subject article is classifiable within an eo nomine provision, we look to whether the subject article is merely an improvement over or whether it is, instead, a change in identity of the article described by the statute. See United Carr Fastener Corp. v. United States, 54 C.C.P.A. 89, 91, 1967 WL 8910, *2-*3 (CCPA 1967). "The criterion is whether the item possess[es] features substantially in excess of those within the common meaning of the term." Casio, 73 F.3d at 1098 (quotation marks and citation omitted) (emphasis in original).
When goods are prima facie classifiable under two or more headings or subheadings of HTSUS, we apply GRI 3 to resolve the classification. Home Depot, 491 F.3d at 1336. We apply GRI 3(a) when the goods, as a whole, are prima facie classifiable under two or more headings or subheadings to determine which heading provides the most specific description of the goods. See GRI 3(a); Bauer Nike Hockey USA, Inc. v. United States, 393 F.3d 1246, 1252 (Fed.Cir.2004). When two subheadings "each refer to part only of the materials. . . contained in . . . composite goods," they are "regarded as equally specific" under GRI 3(a) and we apply GRI 3(b) to resolve the classification. GRI 3(a). GRI 3(b) instructs that we classify composite goods made up of different components "as if they consisted of the material or component which gives them their essential character."
In reaching its conclusion that the subject articles are backpacks, the Court of International Trade began its analysis by applying GRI 1 to determine whether the subject articles were classifiable as a whole under a particular heading and subheadings. Turning to heading 4202, which the parties agreed applied to the subject articles, the Court of International Trade defined the terms "traveling bag," "sports bag," "insulated food or beverage bag," and "backpack"
The Court of International Trade next determined that the subject articles were composed of an outer surface of textile materials and properly classifiable under 4202.92, HTSUS. Id. at 1342.
Turning to the final set of HTSUS subheadings applicable to the subject articles,
The Court of International Trade found as a fact that a portion of each of the subject articles was designed to carry water, while the remainder of the capacity was designed to carry cargo. Id. at 1344. Nevertheless, the Court of International Trade reasoned that the articles "fall[ ] within the tariff provision covering `travel, sports, and similar bags,' and [are] prima facie classifiable thereunder[,]" because they are properly described as "backpacks." Id. at 1342. The Court of International Trade further concluded that the subject articles could not be "fairly described as `beverage bags'" as a whole because "there is simply too much that is designed to carry cargo (rather than beverages)." Id. at 1344. The Court of International Trade also determined that "the water-carrying and -dispensing functionalities" of the subject articles "do not remove them from the purview of `travel, sports and similar bags'" because the tariff provision covering "travel, sports, and similar bags" is an eo nomine provision which includes all forms of the named article, even improved forms. Id. at 1343.
Having concluded that the "travel, sports and similar bags" subheading encompassed the subject articles as a whole, the Court of International Trade applied GRI 1 and classified the subject articles under subheading 4202.92.30. Id. at 1345. In so doing, the Court of International Trade rejected CamelBak's argument that the hydration component of the subject articles removed them from the scope of the eo nomine backpack provision, thereby making them new articles of commerce and composite goods. See id. Addressing CamelBak's argument, the Court of International Trade explained that "[t]he mere fact that a piece of merchandise may consist of more than one component does not necessarily make that merchandise a `composite good' subject to classification under GRI 3(b)." Id. The Court of International Trade then determined that "[t]here is nothing about incorporating into a backpack a compartment designed to contain (and maintain the temperature of) beverages that makes the backpack not a backpack." Id. at 1346 (emphasis in original). That is, "a `backpack' is a `backpack,' no matter how . . . elaborate it may be." Id. In essence, the Court of International Trade regarded the hydration component of the subject articles as an incidental feature and did not consider its primary design or use as contributing to the classification characteristics of the articles.
On appeal, CamelBak concedes that the cargo component of the subject articles is prima facie classifiable as "travel, sports and similar bags" of subheading 4202.92, because it permits a consumer to carry some personal effects, as defined in Additional U.S. Note 1. CamelBak contends, however, that the subject articles cannot be classified under 4202.92.30 by reference to GRI 1 alone, because the "travel, sports and similar bags" provision does not cover the articles as a whole (i.e., the subject articles are not eo nomine backpacks). Rather, CamelBak repeats its argument that the subject articles are made up of two major components each of which is
The government, relying on the common meaning of the term "backpack" and Additional U.S. Note 1 to Chapter 42, responds that the Court of International Trade correctly sustained Customs' classification of the subject articles under 4202.92.30 HTSUS as "travel, sports and similar bags" pursuant to GRI 1 because backpacks, as a whole, are designed to carry and organize a multitude of personal effects, including water. Thus, the backpack provision encompasses the subject articles in their entirety. The government further contends that, as an eo nomine provision, subheading 4202.92.30 covers all forms of travel and sports bags including those that carry water in a water bladder. Accordingly, the government contends that a GRI 3(b) analysis is not triggered in this case because the Court of International Trade correctly classified the subject articles pursuant to GRI 1.
In this case, we are called upon to determine whether the Court of International Trade correctly classified the subject articles as "backpacks" falling within the "sports, travel, and similar bags" eo nomine provision of subheading 4202.92.30, HTSUS. If the subject articles fall within the scope of the eo nomine backpack provision then, under Mita Copystar, GRI 1 mandates that the subject articles be classified as "travel, sports and similar bags" and GRI 3 is not triggered.
Turning to the classification of the subject articles, we note that although Casio sets forth the proposition that a change in identity removes an article from an eo nomine provision, it does not provide the analytical tools or factors for making that determination. The case law of this and our predecessor court, however, provides several analytical tools or factors we can use to assess whether the subject articles are beyond the reach of the eo nomine backpack provision. These factors include the design of the subject articles, see Casio, 73 F.3d at 1098 (affirming the trial court's finding that the subject articles— synthesizers—were not beyond the scope of the eo nomine "electronic musical instrument" tariff provision because the additional features of the articles were "designed primarily to make it easier for a musician to create music"), and the use or function of the subject articles, see Trans-Atlantic Co. v. United States, 60 CCPA 100, 471 F.2d 1397, 1399 (1973) ("[W]e think that the primary function of the imported article should govern classification."); United States v. Quon Quon Co., 46 C.C.P.A. 70, 72, 1959 WL 7626, *2 (1959) ("use cannot be ignored in determining whether an article falls within an eo nomine tariff provision"); see also BASF Wyandotte Corp. v. United States, 855 F.2d 852, 853 (Fed.Cir.1988) (citing Quon Quon for the proposition that "the use of a product may be considered in determining the classification of that article").
46 C.C.P.A. at 73 (emphasis in original).
Several commercial factors also guide the court's assessment of whether articles fall within the scope of an eo nomine provision, including how the subject articles are regarded in commerce, see Servo-Tek Prods. Co., Inc. v. United States, 57 CCPA 13, 416 F.2d 1398, 1400 (1969) (concluding that the subject articles were not regarded in commerce as merely "motors" and should not be classified as such), how the subject articles are described in sales and marketing literature, see Fairchild Camera & Instrument Corp. v. United States, 53 C.C.P.A. 122, 124, 1966 WL 8923, *2-*3 (1966) (classifying the subject articles as "cameras" based, in part, on the fact that they were consistently described as "cameras" in sales literature), and whether the additional component is a substantial or incidental part of the whole product, cf. United States v. N.Y. Merch. Co., 58 CCPA 53, 435 F.2d 1315 (1970).
Applying the above factors to the present case, we conclude that the Court of International Trade clearly erred in finding that the subject articles are nothing more than improved backpacks. It is correct that "travel, sports and similar bags" are eo nomine and include all forms of backpacks. The subject articles, however, "possess[ ] features substantially in excess of those within the common meaning" of the term backpack as defined by the Court of International Trade, which the court failed to regard. Casio, 73 F.3d at 1098 (emphasis in original). Thus, they cannot be classified eo nomine as conventional backpacks. At most, the cargo component is classifiable as a conventional backpack because it is designed and used to carry personal effects. It is undisputed, however, that the hydration component has a different design and primary use: to provide a temperature-maintained, continuous source of hands-free hydration to a user while engaged in a sporting event or recreational activity. When using the subject articles, the user can drink the beverage at will, without removing the article, thereby minimizing any disruption in activity. As Wesley Watson, CamelBak's Vice President of Global Sourcing and Distribution testified, CamelBak's "core product is manufactured around hydration; allowing hydration to be provided to an active user in the best way and the easiest way. Hands-free hydration is a staple or a motto of our organization, and we design products specifically for markets that allow you to drink while you're using, while you're doing an activity." Indeed, the subject articles exist "to provide a hands-free . . . way to drink" and it was error for the Court of International Trade to discount the hydration component and characterize it as a mere feature without considering
That there is a substantial difference in identity of the subject articles from a conventional backpack is further demonstrated by the commercial factors, such as the higher prices CamelBak charges and consumers pay for the subject articles as compared to conventional backpacks, the placement of the subject articles in retail catalogues and stores in a "hydration pack" section rather than a "backpack" section, and CamelBak's reference to the subject articles as "hydration packs" in its literature and marketing materials. These factors demonstrate that subject articles are commercially known, advertised and sold as "hydration packs," as opposed to backpacks, and that consumers purchase them for different reasons than they purchase conventional backpacks.
Finally, the hydration component of the subject articles is not merely incidental to the cargo component but, instead, provides the articles with a unique identity and use that removes them from the scope of the eo nomine backpack provision. That is, the subject articles are not merely an improvement over the conventional backpack as the Court of International Trade concluded. Thus, the subject articles are not classifiable as a whole pursuant to GRI 1.
Rather, they are composite goods made up of two components, which lack a single specific classification under HTSUS (i.e., there is no HTSUS provision for combination backpacks and hydration packs). Each component of the subject articles is classifiable under a separate subheading of 4202.92 HTSUS—the cargo component is classifiable as a "travel, sports, or similar bag[ ]" under 4202.92.30 HTSUS, and the hydration component is classifiable as an "insulated food and beverage bag" under 4202.92.04 (or 4202.92.08) HTSUS. Accordingly, GRI 3(b) controls the classification of the subject articles.
Regarding the application of GRI 3(b), CamelBak contends that there are no factual disputes to resolve with respect to the essential character of the subject articles because the parties agree on the basic nature of the products and the government failed to refute the evidence CamelBak adduced in support of its summary judgment motion. Thus, argues CamelBak, a remand to the Court of International Trade is not necessary and this court can classify the subject articles pursuant to GRI 3(b). We are not persuaded by CamelBak's argument.
First, we note that the essential character of the subject articles is a question of fact. See Home Depot, 491 F.3d at 1337 ("the application of this [essential character] test requires a fact-intensive analysis"); Pillsbury Co. v. United States, 431 F.3d 1377, 1380 (Fed.Cir.2005) ("Predominance [in the context of GRI 3(b)] is a factual determination. . . ."). Second, contrary to CamelBak's argument, the parties dispute the essential character of the subject articles. Indeed, the government contends that CamelBak cannot prevail on a GRI 3(b) analysis because it failed to demonstrate by competent evidence that any component of the subject articles is classifiable as an insulated beverage bag.
For the foregoing reasons, we reverse the Court of International Trade's grant of
BRYSON, Circuit Judge, dissenting.
I respectfully dissent. The Court of International Trade upheld Customs' classification of the goods at issue in this case as "travel, sports and similar bags" within HTSUS 4202.92.30. That determination should be affirmed. Additional Note 1 to chapter 42 of the HTSUS tells us that this category includes goods "of a kind designed for carrying clothing and other personal effects during travel, including backpacks and shopping bags[.]" As an eo nomine provision, that subheading encompasses "all forms of the named article." Carl Zeiss, Inc. v. United States, 195 F.3d 1375, 1379 (Fed.Cir.1999). The fact that an article features an improvement does not remove it from the statutory class. See Casio, Inc. v. United States, 73 F.3d 1095, 1098-99 (Fed.Cir.1996). To be sure, there comes a point at which an "improvement" amounts to such a fundamental change in an item that the item cannot fairly be classified as a member of the eo nomine class. The majority concludes that the line has been crossed in this case. The Court of International Trade came to a contrary conclusion, and in my view that court's highly factual determination cannot be said to be clearly erroneous. See id. at 1098.
In holding that the products at issue are not backpacks, the majority relies heavily on its determination that the subject goods are sold for higher prices than traditional backpacks. To support its conclusion, the majority cites an article that appears in a magazine that is directed toward runners and as well as several retail catalogs that were admitted into evidence. The prices listed for backpacks that include a hydration component and for backpacks without that feature overlap considerably, and the record does not indicate that the price of backpacks having a hydration component is so out of line with the price of backpacks lacking that feature as to suggest clear error in the trial court's finding.
While it is true that the way particular products are marketed can affect whether they should be viewed as being members of an eo nomine class, the evidence in the record on that score is mixed. CamelBak's Vice President for Marketing and Product Management stated in his deposition testimony that product placement varies from retailer to retailer. He explained that many retailers place cycling-oriented articles with other cycling-oriented hydration products. But he also stated that some retailers sell the subject articles alongside backpacks not having a hydration component:
That testimony lends support to the trial court's finding that the subject articles are properly classified in the eo nomine category for backpacks.
The majority points out that in its promotional and sales literature CamelBak refers to the subject articles as "hydration packs." That point, however, does not carry much probative force. It is not surprising that CamelBak has selected the adjective "hydration" to modify "pack," since
Importantly, CamelBak's promotional literature does not emphasize only the hydration component of its packs. It also touts the packs' storage and cargo-carrying functionality. CamelBak's 2003 catalog tells consumers that the "Mule" product "integrates increased cargo capacity" with CamelBak's most recent developments in hands-free hydration technology. CamelBak describes the "Hawg" product as a "Technical Cycling Pack." The "Hawg," according to CamelBak, is "[b]uilt for haulin' down a trail" and "holds 100 oz of water[ ] and enough gear, clothing, and food for extended rides." And the "Snow-DAWG," which CamelBak describes as a "Versatile Winter Day Pack," is said to allow its purchasers to "Haul it all! Stuff in an extra layer, a pair of mittens, and a mid-morning snack, plus enough water for your snowshoeing, cross-country skiing, or sledding adventure."
In light of the record before it, the trial court did not clearly err in concluding that the subject imports are improved backpacks, classifiable in their entirety under subheading 4202.92.30 of the HTSUS. Because GRI 1 controls this case, there is no need to remand for a GRI 3(b) "essential character" analysis. I would affirm the judgment of the Court of International Trade.
