Importer Drops Classification Lawsuit Because Win Would Have Yielded Tariff Increase
The Court of International Trade has agreed to an importer’s request to dismiss a classification case because a ruling in the importer’s favor would have placed the goods at issue on a list of products subject to additional tariffs when imported from China.
The plaintiff filed this case in June 2015 after U.S. Customs and Border Protection classified various models of showerheads as other plastic hygienic or toilet articles under HTSUS 3924.90.5650 (3.4 percent duty). The plaintiff argued that the showerheads, which it imported from China, should be classified as mechanical appliances for spraying liquids under HTSUS 8424.89.0000 (1.8 percent duty) or as parts of such appliances under HTSUS 8424.90.9080 (duty-free).
However, goods from China classified under HTSUS 8424.89.90 became subject to a Section 301 additional 25 percent tariff as of Aug. 23, 2018, and goods from China classified under HTSUS 8424.90.90 became subject to a Section 301 additional 10 percent tariff as of Sept. 24, 2018 (which has since been increased to 25 percent).
These developments prompted the plaintiff to file a motion to voluntarily dismiss the case in April 2019. CBP opposed this motion, arguing that (a) the case is ready to resolve on the merits (although the plaintiff asserts that there are still some material facts that are disputed), (b) the plaintiff is not abandoning its classification claim and will likely file suit again once the Section 301 tariffs are eliminated, and (c) the federal government has spent more than three years litigating this case and filed a motion for summary judgment the day after the motion to dismiss was filed.
However, the CIT rejected these arguments and granted the request for dismissal. While the court recognized the effort and expense the government devoted to this case, it said at least some of that effort may be useful if the plaintiff does challenge the classification of these showerheads again in the future, which CBP thinks is likely given that the plaintiff has multiple protests involving other entries of these goods that have been administratively suspended.
For more information on this case or pursuing classification issues through litigation, please contact Arthur Purcell at (202) 549-0131.