Aromant Usa, Inc. v. United States

  United States Court of Appeals
      for the Federal Circuit
              __________________________

                AROMONT USA, INC.,
                  Plaintiff-Appellee,
                           v.
                 UNITED STATES,
                 Defendant-Appellant.
              __________________________

                      2011-1017
              __________________________

   Appeal from the United States Court of International
Trade in case no. 03-CV-0354, Senior Judge Thomas J.
Aquilino, Jr.
              ___________________________

              Decided: February 21, 2012
             ___________________________

   BRIAN A. SHER, Bryan Cave, LLP, of Chicago, Illinois,
argued for plaintiff-appellee. Of counsel was JOSHUA J.
HEIDELMAN.

    MARCELLA POWELL, Trial Attorney, Commercial Liti-
gation Branch, Civil Division, United States Department
of Justice, of New York, New York, argued for defendant-
appellant. With him on the brief were TONY WEST, Assis-
tant Attorney General, JEANNE E. DAVIDSON, Director, of
Washington, DC, and BARBARA S. WILLIAMS, Attorney in
charge, of New York, New York. Of counsel was SHERYL
AROMONT USA   v. US                                       2


A. FRENCH, Office of Assistant Chief Counsel, United
States Customs and Border Protection, of New York, New
York.
             __________________________

     Before DYK, PROST, and MOORE, Circuit Judges.
DYK, Circuit Judge.
   The United States appeals the decision of the U.S.
Court of International Trade (“Trade Court”). The Trade
Court granted summary judgment in favor of Aromont
USA, Inc. (“Aromont”), holding that the imported mer-
chandise at issue was properly classifiable under sub-
heading 2106.90.99 of the Harmonized Tariff Schedule of
the United States (“HTSUS”). Aromont USA, Inc. v.
United States (“Summary Judgment Decision”), No. 03-
00354, 2010 WL 3199823, at *4 (Ct. Int’l Trade Aug. 12,
2010). We affirm.
                       BACKGROUND
    This case concerns the proper HTSUS classification of
finished flavoring products that were imported by
Aromont from France. In 2001, United States Customs
and Border Protection (“Customs”) classified Aromont’s
imported flavorings derived from veal, chicken, duck,
lamb, beef, fish, lobster, mushroom, or vegetable stock
under HTSUS subheading 2104.10.00 (“Heading 2104”)
covering “[s]oups and broths and preparations therefor . . .
Other.” J.A. 6. Aromont protested the classification,
contending that the flavorings should have been classified
under HTSUS subheading 2106.90.99 (“Heading 2106”)
covering “[f]ood preparations not elsewhere specified or
included.” J.A. 7. Heading 2106 carries a much lower ad
valorem tax than Heading 2104. Customs denied the
protest and liquidated the merchandise.
3                                        AROMONT USA   v. US


    After denial of the protest, Aromont challenged Cus-
toms’s decision before the Trade Court, again arguing
that the proper classification was under Heading 2106.
At the close of discovery, both the government and
Aromont moved for summary judgment. On August 12,
2010, the Trade Court granted Aromont’s motion and
denied the government’s motion, concluding that “as
imported plaintiff’s goods are properly classified under
heading 2106 ‘Food preparations not otherwise specified
or included.’” Summary Judgment Decision, 2010 WL
3199823, at *4. Heading 2104, insofar as it covers “prepa-
rations” for soups and broths, is a principal use provision
governed by HTSUS Additional U.S. Rules of Interpreta-
tion (“ARI”) 1(a). The Trade Court found that the
Aromont products are not covered by Heading 2104
because they are not principally used as soups or broths.
Id. Instead, Aromont’s “products are found in a variety of
end uses.” Id. While one of the many applications of the
imports might be in soup, that was not the principal use.
Id.
    The government timely appealed. We have jurisdic-
tion pursuant to 28 U.S.C. § 1295(a)(5).
                       DISCUSSION
     We review the Trade Court’s ruling on summary
judgment de novo. Intercont’l Marble Corp. v. United
States, 381 F.3d 1169, 1173 (Fed. Cir. 2004). “We may
affirm a grant of summary judgment on a ground sup-
ported in the record but not adopted by the [trial] court if
we conclude that there was no genuine issue as to any
material fact and the movant was entitled to a judgment
as a matter of law.” Clock Spring, L.P. v. Wrapmaster,
Inc., 560 F.3d 1317, 1324 (Fed. Cir. 2009) (internal quota-
tions omitted) (citing Fed. R. Civ. P. 56(c)).
AROMONT USA   v. US                                       4


    Heading 2104 covers “[s]oups and broths and prepara-
tions therefor.” J.A. 6. The soups and broths portion of
this heading is an eo nomine provision, that is, a provision
that describes an article by a specific name, not by use.
CamelBak Prods., LLC v. United States, 649 F.3d 1361,
1364 (Fed. Cir. 2011). The government does not contend
that Aromont’s flavorings are classifiable under the eo
nomine provision covering soups and broths. Instead, the
government contends that the flavorings are “prepara-
tions” for soups and broths covered by the principal use
provision “preparations therefor.”
   Principal use provisions are governed by ARI 1(a),
which provides that
   [i]n the absence of special language or context
   which otherwise requires— . . . a tariff classifica-
   tion controlled by use (other than actual use) is to
   be determined in accordance with the use in the
   United States at, or immediately prior to, the date
   of importation, of goods of that class or kind to
   which the imported goods belong, and the control-
   ling use is the principal use.
“Principal use” in this context has been defined as the use
“which exceeds any other single use.” Lenox Collections v.
United States, 20 C.I.T. 194, 196 (1996) (citing Conversion
of the Tariff Schedules of the United States Annotated
into the Nomenclature Structure of the Harmonized
System: Submitting Report 34–35 (USCIT Pub. No. 1400)
(June 1983)).
   In Primal Lite, Inc. v. United States, we construed
ARI 1(a) to “call for a determination as to the group of
goods that are commercially fungible with the imported
5                                         AROMONT USA   v. US


goods.” 182 F.3d 1362, 1365 (Fed. Cir. 1999). 1 The so-
called Carborundum factors provide guidance in deter-
mining what goods are commercially fungible with the
imported goods. See BenQ Am. Corp. v. United States,
646 F.3d 1371, 1377 (Fed. Cir. 2011). These factors
include: use in the same manner as merchandise which
defines the class; the general physical characteristics of
the merchandise; the economic practicality of so using the
import; the expectation of the ultimate purchasers; the
channels of trade in which the merchandise moves; the
environment of the sale, such as accompanying accesso-
ries and the manner in which the merchandise is adver-
tised and displayed; and the recognition in the trade of
this use. United States v. Carborundum Co., 536 F.2d
373, 377 (CCPA 1976). Here, the parties dispute the
application of the pertinent factors, as follows.
    Actual Use. The government argues that “[t]he actual
use of an imported article is irrelevant to classification in
a principal use tariff provision.” Appellant Br. 21. Thus,
it contends that the trial court erred in predicating its
decision primarily on the actual use of the merchandise.
The government points out that under the HTSUS, there
are two separate types “use” provisions—one for deter-
mining an article’s “actual use” and the other for deter-
mining the “principal use” of articles of its kind. The
government theorizes that the two provisions must be
different from each other and that actual use must there-
fore be pertinent only to the “actual use” provision.
    1   See also Pistorino & Co. v. United States, 607 F.2d
989, 992 (CCPA 1979) (finding that beam cutting ma-
chines were properly classifiable under a particular
heading because “the imported machines were competi-
tive with the machines which appellant was attempting to
distinguish, and . . . the imported machines and the other
machines could be used side by side and could be used as
replacements for one another in many applications”).
AROMONT USA   v. US                                      6


     We reject the government’s argument. In Carborun-
dum, the court recognized the relevance of “the use, if
any, in the same manner as merchandise which defines
the class.” 536 F.2d at 377; see also Maher-App & Co. v.
United States, 418 F.2d 922, 927 (CCPA 1969) (Baldwin,
J., concurring) (“Nor will proof that the merchandise in
question was actually used for the purpose . . . be suffi-
cient, although it will be relevant.”). In Primal Lite, we
weighed heavily the actual use of the imports in question
in determining the group of goods that were commercially
fungible with the imported goods. 182 F.3d at 1365.
Specifically, in interpreting a principal use provision, we
held that the imported goods did not consist of “lighting
sets of a kind used for Christmas trees” because an “affi-
davit established that the principal use of [the] imported
goods was not for Christmas trees, and the government
provided no evidence that those goods and those commer-
cially fungible with them are principally used for Christ-
mas trees.” Id.
    To be sure, under “actual use” provisions of the
HTSUS, imports are classified according to the actual use
to which they are put in the United States “‘if such use is
intended at the time of importation, the goods are so used
and proof thereof is furnished within 3 years after the
date the goods are entered.’” Id. at 1363 (quoting ARI
1(b)). But there is no inconsistency in looking at actual
use under both provisions. Actual use of the imported
goods is the only factor that is looked at under actual use
provisions. In contrast, under principal use provisions,
actual use of the particular imported goods is evidence of
the principal use of the merchandise involved. Actual use
of the goods involved is but one of a number of factors,
and perhaps one of the more important of the Carborun-
dum factors.
7                                        AROMONT USA   v. US


    The other Carborundum factors take account of the
fact that a single item might be put to a use different than
its ordinary use. Primal Lite, 182 F.3d at 1364 (“The
purpose of ‘principal use’ provisions . . . is to classify
particular merchandise according to the ordinary use of
such merchandise, even though particular imported goods
may be put to some atypical use.”); see also Clarendon
Mktg., Inc. v. United States, 144 F.3d 1464, 1467 (Fed.
Cir. 1998); Pistorino, 607 F.2d at 992. Thus, “a classifica-
tion covering vehicles principally used for automobile
racing would cover a race car, even if the particular
imported car was actually used solely in an advertising
display.” Primal Lite, 182 F.3d at 1364.
    The government also argues that even if actual use is
relevant, as we have held, the evidence of actual use
supplied by Aromont is not relevant because it concerns
the use of goods for years other than the year of importa-
tion (2001). See ARI 1(a). The deposition testimony of
Terry Wight (“Wight”), former vice president of sales and
marketing of Aromont, indicates, however, that the dur-
ing the relevant time period, the imported products were
always used as a flavor note, especially by industrial
customers. See J.A. 328 (“They purchased the Aromont
product as an ingredient that went into their sauces or
gravies. Almost to a tee, they bought it as a flavor profile
for those products.”). Wight also stated that the share of
sales to industrial customers (which used the products as
a flavoring note) was higher in 2001 than in subsequent
years. J.A. 330. Wight was the sole employee of Aromont
in the United States during the years that the goods at
issue were imported, and he “was basically doing all of the
ordering, the distributing, the selling, the marketing,
[and] the accounting.” J.A. 315. His deposition testimony
is thus highly probative. In light of this testimony, the
government’s passing suggestion that the use of the goods
AROMONT USA   v. US                                       8


was not shown to be the same in 2001, 2002, and 2003
does not create a genuine dispute of material fact.
    In sum, because the goods imported were used pri-
marily for as flavor profiles for sauces and gravies, this
factor weighs heavily against classifying the flavorings as
preparations for soups and broths.
    Physical characteristics. Another of the Carborun-
dum factors is the physical characteristics of the imports.
536 F.2d at 377; see also Maher-App & Co., 418 F.2d at
926 (Baldwin, J., concurring). Here, the physical charac-
teristics of the imports distinguish them from other
preparations for soups and broths. The Explanatory
Notes to Heading 2104 state that the heading covers
“[p]reparations for soups or broths requiring only the
addition of water, milk, etc.” 2 Aromont presented deposi-
tion testimony that the products at issue do not reconsti-


   2   The Explanatory Note to Heading 2104 reads:

       This category includes:

    (1) Preparations for soups or broths requiring only
    the addition of water, milk, etc.

   (2) Soups and broths ready for consumption after
    heating.

        These products are generally based on vegetable
   products (flour, starches, tapioca, macaroni, spaghetti
   and the like, rice, plant extracts, etc.), meat, meat ex-
   tracts, fat, fish, crustaceans, molluscs or other aquatic
   invertebrates, peptones, amino-acids or yeast extract.
   They may also contain a considerable proportion of
   salt.

        They are generally put up as tablets, cakes, cubes,
   or in powder or liquid form.
9                                          AROMONT USA   v. US


tute into soup or broth easily by adding a liquid because
the result is a “cloudy liquid.” J.A. 293.
    The government relies on the fact that the Explana-
tory Notes to Heading 2104 state that the products cov-
ered by the heading “are generally put up as tablets,
cakes, cubes, or in powder or liquid form.” The govern-
ment’s import specialist stated in his declaration that
“[a]rticles principally used as preparations for soups and
broths are sold in many different forms, including solid
cubes, cakes, pastes, liquids, concentrated or reduced
liquids, or powders,” and this would include a product
such as Aromont’s with a honey-like consistency. J.A. 86.
But this cannot support classification. If preparations for
soups and broths can in fact be found in almost any form,
the fact that the imports at issue take one of those forms
is not significant.
    Cost. The cost of the flavorings also weighs against
classifying Aromont’s imports under Heading 2104.
Aromont presented evidence, unrebutted by the govern-
ment, that its products were “very expensive” compared to
other products on the market, J.A. 321, and that they
were not “the right application” for a soup or broth, J.A.
293. Due to their higher cost and concentrated flavor,
Aromont’s flavorings were intended to be used only as a
“flavor profile” or a “flavor note” to other recipes, and thus
would generally be added in small amount to enhance
flavor. J.A. 327–28.
    Expectations of the ultimate purchasers. As to expec-
tations, the government argues that Aromont specifically
advertised that its products could easily be fashioned into
soup or broth with the addition of wine, water, meat jus,
or cream, and thus the ultimate purchasers of the product
would expect it to do so. It is true that Aromont’s adver-
tisements mention soup as one potential use of the
AROMONT USA   v. US                                      10


Aromont imports, but we are concerned with the primary
use. Aromont’s advertisements list soup as only one of
many potential uses for its imports. For example, one
advertisement states, “Use these classical stocks and Veal
Demi-Glace to make delectable sauces, soups, glazes and
many other dishes. Applications abound, with the addi-
tion of wine, water, cream or butter.” J.A. 92. Another
advertisement states that “delectable traditional sauces,
glazes, stocks and soups are readily fashioned,” and it
goes on to suggest that the product is an “[e]xcellent
mother recipe for all your stocks, sauces, soups and/or
other recipes.” J.A. 93. Thus, these advertisements
support the argument that an ultimate purchaser would
expect the product to be suitable for a number of uses,
including for soup, but not that use in soup is its primary
use.
    Channels of trade. Courts also compare the channels,
class, or kind of trade in which the merchandise moves.
See Carborundum, 536 F.2d at 377 (citing Maher-App &
Co., 418 F.2d at 926 (Baldwin, J., concurring)). It was
shown that Aromont’s products moved through the same
specific channels of trade as preparations for soups and
broths, such as large ingredient customers, food service
distributors, and retail stores. It was also shown that
Aromont’s products and other known preparations for
soups and broths are both sold in retail establishments
such as Whole Foods. These similarities prove little,
given the fact that most food products are generally sold
through such channels.
    Environment of the sale. The environment of sale,
such as accessories that accompany the merchandise and
the manner in which the merchandise is displayed, can
also be relevant. See id. (citing United States v. Baltimore
& Ohio R.R. Co., 47 CCPA 1 (1959)). For example, in
Baltimore & Ohio Railroad Co., our predecessor court
11                                         AROMONT USA   v. US


found that certain decorative coffee cups and saucers were
not primarily used for serving coffee or other liquids,
reasoning in part that the items did not match any din-
nerware sets also sold at the store and were not sold in
sets of six, eight, or twelve, both of which were customary
of cups designed to serve coffee or other liquids. 47 CCPA
at 3. Here, this factor does not benefit either party.
There was no evidence presented that the flavorings were
sold with certain accessories or displayed in a manner
particular to soup and broth preparations.
     Recognition in the trade.      Last, courts consider
whether the merchandise is recognized in the trade as
having that particular use or whether it meets certain
specifications recognized in the trade for that particular
class of products. See Carborundum, 536 F.2d at 377
(citing Bob Stone Cordage Co. v. United States, 51 CCPA
60 (1964) (holding that the imported merchandise did not
meet the specifications recognized in the trade to be
considered agricultural binding twine)). Neither party
provided evidence of industry-specific specifications for
preparations for soups and broths. The government
points out that Aromont, in some of its own documents,
characterized some of the imported merchandise as
“broth.” See, e.g., J.A. 44. One of Aromont’s executives
testified, however, that Aromont’s use of the word “broth”
was merely shorthand and did not mean that any of the
products were broths per se as defined in the trade. J.A.
294. He indeed testified that they were not. The govern-
ment did not present contrary evidence, except for a
conclusory statement by its expert. See J.A. 87. This
factor nonetheless slightly favors the government given
the importer’s own description of the product.
    In sum, Aromont has made a strong showing with re-
spect to the factors for actual use, physical characteristics,
and cost. The government has not made a sufficient
AROMONT USA     v. US                                     12


showing that any of the other factors requires a contrary
result, or that there is a genuine issue of material fact on
any of the relevant factors. Thus, when viewed in its
totality, the principal use of the class of goods at issue is
not as preparations for soups and broths.
    We note that the government challenged Aromont’s
supporting evidence on the ground that paragraphs 12
through 28 of the declaration of Khaled Zitoun (“Zitoun
Declaration”), Vice President of Kerry Ingredients &
Flavors, which purchased Aromont around 2001, were
improper because he lacked personal knowledge of the
assertions in the paragraphs and he did not properly
authenticate the documents referred to therein. Like the
Trade Court, we need not decide this issue because we do
not rely on the Zitoun Declaration. Other admissible
evidence supports our conclusion that summary judgment
in favor of Aromont was proper.
     Because the merchandise does not fall under Heading
2104, it falls under Heading 2106, a “catch all” provision
covering “[f]ood preparations not elsewhere specified or
included.” 3 We therefore affirm the Trade Court’s sum-
mary judgment in favor of Aromont that the merchandise
falls under Heading 2106.
                        AFFIRMED
                           COSTS
    No costs.

    3    Before the Trade Court, Aromont raised the alter-
native argument that two previous Customs rulings
classifying its products under Heading 2106 bound Cus-
toms to that classification. Aromont again raises this
argument on appeal. Because we find that summary
judgment in favor of Aromont is appropriate, we need not
address this alternative argument.