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Marubeni America Corp. v. U.S.

Decided: September 7, 1994.

MARUBENI AMERICA CORP., PLAINTIFF-APPELLEE,
v.
THE UNITED STATES, DEFENDANT-APPELLANT.



Appealed from: U.S. Court of International Trade. Judge Restani

Before Rich, Newman, and Mayer, Circuit Judges.

Rich

RICH, Circuit Judge.

The United States (the government) appeals the May 14, 1993, judgment of the Court of International Trade (CIT), No. 90-04-00210, holding that 1989 and 1990, two door, two-wheel and four-wheel drive, Nissan*fn1 Pathfinder (Pathfinder) vehicles are correctly classified under heading 8703.23.00 (8703) of the Harmonized Tariff Schedule of the United States (HTSUS) as motor vehicles principally designed for the transport of persons. We affirm.

I

BACKGROUND

A. The Merchandise

The merchandise at issue is a two door, two-wheel or four-wheel drive, dual-purpose or multipurpose passenger vehicle, generally referred to as a compact sports utility vehicle. The Pathfinder does not have a cargo box or bed like a truck. Instead, its body is one unit that is configured much like an ordinary station wagon in that it has rear seats that fold forward, but not flat, for extra cargo space. These seats, however, are not removable. The spare tire is housed within the cargo space or alternatively, it may be attached outside the vehicle on the rear hatch. The rear hatch operates like those on a station wagon; it has a window that may be opened to place small packages in the cargo area without opening the tailgate. The Pathfinder is mechanically designed for both on- and off-road use.

B. Conversion to the Harmonized System.

On August 23, 1988, the Omnibus Trade and Competitiveness Act of 1988 (Pub. L. 100-418) was enacted. The Act adopted the new tariff nomenclature - the HTSUS, which became effective on January 1, 1989. The new nomenclature system developed as follows. The Trade Act of 1974 mandated that the United States participate in the development of an international product nomenclature known as the Harmonized System. The Harmonized System is a detailed product classification system developed through the Customs Co-Operation Council (CCC). The System provides a common core language for trade; it does not, however, carry any obligations with respect to tariff rates. To facilitate the conversion from the then existing Tariff Schedules of the United States (TSUS) to the HTSUS, a draft conversion was prepared by the International Trade Commission (ITC). The conversion report cross-references items under the TSUS with the HTSUS and vice versa. USITC Pub. 2030 (1983). This draft conversion was reviewed by government agencies, the private sector, and the trading partners. Later that year, the conversion document was republished for private sector review.

There are no HTSUS headings that expressly include vehicles for transport of goods and persons as did 692.10 TSUS. The final cross-referencing report, however, paired 692.10 TSUS, "motor vehicles for the transport of goods and persons," with 8703 HTSUS, "motor vehicles principally designed for the transport of persons;" and 692.02, "automotive trucks," with 8704 HTSUS, "motor vehicles for the transport of goods." See USITC Pub. 2051 (1988). Note, however, that the TSUS/HTSUS cross-references should not be viewed as a substitute for the traditional classification process. TSUS/HTSUS Cross Reference Clarification, 53 Fed. Reg. 27,447. Prior to January 1, 1989, the effective date of the HTSUS, the Pathfinder was classified under 692.10 TSUS (motor vehicles for the transport of goods and persons), 2.5% ad valorem. While not determinative, prior classification of Pathfinders is instructive. H.R.Con. Rep. No. 576, 100th Cong., 2nd Sess. 549-50 (1988). Legislative history also shows that any changes in the rates of duty from the TSUS to the HTSUS are consequential to the process of converting to the new nomenclature. Id. at 1581.

B. Proceedings below.

The Pathfinder was classified by the United States Customs Service (Customs) under 8704.31.00 (8704) of the HTSUS as a "motor vehicle for the transport of goods." Pursuant to 9903.87.00 of the HTSUS, a 25% ad valorem duty was assessed.

Nissan administratively protested this decision, pursuant to 19 U.S.C. § 1514, claiming that the Pathfinder should be classified as "motor cars and other motor vehicles principally designed for the transport of persons . . . including station wagons" under 8703 HTSUS. This protest was denied. Nissan then brought an action in the CIT. The CIT conducted a three week trial de novo, pursuant to 28 U.S.C. § 2640, that included test driving the Pathfinder and comparison vehicles, videotape viewing, and extensive presentation of both testimonial and documentary evidence. The government argued that the Pathfinder is more like a pick-up truck; therefore, it was a "motor vehicle for the transport of goods." The CIT concluded that Customs' classification of the Pathfinder under 8704 HTSUS, "motor vehicle for the transport of goods," was incorrect, and that the correct classification was under 8703 HTSUS, "motor ...


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