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HQ 964427

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October 27, 2000

CLA-2 RR:CR:TE 964427 RH

CATEGORY: CLASSIFICATION TREATMENT

TARIFF NO.: 4409.10.10

Steven W. Baker, Esq.
Steven W. Baker and Associates
One Sutter Street, Suite 1004
San Francisco, CA 94104-4919

RE: Classification of Stained Cedar Siding; NY 861959; 19 U.S.C. §1625(c)

Dear Mr. Baker:

This is in reply to your letters of June 2, August 8 (to the Ports of Blaine and Champlain), September 8, and September 25, 2000, on behalf of Weiss Sidings Inc./West Coast Prestain, concerning the applicability of 19 U.S.C. §1625(c) modification and revocation procedures and the importation of stained Western red cedar bevel siding from Canada. We met with you on August 16, 2000, to discuss these issues.

In your letter of September 8, you request business confidential treatment with regard to “specific importations” and “specific information regarding Weiss Sidings Inc. and its operations” which you submitted to our office and/or to various Customs ports. You place this information in brackets for identification. You state that the bracketed information is not essential to the ruling revocation process or the underlying classification issue, and that discussion of the information could give competitors access to customer, quality, shipping schedules and similar data which might be used to affect Weiss Sidings’ competitive position.

We do not find that the bracketed information on page 2 – paragraph 4, and page 4 – paragraph 3, disclose any facts that would reveal information harmful to your client’s competitive position. Accordingly, confidentiality is denied. However, under the provisions of 31 CFR 1.6, if a Freedom of Information Act request is made for your submission you will be notified and given an opportunity to further justify your request and, if appropriate, an opportunity to prevent disclosure through judicial action.

FACTS:

Weiss Sidings Inc. is a U.S. corporation which surface coats and sells wood siding products in the United States and Canada. It operates coating facilities, under the DBA West Coast Prestain, in Surrey, B.C., Canada. It also operates coating facilities in the states of Washington and Indiana.

You state that the clear Western red cedar siding involved in this case is only produced in quantity in B.C., Canada. The products are primarily manufactured by three large integrated forest product companies, all of which act as suppliers to Weiss.

Within the last several months, Western red cedar siding producers entered a number of shipments of stained Western red cedar bevel siding into the United States under subheading 4418.90.4090 of the Harmonized Tariff Schedule of the United States Annotated (HTSUSA), citing the applicability of New York Ruling Letter (NY) 861959, dated April 17, 1991. The products were coated and or stained by West Coast Prestain, and shipped from that facility to the United States. The entries were filed in the name of the lumber producers. The products were processed through and exported by the West Coast Prestain facility.

You claim that your client and other importers relied on NY 861959 to classify the imported siding under heading 4418, HTSUSA, and that NY 861959 should be affirmed, or revoked in accordance with 19 U.S.C. §1625(c) procedures. Alternatively, you argue that your client is entitled to a treatment under 19 U.S.C. §1625(c)(2).

ISSUES:

Do the revocation procedures set forth in 19 U.S.C. §1625(c)(1) apply to NY 861959?

Has Weiss Sidings Inc. established a treatment under 1625(c)(2)?

LAW AND ANALYSIS:

Classification of goods under the HTSUSA is governed by the General Rules of Interpretation (GRIs). GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes. Additionally, the Explanatory Notes (EN’s) to the Harmonized Commodity Description and Coding System constitute the official interpretation of the nomenclature at the international level. The EN’s are not legally binding. However, they do represent the considered views of classification experts of the Harmonized System Committee. It has therefore been the practice of the Customs Service to follow, whenever possible, the terms of the EN’s when interpreting the HTSUSA.

Two headings are at issue in this case. Heading 4409, HTSUSA, which provides for wood continuously shaped along any of its edges, whether or not planed, sanded or finger-jointed. Heading 4418, HTSUSA, provides for builders’ joinery and carpentry of wood.

In NY 861959, Customs classified stained Western red cedar siding as “builders’ joinery and carpentry of wood” under subheading 4418.90.4090, HTSUSA. The EN’s to heading 4409, in effect at the time that Customs issued NY 861959, specifically excluded wood which was surface worked beyond planing or sanding (e.g., veneered, polished, painted, varnished, bronzed, or faced with metal leaf (generally heading 4421).

The EN’s to headings 4409 and 4418 changed in 1991, prior to the implementation of the Customs Modernization Act ("Mod Act") (passed as part of the North American Free Trade Agreement Implementation Act ("NAFTA"), Pub. L. 103-182 §623 (1993)), but after the issuance of NY 861959. At its Sixth Session, in November 1990, the Customs Cooperation Counsel's Harmonized System Committee (HSC) decided that the classification of wood products should not be affected by their having been painted, stained or varnished. The Committee reasoned that these surface treatments did not affect the basic character of the products.

At its Seventh Session in April 1991, the HSC approved the following new texts for the EN’s:

Amendment to the General Explanatory Note to Chapter 44 (page 622, Sixth paragraph):

Generally speaking, throughout the Nomenclature, the classification of wood is not affected by treatment necessary for its preservation, such as seasoning, superficial charring, priming and stopping, or impregnation with
creosote or other wood preservatives (e.g., coal tar, pentachlorophenol, chromated copper arsenate or ammoniacal copper arsenate); nor is it affected by reason of being painted, stained or varnished. However, these general considerations do not apply in the case of the subheadings of heading 44.03 and 44.06, where specific classification provision has been made for particular categories of painted, stained or preservative-treated wood.

3. Exclusionary Explanatory Note to Heading 44.09 (page 629, last paragraph, (e), new paragraph:

Wood which has been surface worked beyond planing or sanding, other than painting, staining or varnishing e.g., veneered, polished, bronzed, or faced with metal leaf) (generally heading 44.21).

Under the decision of the HSC, products of chapter 44 remain classified in their "material" headings regardless of the presence of paint, stain or varnish. This decision represented a broader interpretation of certain provisions of Chapter 44 of the Harmonized System (notably the first nine headings) than was held by the Customs Service.

Shortly after the HSC decision and prior to the implementation of the "Mod Act", the Office of Trade Operations issued a Directive to All Customs Field Offices on April 22, 1993, adopting the aforementioned amendments to the EN’s so that the presence of paint, stain or varnish shall not affect the classification of products of Chapter 44. Several rulings were also issued after the HSC decision reflecting the change in the EN’s. See, Headquarters Ruling Letter (HQ) 953913, dated July 30, 1993, and NY A89856, dated December 18, 1996.

As stated previously, the EN's are relevant as a guideline in determining the scope of a heading. Both Congress and Customs have endorsed their use in the classification of merchandise. In T.D. 89-80, Customs set forth that EN's, along with decisions of the Harmonized System Committee that are published in the Compendium of Classification Opinions, are to be accorded appropriate weight in making classification determinations and that they (EN's) should always be consulted. Further, both Congress, in the report of the Joint Committee on the Omnibus Trade and Competitiveness Act of 1988, and Customs, in the T.D., have acknowledged that the EN's will be modified from time to time. That being the case, it is clear that Congress anticipated that EN's would be amended periodically, and that Customs, in such instances, would appropriately consider EN's in their amended form.

You argue that the provisions of 1625(c) apply to rulings before the effective date of the “Mod Act”, based on American Bayridge v. United States, 35 F. Supp. 2d 942 (Ct. of Int'l. Trade (1999), vacated on other grounds, Slip Op. 99-1228 (Ct. Appl’s Fed. Cir., October 6, 1999) and that Customs should affirm NY 861959 or alternatively, apply 19 U.S.C. §1625(c) to “shipments” of Western Red Cedar siding. As an example, you cite several ruling letters issued prior to the effective date of the “Mod Act” which Customs revoked or modified under 19 U.S.C. §1625(c)(1). In your opinion, your client's merchandise is identical or substantially similar to the siding the subject of NY 861959, although Customs has classified the merchandise under heading 4409. Additionally, you state that the Directive does not meet the public informational requirements, not having been published as a Treasury Decision, General Notice, or any other public form.

In American Bayridge, the court noted that the “Mod Act” “substantially amended” section 625 of the Tariff Act of 1930, as amended, 19 U.S.C. §1625 (1994), and that “[c]urrent section 625 is a marked change from the old statute." Id. at 934. The additions to section 625 change the procedures regarding appeals, publication of decisions that limit court decisions, and publication of certain information.

Prior to the amendment, section 625 did not address the issue of modification or revocation of interpretative rulings. Under Customs regulations, which remain in force except to the extent they are in conflict with current law, interpretive rulings were to be relied upon only by the importer requesting the ruling. 19 CFR §177.9(c). Moreover, Customs Regulations provide:

Any ruling letter found to be in error or not in accordance with the views of the Customs Service may be modified or revoked. Modification or revocation of a ruling letter shall be effected by Customs Headquarters by giving notice to the person to whom the ruling letter was addressed and, where circumstances warrant [not here relevant], by publication of a notice or other statement in the Customs Bulletin. 19 C.F.R. §177.9(d)(1) (1998).

Emphasis supplied.

Rather than codifying the existing administrative practice, Congress enacted a statute removing the discretion to publish found in the regulation. The new statute (19 U.S.C. § 1625(c)(1)) reads, in relevant part:

A proposed interpretive ruling or decision which would –
modify (other than to correct a clerical error) or revoke a prior interpretive ruling or decision which has been in effect for at least 60 days . . . shall be published in the Customs Bulletin.

Addressing the applicability of the new statute, the court in American Bayridge stated:

It would be absurd to find that customs could continue to operate under its old regulations implementing the statute without accounting for the significant change made to the statute. The Court, today, does not dispute the agency’s authority to interpret its statute through the promulgation of regulations. But in this case, the agency has not implemented regulations to account for a significant change. Not only does the statute plainly dictate the outcome, but deference cannot be paid to the agency’s interpretation of 19 U.S.C. @ 1625, as amended, because the agency has simple not interpreted the new statute. Here, the agency’s continued reliance on regulations that have been superseded by the amendment to the statue could not be found to be reasonable even if the statute were silent or ambiguous. Id. at 940. Emphasis supplied.

As noted earlier, prior to the “Mod Act” Customs issued at least two ruling letters (available to the public) that adopted the changes in the EN’s to headings 4409 and 4418. HQ 953913 and NY A89856. Furthermore, Customs adopted the changes in the EN’s in the 1993 Customs Directive. Under the law in effect at that time, Customs was not required to publish these decisions. Accordingly, NY 861959 was correct as a matter of law at the time it was issued, and is not subject to the modification or revocation procedures in 19 U.S.C. §1625(c)(1).

While the procedures set forth in 19 U.S.C. §1625(c)(1), for modification or revocation of a ruling letter do not apply to rulings which were correct as a matter of law before the implementation of the “Mod Act”, a party is not precluded from utilizing the procedures set forth in 19 U.S.C. §1625(c)(2), to claim a treatment. You assert that there was a “regular, sustained and continued treatment” of classifying Western red cedar siding under 4418 during the period June 1999 through April 2000.

To substantiate a claim for treatment under 19 U.S.C. §1625(c)(2), Customs requires evidence of a consistent classification treatment by it on identical or substantially identical transactions. The showing must go back two years prior to the date of the last liquidated entry subject to the claim. The entry information must include a list of every entry of the merchandise both liquidated and unliquidated up to the point where your client was advised to change the classification to that asserted by Customs, the entry number, port of entries, and it must identify any entries that were subject to examination by Customs. The request must also provide the tariff classification, dollar value and the volume of the merchandise. We also require a statement from the importer or his designee that there have been no entries of the merchandise under a tariff provision different from the claimed treatment provision for the same or similar merchandise. This information will then be verified with the affected ports.

The information you have provided up to this point does not substantiate that your client is entitled to a treatment. We are only aware of a few recent entries of their merchandise under heading 4418. If the information required to establish a treatment for your client exists, you may resubmit your request and provide the required information.

Further, while a third party may identify rulings it believes to be in error which were issued to a third party for appropriate Customs action, a third party may not claim a treatment on behalf of another importer. A claim of treatment is personal to each importer (see Customs Bulletin relating to lithograph posters – copy attached). In fact, to establish a treatment under 19 U.S.C. §1625(c)(2), Customs requires an importer to provide the aforementioned entry information which is not available to a third party and is confidential commercial information exempt from disclosure under the Freedom of Information Act (5 U.S.C §522(b)(4)).

Thus, to issue a decision on treatment under 19 U.S.C. §1625(c)(2), Customs must have the consent of the importer of record. In other words, the request must be made by the importer, his attorney or Customs broker. No evidence exists in the record that you are entitled to claim treatment of behalf of the other importers referred to in your request. Accordingly, notwithstanding the lack of evidence presented, we find that you do not have standing to request a treatment on behalf of those other importers. With that in mind, you may resubmit a request for treatment on behalf of one or all of the importers you mention, only if you represent them, and provide the information detailed in this letter.

In addition, while we apologize for any confusion your telephone call with my staff concerning the revocation of NY 861959 may have caused, we note that you were advised on the telephone that, even if we were required to revoke that ruling under 1625(c)(1) procedures, your client would have to establish that its merchandise was identical or substantially similar in order to receive a treatment. Moreover, you should be aware that under 19 CFR 177.1(b) oral advice is not binding.

Finally, as was indicated earlier in this letter, the claims for treatment will be verified by the ports involved in the import transactions. This verification is only one of the tasks the ports involved will undertake. As you correctly point out in your submissions and as pointed out in every notice Customs has published under 19 U.S.C. §1625, including the one attached to this letter, two new concepts that emerge from the new law are “informed compliance” and “shared responsibility.” For example, under section 484 of the Tariff Act of 1930, as amended, (19 U.S.C. 1484) the importer of record is responsible for using reasonable care to enter, classify and value imported merchandise, and provide any other information necessary to enable Customs to properly assess duties, collect accurate statistics and determine whether any other applicable legal requirement is met. Where, as you acknowledge, there has been contradictory treatment of substantially identical transactions which may raise doubts/ambiguity as to the proper classification of merchandise, the question remains whether an importer has “complied with Customs laws and regulations” and exercised “reasonable care” in relying on a ruling without going through the Part 177 procedures to request clarification of the proper classification of the merchandise. We note your comment that an importer searching the publicly available rulings would locate NY 861959. However, he would also locate HQ 953913 and NY A89856, which as pointed out earlier, adopt the classification position set forth in this decision.

The second task the ports will undertake which is completely independent of the first task of verifying the facts in the alleged treatment claim (the determination of whether or not treatment exists is one for Customs Headquarters to make after reviewing the facts), is an assessment of whether or not reasonable care was exercised by the importer, and/or broker and/or attorney involved in the import transaction. There seems to be some individuals in the importing community who are under the mistaken impression that a determination of treatment by Customs means ispo facto that the importer and others involved in the import transaction were exercising reasonable care. This is not the case. There is absolutely no linkage between the two determinations. To hold otherwise would turn the penalty process on its head and make it impossible to administer. If a port director believes reasonable care was not exercised a penalty action may be
initiated under the appropriate regulatory or statutory provisions against the person believed to be the culpable party involved in the import transaction. A subsequent or for that matter prior finding of treatment has no impact on that lack of reasonable care determination.

HOLDING:

The revocation procedures set forth in 19 U.S.C. §1625(c)(1) do not apply to the revocation of NY 861959. Furthermore, Weiss Sidings Inc./West Coast Prestain has not submitted sufficient evidence to establish a treatment under 19 U.S.C. §1625(c)(2). Accordingly, the Western red cedar siding imported by Weiss Sidings Inc./West Coast Prestain is classifiable under subheading 4409.10.10, HTSUSA. Articles classifiable under this provision, which are products of Canada are subject to entry requirements based on the U.S.-Canada Softwood Lumber Agreement of 1996. All invoices of such articles must be annotated with the Canadian province of manufacture. If manufactured in Ontario, Quebec, British Columbia or Alberta, a permit is required.

Sincerely,

John Durant, Director
Commercial Rulings Division

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See also:

• Tariff No.: 4409.10.10 - Coniferous wood siding continuously shaped along any of its edges or faces but not on its ends
• Tariff No.: 4418.90.40 - Builders' joinery and carpentry of wood, including cellular wood panels, nesi