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HQ 965865




November 15, 2002

CLA2 RR:CR:TE 965865 SG

CATEGORY: CLASSIFICATION

TARIFF NO.: 4202.92.9060

Port Director
U.S. Customs Service
1205 Royal Lane
DFW International Airport, Texas 75261

RE: Application for Further Review of Protest No. 5501-02-100135; Classification of jewelry gift boxes; Heading 4202; paper coated with a sheeting of plastic; Pellaq™ by Skivertex®; subheading 4202.92; “outer surface of”; “sheeting of plastics”; Sarne Handbags Corp. v. United States; Stipulated Judgement; Kalencom Corporation v. United States

Dear Sir:

This is in reply to your request for further review of Protest No. 5501-02-100135, timely filed on May 21, 2002, by McKinley International Corp., on behalf of the importer, Chippenhook Corp., against the classification and liquidation of gift boxes which were liquidated on February 22, 2002. The boxes are used to package jewelry.

When entered the boxes were classified as containers with an outer surface of plastic sheeting in subheading 4202.92.9060, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), and were subsequently liquidated without change. The importer has protested the classification and claims that the goods were entered in 4202.92.9060, HTSUSA, pursuant to Customs instructions. It is claimed that the proper classification of these boxes is under subheading 4202.99.1000, HTSUSA, as a box wholly or mainly covered with paper.

FACTS:

The merchandise under protest is identified as jewelry boxes covered in Pellaq™ by Skivertex®. The boxes are lidded containers of the kind normally given to the purchasers of the below referenced jewelry items. Item number 7200 is described as being for a single ring, item 7251 for a large pendant, item 7242 for a bracelet, and item 7201 for earrings. The boxes appear to be suitable for long term use.

The exterior of the box is covered with a paper impregnated with latex. It is a composite of three layers of materials. The base, also known as the substrate, is of cellulose fiber (paper) which has been saturated with acrylic latex. The outer surface consists of a pigmented aqueous acrylic. A sample of the Pellaq™ paper was provided.

The gift boxes were classified by Customs in subheading 4202.92.9060 of the HTSUSA, which provides for “Trunks, suitcases. . .and similar containers; traveling bags. . . jewelry boxes. . . and similar containers, of leather or of composition leather, of sheeting of plastics, of textile materials, of vulcanized fiber, or of paperboard, or wholly or mainly covered with such materials or with paper: Other: With outer surface of sheeting of plastic or of textile materials: Other: Other, Other: Other”.

It is protestant's view that Customs erroneously classified the item as having an outer surface of plastic sheeting in subheading 4202.92, HTSUS. Protestant seeks to have the merchandise classified within subheading 4202.99.10, HTSUS, which provides for “Trunks, suitcases. . .and similar containers; traveling bags. . . jewelry boxes. . . and similar containers, of leather or of composition leather, of sheeting of plastics, of textile materials, of vulcanized fiber, or of paperboard, or wholly or mainly covered with such materials or with paper: Other: Other: Of materials (other than leather, composition leather, sheeting of plastics, textile materials, vulcanized fiber or paperboard) wholly or mainly covered with paper: Of plastics." In support thereof, protestant cites the Court of International Trade Stipulated Judgement on Agreed Statement of Facts, Kalencom Corporation v. United States, dated April 18, 2002.

ISSUES:

1. Whether a court-approved stipulation has precedential effect over the classification of merchandise not subject to that order.

2. What is the correct classification of the subject jewelry gift boxes?

LAW AND ANALYSIS:

1. We first address the claim that a stipulation agreed to in Kalencom v. United States, Court No.01-00030, should control the disposition of the instant case. That proceeding involved presentation boxes covered with "Skivertex®". The merchandise was initially classified by Customs as "jewelry boxes and similar containers, wholly or mainly covered with sheeting of plastics: Other: With outer surface of sheeting of plastic or of textile materials: Other:Other" under subheading 4202.92.90, HTSUS. That litigation ended with the assent of the parties to a stipulated agreement in which Customs reclassified the merchandise as "jewelry boxes and similar containers, wholly or mainly covered with paper: Other: Other: Of materials (other than leather, composition leather, sheeting of plastics, textile materials, vulcanized fiber or paperboard) wholly or mainly covered with paper: Of Plastics" under subheading 4202.99.10, HTSUS.

The Court of International Trade (CIT) has indicated that a case submitted on an agreed stipulation of facts, without trial or briefing by the Court, lacks precedential value. See Siemens America, Inc. and Siemens Corp. v. United States, 2 CIT 136, 140 (1981), aff'd. 1 Fed Cir. (T) 9, 692 F.2d 1382 (Fed. Cir. 1982), where three prior judgments which were predicated on an agreed statement of facts had no stare decisis effect on subsequent liquidations. The reasoning for the conclusion that an agreement to stipulate should have no effect as precedent was that the agreement may be based on a variety of factors which are unique to the particular facts of the case.

Furthermore, the Supreme Court has made it clear that, as collateral estoppel does not apply in classification cases, the government is free to relitigate the classification of merchandise at issue in an action covering other entries. United States v. Stone & Downer Co., 274 U.S. 225 (1927). See also, Schott Optical Glass, Inc., v. United States, 748, 677 (Fed. Cir. 1984); Heraeus Amersil, Inc. v. United States, 13 CIT 764, 766 (1989); Ashdown, U.S.A., Inc. v. United States, 12 CIT 808, 810 n.1, 696 F. Supp. 661 (1988). In an action before the CIT, if the court makes a determination that merchandise which is before it should be classified in a certain manner, there is nothing precluding similar merchandise in future importations from being treated differently by the Customs Service. Thus, Customs is under no obligation to classify the jewelry gift boxes imported by protestant in the same subheading as the presentation boxes in Kalencom. We do not find that the stipulation is compelling and believe that the extent of the stipulation should be limited to the specific entry of presentation boxes referred to in the judgement. Therefore the stipulation does not control the classification of the boxes subject to this protest.

2. Classification of goods under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) is governed by the General Rules of Interpretation (GRI), taken in order. GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may then be applied.

The Harmonized Commodity Description and Coding System Explanatory Notes (EN) represent the official interpretation of the Harmonized System at the international level (for the 4 digit headings and the 6 digit subheadings) and facilitate classification under the HTSUSA by offering guidance in understanding the scope of the headings and the GRI. The Explanatory Notes, although not dispositive or legally binding, provide a commentary on the scope of each heading of the HTSUSA, and are generally indicative of the proper interpretation of these headings.

In pertinent part, Heading 4202, provides for:

Trunks, suitcases. . .and similar containers; traveling bags. . . jewelry boxes . . . and similar containers, of leather or of composition leather, of sheeting of plastics, of textile materials, of vulcanized fiber, or of paperboard, or wholly or mainly covered with such materials or with paper. (Emphasis added).

The EN to heading 4202, HTSUSA, state that articles covered by the second part of the heading must be only “of” the materials specified therein or must be “wholly or mainly covered with such materials or with paper.” Protestant agrees that the subject boxes are “covered with paper” and, therefore, meet the criteria in the heading which are repeated in the EN for classification within heading 4202.

The issues raised in the application for further review concern the subheading under which to classify the gift box containers. At the six-digit level, the tariff nomenclature indicates that the classification of containers of heading 4202 is based on the material that comprises the "outer surface." See Headquarters Ruling Letter (HQ) 954021, dated November 1, 1993, citing HQ 087760, dated October 31, 1991, and HQ 087640, dated November 8, 1990. When classifying goods in heading 4202, HTSUSA, it is problematic when the material that comprises the outer layer is a composite material, e.g., when the outer layer is composed of a base material of paper that is coated with plastic. Customs addressed this issue in HQ 963618, dated August 2, 2002, wherein Customs explained:

At the four-digit level, heading 4202, HTSUSA, requires that a good be "of" or "wholly or mainly covered with" a specified material. However, at the six-digit level, the nomenclature classifies goods by the material which comprises the "outer surface." . . . In classifying goods such as these, we must distinguish between the requirements of the four- and six-digit provisions, since they dictate different criteria for classifying goods.

This distinction was further discussed in HQ 954021, wherein Customs, noting HQ 087760, stated: "Evident in the above are two important distinctions: (1) a covering vs. an outer surface, and (2) classification at the four-digit (or heading) level vs. classification at the six-digit (or subheading) level."

The jewelry gift boxes before us are covered with plastic coated paper. Thus, at the four digit, or heading level, the boxes are considered to be "wholly or mainly covered" with paper. However, classification at the six-digit level requires consideration of what material constitutes the outer surface.

Except as noted below, the term “outer surface of” is not defined in Chapter 42, nor anywhere else in the HTSUSA. In HQ 086775, dated July 9, 1990, Customs stated that the outer surface of a good "is that which is both visible and tactile.” Also see, HQ 954021, and the cases cited therein. “Tactile” is defined as follows: “1. Perceptible to the touch: TANGIBLE.” “Tangible” is defined as follows: “1a. Discernible by the touch or capable of being touched.” Webster’s II New Riverside University Dictionary (1984), at 1178 and 1182, respectively. Moreover, for purposes of heading 4202, Customs resolved the issue of what is the “outer surface of” articles made with composite materials. Specifically, we have addressed in a number of rulings the issue of whether jewelry box frames, which were made of plastic or metal and were covered with a material consisting of paper backings to which textile materials had been applied, had an outer surface of textiles or of paper. See HQ 954021, dated November 1, 1993. In reaching our conclusion in that ruling that the boxes had an outer surface of textile materials, we said that Additional U.S. Note 2 of Chapter 42 is instructive in understanding the meaning of “outer surface of” when applied to composite materials (not specifically listed in that note).

Customs interpretation of the term "outer surface of" is consistent with Additional U.S. Note 2 of Chapter 42, HTSUSA, which provides that:

For purposes of classifying articles under subheadings 4202.12, 4202.22, 4202.32, and 4202.92, articles of textile fabric impregnated, coated, covered or laminated with plastics (whether compact or cellular) shall be regarded as having an outer surface of textile material or of plastic sheeting, depending upon whether and the extent to which the textile constituent or the plastic constituent makes up the exterior surface of the article.

Thus, this note explicitly provides the mechanism for making an "outer surface" determination where a textile is impregnated, coated, covered or laminated with plastics. The note expresses the concept of "outer surface" by use of the term "exterior surface." The note is useful in understanding the term "outer surface" when applied to other composite materials. Customs has relied upon this note as guidance when classifying other articles in heading 4202 that are composed of composite materials. Customs application of the note is consistent with the Court of International Trade’s decision in Sarne Handbags Corp. v. United States, 100 F. Supp. 2d 1126; Slip. Op. 2000 -51 (2000), wherein the court, applying the note, found that a handbag made of plastic coated textile was classified as having an outer surface of sheeting of plastic.

When applying the definition of "visible and tactile" to goods of heading 4202, HTSUSA, Customs has consistently classified the goods according to the outermost surface of the composite material at issue. For instance, Customs addressed this same issue as it pertained to jewelry box cases that were covered with a flock-coated paper. Customs concluded, based on the fact that it was the textile flock that was visible and tactile, the jewelry cases had an outer surface of textile materials. See HQ 954021, supra, and HQ 961175, dated July 21, 1998. Similarly, Customs has classified jewelry boxes, a coupon holder, and a "Vanity Train Case" covered with paper that had been coated with sheeting of plastic, as cases having an outer surface of sheeting of plastic. See HQ 960454, dated December 9, 1997 (jewelry box); HQ 961175, supra, (jewelry box); HQ 960990, dated February 3, 1998 (coupon holder); and HQ 960462, dated December 16, 1997 (Vanity Train Case). See also, HQ 086983, dated June 14, 1990 (classifying a jewelry organizer that was covered with a floral textile material that was covered with clear plastic sheeting as having an outer surface of sheeting of plastic).

Moreover, Customs has recently ruled that articles composed of plastic coated leather are considered to have an outer surface of sheeting of plastic. See, HQ 963618, dated August 2, 2002 (classifying a handbag constructed of a combination of split leather covered with a layer of plastic and plastic sheeting backed with textile [imitation leather], as having an outer surface of sheeting of plastic); HQ 960344, dated April 19, 2000 (classifying an attaché case composed of three layers, an outer layer of plastic sheeting, a middle layer of composition leather and an inner layer of textile material, as having an outer surface of sheeting of plastic); HQ 960002, dated October 24, 1997 (classifying a tote bag featuring front and back panels manufactured from a composite material of plastic covered layers of leather and composition leather as having an outer surface of sheeting of plastic); and HQ 955515, dated May 5, 1994 (holding that if the leather portions of the bag have a coating of plastic, then the outer surface is of sheeting of plastic).

It is protestant's view that the jewelry gift boxes are properly classifiable in subheading 4202.99.10, HTSUSA, as a jewelry box wholly or mainly covered with paper.

In Sarne the court cited Pillowtex Corp. v. United States, 171 F.3d 1370, 1374 (Fed. Cir. 1999), which held that a tariff term’s correct meaning is its common meaning. The court then found that “'sheeting' is material in the form of or suitable for forming into a broad surface of something that is unusually thin, or is a material in the form of a continuous thin covering or coating.” The court found that the outer surface of the merchandise at issue contained a “plastic” or “plastics” component that was exposed, entirely “covered” the textile component, and was relatively thin in comparison to its breadth, and as such the merchandise was correctly classified under the provision for merchandise with an outer surface of ”sheeting of plastics.” The court in Sarne went on to state:

U.S. Note 2 provides support for the Court’s conclusion. While U.S. Note 2 relates only to specific subheadings within heading 4202, HTSUS, and therefore, is not binding for determining prima facie classifiability under heading 4202, HTSUS, it is persuasive as to what Congress intended the phrase “sheeting of plastics” to mean in the context of the statute as a whole. Cf. Productol Chem. Co. v. United States, 74 Cust. Ct. 138, 151 Cust. Dec. 4598 (1975) (when the same word or phrase is used in different parts of the same statute it will be presumed to have the same meaning, unless a contrary intent is indicated). Thus, it appears when “textile fabric [is] impregnated, coated, covered, or laminated with plastics” and “the plastic constituent makes up the exterior surface of the article,” Congress intended the material on the outer surface of the merchandise to be considered a “sheeting of plastics.” See U.S. Note 2.

In the items under protest, the paper which covers the boxes is entirely covered with a sheeting of plastic. Each box's outer surface consists of a plastics component that is exposed, entirely covers the paper component, and is relatively thin in comparison to its breadth.

Applying the principles set forth in previously cited Headquarters rulings and Sarne, we find that the outer surface of the boxes under protest is "plastic sheeting". Having determined that the boxes have an outer surface of plastic sheeting, they are classified at the six digit level under subheading 4202.92, HTSUS, which provides for certain containers that have an outer surface of sheeting of plastic or textile materials. Also see, HQ 965568, dated September 25, 2002, in which we held that jewelry boxes covered in Pellaq™ by Skivertex® had an outer surface of "plastic sheeting" and were classified under subheading 4202.92.9060, HTSUSA.

HOLDING:

The jewelry gift boxes covered in Pellaq™ by Skivertex® are classified in subheading 4202.92.9060 of the HTSUSA, which provides for “Trunks, suitcases. . .and similar containers; traveling bags. . . jewelry boxes. . . and similar containers, of leather or of composition leather, of sheeting of plastics, of textile materials, of vulcanized fiber, or of paperboard, or wholly or mainly covered with such materials or with paper: Other: With outer surface of sheeting of plastic or of textile materials: Other: Other, Other: Other”. The jewelry gift boxes are dutiable at the general column one rate of duty in effect at the time of entry of 18.3% ad valorem.

The protest under consideration should be DENIED.

In accordance with Section 3A (11) (b) of Customs Directive 0993550065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing the decision.

No later than sixty days from the date of the decision, the Office of Regulations and Rulings will make this decision available to Customs personnel and to the public on the Customs Home page on the World Wide Web at www.customs. gov, by means of the Freedom of Information Act and other methods of public distribution.

Sincerely,


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