CIT Finds Trousers Not Made of 'Metalized Yarn,' Subject to Higher Duty Rate for Synthetic Fibers
Women’s trousers imported by Lockhart Textiles that are made from a yarn that includes metal nanopowders are classifiable as trousers of synthetic fibers, rather than of “other textile materials,” the Court of International Trade said in a May 29 decision. Directly addressing the central issue of a series of cases on Best Key yarn that skirted it over five years ago (see 1502030060), CIT found the yarn used to make the trousers is not classifiable as “metalized yarn” of heading 5605.
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As anticipated by Best Key in those earlier battles -- in which the Federal Circuit eventually ruled Best Key had no standing because metalized yarn itself is subject to a higher duty than synthetic yarn -- the decision makes Lockhart’s synthetic trousers more expensive to import than if they were made from yarn that was metalized for tariff classification purposes.
The Best Key yarn is made by incorporating zinc nanoparticles into a molten slurry that is then extruded to form monofilaments. If the court had decided that the yarn was metalized yarn of heading 5605, it would have classified Lockhart’s apparel as women’s trousers made of “other textile materials” of subheading 6104.69.80, dutiable at 5.6%. Its finding that the yarn, even with the metal added, is not metalized yarn for tariff classification purposes led it to classify the apparel in subheading 6104.63.20 as trousers of synthetic fibers, which has a 28.2% duty rate.
In reaching its decision, CIT noted that the Explanatory Note to heading 5605 says metalized yarns include textile yarns that are combined with metal thread or strip, or covered with metal by any other process. Both of those processes contemplate an existing yarn to which metal is subsequently added. The metal in Best Key’s yarn, on the other hand, is incorporated into the slurry before the yarn is produced, so it meets neither of the definitions provided in the explanatory notes, CIT said.
Lockhart had argued that eo nominee tariff provisions like heading 5605 cover any “future-developed version of the named product if it bears an ‘essential resemblance’ to the goods or exemplars identified in the tariff heading.” But CIT said that other portions of the Explanatory Note to that heading exclude some forms of yarn with metal, including “yarn composed of a mixture of textile materials and metal fibres conferring on them an antistatic effect.” And it held that the “essential resemblance” test cited by Lockhart is no longer relevant to today’s tariff schedule.
“Given that the dispute in this matter involves interpretation of the HTSUS, not the TSUS” -- the predecessor to the Harmonized Tariff Schedule that was superseded in 1989 -- “the court determines that the ‘essential resemblance’ concept” cited by Lockhart “is of limited relevance,” CIT said. Lockhart “has not identified any cases applying the ‘essential resemblance’ concept under the HTSUS,” CIT said. “Moreover, in the cases [Lockhart] relies upon, there is no discussion or analysis of how the court is to apply the ‘essential resemblance’ concept (i.e., the factors, the test, the guiding principles, etc.). The TSUS concept of ‘essential resemblance’ must therefore remain a relic of the TSUS.”
Lockhart will likely appeal CIT’s decision, said John Peterson of Neville Peterson, who represents Lockhart and also represented Best Key. “The Court used the language of the Explanatory Notes to limit the otherwise unlimited language in the tariff provision for ‘metalized yarn,’” Peterson said. “The Court also declined to use the ‘essential resemblance’ test because it would be contrary to ‘legislative intent,’ but we have no idea what that ‘intent’ might be. It's very clear that the Explanatory Notes are not the legislative history to the tariff schedule,” he said.
(Lockhart Textiles, Inc. v. U.S., Slip Op. 20-74, CIT # 17-00099, dated 05/29/20, Judge Gordon)
(Attorneys: John Peterson of Neville Peterson for plaintiff Lockhart Textiles, Inc.; Marcella Powell for defendant U.S. government)