In the Supreme Court of the United States
UNITED STATES OF AMERICA, PETITIONER
THE MEAD CORPORATION
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
BRIEF FOR THE UNITED STATES
SETH P. WAXMAN
Counsel of Record
DAVID W. OGDEN
Acting Assistant Attorney
LAWRENCE G. WALLACE
Deputy Solicitor General
KENT L. JONES
Assistant to the Solicitor
BRUCE G. FORREST
Department of Justice
Washington, D.C. 20530-0001
NEAL S. WOLIN
Department of the Treasury
Washington, D.C. 20220
1. Whether classification rulings issued by the Customs Service are entitledto deference in determining the proper tariff classification of importedgoods.
2. Whether the Customs Service reasonably interpreted the statutory phrase"diaries, notebooks and address books, bound" in Subheading 4820.10.20of the Harmonized Tariff Schedule of the United States to include the spiral-boundand ring-bound day planners imported by respondent.
In the Supreme Court of the United States
UNITED STATES OF AMERICA, PETITIONER
THE MEAD CORPORATION
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
BRIEF FOR THE UNITED STATES
The opinion of the court of appeals (Pet. App. 1a-16a) is reported at 185F.3d 1304. The opinion of the Court of International Trade (Pet. App. 19a-27a)is reported at 17 F. Supp. 2d 1004. The Customs Service ruling (Pet. App.28a-47a) that applies to this case is cited as HQ No. 955937 and is reportedunofficially at 1994 WL 712863 (Customs).
The judgment of the court of appeals was entered on July 28, 1999. A petitionfor rehearing was denied on November 1, 1999 (Pet. App. 17a). On January19, 2000, the Chief Justice extended the time for filing a petition fora writ of certiorari to March 1, 2000. The petition for a writ of certiorariwas filed on February 29, 2000, and was granted on May 30, 2000. The jurisdictionof this Court rests upon 28 U.S.C. 1254(1).
STATUTORY AND REGULATORY PROVISIONS INVOLVED
1. General Note 20 of the Harmonized Tariff Schedules of the United States,19 U.S.C. 1202 (Supp. I 1995), provides in relevant part:
The Secretary of the Treasury is hereby authorized to issue rules and regulationsgoverning the admission of articles under the provisions of the tariff schedules.* * *
2. 19 U.S.C. 1502(a) provides in relevant part:
The Secretary of the Treasury shall establish and promulgate such rulesand regulations not inconsistent with the law (including regulations establishingprocedures for the issuance of binding rulings prior to the entry of themerchandise concerned), and may disseminate such information as may be necessaryto secure a just, impartial, and uniform appraisement of imported merchandiseand the classification and assessment of duties thereon at the various portsof entry. * * *
3. 19 U.S.C. 66 provides in relevant part:
The Secretary of the Treasury shall prescribe forms of entries, oaths, bonds,and other papers, and rules and regulations not inconsistent with law, tobe used in carrying out the provisions of law relating to raising revenuefrom imports, or to duties on imports * * * and shall give such directionsto customs officers and prescribe such rules and forms to be observed bythem as may be necessary for the proper execution of the law.
4. 19 U.S.C. 1624 provides:
In addition to the specific powers conferred by this chapter the Secretaryof the Treasury is authorized to make such rules and regulations as maybe necessary to carry out the provisions of this chapter.
5. 19 U.S.C. 1625 provides in relevant part:
(a) Within 90 days after the date of issuance of any interpretive ruling(including any ruling letter, or internal advice memorandum) or protestreview decision under this chapter with respect to any customs transaction,the Secretary shall have such ruling or decision published in the CustomsBulletin or shall otherwise make such ruling or decision available for publicinspection.
* * * * *
(c) A proposed interpretive ruling or decision which would-
(1) modify (other than to correct a clerical error) or revoke a prior interpretiveruling or decision which has been in effect for at least 60 days; or
(2) have the effect of modifying the treatment previously accorded by theCustoms Service to substantially identical transactions;
shall be published in the Customs Bulletin. The Secretary shall give interestedparties an opportunity to submit, during not less than the 30-day periodafter the date of such publication, comments on the correctness of the proposedruling or decision. After consideration of any comments received, the Secretaryshall publish a final ruling or decision in the Customs Bulletin within30 days after the closing of the comment period. The final ruling or decisionshall become effective 60 days after the date of its publication.
6. For the period that this case involves, Subheading 4820.10.20 of theHarmonized Tariff Schedules of the United States, 19 U.S.C. 1202 (Supp.I 1995), provides a rate of duty of 3.2% for:
Diaries, notebooks and address books, bound; memorandum pads, letter padsand similar articles * * * .
7. 19 C.F.R. 177.9(a) provides in relevant part:
Effect of ruling letters generally. A ruling letter issued by the CustomsService under the provisions of this part represents the official positionof the Customs Service with respect to the particular transaction or issuedescribed therein and is binding on all Customs Service personnel in accordancewith the provisions of this section until modified or revoked. In the absenceof a change of practice or other modification or revocation which affectsthe principle of the ruling set forth in the ruling letter, that principlemay be cited as authority in the disposition of transactions involving thesame circumstances. Generally, a ruling letter is effective on the dateit is issued and may be applied to all entries which are unliquidated, orother transactions with respect to which the Customs Service has not takenfinal action on that date. * * *
8. 19 C.F.R. 177.10 provides in relevant part:
(a) Generally. Within 120 days after issuing any precedential decision underthe Tariff Act of 1930, as amended, relating to any Customs transaction(prospective, current, or completed), the Customs Service shall publishthe decision in the Customs Bulletin or otherwise make it available forpublic inspection. For purposes of this paragraph a precedential decisionincludes any ruling letter, internal advice memorandum, or protest reviewdecision. * * *
* * * * *
(c) Changes of practice or position.
(1) Before the publication of a ruling which has the effect of changinga practice and which results in the assessment of a higher rate of duty,notice that the practice (or prior ruling on which the practice is based)is under review will be published in the Federal Register and interestedparties given an opportunity to make written submissions with respect tothe correctness of the contemplated change. This procedure will also befollowed when the contemplated change of practice will result in the assessmentof a lower rate of duty and the Headquarters Office determines that thematter is of sufficient importance to involve the interests of domesticindustry.
This case concerns whether judicial deference is owed to the tariff classificationrulings issued by the Customs Service under 19 U.S.C. 1502(a). That statuteauthorizes the Secretary of the Treasury to adopt "rules and regulations"providing for the issuance of such "binding rulings prior to the entryof the merchandise" as may "be necessary to secure a just, impartial,and uniform appraisement of imported merchandise and the classificationand assessment of duties thereon * * * ." 19 U.S.C. 1502(a). Pursuantto that authority, the Secretary has provided for the issuance of tariffclassification rulings by the Customs Service which are "binding onall Customs Service personnel" and which, "[i]n the absence ofa change of practice or other modification or revocation which affects theprinciple of the ruling set forth in the ruling letter * * * may be citedas authority in the disposition of transactions involving the same circumstances."19 C.F.R. 177.9(a). In addition, the Customs Service is authorized to issueclassification rulings in connection with specific merchandise already imported,19 C.F.R. 177.11(a), and to rule on protests from customs classificationdeterminations, 19 U.S.C. 1515(a). The classification determinations setforth in such rulings and protest review decisions are also "precedential"in effect. 19 C.F.R. 177.10(a).1
In the present case, the Federal Circuit held that these tariff classificationrulings of the Customs Service are to be given no judicial deference, andare instead to be disregarded utterly in interpreting the customs provisions.Pet. App. 6a-7a. Having elected to disregard the agency's interpretive "bindingrulings," the court then concluded that the particular items importedby respondent were subject to no duty under the provisions of the TariffAct involved in this case. That holding is incorrect and the judgment ofthe court of appeals should be reversed.
1. Respondent imports "daily planners," which are "loose-leafbooks containing calendars, room for daily notes, telephone numbers, addressesand notepads. This sort of product originated in England and is probablybest known under the trademark of Filofax." Pet. App. 19a. Under Subheading4820.10.20 of the Harmonized Tariff Schedule of the United States (HTSUS),19 U.S.C. 1202 (Supp. I 1995), if such items are properly classified as"bound" "diaries," they are subject to an import dutyof 3.2% of their value.2 If, however, these items are not "bound"or are not "diaries," they would then fall under Subheading 4820.10.40of the HTSUS as "[o]ther" items for which no duty applies. Pet.App. 20a-21a, 24a.
In 1993, when respondent imported its daily planners into the United States,they were classified as "bound" "diaries" to which the3.2% duty then applied. Respondent filed an administrative protest of thatclassification. On October 21, 1994, the Customs Service issued a detaileddenial of that protest in Headquarters Ruling Letter (HQ) No. 955937, 1994WL 712863 (Customs). Pet. App. 28a-47a. That ruling noted that the issuepresented by respondent "has been addressed in several rulings by thisoffice" (id. at 31a-32a, citing, e.g., Headquarters Ruling Letters(HRL) Nos. 955636, 1994 WL 220733 (Customs Apr. 6, 1994) and 955637, 1994WL 220734 (Customs Apr. 6, 1994)):
In these rulings this office has consistently determined that articles similarin design and/or function to the instant merchandise are classifiable asdiaries. The rationale for this determination was based on lexicographicsources, as well as extrinsic evidence of how these types of articles aretreated in the trade and commerce of the United States.
The agency noted that the text of Subheading 4820.10, "the common dictionarydefinition of 'diary', and past Customs rulings" all reflect that suchdaily planners are properly "classifiable as a bound diary." Pet.App. 32a. See note 1, supra.
The Customs Service explained that the daily planners imported by respondent"fit squarely" within one of the definitions of the word "diary"contained in the Oxford English Dictionary-as "[a] book prepared forkeeping a daily record, or having spaces with printed dates for daily memorandaand jottings." Pet. App. 32a-33a. The Service rejected respondent'sassertion that the agency should base its classification of such merchandisesolely on the first enumerated definition of "diary" in one dictionaryas "[a] daily record of events or transactions, a journal." Id.at 33a. The agency explained that "[m]any words have several definitionsand Customs may consider any or all of them when making a classificationdetermination." Ibid. The agency concluded that the broader definitionof the term "diary" adopted in its rulings "reflects thecommon and commercial identity of these items in the marketplace"-afact evidenced by the common usage of the term "desk diary" todescribe the imported merchandise. Id. at 34a.
Noting that customs provisions commonly incorporate prevailing commercialusages, the agency concluded that "there are many forms of 'diaries'"and that "the determinative criteria as to whether these types of articlesare deemed 'diaries' for classification purposes is whether they are primarilydesigned for use as, or primarily function as, articles for the receiptof daily notations, events and appointments." Pet. App. 39a-40a. Sincethe daily planners imported by respondent are designed for those exact functions,the agency concluded that they constitute "diaries" within themeaning of HTSUS 4820.10.20. Id. at 34a, 43a.
The Customs Service further concluded that the daily planners imported byrespondent are "bound" within the meaning of the statutory classificationprovision. Pet. App. 44a-47a. The agency emphasized that, in determiningwhat constitutes a "bound" "diary," the traditionalelements of formal "bookbinding" are not applicable. "Theissue is not what constitutes a bound book, and there is no requirementthat a diary be in the format of a book." Id. at 44a. Instead, theagency noted that the official explanation of the term "bound"in the notes of the Harmonized System Committee-the international authoritythat had drafted the terminology employed in this customs provision-statesthat the term "bound" includes "reinforcements or fittingsof metal, plastics, etc." Id. at 45a. The Customs Service noted thatthe explanation of the Harmonized System Committee "represent[s] theofficial interpretation of the [Harmonized Tariff System] at the internationallevel" and that the Committee's explanation of "this language[is] indicative of the drafters' intent to include as bound any articlespossessing ring binders or spiral binders." Ibid. The agency thus concludedthat, "whether a ring binder or spiral" binder is used, "[p]agesheld together in this manner" are "bound" for the purposesof this customs provision. Id. at 46a.
Since respondent's daily planners are bound in this very manner, the CustomsService ruled that these articles are "bound" "diaries"to which the 3.2% duty applied under HTSUS 4820.10.20. Pet. App. 46a-47a.
2. Six months after this ruling was issued, respondent again imported additionalarticles of the same type. When the agency again ruled that these dailyplanners are subject to duty as "bound" "diaries," respondentthen raised exactly the same protest that the agency had just reviewed andrejected in HQ No. 955937. When that protest was again denied by the agency,respondent brought this action in the United States Court of InternationalTrade to seek review of the agency's classification determination. Pet.App. 19a.
3. The Court of International Trade has exclusive jurisdiction to reviewthe denial of a protest from a Customs Service classification decision.28 U.S.C. 1581(a). On cross-motions for summary judgment, the court upheldthe agency's determination in this case.
The court noted that respondent's daily planners were "designed fornotations concerning the full range of daily experience" and that any"supplementary material" they contain does not alter their primarycharacter as business diaries. Pet. App. 25a. The court explained that itsprior decisions in Fred Baumgarten v. United States, 49 Cust. Ct. 275 (1962),and Brooks Bros. v. United States, 68 Cust. Ct. 91 (1972), indicate thatwhen, as here, "the diary portion was the essential or indispensablepart of the importation," that is "controlling of its classification."Pet. App. 22a. The court noted that the current "tariff language"in the HSTUS was "adopted with knowledge of these judicial precedents."Id. at 23a (citing Central Prods. Co. v. United States, 936 F. Supp. 1002,1006-1007 (Ct. Int'l Trade 1996)).3
The court also upheld the conclusion of the Customs Service that respondent'sdiaries were "bound" for purposes of HTSUS 4820.10.20. The courtexplained that "[t]he common meaning of 'bound' is fastened. The irrevocabilityof the fastening is not important so long as it goes beyond the transitoryrole of packaging." Pet. App. 26a.
4. The Federal Circuit has exclusive jurisdiction to review decisions ofthe Court of International Trade. 28 U.S.C. 1295(a)(5). On appeal from thedecision in this case, the Federal Circuit reversed. Pet. App. 1a-16a.
a. The court of appeals first addressed whether it would afford deferenceto the classification rulings of the Customs Service in determining theproper "meaning and scope of the tariff terms." Pet. App. 4a.The court noted that, in United States v. Haggar Apparel Co., 526 U.S. 380,391 (1999), this Court held that (Pet. App. 5a):
if an HTSUS provision is ambiguous and Customs promulgates a regulationthat "fills a gap or defines a term in a way that is reasonable inlight of the legislature's revealed design," courts should give thatjudgment "controlling weight" as articulated in Chevron U.S.A.Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844 .
The Federal Circuit reasoned, however, "that Haggar, and thus Chevrondeference, does not extend to ordinary classification rulings [of the CustomsService]." Ibid. The court stated that deference is inappropriate fortariff classification rulings because those rulings are issued without thebenefit of public comment, "do not carry the force of law and are not,like regulations, intended to clarify the rights and obligations of importersbeyond the specific case under review."4 Id. at 6a. The court statedthat the "significant differences between Customs regulations and Customsrulings convince this court that Haggar's reach does not extend to standardCustoms rulings." Id. at 6a-7a.5 The court of appeals concluded thatit would therefore "continue to adhere to its [pre-Haggar] precedentgiving no deference to such rulings." Id. at 7a (citing Rollerblade,Inc. v. United States, 112 F.3d 481, 484 (Fed. Cir. 1997)).6
b. Having thus chosen simply to disregard the interpretive classificationrulings of the Customs Service, the Federal Circuit found it unnecessaryto address or consider the detailed reasoning adopted by the Customs Servicein issuing the Headquarters Rulings that apply to the facts of this case.See pages 7-10, supra. The court instead looked primarily to what it regardedas an appropriate dictionary definition of the term "diary" inthe Oxford English Dictionary and concluded that, to be a "diary,"an item of merchandise must have "relatively extensive" spacefor the recording not only "of the events themselves, but also a person'sobservations, thoughts, or feelings about them." Pet. App. 12a. Givingno weight to the common commercial use of the term "diary," thecourt expressed the view that a daily planner that contains "a placeto jot down the date and time" of future appointments cannot qualifyas a "diary" because the very essence of a "diary" isto be "retrospective, not prospective." Id. at 12a-13a.
Applying "the above principles," the court concluded that respondent'sdaily planners are not "diaries" within the meaning of HTSUS Subheading4820.10.20 because (i) "the space provided" in those planners"would not permit a diarist to record relatively extensive notationsabout events, observations, feelings, or thoughts" and, (ii) while"[t]hese pages facilitate advance planning and scheduling[,] * * *a diary is not for planning." Pet. App. 13a-14a.
c. The court of appeals further concluded that respondent's daily plannersare not "bound" within the meaning of the HTSUS 4208.10.20. Todetermine the meaning of this customs provision, the court looked to a bookpublishing industry definition of a "bound book" as a book thatis "sewn, glued, or stapled into permanent bindings." Pet. App.15a. The court stated that a diary may be considered as "bound"under this book publishing definition only if a "permanent" bindinghas been employed. Ibid. Because respondent's product is "containedin ringed loose-leaf binders" that lack the "permanent" characterof a "bound book," the court held that these items are not "bound"within the meaning of the tariff provision. Id. at 15a-16a.
In reaching that conclusion, the court of appeals did not address the reasoningof the applicable Headquarters Rulings or of the authorities cited therein.In particular, the court of appeals did not acknowledge or discuss the officialinterpretive statements of the Harmonized System Committee (which draftedthese tariff provisions) which explain that the term "bound" "diaries"as used in HTSUS 4820.10.20 includes diaries that are bound with metal orplastic fittings, such as rings or spirals. See Pet. App. 45a; page 10,supra.
d. The court of appeals held that, since respondent's daily planners aresimilar to, but are not, "bound" "diaries" within themeaning of this tariff provision, they are to be "classified underthe 'other' subheading of [HTSUS] 4820.10.40," for which no duty applies.Pet. App. 16a. The United States filed a timely petition for rehearing withsuggestion for rehearing en banc. A response to the petition was requestedby the court from respondent. The court thereafter denied the petition withouta published vote. Id. at 17a.
SUMMARY OF ARGUMENT
I. The court of appeals erred in refusing to afford any deference to theformal "binding ruling" of the Customs Service adopted to applyand enforce the customs laws pursuant to 19 U.S.C. 1502(a). Decisions ofthis Court affording broad deference to the views of the federal officialswho administer tariff legislation date to the very beginning of the Republic.United States v. Vowell, 9 U.S. (5 Cranch) 368, 372 (1809). This Court haslong held that the agency's formal interpretations of the customs provisions-whether