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Kalle USA, Inc. v. United States

United States Court of Appeals, Federal Circuit

May 2, 2019

KALLE USA, INC., Plaintiff-Appellant
v.
UNITED STATES, Defendant-Appellee

          Appeal from the United States Court of International Trade in No. 1:13-cv-00003-GSK, Judge Gary S. Katzmann.

          Frederic Van Arnam, Jr., Barnes, Richardson & Col-burn, LLP, New York, NY, argued for plaintiff-appellant.

          Hardeep Kaur Josan, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice, New York, NY, argued for defendant-appellee. Also represented by Amy Rubin; Jeanne Davidson, Joseph H. Hunt, Washington, DC; Paula S. Smith, Office of the Assistant Chief Counsel, United States Bureau of Customs and Border Protection, United States Department of Homeland Security, New York, NY.

          Before Dyk, Chen, and Hughes, Circuit Judges.

          PER CURIAM.

         This is a tariff classification case involving imported sausage casings. Kalle USA, Inc. appeals the Court of International Trade's summary judgment decision classifying the casings as made-up textiles under subheading 6307.90.98 of the Harmonized Tariff Schedule of the United States. Kalle USA, Inc. v. United States, 273 F.Supp.3d 1319, 1333 (Ct. Int'l Trade Nov. 2, 2017). Kalle argues that the Trade Court erroneously interpreted the phrase "completely embedded in plastics" as it is used in HTSUS Chapter 59 Note 2(a)(3), and that the casings should be classified as plastics under HTSUS Chapter 39. Because we agree with the result reached by the Trade Court, we affirm.

         I

         A.

         Kalle imports its NaloProtex G1 and NaloProtex G2 casings[1] into the United States from Germany. The casings, which are used to encase processed food products, such as sausage, ham, or cheese, are comprised of a woven textile sheet that is coated with a layer of plastic on one side. "The plastic coating is chosen to be appropriately thin" and "only fills the interstitial spaces between the textile fibers" to ensure that the casing's "textile character remains recognizable even after a coating." J.A. 81. The textile material gives the casing its strength and shape and allows the casing to "absorb dyes and aroma substances and transfer these substances into the encased product." Id. The plastic coating helps "prevent moisture transmission into or out of the casings." Id. After the textile sheet is coated in plastic, the sheet is trimmed, folded to form a tube, and "fixed with a seam by gluing." Id. The casings are imported as flattened tubes wound around a cardboard core.

         B.

         Kalle imported nine entries of the NaloProtex casings between July and August of 2010. The casings were liquidated by United States Customs and Border Protection in June 2011 under HTSUS subheading 6307.90.98 (2010), [2]which covers "[o]ther made up articles, including dress patterns: . . . [o]ther . . . [o]ther" and is subject to a duty of 7%. Kalle filed a protest to Customs' determination in September 2011, arguing that the casings should be classified under HTSUS subheading 3917.39.0050, which covers "[t]ubes, pipes and hoses and fittings therefor (for example, joints, elbows, flanges), of plastics: . . . [o]ther . . . [o]ther" and is subject to a duty of 3.1%. Kalle emphasized that the "tubes, pipes, and hoses" of heading 3917 "include[] sausage casings and other lay-flat tubing." See HTSUS Chapter 39 Note 8. Customs denied Kalle's protest.

         Kalle then filed a complaint with the Trade Court in January 2013. The Trade Court granted summary judgment in favor of the government after determining that "the casings are made up articles of textile fabric, [so] they are properly classified under heading 6307." Kalle, 273 F.Supp.3d at 1336. The court noted that heading 6307 is within HTSUS Section XI and that Chapter 39 expressly excludes goods of Section XI from its scope. See HTSUS Chapter 39 Note 2(p) (noting that "[t]his chapter does not cover . . . [g]oods of section XI (textiles and textile articles)"). Therefore, the court concluded that the casings "cannot be classified under heading 3917" as Kalle argued. Kalle, 273 F.Supp.3d at 1336.

         The Trade Court rejected Kalle's argument that the casings are "completely embedded in plastics" and are thus excluded from Section XI pursuant to HTSUS Chapter 59 Note 2(a)(3). Citing dictionary definitions of the words "completely" and "embedded," the court determined that "for a textile to be completely embedded in plastic, it must be entirely firmly fixed in the plastic." Id. at 1333. Because the "casings are only coated on one side and . . . the coating material only fills the interstitial spaces between the textile fibers," the Trade Court found that the ...


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