CAFC Reverses CIT Classification Ruling on Modular Storage System Parts

The U.S. Court of Appeals for the Federal Circuit overturned a Court of International Trade ruling in a July 18 decision on the classification of parts made for the Container Store’s "elfa" modular storage furniture system. The CAFC disagreed with the CIT's finding from last year that the "top tracks and hanging standards" are classifiable as parts of general use, not parts of furniture (see 1601220024). CIT didn't give enough consideration to an explanatory note for heading 8302, which explains that the scope of heading 8302 doesn't include goods that form an "essential part of the structure," the CAFC said in its decision (here).

The Container Store imported the steel elfa top tracks and hanging standards -- which work together to mount the elfa system to a door or wall and hang elfa components like drawers, baskets and shelves -- in 2007 and 2008. CBP originally classified them under different subheading in chapter 83, but in litigation the government argued the top tracks and hanging standards should be classified under subheading 8302.42.30, “base metal mountings, fittings and similar articles suitable for furniture … : Other, suitable for furniture: Of iron or steel, of aluminum or of zinc,” dutiable at 3.9%.

Explanatory Note 83.02 reinforces the essential parts distinction in listed examples, including window frames and swivel chairs, the CAFC said. "Just as a swivel device is an indispensable skeletal component of a revolving chair and a window frame is an indispensable skeletal component of a completed window assembly, the top tracks and hanging standards are essential skeletal components." The government argued that the explanatory note should be ignored because it contravenes the plain meaning of the tariff provision. Door hinges and door knobs are classifiable in heading 8302, despite being "essential to doors," the Justice Department noted as an example.

The CAFC wasn't persuaded. "This argument fails," it said. Unlike door knobs and hinges, the "top tracks and hanging standards actually create the structure" of the storage unit, the CAFC said. "Given that the top tracks and hanging standards are designed exclusively" for the elfa unit system, "they are properly classified as parts of unit furniture under HTSUS subheading 9403.90.80," the CAFC said. As a result, "the judgment of the Court of International Trade is reversed and the case is remanded for further proceedings consistent with this opinion," it said.

(The Container Store v. U.S., CAFC #2016-1666, dated 07/18/17, Judges Newman, Mayer and O'Malley)

(Attorneys: Robert Silverman of Grunfeld Desiderio for plaintiff the Container Store; Marcella Powell for defendant U.S. government)