Government Argues for Summary Judgment in Agricultural Net Wrap Case

Agricultural net wraps for baling hay or other silage are not "parts" of agricultural machinery, but rather an input classifiable as fabric, the government said in a July 15 brief at the Court of International Trade (RKW Klerks Inc. v. U.S., CIT #20-00001).

The central issue concerns the correct classification of two products, Rondotex and Top Net, which are both net wraps, a type of warp knit designed to secure crops in a round bale. The case stems from a single entry RKW Klerks filed at the Port of Charleston in 2018. CBP liquidated the entry under subheading 6005.39.00, which covers “[w]arp knit fabrics (including those made on galloon knitting machines), other than those of headings 6001 to 6004: Of synthetic fibers: other, printed,” with a duty rate of 10%. RKW Klerks filed a protest later that year seeking to have the net wraps reliquidated under subheading 8433.90.50, duty free, as “harvesting or threshing machinery... parts thereof..." When CBP denied the protest, RKW sued at the Court of International Trade seeking to have the net wraps reclassified under 8433.90.50 or, alternatively, under 8436.99.00 as “Other agricultural, horticultural ... parts...," also duty free.

In a May 10 brief (see 2205110033), the government argued that the net wraps are specifically described in subheading 6005.39.00 as a warp knit fabric made of synthetic fibers and therefore should be "precluded from classification as 'parts.'" The only dispute is the legal interpretation of headings 6005, 8433, and 8436, the government said. DOJ pointed to prior CBP rulings on similar merchandise and noted that "[CIT] and [the] Federal Circuit have held that inputs on which a machine operates are not parts of those machines."

In its June 3 response brief (see 2206030041), RKW Klerks argued that Congress had "long expressed a desire to favorably treat agricultural products" so that tariff classifications of agricultural items should be "liberally construed." The motion also said that heading 6005 is not the only provision describing the net wrap and that the more specific "parts provision" should have precedence over a general "basket provision."

Although court decisions have acknowledged congressional intent to interpret the agricultural provisions of tariff schedules liberally, "the Court is still obligated to follow GRI 1," the government said in its July 15 brief. "[RKW] has not cited one case in which the CIT rejected classification ... because of congressional intent to interpret the agricultural provisions of tariff schedules liberally."

RKW does not dispute that the items are "warp knit fabrics," which are explicitly covered by heading 6005, the government said. The explanatory notes to the heading specifically describe the manufacturing method used by RKW. The net wraps are not “parts” of round baling machinery but are instead an "input" similar to thread for a sewing machine or ink for a printer, the government argued. Parts constitute "a member of a machine or other apparatus," the government said. The primary function of the baling machines is to gather, cut, and compress agricultural products and the net wraps do not contribute to that function. Because the net wraps are not parts, they cannot be classified under tariff provision for parts of agricultural machinery, DOJ said.