CAFC Says Net Wraps Used in Hay Baling Machine Not a 'Part' of the Machine

The U.S. Court of Appeals for the Federal Circuit on March 7 said that importer RKW Klerks' net wraps products, used in a machine to bale harvested crops, are not "parts" of harvesting machinery under the Harmonized Tariff Schedule. Judges Richard Taranto, Raymond Chen and Tiffany Cunningham thus sided with CBP's classification of the products as "warp knit fabric," dutiable at 10% under HTS subheading 6005.39.00.

The court clarified its prior rulings on whether a product is part of a larger machine, holding that when an item is "consumable," such as "bullets in a gun, staples in a stapler, or film in a camera," the "consumable is not dedicated solely for use with the machine (and thus a machine part) simply because it is used exclusively by the machine." Chen, the opinion's author, ruled the net wrap is "never a part of the baling machine" because the "output product of the baling machine is the Netwrap packaged around a hay bale."

Patrick Reed, counsel for RKW Klerks, said in an email that the decision "creates new law" on the definition of a part. "Previously, the law established that a 'part' includes items dedicated for use with a particular machine and that a container holding a consumable input (such as a toner cartridge containing toner for a photocopying machine) is a part of the machine in which it is used," he said. "Today’s decision holds for the first time that where a consumable input (material used in a baling machine to wrap bales of hay) is dedicated for use with a particular machine but is held on a spool instead of being inside a container, it is not a part of the machine in which it is used."

RKW Klerks imported two types of net wraps, both of which were made of synthetic fabric and used to wrap around bales of harvested crops released from baling machines so that the bales maintain a compressed structure. CBP said the products fell under HTS subheading 6005.39.00, while the importer argued for classification under subheading 8433.90.50 as "parts" of harvesting machinery or, alternatively, under subheading 8436.99.00, as "parts" of other agricultural machinery.

The Court of International Trade sided with CBP, ruling the net wraps are not a "part" of the hay baling machines (see 2305090033). The appellate court agreed, largely echoing the trade court's language in its decision.

Chen opened by noting that the question of whether an article is a part must be decided "from the nature of the article as it is applied to that use," adding that an item is a "part" when it's "dedicated solely for use with another article such that the item has no independent function or purpose except to operate in conjunction with the larger article." The court cited two key prior CAFC decisions, U.S. v. Pompeo and Bauerhin Techs. Ltd. P'ship v. U.S., both of which said that the product under review was a "part" since it couldn't serve a function apart from the "larger article."

Chen found this relationship to be unlike the relationship between the net wraps and baling machines, "at least because Netwraps have additional function outside the machine." The court agreed with CIT that the wraps are being used by baling machines as inputs and exit baling machines as part of the wrapped hay bales that serve a function "outside of and independent from the machine."

The appeals court also rejected the "dedicated solely for use" inquiry, which says a product isn't a "part" where it performs its separate function without losing any essential characteristics and is "complete in itself." In this case, the net wraps are a "complete product even without the baling machine," Chen said. The record shows that the wraps and the baling machines are "sold separately," and while an item being sold separately is "not necessarily excluded from being a part, such features of a commercial article are certainly probative," the court said.

RKW Klerks also challenged the trade court's finding that the net wraps are not "integral to the function of the baling machine." The appellate court said it sides with the U.S. that a "baling machine is capable of performing its function of collecting crop pieces and compacting those pieces into the shape of a bale without the Netwraps." The wraps are no more "integral" to the machine' function than the hay that's being compressed, Chen said.

(RKW Klerks v. United States, Fed. Cir. # 23-1210, dated 03/07/24; Judges: Richard Taranto, Raymond Chen and Tiffany Cunningham; Attorneys: Patrick Reed of Simons & Wiskin for plaintiff-appellant RKW Klerks; Luke Mathers for defendant-appellee U.S. government)