CAFC Judges Question Whether Conduit Has Insulating Function, in Tariff Row

Judges at the U.S. Court of Appeals for the Federal Circuit on Sept. 4 heard oral argument in a tariff classification case on electrical conduit imported by Shamrock Building Materials. Judges Richard Taranto, Todd Hughes and Tiffany Cunningham asked whether the conduit had an insulating function and whether there is a de minimis amount of insulating material a conduit needs to include to qualify for classification under Harmonized Tariff Schedule heading 8547 (Shamrock Building Materials v. United States, Fed. Cir. # 23-1648).

Shamrock is seeking classification under heading 8547, which covers "electrical conduit tubing .lined with insulating material," while the U.S. is looking to fit the goods under heading 7306, which provides for "other" tubes, pipes and hollow profiles of iron or steel (see 2309250037). The Court of International Trade sided with the U.S., finding that Shamrock's conduits cannot insulate the base metal from the electric current or the heat in the wire it surrounds (see 2303140035).

The trade court focused on the conduit's commercial applications, finding that heading 8547 describes conduits that perform an "insulating function necessary or desirable for electrical wiring in applications for which the conduit is designed and for which it is marketed in commerce."

The oral argument session heavily featured the evidentiary record in the proceeding to assess, among other things, whether the conduits were marketed as having insulating properties. DOJ attorney Nico Gurian noted that none of Shamrock's marketing materials mention the good's insulating features and said that, in fact, the conduit is noted for including "system grounding," which is a safety mechanism through which the conduit can actually act as a conductor of electricity.

Taranto asked about two emails Shamrock sent to a third party discussing the conduit's insulating properties. The company said the conduit is made of epoxy, melamine and silicon, all of which are insulating materials. Gurian said the company, and the witnesses called in the case, made an "analytic leap" by declaring that something that includes insulating materials has insulating properties.

Hughes took this line of argument to mean that the language of heading 8547 depends on the product at issue having an "insulating function as opposed to just being a type of insulating material." Gurian said the relevant Explanatory Note and notes to heading 85 further illustrate this point, which is that the product must function as an insulator to fit under the heading. Hughes asks when a product goes from having a slight insulating function to having a sufficient insulating function to fit under the heading. To answer this, Gurian said the court must look to the product's commercial use.

During rebuttal, Patrick Gil, counsel for Shamrock, said that any inquiry into the level of insulating function of an imported conduit would be a "nightmare for importers and for Customs." If this theory holds, every time a conduit is imported it would have to be sent to a lab for testing on how resistant its insulating materials are, Gil said.

In response to a question from Hughes asking why the conduits aren't marketed as insulating, Gil said he has "no clue what marketing has to do with this," since the company's claim is that the plain language of the heading covers the products at issue. Gil later said there's no marketing of the insulating function of the conduits because that function is so readily apparent to contractors, who only have two choices: conduits with or conduits without the insulating material.

Gil also centered his claim on the fact that there were over 20 years of customs rulings on similar conduits, which fit them under heading 8547. Taranto seemed unimpressed with these rulings, finding them to be "conclusory" and not looking into the question of whether the conduits had an insulating function.