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CIT Erroneously Required Two 'Parts' Tests for Imported Net Wrap, Importer Argues on Appeal

A Court of International Trade decision on the classification of net wraps used for bailing hay was "fatally inconsistent" with the Federal Circuit's controlling precedent on the tariff definition of a part, RKW Klerks argued in a May 7 brief at the U.S. Court of Appeals for the Federal Circuit (RKW Klerks v. United States, Fed. Cir. # 23-1210).

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RKW, which argues the net wraps are parts of harvesting machines of other agricultural machines, and not warp knit fabric, said past Federal Circuit precedent requires that items meet only one of the two "parts" tests. In its October opinion, the lower court required the net wraps to meet both the “dedicated solely for use with” test as well as the “integral to the function,” RKW said (see 2210050032). The government apparently seeks to have the Federal Circuit disregard precedent and resurrect a rejected argument that an imported article must satisfy the “integral to the function” test in all cases, RKW said

RKW argued that the proper classification for the net wraps was under Harminized Tariff Schedule subheading 8433.90.50 as "parts" of "harvesting or threshing machinery" or subheading 8436.99.00 as parts of other agricultural machines, despite the October ruling by CIT that CBP had correctly classified the wraps as fabric under HTS subheading 6005.39.00.

The net wraps at issue meet CAFC's legal standard for a part, RKW argued in its Feb. 2 opening brief (see 2302030041). Although it is unnecessary for the court to address whether the net wraps meet both tests, RKW says that the wraps also meet the “integral to the function” test. That test evaluates whether the complete article to which an imported item is to be joined could perform one of its proper functions. It doesn't, as the government argues, test whether an article could function with an alternative part, RKW said. DOJ said the net wraps failed the test because the baling machines could use net wrap or twine to wrap the bales.

DOJ offered no persuasive argument to distinguish two cases cited by RKW to support its "part" argument, RKW argued, saying that DOJ conflated the issue of whether a competing HTS heading describes the netwrap with the separate issue of whether a net wrap meets the tariff definition of a part in its April 10 opening brief (see 2304100042).

Finally, RKW argued that two cases cited by DOJ are distinct from this case because they involved out-of-date technology. The baling machines described in the government's example case were not automatic-wrapping baling machines and so did not include wrapping as an "integral function" that required net wrap. The "conclusion that hand-tied bale ties were not parts of non-wrapping baling machines at the time of Wilbur-Ellis does not at all support the conclusion that netwrap on the cardboard core is not a part of modern baling machines that wrap bales automatically," RKW said. "Since netwrap is essential to the automatic-wrapping baling machine’s function of wrapping bales with netwrap, netwrap on its cardboard core is a part of the machine."