us-cbp-cross-rulings-hq-081055•HQ 081055: Decision on Application for Further Review of Protest No. 0401-7-000716
HQ 081055: Decision on Application for Further Review of Protest No. 0401-7-000716
us-cbp-cross-rulings-hq-081055HQ 081055: Decision on Application for Further Review of Protest No. 0401-7-000716Guidance
Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.
HQ 081055
February 3, 1989
CLA-2 CO:R:C:G 081055 JLJ
CATEGORY: Classification
TARIFF NO.: TSUS 700.95
District Director of Customs
Boston Federal Office Building
10 Causeway Street
Boston, Massachusetts 02222-1059
RE: Decision on Application for Further Review of
Protest No. 0401-7-000716
Dear Sir:
This protest was filed against your decision in the
liquidation of certain Boston entries covering shipments of
unfinished footwear produced in Taiwan.
FACTS:
Counsel for the protestant describes the merchandise as
uppers which are substantially transformed by the importer in the
United States into various men's and women's running shoes,
including the America (styles 8874, 8875 and 8876) and the Shadow
(styles 8867 and 8868). Counsel claims that the merchandise is
classified under the provision for articles not specially
provided for, of leather, in item 791.90, Tariff Schedules of the
United States (TSUS).
The entries were liquidated under the provision for other
footwear, other, other, in item 700.95, TSUS.
Samples of both the instant merchandise and a finished
athletic shoe were submitted with this protest.
ISSUE:
Is the merchandise classified as unfinished footwear in item
700.95, TSUS, or as parts of footwear according to the component
of chief value in item 791.90, TSUS?
-2-
LAW AND ANALYSIS:
Customs Headquarters Ruling Letter (HRL) 079115 of May 18,
1987 (Internal Advice 24/86), considered the same issue and held
that the instant merchandise was classified as unfinished
footwear in item 700.95, TSUS. Nevertheless, counsel for
protestant argues that the merchandise is classified as parts of
footwear in item 791.90, TSUS. Two videotapes and a written
brief were submitted by counsel, all of which have been
considered.
The leading case for determining whether an article is
unfinished is Daisy-Heddon, Div. Victor Comptometer Corp. v.
United States (Daisy-Heddon), 66 CCPA 97, C.A.D. 1228 (1979).
The Daisy-Heddon court enumerated certain tests for determining
whether an article is considered unfinished for tariff purposes.
Those tests are as follows:
1. Comparison of the number of omitted parts with the number
of included parts;
2. Comparison of the time and effort required to complete
the article with the time and effort required to place it
in its imported condition;
3. Comparison of the cost of the included parts with that of
the omitted parts;
4. The significance of the omitted parts to the overall
functioning of the completed article; and
5. Trade custom, i.e., does the trade recognize the importa-
tion as an unfinished article or as merely part of the
article.
Counsel notes that in Treasury Decision (T.D.) 79-100, 13
Customs Bulletin 247 (1974), one of the first footwear rulings to
apply Daisy-Heddon, Customs held that, with regard to a lasted
leather footwear upper, "An unfinished article may be classified
as the finished article when completed to the stage at which the
fundamental characteristic of the finished article is present....
The essence or fundamental characteristic of a shoe is readily
apparent. A lasted leather footwear upper resembles a shoe and
provides a layer or two of protection between the foot and
flooring."
Counsel claims that the instant merchandise is not a lasted
leather upper, does not have a leather bottom, and is not lasted
prior to importation, therefore it does not have the "fundamental
characteristic" of a shoe. We note, however, that the instant
-3-
sample does have an "underfoot," a piece of material sewn to the
bottom, which provides a layer of protection between the foot and
the flooring. We also note that the Seventh Annual Runner's
World Special Shoe Survey, in the October, 1981, Runner's World,
defines slip lasting as the process "where the upper material or
its extension completely encloses the foot." The instant sample
has been slip lasted in that the upper material completely
encloses the foot in the underfoot. Inasmuch as the instant
sample resembles a shoe, is slip lasted and has a layer of
protection between the foot and the flooring, it has the
fundamental characteristics of footwear, and therefore it is
unfinished footwear based on the criteria of T.D. 79-100.
The first Daisy-Heddon test is a comparison of the number of
omitted parts with the number of included parts. Counsel claims
that the imported sample and the United States components both
have nine parts, however he lists as three items three pieces of
material which are each made into three parts - i.e., a piece of
suede which is made into the vamp tie, the eye stay and the
counter piece; a piece of nylon which is made into the two
saddles and the backtab; and another piece of nylon which is made
into the two quarters and the tongue front. Counsel also notes
that the tongue contains a tongue loop, tongue label and tongue
binding. Adding up all pieces of the imported sample, we get 18
pieces, as opposed to only 9 pieces added in the United States.
The second Daisy-Heddon test is a comparison of the time and
effort required to complete the shoe with the time and effort
required to make the imported article. We note that counsel's
description of the manufacturing processes in Taiwan and the
United States is quite misleading. By noting all the processes
which take place in the United States while leaving out the
details on the Taiwan side, counsel implies that the operations
in the United States are much more complex. Regarding the Taiwan
processes, counsel omitted such important data as the fact that
the cutting of each individual piece of leather required a
specially made cutting die to be placed by hand on the hide by an
experienced cutter and the fact the textile pieces had to be
individually marked so that the sewing machine operator would be
able to precisely place and align each piece.
The true complexity of the Taiwan tasks are supported by the
greater time required to perform them. Appendix B compares labor
time in the United States with that abroad. We note that packing
labor is included in the American processing. We do not consider
packing part of the manufacturing process, therefore we have
excluded the packing labor time (3.50 minutes for the Mens Shadow
-4-
8868 and 3.32 minutes for the Mens America 8874) from the
American labor time. This leaves American labor times of 20.74
minutes for the Mens Shadow 8868 and 15.54 minutes for the Mens
America 8874, as opposed to Taiwan labor times of 32.97 minutes
for the Mens Shadow 8868 and 20.42 minutes for the Mens America
8874. On the basis of manufacturing time alone, clearly much
more effort was expended in Taiwan.
Counsel claims that much labor is saved in the United States
because of the sophisticated machinery used by the protestant.
While this may be so, we presume that the machinery used in
Taiwan is equally "state of the art" machinery. It makes no
difference that the protestant uses more machines in the United
States than does the Taiwanese factory which produces the instant
merchandise. Indeed, in Simod America Corp. v. United States
(Simod), Slip Op. 88-101, decided July 28, 1988, the court was
impressed with the foreign "labor-intensive craftsmanship" as
opposed to the "highly industrialized" American factory; it found
that none of the tasks performed in the American factory involved
considerable skill.
The third Daisy-Heddon test requires a comparison of the
cost of the parts assembled before importation with the cost of
the parts added at protestant's factory. We note that counsel
has included $0.091 for shoelaces for the Shadow shoes and $0.108
for shoelaces for the America shoes. We are not sure whether the
cost of shoelaces should be included in the cost of the footwear.
If they are included, the total cost for the United States parts
and labor is $7.245 for the Mens Shadow 8868 and Womens Shadow
8867, as opposed to foreign parts and labor costs of $4.950 for
the Mens Shadow 8868 and $4.750 for the Womens Shadow 8867. The
total United States parts and labor costs are $6.435 for the Mens
America 8874 and 8876 and for the Womens America 8875, while the
total foreign parts and labor costs are $4.650 for the Mens
America 8874 and 8876 and $4.450 for the Womens America 8875.
Although the United States costs are higher than the Taiwan
costs, this is due primarily to the unusual quality and expense
of the plastic sole materials used. It is unlikely that a slip
lasted upper such as the instant import would be used with a very
cheap bottom, because slip lasting is a more difficult and
expensive way to make shoes than the much more common cement
lasted jogging shoe.
We are of the opinion that this element of the Daisy-Heddon
test has limited application under circumstances where identical
imports are completed with additional material of varying costs.
-5-
It is a basic principle of Customs law that there is only one
correct tariff classification for each article. If these
identical uppers were imported in the future for completion with
moderately priced bottoms, their classification could hardly be
allowed to change based on the materials used to complete the
footwear. While this Daisy-Heddon test is in the protestant's
favor, its overall significance is doubtful.
The forth Daisy-Heddon test is the significance of the
omitted American parts to the overall functioning of the
completed article. Counsel claims that the omission of most of
the bottom of the footwear is highly significant. He cites to
T.D. 79-100, supra, which classified a lasted leather upper as
unfinished footwear because it resembled a shoe and provided a
layer or two of protection between the foot and the floor.
The instant sample is slip lasted, resembles a shoe and
provides a layer of protection between the foot and the floor.
While the import would not be usable as footwear in its condition
as imported, both Customs and the courts have found several items
lacking in outsoles to be unfinished footwear. In Uniroyal, Inc.
v. United States, 3 CIT 220, Slip Op. 82-45 (1982), imported
leather uppers without outsoles were found to be "substantially
complete" shoes. In Simod, supra, an athletic shoe upper with an
underfoot, which had no sole and which was lasted in the United
States, was found to be unfinished footwear.
The final Daisy-Heddon test is the determination of trade
custom. Counsel presents three definitions of uppers which he
claims apply to the instant sample. We note that Uniroyal,
supra, found that merchandise consisting of shoe uppers with an
attached underfoot were substantially complete footwear. In
Simod, supra, the court again found that shoe uppers with an
attached underfoot were substantially complete footwear. By
these standards, the instant merchandise, consisting of the top
portion of an athletic shoe plus an underfoot, is definitely
unfinished footwear.
Counsel observes that in HRL 073259 of February 11, 1984,
Customs used the following criteria in determining whether
merchandise was an upper or unfinished footwear:
1. The upper has the equivalent of a midsole;
2. It has been formed to fit the foot;
3. It provides a layer of protection between the foot
and the floor; and
4. It possesses the fundamental characteristics of footwear.
-6-
By all of these criteria the instant sample is unfinished
footwear. The underfoot is the equivalent of a midsole. The
sample has been formed to fit the foot; it is advanced far enough
that it will fit only one size and one width foot. The underfoot
provides a layer of protection between the foot and the floor.
Finally, the sample possesses the fundamental characteristics of
footwear; it is advanced far enough that it could not be made
into anything other than athletic footwear.
Following the above-cited reasons, we find that the instant
sample is unfinished footwear.
HOLDING:
The instant sample is classified as unfinished footwear in
item 700.95, TSUS. The protest should be denied in full. A copy
of this letter should be sent to the protestant along with the CF
19 Notice of Action.
Sincerely,
John Durant, Director
Commercial Rulings Division
6cc: A.D., N.Y. Seaport (NIS-346)
1cc: Reg. Comm., NE Region
2cc: Chief, CIE
1cc: Regula. Trade Prog. Divi.
1cc: John Durant
JLJohnson:tj:typed 08/30/88
Continua la tua ricerca in ChatGPT o Claude
Collega Omnilex per cercare nel corpus legale dal tuo assistente IA.