In Customs Case, a Hole Punch Is a Hole Punch

By Gabriella Khorasanee, JD on November 13, 2013 | Last updated on March 21, 2019

It's not every day that we get to read a Federal Circuit opinion deciding what tariff classification a product should be given. It's your lucky day, as the Federal Circuit recently opined on the nature of paper hole punches used for scrapbooking.

The Federal Circuit had to determine, "[w]hat's in a name?," and found in this case, the answer was "everything."

Stampin' Up!

Wilton Industries manufactured a line of 39 paper punches in Taiwan as part of the "Stampin' Up!" collection. The paper punches are intended for use in making scrapbooks and other crafts. Customs classified the all of the items, except one, under the HTSUS heading 8203.40.60, "perforating punches and similar handtools," which has a 3.3 percent duty margin. Wilton protested, seeking classification under the duty free HTSUS heading 8441.10.00.

Wilton filed a claim in the United States Court of International Trade, and the parties tried to resolve their differences of opinion, by entering a stipulation agreement classifying 23 of the 39 punches under the duty free heading 8441.10.00 because they were too large to use by hand.

With the remaining punches' classification still in dispute, both parties moved for summary judgment. The court denied Wilton's motion, and granted the government's motion. Wilton appealed.

Duty Free or 3.3% Tariff?

The Federal Circuit's previous decision in Orlando Food Corp. v. United States requires a two-step inquiry in determining the proper customs classification for merchandise. However, where, as here, there were no factual disputes, the classification of merchandise is a question of law.

The Federal Circuit reviewed the two HTSUS headings and held that Wilton's paper punches fell under heading 8203.40.60 because "[t]he imported merchandise is described eo nomine by heading 8203.40 as perforating punches." The court bolstered its opinion by looking at the notes of each subheading, and finding that 8203.40 applied to punching paper, while 8441.10 applied to the manufacture of paper.

Because this opinion relied in large part in the actual name that Wilton had used to describe its products, companies would be well advised to consider customs classifications before naming their products. If a company knows that it's shooting for a particular duty-free classification, it may want to use some of the same terminology in naming and describing its product. It will not be determinative, but it will help.

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