Alcan Aluminum Corporation v. United States

165 F.3d 898, 20 I.T.R.D. (BNA) 1865, 1999 U.S. App. LEXIS 100, 1999 WL 2806
CourtCourt of Appeals for the Federal Circuit
DecidedJanuary 5, 1999
Docket98-1172
StatusPublished
Cited by27 cases

This text of 165 F.3d 898 (Alcan Aluminum Corporation v. United States) is published on Counsel Stack Legal Research, covering Court of Appeals for the Federal Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Alcan Aluminum Corporation v. United States, 165 F.3d 898, 20 I.T.R.D. (BNA) 1865, 1999 U.S. App. LEXIS 100, 1999 WL 2806 (Fed. Cir. 1999).

Opinions

Opinion for the court filed by Circuit Judge CLEVENGER. Dissenting opinion filed by Chief Judge MAYER.

CLEVENGER, Circuit Judge.

Appellant Alcan Aluminum Corporation requests reversal of the Court of International Trade’s decision affirming the United States Customs 'Service’s imposition of merchandise processing fees on imported aluminum ingots at a rate greater than that permitted by the United States-Canada Free-Trade Agreement of 1988. See Alcan Aluminum Corp. v. United States, 986 F.Supp. 1436 (CIT 1997). Because the Court of International Trade erred by finding the common-law “substantial transformation” test available as an alternative to the transformation requirements of General Note 3(c)(vii)(B)(2) of the 1993 Harmonized Tariff Schedule of the United States, and failed to construe General Note 3(c)(vii)(B)(2) in light of the well-recognized [900]*900doctrine of de minimis non curat lex, we reverse.

I

This dispute arose when the Alcan Aluminum Corporation (“Alcan”) imported from Canada unwrought aluminum ingots, seeking preferential trade status under the United States-Canada Free-Trade Agreement Implementation Act of 1988 (“USCFTA Act”), Pub.L. No. 100-449, 102 Stat. 1851 (1988). See also 19 U.S.C. § 2112 note (1994). Section 202 of the USCFTA Act allowed “goods originating in the territory of Canada” to qualify for merchandise processing fee of 0.038 percent ad valorem, greatly reduced from the 0.19 percent imposed on ineligible imports.1 See 19 U.S.C. §§ 58(a), (b)(10) (1993) (authorizing full and reduced merchandise processing fees respectively).

A

At the time of their import, Alcan asserted that the aluminum ingots, comprised of both Canadian and “offshore” — non-Canadian— materials, underwent the “transformation” required by HTSUS General Note 3(c)(vii)(B)(2) (1993) (codifying section 202(a)(1)(B) of the USCFTA Act), and thus constituted “goods originating in the territory of Canada” that qualified for the reduced merchandise processing fee. The United States Customs Service (“Customs”) disagreed, and imposed the full merchandise processing fee because a small amount — less than one percent by weight and value — of the ingredients used in production of the ingots did not undergo a tariff classification shift, as required by General Note 3(c)(vii)(B)(2)(I). Upon paying the fees and exhausting admin.istrative remedies, Alcan filed suit in the Court of International Trade. After a two-day trial, that court issued a ruling affirming Customs’ decision, holding (1) that while the common-law “substantial transformation” test established by United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267, 1940 WL 4085 (1940), was applicable to the “transformation” requirement in General Note 3(c)(vii)(B)(2), the imported merchandise did not undergo such a transformation, and (2) that the principle of de minimis non curat lex did not apply to the terms of that subsection. See Alcan, 986 F.Supp. at 1436. Alcan appealed to this court. Our jurisdiction is pursuant to 28 U.S.C. § 1295(a)(5) (1994).

We review the Court of International Trade’s interpretation of statutory provisions de novo. See Midwest of Cannon Falls, Inc. v. United States, 122 F.3d 1423, 1426 (Fed.Cir.1997); Rollerblade, Inc. v. United States, 112 F.3d 481, 483 (Fed.Cir.1997).

B

The imported goods, aluminum ingots, are a common bulk form of aluminum alloy, weighing on the order of 25,000 pounds each. Aluminum purchased in ingot form is generally intended to be further processed into wrought aluminum products as varied as aluminum cans and airplane skins. During the production process, a small amount of “grain refiner” is fed into the molten aluminum, primarily to prevent cracking during the ingot casting process or transportation. The ingots involved in this dispute contained grain refiner purchased in rod form and originating outside of Canada, forming the sole basis of Customs’ rejection of preferential trade status.

The parties do not dispute that the materials used to produce the aluminum alloy ingots — apart from the grain refiner — underwent the requisite transformation in Canada to earn the reduced merchandise processing fee. The parties also stipulate that the amount of grain refiner used is trivially small: less than one percent, by weight and value, of the total aluminum ingots. The grain refiner itself is almost entirely aluminum, with less than six percent of its weight coming from the active ingredients, titanium and boron. When introduced into the molten aluminum alloy, the titanium and boron form TÍB2 molecules, which act as nuclei for grain formation during solidification, while the aluminum component of the grain refiner acts [901]*901merely as a carrier that helps disperse the TÍB2 molecules throughout the molten alloy. The resulting fine-grained aluminum alloy ingot is somewhat stronger than ingots produced without grain refiner and thus more resistant to cracking during production and shipment.

C

The relevant portion of HTSUS General Note 3(e)(vii)(2)(I) (1993) allowed goods to be classified as “originating in the territory of Canada” (and thus subject to lower merchandise processing fees) if they “ha[d] been transformed in the territory of Canada and/or the United States, so as to be subject to a change in tariff classification as described in the rules of subdivision (e)(vii)(R) of this note[.]” Subdivision (c)(vii)(R)(15) defined a qualifying tariff shift as “[a] change from one chapter to another” within Chapters 72 to 83, and (e)(vii)(R)(15)(rr) allowed a change to a heading between 7604 and 7606 from any heading outside that group. Under the version of the HTSUS then in effect, grain refiner in rod form was classifiable under heading 7604 (Chapter 76), while the aluminum ingots themselves were classifiable in heading 7601 (also Chapter 76). Although Alcan argued below that the grain refiner should not have been classified under Chapter 76 (aluminum) because its “essential character” was imparted by the titanium and boron active ingredients, it abandons that position here, essentially conceding that the grain refiner did not meet the requirements of subdivision (e)(vii)(R)(15). Instead, Alcan argues that the grain refiner was “substantially transformed” under the common-law Gibsortr-Thomsen test, and that the de min-imis amount of grain refiner in the aluminum ingots should not have prevented the application of General Note 3(c)(vii)(B)(2). Customs, for its part, asserts that the Court of International Trade erred by applying the Gibson-Thomsen test in place of the requirements of General Note 3(c)(vii)(B)(2), but that the Court of International Trade’s refusal to recognize a de minimis exception is correct. We address these contentions in turn below.

II

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Bluebook (online)
165 F.3d 898, 20 I.T.R.D. (BNA) 1865, 1999 U.S. App. LEXIS 100, 1999 WL 2806, Counsel Stack Legal Research, https://law.counselstack.com/opinion/alcan-aluminum-corporation-v-united-states-cafc-1999.