Schlumberger Technology Corp. v. United States

845 F.3d 1158, 38 I.T.R.D. (BNA) 1661, 2017 WL 74761, 2017 U.S. App. LEXIS 322
CourtCourt of Appeals for the Federal Circuit
DecidedJanuary 9, 2017
Docket2015-2076
StatusPublished
Cited by43 cases

This text of 845 F.3d 1158 (Schlumberger Technology Corp. 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
Schlumberger Technology Corp. v. United States, 845 F.3d 1158, 38 I.T.R.D. (BNA) 1661, 2017 WL 74761, 2017 U.S. App. LEXIS 322 (Fed. Cir. 2017).

Opinion

WALLACH, Circuit Judge.

The instant appeal concerns the proper classification of bauxite proppants imported by Appellee Schlumberger Technology Corporation (“Schlumberger”) in 2010. U.S. Customs & Border Protection (“Customs”) classified the subject merchandise under Subheading 6909.19.50 of the Harmonized Tariff Schedule of the United States (“HTSUS”). 1 Schlumberger appealed Customs’s classification to the U.S. Court of International Trade (“CIT”). The CIT rejected Customs’s classification and, instead, entered summary judgment that the subject merchandise should enter un *1161 der HTSUS 2606.00.00. Schlumberger Tech. Corp. v. United States, 91 F.Supp.3d 1304,1324 (Ct. Int’l Trade 2015).

Appellant, the United States (“Government”), appeals. We possess subject matter jurisdiction pursuant to 28 U.S.C. § 1295(a)(5) (2012). We affirm the CIT.

Background

The parties do not dispute the facts material to the resolution of the classification question before us. We discuss in turn the facts relevant to the subject merchandise, Customs’s classification, and the CIT’s decision before turning to the merits.

I. The Subject Merchandise

Schlumberger, an oil well services provider, J.A. 119, imported the subject bauxite proppants from the People’s Republic of China, J.A. 1729. Schlumberger used the subject merchandise in hydraulic fracturing services that it provided to customers in the United States. J.A. 126. The subject merchandise, when combined with other materials after importation, increased oil well productivity by preventing fractures in rock formations from closing. J.A. 126,129, 281.

The subject bauxite proppants consisted of two models: “S580-2040 Ceramic Prop-pant[s]” (“2040 Proppants”) and “S580-4070 Ceramic Proppant[s]” (“4070 Prop-pants”). J.A. 119-20. “S580” referred to the designation used by Schlumberger for bauxite proppants produced by a specific third-party supplier, J,A. 125, and “2040” and “4070” referred to the “size of sieves through which the proppants can fit,” J.A. 123. Each model primarily consisted of “non-metallurgical bauxite,” 2 but the precise chemical composition of the merchandise is unknown because neither party retained a sample of the merchandise. J.A, 1729; see J.A. 498-510. Each model measured less than a millimeter in diameter and possessed specific physical characteristics with associated values for crush resistance (i,e., strength), specific density, roundness, and sphericity. J.A. 122-23.

The production of the subject merchandise involved the following steps. First, “[t]he raw materials of the subject prop-pants were milled or ground to a fine powder.” J.A. 126. Second, the resulting powder underwent a granulation process in a pan granulator, which resulted in “larger sized particles from the milled particles.” J.A. 124. Third, “the particles [were] sorted” to determine whether they met the required size specifications and, if so, the particles were dried. J.A. 124-25. Fourth, the particles that fell within the required size specifications were kiln fired. J.A. 125. Fifth, after firing, the particles were sorted anew to ensure that ninety percent of them fell within the required size specifications. J.A. 125. Finally, the particles that met the previous steps were packed in bulk in 3,200 pound bags and exported to the United States as the subject bauxite proppants. J.A. 125.

II. Procedural History

Customs classified the subject bauxite proppants under HTSUS 6909.19.50 at a duty rate of four percent ad valorem. J.A. 120-21. The subheading selected by Customs covers “Ceramic wares for laboratory, chemical, or other technical uses; ceramic troughs, tubs and similar receptacles of a kind used in agriculture; ceramic pots, jars and similar articles of a kind used for *1162 the conveyance or packing of goods: Other: Other.” HTSUS 6909.19.50. Schlumberger contested the classification in separate protests, 3 arguing that the subject merchandise should enter duty free under HTSUS 2606.00.0060 as “Aluminum ores and concentrates: Bauxite, calcined: Other.” J.A. 109-10; see J.A. 162, 194. Customs denied the protests, and Schlumberger appealed to the CIT. J.A. 107-12.

Following cross-motions for summary judgment, the CIT rejected Customs’s classification and entered summary judgment that the subject bauxite proppants should enter under HTSUS 2606.00.00. See Schlumberger, 91 F.Supp.3d at 1323-24. In relevant part, the CIT reasoned that the applicable interpretive rules “precludefd]” classifying the subject merchandise under HTSUS 6909.19.50 “because the proppants are not ‘ceramic wares’ within the intended meaning of that term as used in [Hjeading 6909.” Id. at 1323. The CIT also found that the Government’s “alternate classification” under Subheading 6914.90.80 “is incorrect because [Hjeading 6914 ... is confined to ‘ceramic articles’ rather than substances such as the proppants at issue.” Id. at 1323-24; see HTSUS 6914.90.80 (covering “Other ceramic articles: Other: Other”). Having found these provisions inapplicable, the CIT concluded that the subject merchandise should enter under HTSUS 2606.00.00 based on Heading 2606’s terms, guidance provided in the notes accompanying HTSUS Chapter 26 and in other sources, and the undisputed material facts. See Schlumberger, 91 F.Supp.3d at 1316-22.

Discussion

I. Standard of Review

We review de novo the CIT’s decision to grant summary judgment and apply anew the standard used by the CIT to assess the subject Customs classification. See Otter Prods., LLC v. United States, 834 F.3d 1369, 1374-75 (Fed. Cir. 2016). “Although we review the decision! ] of the CIT de novo, we give great weight to the informed opinion of the CIT ... and it is nearly always the starting point of our analysis.” Nan Ya Plastics Corp. v. United States, 810 F.3d 1333, 1341 (Fed. Cir. 2016) (internal quotation marks, brackets, and citation omitted). The CIT “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” U.S. CIT R. 56(a) (2015).

The classification of merchandise involves a two-step inquiry. See LeMans, 660 F.3d at 1315. We first ascertain the meaning of the terms within the relevant tariff provision and then determine whether the subject merchandise fits within those terms. See Sigma-Tau HealthSci, Inc. v. United States, 838 F.3d 1272, 1276 (Fed. Cir. 2016).

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845 F.3d 1158, 38 I.T.R.D. (BNA) 1661, 2017 WL 74761, 2017 U.S. App. LEXIS 322, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schlumberger-technology-corp-v-united-states-cafc-2017.