Application for Further Review of Protest Number 3001-13-100480; Tariff classification of “C/X” plywood

HQ H256797 May 28, 2015 CLA-2 OT: RR: CTF: TCM ERB CATEGORY: Classification ` TARIFF NO.: 4412.32.3175 Port Director, Port of Seattle U.S. Customs and Border Protection 1000 Second Avenue, Suite 2100 Seattle, WA 98104-102 Attn: Frank McCracken, Import Specialist RE: Application for Further Review of Protest Number 3001-13-100480; Tariff classification of “C/X” plywood Dear Port Director: The following is our decision regarding the Application for Further Review (AFR) of Protest Number 3001-13-100480, timely filed on December 13, 2013, by counsel on behalf of Shelter Forest International (Shelter Forest or Protestant). The AFR concerns the tariff classification of entries of plywood under the Harmonized Tariff Schedule of the United States (HTSUS). Specifically, Shelter Forest protests U.S. Customs and Border Protection’s (CBP) liquidation of the subject merchandise under subheading 4412.32.31, HTSUS. FACTS: The subject merchandise comprised eight (8) entries at the Port of Seattle between June 28, 2012 and July 19, 2012. Shelter Forest classified the goods at the time of entry under subheading 4412.32.05, HTSUS, as, “Plywood, veneered panels and similar laminated wood: Other plywood consisting solely of sheets of wood (other than bamboo), each ply not exceeding 6mm in thickness: Other, with at least one outer ply of non-coniferous wood: Not surface covered, or surface covered with a clear or transparent material which does not obscure the grain, texture or markings of the face ply: With a face ply of Birch (Betula spp.).” This provision is duty free. CBP liquidated all subject entries on June 28, 2013, under subheading 4412.32.31, HTSUS, as, “Plywood, veneered panels and similar laminated wood: Other plywood consisting solely of sheets of wood (other than bamboo, each ply not exceeding 6mm in thickness: Other, with at least one outer ply of nonconiferous wood: Not surface covered, or surface covered with a clear or transparent material which does not obscure the grain, texture or markings of the face ply: Other: Other: Not surface covered.” The duty rate for this classification is 8 percent, ad valorem. The subject merchandise is 5.2 mm – 5.5 mm-thick plywood panels that have an outer ply of birch wood and an outer ply of luan (also known as lauan), and a core of poplar. According to Shelter Forest’s submission, the plywood is graded “C/X”, meaning one outer ply is graded “C” and one outer ply is ungraded, denoted by the “X”. Both birch and luan are non-coniferous woods. CBP performed a physical examination of the imported plywood, and samples were taken. These were also analyzed by the National Import Specialist in CBP’s National Commodity Specialist Division (NCSD). ISSUE Whether plywood with one face of grade “C” birch and the other of ungraded Luan is classified in subheading 4412.32.05, HTSUS, as “Plywood, veneered panels and similar laminated wood: Other plywood consisting solely of sheets of wood (other than bamboo), each ply not exceeding 6 mm in thickness: Other, with at least one outer ply of non-coniferous wood: Not surface covered, or surface covered with a clear or transparent material which does not obscure the grain, texture or marking of the face ply: With a face ply of Birch (Betula spp.)” or in subheading 4412.32.31, HTSUS, which provides for, “Plywood, veneered panels…Other: Other: Not surface covered…Other”. LAW & ANALYSIS Initially, we note that the matter is protestable under 19 U.S.C. § 1514(a)(2) as a decision on classification. The protest was timely filed, within 180 days of liquidation for entries made on or after December 18, 2004. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub. L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3)(2006)). Further Review of Protest No. 3001-13-100480 is properly accorded to Protestant pursuant to 19 C.F.R § 174.24(a) because the decision against which the protest was filed is alleged to be inconsistent with the rulings and decisions made by CBP. Specifically, Shelter Forest argues that in cases where it is not possible to classify panels by the grade of the outer plies, the merchandise should be classified according to the side which predominates in value and is key to the product’s consumer appeal. Shelter Forest also argues that further review is appropriate pursuant to 19 C.F.R. § 174.24 (b) and (c) as the classification of the subject C/X birch panels involves questions of law or fact which have not been ruled upon by Customs, or, that the classification of the subject merchandise involves facts which were not considered in earlier rulings. Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs may then be applied. The 2012 HTSUS subheadings under consideration are the following: 4412 Plywood, veneered panels and similar laminated wood: Other plywood consisting solely of sheets of wood (other than bamboo), each ply not exceeding 6 mm in thickness: 4412.32 Other, with at least one outer ply of nonconiferous wood: Not surface covered, or surface covered with a clear or transparent material which does not obscure the grain, texture or markings of the face ply: 4412.32.05 With a face ply of Birch (Betula spp.): 4412.32.31 Other The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System at the international level. While not legally binding, the ENs provide a commentary on the scope of each heading of the HS and are thus useful in ascertaining the proper classification of merchandise. See T.D. 89-90, 54 Fed. Reg. 35127, 35128 (August 23, 1989). The EN to heading 44.12 states the following: This heading covers: Plywood consisting of three or more sheets of wood glued and pressed one on the other and generally disposed so that the grains of successive layers are at an angle; this gives the panels greater strength and, by compensating shrinkage, reduces warping. Each component sheet is known as a “ply” and plywood is usually formed of an odd number of plies, the middle ply being called “the core”. Veneered panels, which are panels consisting of a thin veneer or wood affixed to a base, usually of inferior wood, by glueing under pressure. *** The heading also covers plywood panels, veneered panels and panels of similar laminated wood, used as flooring panels, some of which are referred to as “parquet flooring.” These panels have a thin veneer of wood affixed to the surface, so as to imitate an assembled flooring panel. The product at issue is described by the term “plywood” of heading 4412, HTSUS and is also described by the EN to 44.12, which clarifies the scope of this heading as regards plywood. Classification in heading 4412, HTSUS, is not in dispute. Further, both birch and luan are non-coniferous woods, as is required under subheading 4412.32, HTSUS. The difference between subheadings 4412.32.31, HTSUS and 4412.32.05, HTSUS, is the type of wood that makes up the face ply. Our analysis thus turns to the 8-digit level of the HTSUS, which implicates an examination pursuant to GRI 6. GRI 6 states: For legal purposes, the classification of goods in the subheading of a heading shall be determined according to the terms of those subheadings and any related subheading notes, and mutatis mutandis, to the above rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this rule, the relative section, chapter, and subchapter notes also apply, unless the context otherwise requires. Plywood is a manufactured wood panel made from thin sheets of wood veneer. The veneers are glued together, with adjacent plies having their wood grain rotated relative to adjacent layers up to 90 degrees so as to ensure stability and strength. The Voluntary Product Standard PS 1-09, Structural Plywood, was created by the National Institute of Standards and Technology (NIST) of the U.S. Department of Commerce (Commerce), under procedures published by Commerce in Title 15 C.F.R. §10, regarding voluntary standards (herein after referred to as PS 1-09). PS 1-09 is the industry standard by which plywood is governed, and is relied upon by CBP when analyzing plywood imports. See Headquarters Ruling (HQ) H248711, dated December 15, 2014. The grading of sawn wood into categories as it is processed helps determine the value and potential use for each board. The upper grades are most suitable for mouldings, architectural interiors, and furniture applications. For example, Grade N veneer is intended for a natural finish and is to be free from knots, knotholes, pitch pockets, open splits, other open characteristics and stain. The middle grades are most suitable for the kitchen cabinet industry, most furniture parts, and plank and strip flooring. For example, Grade A veneer is suitable for painting, and shall be firm, smoothly cut, and free of knots, pitch pockets, open splits, and other open characteristics and well joined when of more than one piece. Lower grades, or panels with visible knotholes, pitch pockets, splits or gaps, are more commonly used in applications where the panels are covered and visible appearance is not related to function, such as with underlayment. For example, Grade C veneer may have knots, worm and borer holes, broke grain, pitch pockets, patches, and discoloration in accordance with certain parameters outlined in the PS 1-09 standard. The Grade “X”, however, does not mean the wood is of the lowest possible quality, rather, it means the wood is not graded at all. Shelter Forest states that the birch side of the subject merchandise has a “C-grade.” No grade is advertised or stated by Shelter Forest for the luan side, it is marked with an “X” grade. The term “face-ply” is found in the subheading text and is commonly used in this industry, but it is not defined in the HTSUS or the ENs. When a tariff term is not defined by the HTSUS or the legislative history, its correct meaning is its common or commercial meaning. See Rocknell Fastener, Inc. v. United States, 267 F.3d 1354 (Fed. Cir. 2001). “To ascertain the common meaning of a term, a court may consult ‘dictionaries, scientific authorities, and other reliable information sources and ‘lexicographic and other materials’.” Id (quoting C.J. Tower & Sons of Buffalo, Inc. v. United States, 673 F.2d 1268, 1271, 69 C.C.P.A. 128 (C.C.P.A. 1982); Simod Am. Corp. v. United States, 872 F.2d 1572, 1576 (Fed. Cir. 1989)). The International Wood Products Association’s (IWPA) Board of Directors adopted The Procurement Standard for Imported Hardwood Plywood, on March 4, 1997. The Definition section of this standard defines the “face” as: “The better side of any plywood panel in which the outer plies are of different veneer grades. Also either side of a panel in which there is no difference in the veneer grade of the outer plies.”  The APA-Engineered Wood Association Handbook and Grade Glossary defines the term “face” as: “The highest grade side of any veneered-faced panel that has outer plies of different veneer grades. Also either side of a panel where grading rules draw no distinction between faces. For example, the face of an A – C panel is the side with the A – grade outer ply. Both sides of an A – A or B – B panel are referred to as the faces.” The Hardwood Plywood Veneer Association (HPVA) is an American National Standard Institute (ANSI) accredited standards developer for the hardwood and decorative plywood industry. The most recent standard relevant here, is ANSI/HPVA HP-1-2009. This standard defines the “face” as “the better side of any plywood panel in which the outer plies are of different veneers grades.” The Complete Dictionary of Wood defines “face” as, “the better side of a prepared piece of wood.” CBP has been consistent in its rulings regarding the determination of the face ply of plywood. See HQ H248711, supra; and see HQ H044702, dated March 9, 2009, (quoting New York Ruling (NY) R02554, dated October 6, 2005, citing the IWPA Procurement Standard for Imported Hardwood Plywood, and the APA – The Engineered Wood Association Handbook and Grade Glossary, “face” [ ]: The highest grade side of any veneer-faced panel that has outer plies of different veneer grades…”). See also NY N130835, dated November 23, 2010 (“Since the Meranti is the outer ply that is of superior grade, it would constitute the face ply”); NY N005487, dated February 9, 2007, (classifying plywood for use in cabinetry and furniture according to the Calophyllum ply as the face, “because it is the better grade” and Russian or Chinese birch, as the back); and see NY N238065, dated March 4, 2013, (classifying plywood for use as underlayment, CBP stated: “As the outer ply with the higher grade constitutes the face ply, where the Bintangor has the higher grade, the Bintangor is the face ply. Where the Birch has the higher grade, the Birch is the face ply”). Shelter Forest is not asking CBP to abandon industry standards regarding the determination of the face ply, nor is Protestant seeking divergence from CBP’s consistent treatment of entries of plywood. Rather, Shelter Forest argues that CBP should only factor into its analysis the one grade provided for the C-graded birch ply to determine which side is the face ply. Specifically, Shelter Forest argues that CBP should conduct an “essential character” analysis under GRI 3(b), in the instant circumstance where both outer plies are made of wood, but the grade is not identifiable for one of the plies. We disagree. As above, the minimum veneer quality or grade of wood is determined by industry standards of enumerated characteristics. In HQ H248711 this office confirmed that characteristics of the plywood are confirmed via visual inspection. To be clear, this is not a visual inspection of the wood as regards its subjective beauty. Rather, it is a visual inspection of characteristics which may impact the performance of the wood, depending on its use, e.g., cabinetry or flooring which is seen by the consumer post-installation, versus underlayment which is unseen by the consumer post-installation. This inspection by CBP ensures that an importer’s marked or advertised grade is accurate. Here, the Port observed, and the NCSD confirmed, that the birch side of the subject plywood exhibited characteristics which are common to a “C” graded wood veneer, such as some visible knots, knotholes, cracks, splits, and discoloration of the wood. The luan side, however, though not labelled with a grade, did not exhibit any such defects. Rather, it was smooth and blemish free. Thus, per industry guidelines, the flaws found in the birch ply mean the birch side is a lower quality grade than the luan. Therefore, the luan side is the face ply. Shelter Forest points to NY N049017, dated February 13, 2009, NY N005487, dated February 9, 2007, NY L86523, dated August 18, 2005, NY N027781, dated June 4, 2008, to support its argument that that the subject merchandise should be classified pursuant to a GRI 3(b) “essential character” analysis, and thus according to which side will be the most prominently exposed side. However, in each of these rulings, one outer ply of the subject merchandise was made of wood and the other outer ply was made of something other than wood (e.g., medium-density fiberboard (MDF) or laminate). Surface coverings such as MDF or laminate are not graded. When one side of plywood has a decorative surface applied to it CBP will, “not be persuaded that the principal application in the United States of the subject plywood is one that would ignore and conceal the laminate surface.” See NY N049017. The plies at issue in those cases are not at all similar to the instant product, where both outer plies are made of wood. The goods considered in the aforementioned rulings were composite goods and a GRI 3 analysis was appropriate, but that is not the case here, where classification can be determined pursuant to a GRI 1 analysis. Shelter Forest also argues that the face ply should be determined according to the side which exhibits “consumer appeal.” But consumer appeal is not a characteristic that factors into the grade of wood. Additionally, the subject merchandise is generally used as underlayment, which when installed, is not exposed to the consumer. Consumer appeal is irrelevant. Furthermore, regardless of which side is the face, the subject plywood as a whole is not of a high enough grade to be used in a context where visual appearance would be relevant, such as cabinetry or flooring. Next, Shelter Forest alleges without submitting evidence to support its claim that birch ply is more expensive than luan ply, and thus should be considered the face ply. However, every dictionary, scientific authority, glossary, or trade association noted herein states that the wood grade determines the face ply, not the value of the wood or the individual plies. As was noted above, physical examination of the imported product was conducted on several shipments, and photos and samples were taken by CBP. All opinions concur: the luan outer ply was smooth and nearly blemish free. The birch outer ply was visibly split and contained knots, cracks and color variations. Per industry guidelines, these flaws mean the birch is a lower grade than the luan. Therefore, the luan is the higher grade outer ply and meets all industry definitions – most notably those found in PS 1-09, the governing standard for structural plywood - of a face ply. The subject merchandise is fully described under subheading 4412.32.31, HTSUS, as plywood consisting solely of sheets of wood…, each ply not exceeding 6 mm in thickness: Other, with at least one outer ply of non-coniferous wood: Not surface covered, or surface covered with a clear or transparent material which does not obscure the grain, texture or markings of the face ply: Other. This is consistent with previous CBP rulings on similar merchandise. HOLDING By application of GRI 6 and GRI 1, the subject merchandise is classified in subheading 4412.32.3175, HTSUSA which provides for, “Plywood, veneered panels and similar laminated wood: Other plywood consisting solely of sheets of wood (other than bamboo), each ply not exceeding 6 mm in thickness: Other, with at least one outer ply of non-coniferous wood: Not surface covered or surface covered with a clear or transparent material which does not obscure the grain, texture or markings of the face ply: Other: Other: Other; Other: Not surface covered.” The general column one duty rate is 8 percent ad valorem. You are instructed to DENY the protest. In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook you are to mail this decision, together with the CBP Form 19, to the Protestant no later than 60 days from the date of this letter. Any re-liquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision. Sixty days from the date of the decision, the Office of International Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP home page on the World Wide Web at http://www.cbp.gov by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division