| M E M O R A N D U M | |
| TO: | Clients and Friends of the Firm |
| FROM: | John M. Peterson Neville, Peterson, LLP |
| RE: | Tariff Classification of Festive Articles: Federal Circuit Decision in Park B. Smith, Ltd. v. United States |
I. Introduction
In a significant victory for importers, the U.S. Court of Appeals for the Federal Circuit has reaffirmed that goods which are closely associated with a festive occasion, and are used or displayed principally in connection with that occasion, are properly classifiable as "festive articles", entitled to duty-free entry under Harmonized Tariff Schedule (HTS) Heading 9505.
In Park B. Smith, Ltd. v. United States, Court No. 01-1578, 1586 (October 21, 2003), the Federal Circuit rejected government claims that various functional articles bearing festive and holiday designs - placemats, table napkins, table runners and woven rugs ("dhurries") - should be classified as textile products of HTS Section XI.. Instead, the Federal Circuit upheld a Court of International Trade (CIT) decision classifying most of these products as "festive" articles of HTS Heading 9505.
This Memorandum discusses the Park B. Smith decision and its impact upon the classification of imported articles bearing a festive motif or design.
Affirming The Midwest of Cannon Falls Criteria for "Festive Articles"
In Park B. Smith, the Federal Circuit reiterated the criteria for classification of "festive articles" that it had articulated in Midwest of Cannon Falls, Inc. v. United States, 122 F.3d 1423 (Fed. Cir. 1997). Specifically, the Federal Circuit reaffirmed:
...that classification as a "festive article" under Chapter 95 requires that the article satisfies two criteria: (1) it must be closely associated with a festive occasion and (2) the article is used or displayed principally during that festive occasion.
As the CIT has elaborated, in order for goods to be "closely associated with a festive occasion", it is necessary that "the physical appearance of an article is so intrinsically linked to a festive occasion that its use during other time periods would be aberrant."
The Park B. Smith court held that goods bearing festive symbols or decorations may be treated as "festive" articles. It is irrelevant whether the articles are functional, or belong to a broader "class or kind" of goods whose use is not primarily festive (e.g., tablecloths, rugs, etc.).
The appellate court also affirmed that where the tariff contains an exclusionary legal note providing that a Chapter or Section of the HTS does not include "articles of Chapter 95", (such as the note excluding festive articles from classification in the HTS Section XI provisions for textiles), that note is a mandatory part of the tariff, and must be observed. The Federal Circuit rejected the government's argument that such exclusionary notes do not apply in cases where an article is "more specifically" provided for in a heading other than HTS Heading 95051.
The Court concluded that:
Goods with "Seasonal" Motifs
...the statutory purposes are correctly interpreted by the ruling and criteria established by Midwest of Cannon Falls. That case does not convert every article having a cheerful design or holiday association into a "festive article" classifiable under Chapter 95, as the government argues. Although there is no base in Midwest of Cannon Falls for drawing a classification distinction between two- dimensional and three-dimensional articles, as the government urged below, the Midwest decision does require that the article have a direct association with and limited use to a particular holiday occasion.
The Federal Circuit did rule, however, that the CIT had erred in classifying as "festive" certain articles having "seasonal" designs, which are not associated with a particular festival or holiday. Thus, the court concluded, "the general autumnal colors or other seasonal association do not invoke a particular festival".
Accordingly, the "Court concluded that articles directed to general or seasonal use instead of specific holidays or festivals do not meet the criteria for classification under HTS Heading 9505. It remanded the case to the CIT, with instructions for the lower court to apply the definition of "festive" articles more precisely to the goods at bar. While the vast majority of goods involved in the case will remain classifiable as festive articles of heading 9505, some goods, which have "seasonal" rather than "Festive" or "holiday" motifs, will likely be reclassified into other headings.
Goods With Festive Color Schemes But Having No "Symbolic Content"
Finally, the Federal Circuit held that goods could not be classified as "festive" simply by virtue of having a color scheme associated with a holiday, if the goods have no "symbolic content" associating them with a particular holiday or festival. The court held that "if use of such articles at times other than holidays would not be abhorrent, they do not meet the Chapter 95 Criteria." According to the court, festive articles must "by their design and symbols [be] directed to a specific festive holiday" and "their use at times other than that holiday would be aberrant"
Conclusion and Recommendations
Park B. Smith confirms a broad and favorable definition of the "festive" articles of HTS heading 9505. So long as a good is closely associated with a holiday, and its display at other times would be aberrant, the good is likely to fall within Chapter 95. This conclusion is reinforced in cases where there the tariff contains exclusionary legal notes. Thus, it is possible that tabletop articles, bedding and even wearing apparel (except "sports clothing or articles of fancy dress, which are excluded from Chapter 95), featuring a holiday design and intended for display only during or in connection with a particular holiday or festival, may be classifiable duty free under HTS Heading 9505.
We stand ready to furnish any other additional information which may be required in reviewing the classification of holiday articles, and filing appropriate protests or taking other actions necessary to allow importers to take advantage of the Park B. Smith decision.
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