Pleasure-Way Industries, Inc. v. United States
878 F.3d 1348
| Fed. Cir. | 2018Background
- Pleasure-Way Industries bought 144 Daimler‑Chrysler "Sprinter" cargo vans in the U.S., exported them to Canada (Jan 2008–Sept 2009), and converted them into Plateau TS and Ascent TS motorhomes with extensive interior and exterior additions.
- After conversion, Pleasure‑Way re‑imported the vehicles and sought classification under HTSUS subheading 9802.00.50 (favorable duty treatment for goods re‑entered after repair/alteration in Canada) under 19 C.F.R. § 181.64.
- U.S. Customs initially granted the request, then reversed, classifying the imports under HTSUS subheading 8703.33.00 and assessing a 2.5% ad valorem duty.
- Pleasure‑Way protested, sued in the Court of International Trade under 28 U.S.C. § 1581(a), and lost on summary judgment; CIT held the regulation inapplicable.
- On appeal, the Federal Circuit reviewed de novo the regulation’s interpretation and its application to undisputed facts and affirmed the CIT judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether conversions in Canada created a "new or commercially different good" from exported vans under 19 C.F.R. § 181.64(a) | Pleasure‑Way: converted motorhomes are the same identifiable vans (VINs remain); changes are repairs/alterations eligible for favorable treatment | Government: conversions produced commercially different goods (different name, use, market, price, and HTSUS classification), so favorable treatment is inapplicable | Held: Conversions created commercially different goods; favorable treatment denied |
| Whether conversions "destroyed the essential characteristics" of the exported vans under § 181.64(a) | Pleasure‑Way: argued identifiability and continuity show essential characteristics preserved | Government: interior/exterior conversions changed the vehicle's commercial character and essential nature as cargo vans | Not necessary to decide separately; court found commercial‑difference dispositive |
| Whether exported vans were "incomplete for their intended use" making § 181.64(b) exclusion applicable | Pleasure‑Way: vans were completed vehicles and not unfinished parts; so § 181.64(b) should not bar treatment | Government: foreign processing converted vans into different finished articles; even if completed, processing changed commercial identity | Court noted § 181.64(b) applies to unfinished articles but resolved case on commercial‑difference ground |
| Whether identifiability (e.g., preserved VIN) controls commercial‑difference analysis | Pleasure‑Way: identifiability means product is same and eligible for duty treatment (relying on Press Wireless) | Government: identifiability is irrelevant; test is commercial character—market use, price, name, HTSUS classification | Held: Identifiability does not preclude finding a commercially different good; Press Wireless does not require opposite result |
Key Cases Cited
- Paroline v. United States, 134 S. Ct. 1710 (Sup. Ct.) (principle on postpositive modifiers and natural construction of statutes)
- Dolliff & Co. v. United States, 599 F.2d 1015 (Ct. Cl.) (foreign processing on unfinished goods is not an "alteration")
- Millennium Lumber Distr. Ltd. v. United States, 558 F.3d 1326 (Fed. Cir.) (standard of de novo review for regulation interpretation on summary judgment)
- Lynteq, Inc. v. United States, 976 F.2d 693 (Fed. Cir.) (de novo review of tariff classification and regulation application)