The U.S. Court of Appeals for the Federal Circuit today affirmed the trade court’s grant of summary judgment for the government in a case concerning the customs treatment of cargo vans that were exported to a manufacturing facility in Canada for conversion into motorhomes. The Federal Circuit agreed with the trade court that the conversion of the vans into motorhomes created “a commercially different good” and thus affected the customs duty applicable on their import back into the United States.
The case is: Pleasure-Way Industries, Inc. v. United States, 2017-1190 (Fed. Cir. January 5, 2018). Read the Federal Circuit’s decision [PDF 129 KB]
A company manufactures and sells motorhomes at dealerships in the United States and Canada. Between January 2008 and September 2009, having bought 144 vans in the United States, the company exported them to its manufacturing facility in Canada, where it converted them into model motorhomes. The conversion included installation of interior features such as fully plumbed kitchen and bathroom fixtures with freshwater and sewage tanks, water heaters, sleeping quarters, countertops with propane burners, microwave ovens, wallmounted televisions, and refrigerators. The conversion also included installation of exterior features such as large picture windows and porch lights, awnings, running boards, and exterior showers.
When the company then imported the resulting motorhomes into the United States, it sought to avoid their being treated, for purposes of import duties, under an applicable provision of the Harmonized Tariff Schedule of the United States (HTSUS) subheading 8703.33.00. It requested a ruling from U.S. Customs and Border Protection that the motorhomes were to be classified under HTSUS subheading 9802.00.50, which provides favorable import-duty treatment to certain articles that meet the requirements set forth in 19 C.F.R. § 181.64 (2017) for favorable treatment of imported articles that qualify as “[g]oods re-entered after repair or alteration in Canada or Mexico.”
CBP initially granted the company’s request, but then changed its position. CBP determined that the regulation does not apply to the motorhomes that resulted from the conversion in Canada of the vans it acquired in the United States, and assessed a 2.5% ad valorem import duty in accordance with HTSUS subheading 8703.33.00.
CBP denied the company’s protest, and the U.S. Court of International Trade court granted summary judgment against the company. The company appealed to the Federal Circuit which today affirmed the trade court’s judgment.
For more information, contact a professional with KPMG’s Trade & Customs practice:
Douglas Zuvich | +1 (312) 665-1022 | email@example.com
Andrew Siciliano | +1 (631) 425-6057 | firstname.lastname@example.org
© 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.