CAFC Rules Against Honda, That Oil Bolts are Screws, Not Auto Parts
In a test case Honda Of America Mfg., Inc., v. U.S., the Court of Appeals for the Federal Circuit affirmed the Court of International Trade’s judgment that certain oil bolts containing cross-sectional holes designed to permit brake or transmission fluids to flow through without leaking are properly classified under HTS 7318.15.80 (as other screws…), at 8.5 percent ad valorem duty rate and not as a part or accessory of motor vehicle under HTS 8708 or 8714.
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Honda argued that these oil bolts, imported from 2002-2004 for use in cars and motorcycles, were properly classified in one of three subheadings in Chapter 87 as vehicle parts or accessories.
The CAFC stated the plain language of the competing subheadings was not dispositive, but that the Section Note 2 of Section XV and Note 2 (b) of Section XVII when read together clarify the subheadings. Thus, these Notes indicate that articles that are “parts of general use” under Chapter 73 cannot be classified as “parts” or “parts and accessories” under Chapter 87.
Honda challenged the interplay between Chapter 73 and 87, arguing instead that General Explanatory Note III to Section XVII should apply, since its oil bolts met the condition that they were suitable for use solely or principally for use with vehicles in Chapter 87. However, the CAFC noted that the Explanatory Note III requires an article to satisfy all three conditions listed, not just one of the conditions.
Honda argued further that its oil bolts were not for general use, because they did not function solely in a fastening capacity, but also conducted fluids and prevented leakage. The CAFC reviewed the Explanatory and Section Notes to Chapter 73 noting that they clearly stated that all types of fastening bolts and metal screws, regardless of shape and use, were classified in the Chapter 73.
Honda also cited three classification rulings issued by Customs and Border Protection that it claimed supported its position. However, after reviewing the cited rulings, the CAFC agreed with the CIT that in its rulings, CBP had followed the principal that articles would be classified under 87 only when they are not parts of general use.
Despite being named oil bolts, Honda’s bolts perform a fastening function, and are tightened by turning their heads, thereby meeting the established definition for “screw”.
The CAFC ruled that these oil bolts are properly classified under subheading 7318.15.80 at 8.5 percent ad valorem.
(See ITT’s Online Archives or 06/11/09 news 09061130, for BP summary of CIT ruling Honda Oil Bolts classified under 7318)
(CAFC decision 09-1493)