United States v. Haggar Apparel Company

PETITIONER: United States
RESPONDENT: Haggar Apparel Company
LOCATION: Elizabeth Township, Allegheny County

DOCKET NO.: 97-2044
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Federal Circuit

CITATION: 526 US 380 (1999)
ARGUED: Jan 11, 1999
DECIDED: Apr 21, 1999

ADVOCATES:
Carter G. Phillips - Argued the cause for the respondent
Kent L. Jones - Argued the cause for petitioner

Facts of the case

The Harmonized Tariff Schedule of the United States provides importers a partial exemption from duties otherwise imposed for articles which were assembled abroad, but that were not enhanced abroad, except by operations incidental to the assembly process. A regulation issued by the United States Customs Service deems permapressing operations to be an additional step in manufacture, not part of or incidental to the assembly process. The Haggar Apparel Company sought a refund for duties imposed on a collection of its men's trousers that it had shipped to the U.S. from an assembly plant in Mexico. The trousers' pre-treated fabric had been cut in the U.S. and then shipped to Mexico, along with the thread, buttons, and zippers necessary to complete the garments. Under the HTSUS, had the trousers only been sewn and reshipped they would have been eligible for the duty exemption that Haggar sought. However, Haggar also permapressed the trousers by baking them in an oven at the Mexican facility before shipping them to the U.S. The Customs Service claimed that the baking was a process in addition to assembly and denied the duty exemption. Haggar contended that the baking was simply part of the assembly process. Subsequently, Haggar filed suit, seeking the refund, in the Court of International Trade. The court declined to treat the Customs Service's regulation as controlling and ruled in Haggar's favor. The Court of Appeals affirmed.

Question

Is the United States Customs Service's regulation regarding permapressing entitled to judicial deference?

Media for United States v. Haggar Apparel Company

Audio Transcription for Oral Argument - January 11, 1999 in United States v. Haggar Apparel Company

Audio Transcription for Opinion Announcement - April 21, 1999 in United States v. Haggar Apparel Company

William H. Rehnquist:

The opinion of the Court in No. 97-2044, United States versus Haggar Apparel Company, will be announced by Justice Kennedy.

Anthony M. Kennedy:

This case arises from a refund proceedings for duties imposed on men's garments that were shipped by the respondent to this country from an assembly plant that it controlled in Mexico.

What happens is that, this manufacturer was attempting to use Mexican plants for assembly purposes.

It shipped pre-cut fabrics to the plant in Mexico with threads, buttons, and zippers and they were assembled there.

If that had been all, they would have been entitled to a duty exemption without question.

But the fabric had been pretreated with a chemical and when the chemical is subjected to heat, it then puts the permapress in the garments and the baking and the heating was also done in Mexico and the question is whether or not this is incidental to assembly or not?

The respondent sought to permapress the garments in order to maintain their creases, of course.

To accomplish this, they baked the chemically pretreated garments at the Mexican plant.

The statute on which the respondent relies does provide a partial exemption from duties, otherwise imposed if the articles assembled abroad.

I have not been improved in condition except by being assembled or by being subjected to operations incidental to the assembly process.

The custom service claimed that the baking was an added process in addition to assembly and it denied the duty exemption.

Respondent's cases made more difficult by a regulation adopted by the Commissioner of Customs that deems all permapress in operations not incidental to the assembly process.

The respondent brought suit for refund in the Court of International Trade.

The Court declined to treat the regulation as controlling and it ruled in favor of the respondent.

The Court of Appeals for the Federal Circuit affirmed; it also declined to give the regulations deference.

Contrary to the position of that Court and the Court of Appeals, we hold the regulation in question is subject to the analysis required by Chevron, USA and that if it is a reasonable regulation and implementation of an ambiguous statutory provision, it must be given judicial deference.

The statutory scheme does not support the respondent's contention that the regulation is limited in application to customs officers themselves and is not intended to govern the adjudications of importers' refund suits.

In addition, nothing in the regulation in question persuade us that the agency intended the regulation to have some lesser force and effect.

We also reject the argument that various statutes empower the Court of International Trade to interpret the tariff statute without giving Chevron deference to the regulations.

We declined to reach the question whether the regulation in question does need the preconditions for Chevron deference.

Respondent's various arguments in this respect are best addressed in the first instance to the courts below.

Justice Stevens has filed an opinion concurring in part and dissenting in part in which Justice Ginsburg joins.