appraised value of the goods of foreign origin to determine the amount of duty?

Numerous cases have been cited by each party as authorities. We have reviewed these cases and find none of them to be directly in point, or nearly so, with the case at bar. Perhaps the most pertinent case is that of Denike v. United States, 5 Ct. Cust. Appls. 364, T. D. 34553, which was relied on for authority in the dissenting opinion below and by counsel for appellant before this court.

In the Denike case, supra, railroad wheels and axles of American manufacture with tires made in Germany were sent to Mexico, where the tires were repaired, and the articles were later brought back to the United States. The court held that the goods when returned were not dutiable as entireties. By virtue of a statute similar to par. 1615, supra, the wheels and axles were held by the court to be entitled to free entry because they had not been changed in condition; only the tires were held dutiable. In the Denike case, this court relied for authority on the case of Hillhouse v. United States, 152 Fed. 163, T. D. 27831, certiorari denied 208 U. S. 615, which case was also relied on by the dissenting judge in the court below. It is clear, we think, that the Denike case, supra, did not involve the question we have before us. Paragraph 370, supra, as modified by T. D. 49752, supra, provides, inter alia:

*

* * *

* motor boats * * 30 per centum ad valorem. Motor boats, including yachts * * * valued at not more than $15,000 each, 15% ad valorem. [Italics supplied.]

We fail to see how the term "valued" as used here can be taken to mean anything other than the total actual value of the yacht as an entity. It is, in our opinion, too strained an interpretation to construe it in the light of application of paragraph 1615, supra, as meaning the appraised value of goods of foreign origin only. True, identifiable goods of American origin have been constructively separated from the rest of the yacht for purpose of separately appraising them in order to avail appellant of duty exemptions under paragraph 1615 (a), supra. But this is only a legal fiction. These goods have been integrated with the goods of foreign origin and comprise an essential part of the yacht and certainly form a part of the actual value of the yacht.

It seems to us that when the collector constructively separated from the rest of the yacht those parts which could be identified as goods of American origin and admitted them duty free, appellant received all the exemption he was entitled to under authority of the cases considered by us, particularly the Denike and Hillhouse cases, supra. We concur with the following statement of the majority of the court below:

* * *

It is the opinion of this court that it would be an unreasonable extension of the scope of the exemption granted to American goods to hold that

a vessel may be separated into the respective foreign and American parts thereof for purposes of ascertaining the rate of duty applicable thereto.

Appellant asserts, however, that section 503 (c) is controlling here. That section, he points out, requires that the rate of ad valorem duty to be assessed be based on the final appraised value of the merchandise. He contends that the appraiser never furnished to the collector a final appraised value of $17,000; and that the appraiser in fact returned two final appraised values, namely, a value of $4,245 for the identifiable goods of American origin and a value of $12,755 for the goods of foreign origin. To support these arguments, counsel for appellant points out the manner in which the value of foreign goods and the value of duty free goods of American origin are separately listed in the report of the appraiser on Customs Form 6431, set out in part above. Also in support of these arguments, counsel points out that the notation by the appraiser on the pro forma invoice reads "Values Approved," as noted above, rather than "Value Approved." [Italics supplied.]

The collector must, of course, comply with section 503 (c), supra. However, we think appellant's other arguments are without merit. In our opinion, the final appraised value in this case is the appraised value of the yacht as an entity. This is clearly the sum of the appraised values of goods of American and foreign origin respectively. Although the appraiser in his report on Customs Form 6431 listed the two items separately, we think the proper significance to be attached to this is that the report was made in this manner to more clearly present to the collector the pertinent information which the former is obliged to furnish the latter in compliance with the provisions of section 500 (a) of the Tariff Act of 1930. Appellant, by his arguments, in effect urges us to hold that there was no final appraised value of the yacht as a whole, on which the collector could properly base his decision, simply because the appraiser did not go through the mechanics of totaling the separate values on form 6431. It is our opinion that to do this would be to ignore the substance of the facts and hinge outcome of the case on a formal technicality which we think is insignificant in this particular case. Moreover, looking to the pro forma entry, set out in part, supra, we find that one of the values approved by the appraiser therein is a:

55 foot aux. schooner Yacht Keewatin-$17,000

In our opinion, rather than supporting appellant's above-noted contentions, as he claims, this latter form is more logically interpreted as an indication by the appraiser that the value of the yacht as a whole or entity is $17,000.

In view of the foregoing, we think the collector was not in error, and the decision of the Customs Court overruling appellant's protest is affirmed.

UNITED STATES v. C. J. TOWER & SONS (No. 4693)1

1. ABRASIVE SLUDGE METALLIC MINERAL SUBSTANCES IN A CRUDE STATEALLOYS

So-called "Abrasive Sludge 81," imported from Canada, is described as an unwanted byproduct resulting from the treatment of bauxite to produce an abrasive. It was classified as "Ferrosilicon, containing 8 per centum or more of silicon and less than 30 per centum," under paragraph 302 (i), Tariff Act of 1930, as modified by the Canadian Trade Agreement, and assessed with duty at the rate of 1 per centum per pound on the silicon content. Since it appears that commercial designation of the term "alloys" has been amply proved by well-qualified witnesses and that such designation differs from the common meaning of the term, the merchandise is held free of duty as "Metallic mineral substances in a crude state * * *" under paragraph 1664, as claimed by importer.

2. IMPORTATION DOES NOT FALL WITHIN PROVISION FOR ALLOYS

Since the testimony of well-qualified witnesses clearly establishes that the word "alloy" had a well-known commercial meaning throughout the United States which was uniform, definite, and general prior to and at the time of the passage of the Tariff Act of 1930, and that such meaning differed from the common meaning of the word, held that the importation does not fall within the provision for "alloys” in paragraph 302 (o), as contended by the Government.

United States Court of Customs and Patent Appeals, May 28, 1952 Appeal from United States Customs Court, C. D. 1337

[Affirmed.]

Charles J. Wagner, Acting Assistant Attorney General (Joseph F. Donohue, special attorney, of counsel), for the United States.

Barnes, Richardson & Colburn (Joseph Schwartz of counsel) for appellee.

[Oral argument April 8, 1952, by Mr. Donohue and Mr. Schwartz]

Before GARRETT, Chief Judge, and O'CONNELL, JOHNSON, and WORLEY, Associate Judges

WORLEY, Judge, delivered the opinion of the court:

This is an appeal from the judgment of the United States Customs Court, Second Division, rendered pursuant to its decision, C. D. 1337, sustaining the protest of appellee, importer.

Merchandise, invoiced and entered as "Abrasive Sludge," imported from Canada and entered at the port of Buffalo, New York, was classified by the Collector of Customs as "Ferrosilicon, containing 8 per centum or more of silicon and less than 30 per centum" pursuant to the provisions of paragraph 302 (i) of the Tariff Act of 1930, as modified by the Canadian Trade Agreement (T.D.49752) and assessed duty at the rate of one cent per pound on the silicon contained therein.

The importer protested this assessment claiming that the merchandise was properly free of duty, under paragraph 1664 of the Tariff Act

1 C. A. D. 491.

of 1930, as "Metallic mineral substances in a crude state, such as drosses, skimmings, residues, brass foundry ash, and flue dust, not specially provided for" or, alternately, to be dutiable at 7% per centum ad valorem as "Waste, not specially provided for" as provided for under paragraph 1555 of the Tariff Act of 1930, as modified by the Canadian Trade Agreement, supra.

It was stipulated that the involved merchandise was similar in all respects to the merchandise involved in the case of C. J. Tower & Sons v. United States, 19 Cust. Ct. 46, C. D. 1066; that it was made in both cases by the same process and was used for the same purpose and, by agreement of the parties, the record and exhibits in the Tower case, supra, were received in evidence as a part of the record in the case at bar.

A description of the character of the merchandise and the manner of its production was set out in the Tower case, supra, and adopted by the trial court in the instant case. It reads as follows:

* * * this so-called "Abrasive Sludge 81" is an unwanted byproduct resulting from the treatment of bauxite to produce an abrasive.

The aloxite electric furnace, as we operate it, is a metal shell on the bottom of which is placed a coke and tar bottom approximately fifteen inches thick. It's rammed in. The shell is iron, water cooled on the outside. The operation of the furnace is to feed in bauxite, establish an electric arc, two electrodes. The bauxite is melted with sufficient carbon there to reduce some of the impurities, such as iron oxide, silica, and a small amount of titanium oxide. These impurities when they are reduced, come out in the metallic state. These metals are heavier than the alumina, melted alumina bath settled out of the bath. This metallic material first reaching the carbon bottom through the settling, penetrates into the carbon bottom to the extent of possibly six inches. In other words, the carbon bottom acts as a sort of a sponge absorbing this material which is settling out. After we have established this bottom consisting of these metals plus the carbon it becomes impervious and the remainder of the metallic material settles out as the furnace is filled up. This molten material collects on top of this bottom, metallized bottom, and forms what is ordinarily known as ferrosilicon. I'm not sure that's the correct term for it. We call it byproduct ferrosilicon. It's really a byproduct. The court then asked

Judge Lawrence: What is the main thing you are trying to produce when this comes off as a byproduct?

The Witness: We're producing abrasives and we do not control this metallic material at all. It's absolutely a byproduct. We have no interest in it other

than what little salvage we can get by selling it.

After the furnace is full of molten material the power is taken off and the bath is allowed to solidify. The furnace is then dumped and we have on the very bottom of this so-called pig ingot a layer of carbon which is formed, of course, from the coke which was originally put in. Just above that we have a layer of possibly three or six inches thick of this mixture of metallic material which has come down and been absorbed by the carbon. I haven't the analysis before me but I would say that the carbon in there might vary from something under

twenty percent to possibly over thirty percent. That's my recollection. The metallic material also varies very considerably in content from time to time. Above this so-called sludge is a layer of this by-product ferrosilicon which might be four to six inches thick, and above that is the aluminous abrasive material. The record reflects the following analysis of the involved merchandise:

Remainder 6. 95% identity unknown, with the following important

reservation:

* * * that there are variations in the analysis of different shipments; that the carbon varies from slightly under 20 percent to over 30 percent; that the silicon content varies from about 6 percent to about 9 percent and that the other elements vary accordingly.

During the course of the taking of testimony in the Tower case, supra, and after the trial of that case had been transferred from Buffalo to New York City, Special Agents for the Government conducted an extensive investigation as to whether the involved merchandise was in fact ferrosilicon and they concluded that it was not. Thereupon, counsel for the Government stated that the merchandise had been improperly classified under subparagraph (i) of paragraph 302 of the Tariff Act of 1930 and claimed that the involved merchandise was properly dutiable under paragraph 302 (o) of that act which provides for "All alloys used in the manufacture of steel or iron, not specially provided for."

In the instant case it is also the contention of the Government that the involved merchandise falls within the purview of paragraph 302 (0) of the Tariff Act of 1930.

The trial court, in the case herein, sustained the protest of the importer, hence the issues before us are whether from the facts of record the commercial meaning of the word "alloys" differs from the ordinary meaning; and whether the involved sludge is free of duty as a "Metallic mineral substance in a crude state * * * ""

The fundamental error is alleged by counsel for the Government to be the holding that the involved merchandise is not an alloy.

The importer introduced the testimony of four witnesses. The first witness for appellee, Wilbur G. Wellings, stated that he had been employed by the Titanium Alloy Manufacturing Co. of Niagara Falls, New York, for 29 years; that this company was engaged in the manufacture of ferro alloys, ceramin materials, and industrial chemicals; that at the time of his retirement from the company in 1948 he was chief sales manager of the alloy division of the company