International Trade Law News

Published by Jacobson Burton Kelley PLLC

On July 3, 2008, the U.S. Court of International Trade (CIT) denied Totes-Isotoner Corporation’s ("Totes") claim alleging that the Harmonized Tariff Schedule of the United States (HTSUS) violated the equal protection and due process clauses of the U.S. Constitution by setting higher duty rates on men's gloves than women's gloves.

In its opinion, a three judge panel of the CIT held that the mere classification of men’s gloves under a separate tariff heading does not violate the equal protection clause without proof that the government intended to discriminate on the basis of gender. As a result, the CIT dismissed the case for failure to state a claim.

The U.S. Constitution prohibits the government from denying any person the equal protection of the laws. Totes’ complaint alleged that imported men’s gloves are subject to 14% duty rate, while imported gloves for "other persons" are subject to a duty rate of 12.6%. Because these provisions provide for a higher duty rate for men’s gloves, Totes alleged that the HTSUS "discriminates" on the basis of gender.

In its decision, the CIT noted that to properly state a claim for violation of the equal protection clause based on gender, a plaintiff must allege that the government has engaged in gender-based discrimination that is not substantially related to important governmental objectives. To establish the government’s intent, the discrimination must either be evident on its face, or must result in unequal treatment of persons or property within the same class. The CIT held that Totes’ complaint failed on both grounds since Totes’ complaint failed to establish that the gloves will actually be purchased for these purposes or that men will necessarily pay the allegedly discriminatory tax. In addition, the CIT held that because the duty is paid by importers the complaint failed to show how the different duty rates resulted in a discriminatory application of the tax.

Specifically, the CIT stated that:

To be clear, were this a facially discriminatory tax, Plaintiff’s pleadings could be sufficient; in addition, we do not ignore the fact that the tariff schedule makes an express reference to gender. Nor do we assume that this express reference is necessarily benign. Nonetheless, because the challenged tariff classifications are, at worst, "in between" classifications that impose a facially discriminatory tax and classifications that are not facially discriminatory, Plaintiff must at least include an allegation that the challenged tariff classifications distribute the burdens of the tax rate imposed in a way that disadvantages one sex as a whole, or has a disproportionate impact based on sex. To the extent that the challenged tariff provisions do not impose a facially discriminatory tax, Plaintiff must include an allegation of some intent that renders plausible the claim that the discrimination at issue is invidious, arbitrary or unreasonable. In the absence of such allegations, the Complaint does not provide "plausible grounds to infer" a violation of equal protection or allege "enough fact to raise a reasonable expectation that discovery [or further proceedings on the merits] will reveal evidence of illegal" conduct.

Significantly, the CIT dismissed the U.S. Government's claims that the case should be dismissed due to lack of standing and because the case raised a non-justiciable political question. Because the case was dismissed without prejudice, the lawsuit can be revised and re-filed in the CIT. Totes can also appeal the CIT's decision to the Court of Appeals for the Federal Circuit.

This test case has been closely watched by the apparel industry, as a large number of importers of men's and women's clothing, footwear and other articles that are subject to different duty rates have filed similar lawsuits.

Labels: Court of International Trade, HTS