Supreme Court Rules: “Parts” Must Functionally Integrate into Machinery, Rejecting End-Use Claims

Rule-Based Tariff Classification: The Supreme Court clarified that customs classification is strictly a rule-based exercise, emphasizing that tariff classification should adhere to the Customs Tariff Act and Harmonised System of Nomenclature (HSN) rather than being influenced by end-use, trade terminology, or perceived necessity. The court ruled that a “part” must actively participate in a machine’s operation, dismissing claims for supporting structures as qualifying parts.
End-Use and Common Parlance Limitations: The court determined that exclusive end-use cannot dictate tariff classification unless explicitly permitted by the tariff itself. It reinforced that common trade understanding is only applicable when tariff terms are ambiguous, and it cannot override the structured, technical definitions provided in the tariff.
Broader Implications for Various Sectors: This ruling has significant implications beyond agriculture, impacting sectors such as automotive and manufacturing. The established principle that only components functioning within the machine qualify as parts will affect how companies classify items like mounting frames and support structures, which will need to demonstrate functional integration rather than mere necessity or design to qualify for concessional classification.