CAFC Affirms CIT's Classification of Certain Circuits, Remands Question of Whether CBP's Actions Amounted to "Treatment"
In Motorola, Inc. v. U.S., the Court of Appeals for the Federal Circuit agreed with the Court of International Trade and ruled that Customs correctly classified eight models of circuits used in battery packs for cell phones under HTS 8536.30.80 (3.2%) as other apparatus for protecting electrical circuits.
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However, the CAFC disagreed with the CIT's decision that certain Customs actions amounted to a "treatment" under 19 USC 1625(c)(2).
Correct classification is HTS 8536.30.80. First, the CAFC agreed with the CIT that all eight circuit models should be classified under HTS 8536.30.80 (3.2%) as other apparatus for protecting electrical circuits. The CAFC states that in order for the circuits to be classified under HTS 8542.40.00 (duty-free) as hybrid integrated circuits, the active and passive elements must be combined to all intents and purposes indivisibly, on a single insulating substrate. Motorola did not demonstrate that such was the case, as the circuits could be readily disassembled. Therefore, classification under HTS 8536.30.80 is correct.
CAFC remands issue of whether bypass entries and/or preclassification rulings constitute a "treatment." Second, the CAFC vacated the CIT's ruling that Customs violated 19 USC 1625(c)(2).
The CAFC remanded this issue to the CIT to address whether the liquidation under HTS 8542.40.00 of 900 bypass entries of similar circuits in 1995-1997, and/or Customs' 1992 and 1994 preclassification rulings classifying similar circuits under HTS 8542.40.00, constitute "treatment" within the meaning of 19 USC 1625(c)(2).
Treatment status would have required Customs to publish its 2000 contrary ruling, HQ 961050, for notice and comment prior to changing the classification of the goods from HTS 8542.40.00 to HTS 8536.30.80.
Chevron deference. The CAFC also ruled that the CIT erred in not giving Chevron deference to interpretation of the word "treatment" in 19 CFR 177.12(c)(1)(ii), which states, in part, that the admission of entries expeditiously and without examination of Customs officer review does not constitute treatment within the meaning of 19 USC 1625(c)(2).
(If a Customs regulation is a reasonable interpretation and implementation of the underlying, ambiguous statutory provision, it must be given judicial deference, termed Chevron deference. See ITT's Online Archives or 04/23/99 news, 99042222 for BP summary.
Under bypass procedures, Customs may liquidate entries using the value and tariff classification declared by the importer, without inspecting the goods or otherwise independently determining the proper duty to be paid.
Pursuant to 19 USC 1625(c)(2), Customs is required to publish for notice and comment any interpretive ruling or decision that would have the effect of modifying the treatment previously accorded by Customs to substantially identical transactions.)
CAFC Court No. 05-1025, -1041, available at http://www.fedcir.gov/opinions/05-1025.pdf;
CIT Slip Op. 04-102, available at http://www.cit.uscourts.gov/slip_op/Slip_op04/Slip-Op%2004-102.pdf