CIT Rules that Preclassification Rulings and Bypass Entry Procedures Do Not Amount to Customs "Treatment"
In Motorola, Inc. v. U.S., the Court of International Trade (CIT) determined on remand that neither the liquidation of 900 bypass entries nor the issuance of two preclassification ruling letters constitutes "treatment" under 19 USC 1625(c)(2), as interpreted in light of 19 CFR 177.12(c)(1)(ii).
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As a result, Customs did not violate 19 USC 1625(c)(2 by failing to publish HQ 961050 for notice and comment in the Customs Bulletin.
(Between January and June 1998, Motorola entered eight models of circuits used in battery packs for its cellular phones. Motorola had declared these entries to be classifiable as "hybrid integrated circuits" under HTS 8542.40.00 (duty-free); however, Customs rejected Motorola's proposed classification and liquidated the merchandise as other apparatus for protecting electrical circuits under HTS 8536.30.80 (3.2%) pursuant to HQ 961050. Motorola then filed suit.
The CIT and CAFC have ruled that the subject circuits are correctly classified under HTS 8536.30.80 (3.2%). The CIT had also ruled that the 900 entries liquidated under bypass procedures constituted a "treatment" for the purposes of 1625(c). However, the CAFC vacated this aspect of the CIT's ruling, stating that the admission of entries expeditiously and without examination or Customs officer review does not constitute "treatment." The CIT is now reconsidering this "treatment" issue on remand, in light of the CAFC's ruling, including the Chevron deference it has accorded to Customs' interpretation of 19 CFR 177.12(c)(1)(ii))
Neither PRLs Nor Bypass Entries Constitute "Treatment" (Notice/Comment Not Required)
On remand, the CIT finds that the liquidation of the 900 bypass entries at issue does not constitute "treatment" within the meaning of 19 USC 1625(c)(2) because Motorola did not demonstrate that the entries were subject to examination or review sufficient to constitute "treatment." Among other things, the CIT cited testimony indicating that Customs does not routinely review bypass entries or paperwork.
With regard to the PRLs, the CIT states that because a PRL is a prior interpretative ruling, it is governed by 19 USC 1625(c)(1), which pertains only to prior interpretative rulings and decisions. The CIT states that, as such, PRLs are not governed by 19 CFR 1625(c)(2), which pertains solely to "treatment" by Customs.
(See ITT's Online Archives or 05/15/06 news, 06051512, for BP summary of the CAFC's affirmation of the CIT's classification of the circuits at issue and its remand of the question of whether Customs' actions amounted to "treatment.")
CIT Slip Op 06-165 (decided 11/13/06) available at http://www.cit.uscourts.gov/slip_op/Slip_op06/06-165.pdf