CAFC Rules That Misclassification With Subsequent Legal Analysis Is a Still a "Mistake of Fact"
In Brother International, Corp. ("Brother") v. U.S., the Court of Appeals for the Federal Circuit reversed the Court of International Trade, ruling that a misclassification was due to a mistake of fact, and that subsequent legal analysis using the General Rules of Interpretation did not make it a mistake of law.
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In July of 1997, Brother requested a binding ruling on "multi-function centers" (MFCs) invoiced as "multifunctional copier/printer/fax machines," and received a decision that these units should be classified under 8471.60.6200 (duty-free), as printing was their principal function.
Brother then timely requested reliquidation under 19 USC 1520(c) of all earlier entries of MFCs that had mistakenly been classified as photocopying apparatus under 9009.12.000 (3.7%). Customs denied the requests on the grounds that the original misclassification was due to a mistake of law and not due to a mistake of fact.
The CIT determined that a mistake of fact had occurred, reasoning that Brother did not know all the facts concerning the MFCs. Brother, believing the MFCs had no principal function, classified them based on GRI 3(c) " under the heading which occurs last in numerical order among those which equally merit consideration." The CIT further determined that since Brother had made a legal determination of law by using the GRIs in classifying the MFCs, a mistake of law had also occurred, which '"overruled" the mistake of fact.
While the CAFC agreed that this case involved a mistake of fact, it did not agree that there was also a mistake of law. The CAFC stated that "a mistake of fact that leads to a misclassification is still a mistake of fact." The subsequent legal analysis using the GRIs did not constitute a mistake of law, since it was the consequence of a prior mistake of fact. The CIT's decision is reversed with a remand to Customs to reliquidate the entries as duty-free.
(Under the Miscellaneous Trade and Technical Corrections Act of 2004 (Public Law (P.L). 108-429), 19 USC 1520(c) was repealed, effective for goods entered, or withdrawn from warehouse, for consumption on or after December 18, 2004. Issues involving clerical errors, mistakes of fact, or other inadvertences previously dealt with under 19 USC 1520(c) are instead covered under 19 USC 1514. It should be noted that the protest filing/amendment period for 19 USC 1514 is now 180 days (from 90 days); which is less than the one year period previously allotted under 19 USC 1520(c).)
(See ITT's Online Archives or 05/19/05 news, 05051925, for BP summary of CIT decision.)
CAFC 06-1068 (dated 09/18/06) available at: http://www.fedcir.gov/opinions/06-1068.pdf