CAFC Affirmed the CIT's Decision Concerning Treatment
In Motorola, Inc. v. U.S., the Court of Appeals for the Federal Circuit affirmed the remand decision made by the Court of International Trade that neither the liquidation of 900 bypass entries nor the issuance of two proposed ruling letters (PRLs) constituted "treatment" under 19 USC 1625(c)(2), as interpreted in light of 19 CFR 177.12(c)(1)(ii).
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In summary, Motorola imported different models of circuits that it used in battery packs for cellular telephones. On October 22, 1992 and February 4, 1994, Customs issued two PRLs, which classified these circuits under HTS 8542.40.00 (duty free).
Between 1995 and 1997, Motorola filed 900 entries covering ten other circuit models, which were liquidated duty free pursuant to "bypass procedure," meaning that the goods were not inspected by a Customs officer for a determination of the proper tariff classification.
However, in 1996, Customs reviewed some of the bypass entries and concluded that these circuits should be classified under HTS 8536.30.80 (3.2%). In response to an objection from Motorola, Customs also issued HQ 961050, affirming this classification.
From January to June 1998, Motorola filed eight entries of hybrid integrated circuits used in battery packs under HTS 8542.40.00 (duty free). Customs rejected Motorola's proposed classification and based on HQ 961050 liquidated these circuits under 8536.30.80 (3.2%).
Motorola then filed suit arguing that the two PRLs and the years of liquidations by Customs amounted to "treatment," thus, preventing any change in the classification without notice and comment.
In its first decision, the CIT ruled that PRLs are limited to the items identified; therefore, HQ 961050 did not violate USC 1625(c)(1). However, the liquidation of 900 entries under bypass procedures did constitute a "treatment" for the purposes of 1625(c)(2).
In ruling so, the CIT rejected Custom's argument that it should defer to Customs' construction of "treatment" as defined in 19 CFR 177.12(c)(1)(ii). However, the CAFC vacated this aspect of the CIT's ruling, holding that the interpretation of the word "treatment" in the Customs regulation is entitled to Chevron deference. That regulation specifies that the admission of entries expeditiously and without examination by a Customs officer does not constitute "treatment" under 19 USC 1625(c)(2).
On remand from CAFC, the CIT determined that neither the liquidation of 900 bypass entries nor the issuance of two PRLs constituted "treatment" under 19 USC 1625(c)(2), as interpreted in light of 19 CFR 177.12(c)(1)(ii).
The CAFC has now affirmed this CIT remand decision.
(See ITT's Online Archives or 05/15/06 news, 06051512, for BP summary of the CAFC's remand to the CIT of the question of whether Customs' actions amounted to "treatment."
See ITT's Online Archives or 12/01/06 news, 06120125, for BP summary of the CIT's decision on whether Customs' actions amounted to "treatment.")
CAFC decision 07-1073 (dated 12/10/07) available at http://www.cafc.uscourts.gov/opinions/07-1073.pdf