United States Court of Appeals for the Federal Circuit
2007-1073
MOTOROLA, INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
Michael E. Roll, Pisani & Roll, of Los Angeles, California, argued for plaintiff-
appellant. Of counsel on the brief was Mark S. Zolno, Katten Muchin Rosenman LLP, of
Chicago, Illinois.
Amy M. Rubin, Trial Attorney, International Trade Field Office, Commercial
Litigation Branch, Civil Division, United States Department of Justice, of New York, New
York, argued for defendant-appellee. With her on the brief were Barbara S. Williams,
Attorney in Charge. Also on the brief were Peter D. Keisler, Acting Attorney General, and
Jeanne E. Davidson, Director, of Washington, DC. Of counsel on the brief was Chi S.
Choy, Office of Assistant Chief Counsel, United States Customs and Border Protection, of
New York, New York.
Appealed from: United States Court of International Trade
Senior Judge Nicholas Tsoucalas
United States Court of Appeals for the Federal Circuit
2007-1073
MOTOROLA, INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
__________________________
DECIDED: December 10, 2007
__________________________
Before LOURIE and LINN, Circuit Judges, and BUCKLO, * District Judge.
BUCKLO, District Judge.
This is the second time this case has been here on appeal from the Court of
International Trade. The issue is the appropriate tariff classification of various circuits
imported by plaintiff Motorola, Inc. (“Motorola”) and used in cellular phone battery packs.
This court upheld the trial court’s holdings on various issues in the first appeal but
remanded for further proceedings on two issues. Motorola, Inc. v. United States, 436
F.3d 1357, 1368 (Fed. Cir. 2006) (Motorola I). On remand, the trial court found against
Motorola with respect to the tariff classification. For the following reasons, we affirm.
*
Honorable Elaine E. Bucklo, District Judge, United States District Court for
the Northern District of Illinois, sitting by designation.
I. BACKGROUND
This opinion will assume familiarity with this court’s earlier decision, including the
history of this litigation. To summarize, Motorola imports different models of circuits that
it uses in battery packs for cellular telephones. On October 22, 1992, and February 4,
1994, Customs issued preclassification ruling letters (“PRLs”) in response to requests
by Motorola, in which Customs classified certain circuits under the duty free tariff
schedule 8542.40.00 Between 1995 and 1997 Motorola imported ten other circuit
models, filing 900 entries, which were liquidated duty free under 8542.40.00 pursuant to
a “bypass procedure,” meaning that the goods were not inspected for a determination of
the proper tariff schedule. However, in 1996, the Customs Port Director in Chicago
reviewed 92 Motorola bypass entries and concluded they should be classified under a
different entry which was not duty free. These were liquidated in May 1997. In
response to Motorola’s objection, Customs issued Headquarters Ruling (“HQ”) 961050,
which was not published for notice and comment. HQ 961050 classified the May 1997
entries under subheading 8536.30.80 at a 3.2 percent ad valorem duty rate.
Based on HQ 961050, Customs liquidated the eight entries involved in this case
under 8536.30.80. Motorola filed this action in response. The Court of International
Trade held that four of the eight entries were substantially identical to one or more
entries in the PRLs issued to Motorola in 1992 and 1994. Motorola argued that
Customs therefore violated 19 U.S.C. § 1625(c) because it failed to follow the notice
and comment procedure stated in that section. 19 U.S.C. § 1625(c) provides:
A proposed interpretive ruling or decision which would—
(1) modify (other than to correct a clerical error) or revoke a prior
interpretive ruling or decision which has been in effect for at least 60 days;
or
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(2) have the effect of modifying the treatment previously accorded by the
Customs Service to substantially identical transactions; shall be published
in the Customs Bulletin. The Secretary shall give interested parties an
opportunity to submit, during not less than the 30-day period after the date
of such publication, comments on the correctness of the proposed ruling
or decision. After consideration of any comments received, the Secretary
shall publish a final ruling or decision in the Customs Bulletin within 30
days after the closing of the comment period. The final ruling or decision
shall become effective 60 days after the date of its publication.
In its first decision, the Court of International Trade held that PRLs are limited to
the items identified in the PRL and that, accordingly, HQ 961050 did not violate
§ 1625(c)(1) since the items covered by the ruling were not identical to any item listed in
either PRL. Motorola, Inc. v. United States, 350 F. Supp. 2d 1053, 1068-69 (Ct. Int’l
Trade 2004). Motorola did not appeal that decision. The trial court also held that
Customs was bound under § 1625(c)(2) by its prior classification of substantially
identical circuits, through liquidation of bypass entries, because of its failure to follow the
notice and comment procedure. In doing so, the trial court rejected Customs’ argument
that it should defer to Customs’ construction of “treatment” as defined in 19 C.F.R.
§ 177.12(c)(1)(ii). Id. at 1073. This court disagreed, holding that the interpretation of
the word “treatment” in Customs regulation, 19 C.F.R. § 177.12 (c)(1)(ii), is entitled to
deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837 (1984). That regulation specifies that the classification of entries
“expeditiously and without examination or Customs officer review” is not “treatment”
under § 1625(c)(2). This court directed the trial court on remand to determine whether
the bypass entries at issue in this case were examined or reviewed and thus treated.
Motorola I, 436 F.3d at 1367. In addition, because the trial court had not ruled on
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whether the PRLs or importation of goods pursuant to the PRLs, constituted “treatment”
under § 1625(c)(2), the trial court was directed to make this determination. 1 Id. at 1368.
On remand the trial court rejected Motorola’s arguments that the bypass entries
were examined or reviewed and thus treated. Motorola, Inc. v. United States, 462 F.
Supp. 2d 1367, 1379 (Ct. Int’l Trade 2006). Motorola has not appealed that decision.
The trial court also found that PRLs, or goods imported pursuant to the PRLs, are
not treated as that term is used in § 1625(c)(2), concluding that subsection (c)(2) could
not be construed to include PRLs without rendering subsection (c)(1) superfluous. Id. at
1381. On this appeal, Motorola asks us to reverse this determination.
II. DISCUSSION
Motorola argues that Customs violated subsection (c)(2) because Customs not
only issued the two PRLs that included substantially identical parts, but followed these
with years of liquidations of entries pursuant to the PRLs. Motorola argues that all of
this amounts to a “treatment” under § 1625(c)(2).
Customs responds that 19 C.F.R. § 177.12(c)(1)(i) precludes such a conclusion.
This court’s prior opinion held that the portion of 19 C.F.R. § 177.12(c)(1)(ii) that
excludes from the definition of “treatment” entries admitted “expeditiously and without
examination or customs office review” is entitled to Chevron deference. We hold that 19
C.F.R. § 177.12(c)(1)(i), which like (c)(1)(ii) defines “treatment” in § 1625(c)(2), is “a
reasonable and permissible construction of the statute,” 436 F.3d at 1366, and thus
entitled to deference under Chevron. Although in our prior opinion, we focused only on
1
This court upheld the trial court’s determination that four of the eight parts
at issue were not substantially identical to bypass entries relied upon by Motorola. Only
four parts remain in litigation.
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subpart (ii) of 19 C.F.R. § 177.12(c), both subparts provide the rules by which Customs
decides “whether a treatment was previously accorded by Customs to substantially
identical transactions of a person.” 19 C.F.R. § 177.12(c). Subsection (ii) says that
Customs will look at claims of treatment on a case-by-case basis, focusing on whether
Customs has examined the merchandise or otherwise reviewed the transactions, noting
that no weight will be given where there has been no examination. Subsection (c)(i)
informs importers who wish to claim “treatment” under § 1625(c)(2) that:
(i) There must be evidence to establish that:
(A) There was an actual determination by a Customs
officer regarding the facts and issues involved in the
claimed treatment;
(B) The Customs officer making the actual determination
was responsible for the subject matter on which the
determination was made; and
(C) Over a 2-year period immediately preceding the
claim of treatment, Customs consistently applied that
determination on a national basis as reflected in
liquidations of entries or reconciliations or other Customs
actions with respect to all or substantially all of that
person’s Customs transactions involving materially
identical facts and issues[.]
As we held with respect to subsection (c)(ii), it is reasonable for Customs to require that
before it is required to acquiesce to a claim of treatment, there have been “an actual
determination” based on an examination that particular items belonged under a
particular classification, by an officer with responsibility for the subject matter under
consideration, and that the same determination have been made consistently over the
preceding two years with respect to the importer’s materially identical parts.
In this case, Customs agrees that the 1992 and 1994 PRLs could satisfy the first
two requirements. Motorola cannot, however, meet the third requirement. Motorola’s
first argument is that the 900 entries on bypass satisfy this requirement. However,
2007-1073 5
because there was never an actual examination or determination that any of these
transactions qualified for inclusion under schedule 8542.40.00 (a determination that, as
noted above, was not appealed), Customs could not have applied the PRLs on a
national basis to the bypass entries.
Motorola also argues that because there was more than one PRL issued on
substantially identical merchandise, even if the bypass entries are not considered, the
third requirement in 19 C.F.R. § 177.12(c)(1)(ii), is satisfied by the PRLs alone.
Motorola thus contends that the PRLs themselves established a pattern of “treatment”
under § 1625(c)(2). We disagree. It is undisputed that the PRLs are prior interpretive
rulings governed by subsection (c)(1), which bind Customs “only with respect to the
items identified in the PRLs and not any other merchandise, even if [the other
merchandise] is substantially identical.” Motorola I, 436 F.3d at 1364. Allowing an
importer to rely on subsection (c)(2) merely because it had secured multiple PRLs
covering “substantially identical” merchandise would create a fictitious catchall in
subsection (c)(2), thereby gutting the strict identity requirement of the PRL system and
rendering subsection (c)(1) superfluous. See 19 C.F.R. § 177.9(b)(2) (“Each ruling
letter . . . will be applied only with respect to transactions involving articles identical to
the sample submitted . . . or to articles whose description is identical to the description
set forth in the ruling letter”) (emphases added). Accordingly, Motorola cannot show
that Customs violated § 1625(c) in issuing HQ 961050 or in classifying the May 1997
entries under subheading 8536.30.80.
III. CONCLUSION
For the foregoing reasons, we affirm.
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