United States Court of Appeals
for the Federal Circuit
__________________________
DELL PRODUCTS LP,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
__________________________
2010-1451
__________________________
Appeal from the United States Court of International
Trade in Case No. 06-CV-0306, Senior Judge Richard W.
Goldberg.
___________________________
Decided: April 29, 2011
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MICHAEL E. ROLL, Pisani & Roll, LLP, of Los Angeles,
California, argued for plaintiff-appellant. With him on
the brief were BRETT IAN HARRIS and ROBERT J. PISANI.
AMY M. RUBIN, Attorney, Commercial Litigation
Branch, Civil Division, United States Department of
Justice, of Washington. DC, argued for defendant-
appellee. With her on the brief were TONY WEST, Assis-
tant Attorney General, JEANNE E. DAVIDSON, Director;
and BARBARA S. WILLIAMS, Attorney in Charge, Interna-
DELL PRODUCTS v. US 2
tional Trade Field Office, Civil Division, United States
Department of Justice, of New York, New York. Of
counsel on the brief was BETH C. BROTMAN, Office of
Assistant Chief Counsel, International Trade Litigation,
United States Customs and Border Protection, of New
York, New York.
__________________________
Before BRYSON, DYK, and PROST, Circuit Judges.
BRYSON, Circuit Judge.
This case requires us to interpret the phrase “goods
put up in sets for retail sale” as used in General Rule of
Interpretation 3(b) of the Harmonized Tariff Schedule of
the United States. The Court of International Trade
upheld a ruling of U.S. Customs and Border Protection
that spare laptop batteries that were offered for sale
individually but were packaged with laptop computers for
shipment were not “put up in sets for retail sale” with
those computers. We affirm.
I
Dell Products LP manufactures and sells secondary
batteries for use with laptop computers. A secondary
battery provides an additional power source that allows
extended operation of the computer without access to an
external power supply. Two batteries cannot be used at
the same time; once the primary battery dies, it is re-
moved and replaced with a secondary battery.
The secondary batteries at issue in this case were
admitted separately from the laptop computers into Dell’s
Foreign Trade Sub-Zone (“FTZ”) in Nashville, Tennessee.
At the time of their admission to Dell’s FTZ, the secon-
3 DELL PRODUCTS v. US
dary batteries had “non-privileged foreign status,” mean-
ing that they had not been cleared by Customs and would
be appraised for tariff purposes at the time of their formal
entry into the United States. 1
Laptop computers were offered for sale by Dell to-
gether with a primary battery, a power cord and adapter,
and operational manuals. Secondary batteries were
offered for sale separately along with other optional
accessories. If a particular customer chose to purchase a
secondary battery at the time of purchasing a laptop
computer, Dell would package all of the items for that
customer together and would then ship the package from
the FTZ to the buyer. A small box containing the laptop
computer and the primary battery would be placed into a
larger box containing the operational manuals and the
computer’s cord and adapter. If the customer chose to
purchase a secondary battery or any other optional acces-
sories, those items would also be placed in the larger box
for shipping to the customer.
Dell proposed to classify secondary batteries that
were packaged with laptop computers as duty-free “port-
able digital automatic data processing [“ADP”] machines,”
the ordinary classification for laptop computers. Harmo-
nized Tariff Schedule of the United States (“HTSUS”)
subheading 8471.30.00, codified at 19 U.S.C. § 1202.
Customs disagreed and classified the secondary batteries
1 An FTZ is an area that is geographically within
the United States but is considered outside of the United
States for customs purposes. See BMW Mfg. Corp. v.
United States, 241 F.3d 1357, 1358 n.1 (Fed. Cir. 2001).
Within an FTZ, non-privileged foreign merchandise can
be manipulated or manufactured into another item with a
different tariff classification before entry into the United
States. 19 U.S.C. § 81c(a).
DELL PRODUCTS v. US 4
as “other storage batteries,” HTSUS subheading
8507.80.80. Under that subheading, the secondary bat-
teries were assigned a duty rate of 3.4 percent. Customs
explained its classification decision in a formal ruling
letter. U.S. Customs Serv., HRL 967364 (Dec. 23, 2004).
It determined that the secondary batteries were not “put
up in sets for retail sale” with the laptop computers under
General Rule of Interpretation 3(b) (“GRI 3(b)”) and that
the secondary batteries therefore should be classified
separately from the laptop computers.
Dell appealed the Customs ruling to the Court of In-
ternational Trade, arguing that the secondary batteries
were “put up in sets for retail sale” with the laptop com-
puters, or in the alternative, that the secondary batteries
were “functional units” of the laptop computers and
should be classified as ADP machines. The court agreed
with Customs that the secondary batteries should not be
classified as ADP machines. The court interpreted
GRI 3(b) to require distinct articles to be “offered together
for retail sale or displayed or shown together for retail
sale” before they could be classified together for tariff
purposes. The batteries at issue in this case, the court
found, “are not offered or displayed together for retail sale
with the computer—the computer is offered together with
a power cord and primary battery, and the secondary
batteries are offered individually.” The court concluded
that the batteries are “simply one of many optional,
complementary items that may be purchased at the same
time as a notebook computer” and therefore are not “‘put
up together’ with other components of the retail set, as
the terms are used for tariff purposes.”
The trial court further found that a customer “could
purchase one or more secondary batteries, along with
other supplemental items, when simultaneously purchas-
5 DELL PRODUCTS v. US
ing a notebook computer.” Dell would then “package the
additional optional items into a shipping box that already
contained the notebook computer, a primary battery, and
a power cord.” Under those circumstances, the court
explained, even though the secondary batteries were
packaged together with the notebook computers for
transport to customers, the collection of items that in-
cluded the secondary batteries was “never put up by Dell
as [a] set[] prior to a potential retail sale.” To interpret
such a collection of items as a “set” for tariff purposes, the
court noted, would be contrary to the language of GRI
3(b), “which anticipates a set as a defined unit that is
offered for sale to retail customers.” Because the secon-
dary batteries had been offered for sale separately from
the laptop computers, the court explained, “a consumer’s
customized order of individual, complementary items . . .
is not transformed into a GRI 3(b) ‘retail set’ upon entry
merely by virtue of being ordered at the same time and
subsequently packaged together in an FTZ.” In this case,
the court concluded, “the contents of a customized order
are determined by an individual customer; Dell did not
designate which merchandise constituted a set for retail
sale.”
The trial court also rejected Dell’s argument that its
secondary batteries were functional units of laptop com-
puters under GRI 1. In this appeal, Dell challenges only
the trial court’s GRI 3(b) determination.
II
The General Rules of Interpretation govern the inter-
pretation of HTSUS classifications. GRI 3 controls tariff
classification when goods can be classified under two or
more separate subheadings of the HTSUS. GRI 3(b)
states:
DELL PRODUCTS v. US 6
Mixtures, composite goods consisting of different
materials or made up of different components, and
goods put up in sets for retail sale . . . shall be
classified as if they consisted of the material or
component which gives them their essential char-
acter, insofar as this criterion is applicable.
This court has not previously interpreted the phrase
“goods put up in sets for retail sale,” nor had the Court of
International Trade done so prior to the decision in this
case. Dell contends that the phrase “encompass[es] goods
that are ‘packaged’ in a certain manner . . . at the time
those goods are entered into the commerce of the United
States.” The government agrees with the trial court that
GRI 3(b) sets are goods that are offered, displayed or
shown together for retail sale.
Each party cites to competing dictionary definitions of
the term “put up,” which is used in the phrase “goods put
up in sets for retail sale.” In that context, however, the
most relevant definition is that of the phrase “for retail
sale.” The term “for sale” is defined as “offered to be sold;
made available to purchasers,” Random House Webster’s
Unabridged Dictionary 1693 (2d ed. 1987), and is charac-
terized as referring to “the status of being purchasable,”
Webster’s Third New International Dictionary 2003
(1968). Thus, the phrase “goods put up in sets for retail
sale” most naturally refers to goods that are offered to
customers as a set for purchase rather than to a collection
of goods that are assembled into a set after the customer
has purchased them. Although under the Uniform Com-
mercial Code a sale does not occur until “the passing of
title from the seller to the buyer for a price,” UCC § 2-106,
which may not occur until delivery, UCC § 2-401, there is
no indication that “put up” for sale means packaged for
delivery to the customer.
7 DELL PRODUCTS v. US
Dell argues that Customs cannot consider the
manner in which its products were offered for sale be-
cause the only point in time relevant to tariff classifica-
tion is the time of entry into the United States. In
support of that argument, Dell relies on United States v.
Citroen, 223 U.S. 407 (1911). That case concerned a set of
pearls that were purchased in France and then imported
into the United States. The buyer had viewed the pearls
both loose and strung on a necklace, but the pearls en-
tered the United States in loose form for delivery to her.
Once delivered, the pearls were combined with others and
strung on a necklace. Tariff provisions in effect at the
time provided for different duty rates for “pearls set or
strung” and “pearls in their natural state.” 223 U.S. at
413. The Supreme Court concluded that the pearls at
issue were classifiable under the latter provision because
“‘the dutiable classification of articles must be ascertained
by an examination of the imported article itself, in the
condition in which it is imported.’” Id. at 414-15, quoting
Worthington v. Robbins, 139 U.S. 337, 341 (1891).
Citroen is not pertinent here, because it did not ad-
dress the classification of distinct articles. In fact, the
Court in Citroen explicitly distinguished the case in which
“parts of a described article” are “separately packed to
avoid the specified duty on the article as a whole.” 223
U.S. at 416. In reference to that scenario, the Court cited
United States v. Irwin, 78 F. 799 (2d Cir. 1897), a case in
which shotgun stocks and barrels were packaged and
invoiced separately at the point of importation. The Irwin
court classified the stocks and barrels collectively as
“shotguns” because “the fact that [the parts] are packed in
separate cases cannot affect their dutiable character.” 78
F. at 803. By distinguishing Irwin, the Court in Citroen
made clear that its holding did not foreclose inquiry into
the manner of sale or intended use of goods when the
DELL PRODUCTS v. US 8
question is whether distinct articles should be classified
together or separately.
Dell points out that this court continues to cite Cit-
roen for the proposition that goods should be classified in
their condition as imported. E.g., Mita Copystar Am. v.
United States, 21 F.3d 1079, 1082 (Fed. Cir. 1994). While
that principle is not controversial as a general matter,
neither that proposition in general nor Citroen in particu-
lar has been regarded as dispositive as to whether differ-
ent articles should receive the same classification. See
Samsung Elecs. Co. v. United States, 873 F.2d 1427, 1429
(Fed. Cir. 1989).
Determining whether distinct articles are “goods put
up in sets for retail sale” necessarily involves an inquiry
into a point in time before those goods are purchased,
irrespective of the time of entry of the goods into the
United States. In many instances, goods are offered for
sale before they enter the United States for customs
purposes, meaning that Customs must inquire into the
manner in which the goods were presented for purchase
to customers. That was the case here. Customs could not
determine whether secondary batteries and laptop com-
puters that were packaged together had been “put up in
sets for retail sale” simply by examining their condition at
the time of importation. Thus, GRI 3(b) necessarily limits
the application of the Citroen principle in such cases. Cf.
Int’l Bus. Mach. Corp. v. United States, 152 F.3d 1332,
1336 (Fed. Cir. 1998) (noting that Citroen does not govern
the analysis under GRI 10(h)).
Dell contends that its reason for packaging the goods
together should be irrelevant to the tariff classification for
those goods. It argues that goods packaged together for
shipment should be treated in the same way as goods
9 DELL PRODUCTS v. US
packaged together for sale, as long as those goods are
packaged together upon entry into the United States (i.e.,
in this case, upon departure from the FTZ). Dell’s posi-
tion, however, is contrary to the text of GRI 3(b), which
uses the term “retail sale” and not “shipment.” A set of
goods that is packaged “for retail sale” is a set of goods
that is offered for sale to customers as a single unit of
merchandise. It is not a collection of goods that happen to
be packaged together to be transported to the customer,
regardless of whether they had any prior connection.
The General Rules of Interpretation allow for two
collections of goods that are identical in type and physical
configuration upon entry into the United States to be
classified differently because of the manner in which they
were offered for sale. If distinct articles are put up in sets
for retail sale, GRI 3(b) provides that those articles are
classified collectively according to the material or compo-
nent that gives them their essential character. If the
same articles are not put up in sets for retail sale, GRI 1
provides that each article will be classified separately
“according to the terms of the [HTSUS] headings and any
relevant section or chapter notes,” unless another GRI
provision applies. There is therefore nothing anomalous
about the classification of a particular article depending
on the manner in which the manufacturer or importer has
combined or associated that article with other related
articles that are imported with it.
Dell cites Explanatory Note (X) to GRI 3(b) in support
of its position that goods that are packaged together at
the time of importation must be regarded as “put up in
sets for retail sale.” Dell’s argument on that point is
entirely unconvincing, however.
The Explanatory Notes to the General Rules of Inter-
pretation are not legally binding but provide guidance in
DELL PRODUCTS v. US 10
interpreting the GRIs. Home Depot U.S.A., Inc. v. United
States, 491 F.3d 1334, 1336 n.* (Fed. Cir. 2007). Explana-
tory Note (X) sets out a three-part test to determine
whether goods constitute a GRI 3(b) set, all three parts of
which must be satisfied in order for the goods to consti-
tute a set. The last part of the test requires that goods be
“put up in a manner suitable for sale directly to users
without repacking (e.g., in boxes or cases or on boards).”
Based on that language, Dell contends that its secondary
batteries qualify as part of a “set” because they are in-
cluded in the shipping box that is sent from the FTZ to
the customer. However, those examples of packages of
goods that are offered for retail sale do not cast doubt on
the proposition that set determinations for purposes of
GRI 3(b) turn on the seller’s arrangement of goods prior to
their purchase, not on the seller’s arrangement of goods
for shipment to a buyer after the purchase is made. Dell
also points to other HTSUS provisions that use the
phrase “put up” in conjunction with packaging, as opposed
to retail sale. Like the various dictionary definitions of
“put up,” those other HTSUS provisions shed no light on
the meaning of GRI 3(b) because, in those provisions, the
words “put up” are not followed by the words “in sets for
retail sale.”
The consistency of Customs’ interpretation of GRI 3(b)
enhances the persuasive power of that interpretation. As
the Supreme Court recently noted in Kasten v. Saint-
Gobain Performance Plastics Corp., No. 09-834 (U.S. Mar.
22, 2011), the views of an agency with congressionally
delegated enforcement powers as to the meaning of statu-
tory terms are entitled to a degree of weight, even if they
are not entitled to the full degree of deference accorded to
formal notice and comment regulations under Chevron
U.S.A. Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837 (1984). The Court in Kasten explained that
11 DELL PRODUCTS v. US
the length of time an agency has held particular views as
to the meaning of a statute “suggests that they reflect
careful consideration, not ‘post hoc rationalizatio[n].’. . .
And they consequently add force to our conclusion.”
Kasten, slip op. 13; see also United States v. Mead Corp.,
533 U.S. 218, 235 (2001).
Customs has been consistent in its application of
GRI 3(b) to ADP machines and their auxiliary devices.
Prior to the ruling in this case, Customs refused to clas-
sify external speakers used with desktop computers as
“goods put up in sets for retail sale” together with those
computers, because the speakers were not “put up” with
the computers before the buyer purchased the goods.
Instead, each grouping was made as a result of a custom-
ized purchase by a customer. U.S. Customs Serv., HRL
964209 (Sept. 14, 2001). In the present case, Customs
determined that secondary batteries were not “goods put
up in sets for retail sale” with laptop computers because
they were not offered for sale with those computers as a
single unit of merchandise. On the other hand, Customs
concluded in a subsequent ruling that external speakers
that were packaged together with desktop computers
“[p]rior to importation and prior to sale” were classifiable
as GRI 3(b) sets upon importation. U.S. Customs Serv.,
NYRL 044257 (Dec. 2, 2008). 2 Because the trial court’s
2 Dell points out that a 2004 Customs publication
entitled Classification of Sets under HTSUS addresses
the classification of sets but makes no mention of the
importance of the manner in which goods are offered for
sale. The publication, however, does not purport to be a
comprehensive treatment of the issue of set classification,
and it does not contain any discussion of GRI 3(b)’s re-
quirement that goods be “put up in sets for retail sale.”
The publication is therefore irrelevant to the issue in this
case.
DELL PRODUCTS v. US 12
interpretation of GRI 3(b) follows those rulings of Cus-
toms and comports with the language of the Rule, we
uphold its judgment classifying Dell’s secondary batteries
as “other storage batteries.”
AFFIRMED