Kyocera Industrial Ceramics Corp. v. United States

Slip Op. 06 - 187

UNITED STATES COURT OF INTERNATIONAL TRADE

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KYOCERA INDUSTRIAL CERAMICS CORPORA- :
TION,
:
Plaintiff,
:
v. Court No. 02-00705
:

UNITED STATES, :

Defendant. :

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Opinion

[Upon cross-motions as to classification of
certain ceramic substrates for electronic
integrated circuits, summary judgment for
the defendant.]

Decided: December 21, 2006

DeKieffer & Horgan (J. Kevin Horgan and A. David Lafer) for
the plaintiff.

Peter D. Keisler, Assistant Attorney General; Barbara S.
Williams, Attorney in Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (Jack S. Rockafellow); and Office of Assistant Chief
Counsel, International Trade Litigation, U.S. Bureau of Customs
and Border Protection (Michael W. Heydrich), of counsel, for the
defendant.

AQUILINO, Senior Judge: Defendant’s motion to dismiss

plaintiff’s amended complaint for lack of subject-matter juris-

diction having been denied by the court in slip opinion 03-148,
Court No. 02-00705 Page 2

27 CIT 1703, 293 F.Supp.2d 1360 (2003), reh’g denied (Nov. 18,

2004), familiarity with which is presumed, the parties have now

interposed cross-motions for summary judgment as to the correct

classification of certain imported ceramic substrates for

electronic integrated circuits (“IC substrates”) that underlie

this action.

I

As recited in slip opinion 03-148, paragraph 7 of the

amended complaint avers that,

[p]rior to March 10, 1999, blank IC substrates imported
by KICC[1] were classified under HTSUS subheading
8542.90, as parts of integrated circuits, based on HQ
088157 (July 2, 1992), i.e., the “Diacon Ruling,” which
classified ceramic pieces used as bases for integrated
circuits under HTSUS 8542.90, a duty-free classifi-
cation. The classification determination made in the
Diacon Ruling was followed by KICC and Customs until
Customs issued NY D88010 (March 10, 1999), which
classified blank IC substrates of porcelain under HTSUS
6914.10.8000 as “Other ceramic articles: Of porcelain
or china: . . . Other,” dutiable at 9% ad valorem.

27 CIT at 1706, 293 F.Supp.2d at 1362 (footnote omitted).

Certain numbered protests covered by this pleading encompass

entries prior to that day in 1999. Moreover, plaintiff’s papers

in opposition to defendant’s motion to dismiss contained a copy

1
This is counsel’s choice of reference to their plaintiff
client.
Court No. 02-00705 Page 3

of the following declaration to the Customs Service sworn to soon

thereafter by KICC’s erstwhile import/export specialist:

2. In 1992, I became aware of a new ruling, HQ
088157 (July 2, 1992) (i.e., the “Diacon Ruling”),
which affected the tariff classification of blank
ceramic substrates imported by KICC. The Diacon Ruling
held that “ceramic pieces” used as mounting bases for
electronic integrated circuits were properly classified
under subheading 8542.90 of the . . . HTSUS[] as parts
of integrated circuits.

3. Upon learning of the Diacon Ruling, I trans-
mitted a copy . . . to all of KICC’s customs brokers in
the ports then being used by KICC to import ceramic
substrates. I instructed the brokers to classify all
of KICC’s ceramic substrates for integrated circuits in
accordance with the Diacon Ruling.

4. At the same time I advised KICC’s customs
brokers to attach a copy of the Diacon Ruling to each
ceramic substrates entry packet submitted to USCS.

5. When KICC underwent a National Customs Survey
Audit by the USCS in 1993-95, the auditors reviewed the
tariff classification of KICC’s imports, including the
tariff classification of blank ceramic substrates. The
auditors did not object to any of KICC’s classi-
fications.

6. On several occasions during my tenure with
KICC, I discussed with employees of USCS the
implications of the Diacon Ruling for the tariff
classification of ceramic substrates imported by KICC.
During these conversations, the USCS employees never
objected to the classification of ceramic substrates in
accordance with the Diacon Ruling.[2]

2
Plaintiff’s Memorandum in Support of Motion for Summary
Judgment, Exhibit 5; 27 CIT at 1706-07, 293 F.Supp.2d at 1363
(footnote omitted). The acronym “USCS” refers to the Customs
Service, as it was then still known.
Court No. 02-00705 Page 4

A

The plaintiff takes the position that Customs “issued a

new ruling modifying the Diacon Ruling but has not published

notice of that ruling in the Customs Bulletin.” First Amended

Complaint, para. 15. Hence, this “new ruling” is ineffective

upon a reading of 19 U.S.C. §1625(c), which 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

(2) have the effect of modifying the treatment
previously accorded by . . . Customs . . . 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.

The focus of plaintiff’s complaints has been on foregoing

subsection (c)(1). Plaintiff’s subsequently-filed memorandum in
Court No. 02-00705 Page 5

support of its motion for summary judgment, pages 9-10, added

that subsection (c)(2) required Customs to publish

notice in the Customs Bulletin before implementing a
ruling modifying the tariff treatment of Kyocera’s
blank ceramic substrates because the ruling had the
effect of modifying the treatment accorded to sub-
stantially identical transactions involving the
importation of blank ceramic substrates by Kyocera
during the preceding seven years.

This additional claim caused the defendant to file a

motion to strike it from this action or to stay proceedings

herein and remand it for initial administrative determination.

This court granted the alternative relief prayed for. Whereupon

Customs and Border Protection, as it has now become known, issued

HRL 967539 (April 25, 2005), concluding that

there is insufficient evidence to substantiate that
KICC had a treatment. KICC’s treatment claim is here-
by denied.

(1)

According to the plaintiff, “the Diacon Ruling required

that all ceramic substrates for integrated circuits be classified

under HTSUS 8542.90”3 and the subsequent rulings “constituted a

modification of the Diacon Ruling by limiting its application”.

Plaintiff’s Memorandum, p. 19. That it pertained to all ceramic

3
First Amended Complaint, para. 15.
Court No. 02-00705 Page 6

substrates for integrated circuits, however, cannot be gleaned

from the text of the ruling. Indeed, the word “substrate” is not

to be read therein. Appended as exhibits 9-12 to plaintiff’s

summary-judgment memorandum are the protest that resulted in the

Diacon Ruling; an April 30, 1992 Memo re Meeting with

Laboratories & Scientific Services Related to Diacon Ruling; a

Memo from Laboratories & Scientific Services to Chief, Metals and

Machinery Branch Related to Diacon Ruling; and a September 19,

1990 Letter from Sandler, Travis & Rosenberg Related to Diacon

Ruling. These exhibits do contain the phrases “ceramic

substrates or chip carriers”, “ceramic substrate, a housing for

an electronic integrated circuit”, “ceramic substrate or chip

carriers”, and “alternatively referred to as . . . [‘]ceramic

substrates’”, respectively. But compare HQ 088157, wherein the

word substrate does not once appear.

Be the exact content of that Diacon Ruling as it is,

the defendant

flatly reject[s] the conclusion that the [subject
imports] — or that earlier entries of substantially
similar merchandise — were substantially identical to
the ceramic pieces at issue in the Diacon Ruling. In
contrast, [it] direct[s] the Court’s attention to the
drawings and accompanying description in the Diacon
Patent, which demonstrate that the ceramic pieces
Court No. 02-00705 Page 7

described as “substrate” therein are each used to house
an individual IC chip [], and are not used themselves,
as is Kyocera’s substrate, in making IC chips.

Defendant’s Memorandum in Opposition, p. 3 (internal citation

omitted; boldface in original). Plaintiff’s exhibits, which, as

noted, do refer to the imports in Diacon as “substrates”,

nonetheless support defendant’s position that, whatever their

nomenclature, they were used for housing IC chips, not in making

such chips, which is the function of the ceramic pieces at bar.

The exhibits cited also contain phrases such as “[t]he ceramic

substrates or chip carriers are the housings for semiconductor

devices or integrated circuits”; “[i]t is a ceramic substrate, a

housing for an electronic integrated circuit”; “the ceramic base

does not come into contact with the electrical circuit”; and

“used exclusively in the semiconductor industry in leaded chip

carriers, flatpacks, hybrid packages, etc. . . . which house

electronic integrated circuit chips.”

A substrate is defined in The Free On-line Dictionary

of Computing, http://foldoc.org/, © 1993-2005 Denis Howe, as

[t]he body or base layer of an integrated circuit,
onto which other layers are deposited to form the
circuit. . . . It is used as the electrical ground for
the circuit.
Court No. 02-00705 Page 8

The aforementioned Memo from Laboratories & Scientific Services

to Chief, Metals and Machinery Branch Related to Diacon Ruling

states that “the ceramic base does not come into contact with the

electrical circuit and does not appear to serve any electrical

insulating function.” In contrast thereto, plaintiff’s proffered

Statement of Material Facts as to Which There is No Genuine Issue

to Be Tried explains:

1. . . . The substrates are used in the United
States solely or principally as bases in the production
of integrated circuits []. . . .

* * *

4. At the time of importation, these substrates
are dedicated to their use as IC substrates. There is
no other regular commercial application for these
articles.

5. In general, Kyocera’s customers for blank
ceramic substrates are laser houses that will . . .
generally sell the scored substrates to IC manu-
facturers who will, in the case of thick-film
substrates, use screen printing to place resistors and
electrical interconnects for multiple IC’s on the
substrate. In the case of thin film substrates,
resistors and interconnects are achieved through vacuum
deposition or sputtering. Additional components (e.g.,
monolithic integrated circuits, transistors, diodes)
are then affixed to the substrate. The result is a
square or rectangle consisting of multiple hybrid
integrated circuits on a conjoined substrate.

Footnotes omitted.
Court No. 02-00705 Page 9

Due to the material differences between the subject

imports at issue in each case, this court cannot and therefore

does not conclude that the Diacon Ruling applied to “all ceramic

substrates for integrated circuits”. It was not modified or

revoked by the later 1999 or 2002 rulings, and the procedures of

19 U.S.C. §1625(c)(1) did not govern plaintiff’s imports.

(2)

With regard to plaintiff’s alternative claim of

“treatment”, in Arbor Foods, Inc. v. United States, 30 CIT ___,

___, Slip Op. 06-74, p. 16 (May 17, 2006), the court held that,

[t]o establish a violation of § 1625(c)(2), [a party]
must show that: “(1) an interpretive ruling or decision
(2) effectively modifie[d] (3) a ‘treatment’ previously
accorded by Customs to (4) ‘substantially identical
transactions’, and (5) that interpretive ruling or
decision has not been subjected to the notice-and-
comment process outlined in § 1625(c)(2).” Precision
Specialty Metals, Inc. v. United States, 24 CIT 1016,
1040, 116 F.Supp.2d 1350, 1374 (2000).

That is, in order to prevail on its subsection 1625(c)(2) claim,

KICC has the evidentiary burden of showing that the 1999 Ruling

effectively modified a treatment previously accorded by Customs

to substantially identical transactions. See 19 C.F.R.

§177.12(c)(1)(iv). To quote again from Arbor Foods,

[b]ecause § 1625(c) does not define treatment, the
agency and the reviewing court give[] the undefined
Court No. 02-00705 Page 10

term its ordinary meaning. . . . In Precision Specialty
Metals, the court held that “treatment” refers to the
actions of Customs and that § 1625(c) allows importers
to order their behavior based on Customs’ prior
actions. . . . Customs, however, narrowed the scope of
actions that constitute treatment under § 1625(c). In
19 C.F.R. § 177.12(c), Customs stated that “[it] will
give no weight whatsoever to informal entries or
transactions which [it], in the interest of commercial
facilitation and accommodation, processes expeditiously
and without examination or Customs officer review.” 19
C.F.R. § 177.12(c)(1)(ii) (2006). The Federal Circuit
subsequently held that this was a permissible
construction of § 1625(c) that warrants deference and
that entries liquidated under Customs’ “bypass” proce-
dures are not considered “treatments” for the purposes
of § 1625(c). . . .

30 CIT at ___, Slip Op. 06-74, p. 17 (case citations omitted).

Here, the plaintiff claims that it “was not required to

comply with these later-adopted regulations when it invoked

section 1625 in its protest filed in October 2000”. Plaintiff’s

Memorandum, p. 18. However, the court of appeals has held in

Motorola, Inc. v. United States, 436 F.3d 1357, 1366 (Fed.Cir.

2006), that

[i]t makes no difference to our analysis that the
regulation was promulgated in 2002, after the
controversy arose and after this litigation began. So
long as an agency’s interpretation of a statute is not
a “post hoc rationalization . . . seeking to defend
past agency action against attack,” Auer v. Robbins,
519 U.S. 452, 462 . . . (1997), or “wholly unsupported
by regulations, rulings or administrative practice,”
Smiley v. Citibank (S.Dak.), N.A., 517 U.S. 735, 741
. . . (1996)(quoting Bowen v. Georgetown Univ. Hosp.,
488 U.S. 204, 212 . . . (1988)), Chevron deference is
Court No. 02-00705 Page 11

due even if the adoption of the agency’s interpretation
postdates the events to which the interpretation is
applied.

Subsection 177.12(c)(1)(i) of 19 C.F.R. provides that, to sub-

stantiate a claim of “treatment”, 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;

and subsection (c)(1)(iv) adds that the

evidentiary burden as regards the existence of the
previous treatment is on the person claiming that
treatment. The evidence of previous treatment by
Customs must include a list of all materially identical
transactions by entry number (or other Customs assigned
number), the quantity and value of merchandise covered
by each transaction (where applicable), the ports of
entry, the dates of final action by Customs, and, if
known, the name and location of the Customs officer who
made the determination on which the claimed treatment
is based. In addition, in cases in which an entry is
liquidated without any Customs review (for example, the
entry is liquidated automatically as entered), the
person claiming a previous treatment must be prepared
to submit to Customs written or other appropriate
evidence of the earlier actual determination of a
Customs officer that the person relied on in preparing
the entry and that is consistent with the liquidation
of the entry.

Although the plaintiff discounts the need to follow

these regulations, it argues compliance in that KICC “inform[ed]

Customs of its reliance on the Diacon Ruling on multiple
Court No. 02-00705 Page 12

occasions orally and in documentary form by including the Diacon

Ruling in its entry packages.” Plaintiff’s Reply Memorandum,

p. 19. The plaintiff asserts that it “should not be penalized

because [the Customs officer] was not paying attention despite

[KICC’s] repeated efforts to inform him of that fact.” Id. at

20. The requirement is actual determination, however, not

attempted notice by an importer.

Additionally, the plaintiff claims satisfaction of

subsection 177.12(c)(1)(i)(A), supra, in that the requisite

evidence is “clearly establish[ed]” in the declarations

designated exhibits 5 and 6, and executed by Michael G. Lubitz

and Penny A. Evans, KICC’s Import/Export Specialist during the

period 1991–1995 and the company’s Manager of the Import/Export

Department from 1990 through 1994, respectively. In addition to

the representations quoted from the Lubitz declaration, supra,

the Evans declaration states:

2. In 1992, I was advised by Joyce Bryant of
USCS’s Otay Mesa office that a new ruling, HQ 088157
(July 2, 1992)(i.e., the “Diacon Ruling”), was issued
that affected the tariff classification of blank
ceramic substrates imported [by] Kyocera []. The
Diacon Ruling held that “ceramic pieces” used as mount-
ing bases for electronic integrated circuits were
properly classified under subheading 8542.90 of the
[HTSUS] as parts of integrated circuits.
Court No. 02-00705 Page 13

While there may well have been no objection on the part

of Customs, that was not the equivalent of a positive

determination that would satisfy the standard of subsection

177.12(c)(1)(i)(A). With regard to the foregoing paragraph from

the Evans declaration, in its Diacon Ruling Customs cites Kyocera

Int’l, Inc. v. United States, 2 CIT 91, 527 F.Supp. 337 (1981),

aff’d, 69 CCPA 168, 681 F.2d 796 (1982), for support of its

classification decision. That matter dealt with imports

described as “ceramic articles” which, “[a]fter completion of

assembly and processing . . . function as a package or housing

for an associated integrated circuit chip”. 2 CIT at 91, 92, 527

F.Supp. at 337, 338. Therefore, the Diacon Ruling could or would

apply to certain KICC ceramic imports, and it would not be

incorrect for Customs officers to so react. But, there is no

support on the record, adduced from plaintiff’s declarations or

otherwise, that “[t]here was an actual determination by a Customs

officer regarding the facts and issues involved in the claimed

treatment” herein.

Counsel have also filed Plaintiff’s Supplemental

Statement of Material Facts as to Which There is No Genuine Issue

to Be Tried. Among other things, it represents that, “[p]rior to
Court No. 02-00705 Page 14

the issuance of NY D88010 on March 10, 1999, blank ceramic

substrates imported by Kyocera were consistently classified under

HTSUS subheading 8542.90.” The declaration of Gregory Onses and

list of entries attached thereto are presented to prove this

point. However, as long as evidence is absent that such classi-

fication was the result of an actual determination by a Customs

officer and those elements spelled out by 19 C.F.R.

§177.12(c)(1)(iv), the presentment is not conclusive. Moreover,

the court notes in passing that the attached list of “Blank

Substrates Totals by Line Item” fails to reveal the ports of

entry, the dates of final action by Customs, and the name(s) and

location(s) of Service officer(s) who made any determination(s)

on which the claimed treatment is based. The list also fails to

prove that its imports were “materially identical transactions”.

In sum, the evidence submitted, such as it is, does not

establish that “Customs approved the classification of [subject]

blank ceramic substrates as parts of ICs”, as claimed in

plaintiff’s motion for summary judgment. There is nothing to

suggest that the imports at issue were processed after an

examination by Customs or after Service-officer review of the
Court No. 02-00705 Page 15

kind contemplated by 19 C.F.R. §177.12(c)(1)(i)(A), supra, and

there certainly is not adequate factual evidence within the

meaning of subsection 177.12(c)(1)(iv). This court thus

concludes that the plaintiff has failed to satisfy the burden

required to prevail on its “treatment” claim under 19 U.S.C.

§1625(c)(2).

II

Independent of any legal consequence of the Diacon

Ruling for the merchandise still at bar4, the plaintiff continues

to press for classification under HTSUS chapter 85, heading 8542,

as follows:

8542 Electronic integrated circuits and
microassemblies; parts thereof:

* * *

8542.90.00 Parts

That is, plaintiff’s protests of classification under HTSUS sub-

heading 6914.10.80 (“Other ceramic articles: Of porcelain or

4
Included in plaintiff’s entries were substrates for
magnetic head sliders in disc drives for automatic data
processing machines, the classification of which is not at issue
herein. See Slip Op. 03-148, 27 CIT at 1704 and 293 F.Supp.2d at
1361 n. 3.
Court No. 02-00705 Page 16

china: . . . Other”) led Customs to issue HQ 964811 (May 1,

2002), which opted for subheading 6909.11.40, to wit:

6909 Ceramic wares for laboratory, chemical
or other technical uses; . . .

6909.11 Of porcelain or china:

* * *

6909.11.40 Other

A

Each side is of the view that this action is ripe for

summary judgment. See, e.g., Defendant’s Memorandum, p. 7;

Plaintiff’s Reply Memorandum, p. 1. Upon review of all of the

papers filed in support of, and in opposition to, the parties’

cross-motions, the court cannot conclude that there is any

genuine issue of material fact that cannot be resolved without a

trial. Cf. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48

(1986). Indeed, a “classification decision, ultimately, is a

question of law based on two underlying steps.” Universal

Elecs., Inc. v. United States, 112 F.3d 488, 491 (Fed.Cir. 1997).

First, the court must define the terms in the relevant

classification headings, then it has to determine under which of

them the subject imports more correctly land. Id. When defining

the terms in a tariff heading, the court proceeds de novo, for
Court No. 02-00705 Page 17

“[i]t is emphatically the province and duty of the judicial

department to say what the law is.” Id. at 492, quoting Marbury

v. Madison, 5 U.S. 137, 177 (1803). “Although our review is de

novo, we accord deference to a Customs’ classification ruling in

proportion to its ‘power to persuade’ under the principles of

Skidmore v. Swift & Co., 323 U.S. 134 . . . (1944).” Cummins

Inc. v. United States, 454 F.3d 1361, 1363 (Fed.Cir. 2006)(case

citations omitted).

HTSUS General Rule of Interpretation (“GRI”) 1 is that,

“for legal purposes, classification shall be determined according

to the terms of the headings and any relative section or chapter

notes” of the HTSUS. And the “heading which provides the most

specific description shall be preferred to headings providing a

more general description.” GRI 3(a). Additional U.S. Rule of

Interpretation 1(c) states that

a provision for parts of an article covers products
solely or principally used as a part of such articles
but a provision for “parts” . . . shall not prevail
over a specific provision for such part . . ..

(1)

Accordingly, if the ceramic substrates at issue herein

are parts of electronic integrated circuits at the time of their

importation, they should be classified under subheading
Court No. 02-00705 Page 18

8542.90.00, supra, it being more specific. On the other hand, if

the subject imports are not “parts thereof”, heading 6909 must be

considered. Cf. Bauerhin Technologies Ltd. Partnership v. United

States, 110 F.3d 774, 779 (Fed.Cir. 1997)(“a provision for a part

must prevail over a mere basket provision”).

Here, the meaning of subheading 8542.90.00 focuses on

the word “parts”. The question of whether something is a part or

a material has been considered in numerous prior cases. In

Baxter Healthcare Corp. v. United States, 182 F.3d 1333 (Fed.Cir.

1999), for example, the court considered whether Oxyphan®, which

was imported in ten-kilometer spools, was a part or a material

for purposes of the HTSUS. The exact length of the Oxyphan®

required for each finished item was not fixed with certainty at

the time of entry. Post-importation, it was cut, tied in groups,

and wrapped around a steel bellow. The court relied on the

following two-prong analysis:

. . . First, the item must be dedicated solely or
principally for use in those articles and must not
have substantial other independent commercial uses.
See Bauerhin, 110 F.3d at 779. . . . Second, if the
item as imported can be made into multiple parts of
articles, the item must identify and fix with
certainty the individual parts that are to be made
from it. See The Harding Co. v. United States, 23
C.C.P.A. 250, 253 (1936).

182 F.3d at 1338-39 (emphasis in original).
Court No. 02-00705 Page 19

At bar, the defendant “admits that at the time of

importation, the principal commercial use of Kyocera’s articles

is as IC substrates, and that as so used, the substrates are

dedicated to that use.” Defendant’s Response to Plaintiff’s

Statement of Material Facts, para. 4. Cf. Plaintiff’s Statement

of Material Facts, para. 4. Therefore, the focus now is on the

second element of the Baxter test.

In that case, the court found that the rolls of

Oxyphan® were not parts “[b]ecause the individual parts are not

identifiable or fixed at the time of import,” thereby failing the

“fix with certainty the individual parts that are to be made from

it” standard. See 182 F.3d at 1339. Cf. Benteler Industries,

Inc. v. United States, 17 CIT 1349, 1356, 840 F.Supp. 912, 918

(1993)(a laser cutting process eliminated need for physical mark-

ings yet the number of parts was fixed with certainty prior to

importation). In Ludvig Svensson (U.S.) Inc. v. United States,

23 CIT 573, 62 F.Supp.2d 1171 (1999), the function and composi-

tion of screens for greenhouses that were of high technology,

design and planning were found to not have been altered by post-

importation processing, which included cutting, sewing two

screens together, and adding tape and hooks. That processing was
Court No. 02-00705 Page 20

found to be minor, attributable to installation. In E.M.

Chemicals v. United States, 13 CIT 849, 728 F.Supp. 723 (1989),

aff’d, 920 F.2d 910 (Fed.Cir. 1990), liquid crystals that had

been processed sufficiently to dedicate their use in LCDs and

whose post-importation treatment consisted of adding a twist

agent and then placing the mixture between two panels was found

to be assembly. Additionally in that case, although the size of

the display to which the liquid crystals would be ultimately

dedicated was not known at the time of importation, their

character was found to be fixed with certainty at that time due

to advanced manufactured state.

Courts have considered the extent of post-importation

processing in other cases. See, e.g., Heraeus-Amersil, Inc. v.

United States, 10 CIT 258, 640 F.Supp. 1331 (1986)(post-

importation cutting of contact tape and positioning and welding

to certain strength requirements an assembly process, not further

processing); The Servco Co. v. United States, 68 Cust.Ct. 83,

C.D. 4341 (1972), aff’d, 60 CCPA 137, C.A.D. 1098, 477 F.2d 579

(1973)(imports in the shape and form of pipes and tubes not parts

due to substantial post-importation processing necessary before

they could be drill collars).
Court No. 02-00705 Page 21

(2)

In a case such as this, the court must review the

underlying agency analysis to determine whether it “is eligible

to claim respect.” United States v. Mead Corp., 533 U.S. 218,

221 (2001). The level of respect the court can afford a Customs

ruling depends upon

the thoroughness evident in its consideration, the
validity of its reasoning, its consistency with
earlier and later pronouncements, and all those
factors which give it power to persuade, if lacking
power to control.

Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944). Additionally,

[b]y statute, Customs’ classification decision is pre-
sumed to be correct. 28 U.S.C. ' 2639(a)(1). . . . The
presumption of correctness [] carries force on any
factual components of a classification decision, such
as whether the subject imports fall within the scope
of the tariff provision, because facts must be proven
via evidence.

Universal Elecs., Inc. v. United States, 112 F.3d at 491-92

(internal quotations omitted; emphasis in original).

In HQ 964811 (May 1, 2002), relying on Baxter

Healthcare Corp., supra, Customs provided KICC with the following

rationale for its decision to deny classification of its blank
Court No. 02-00705 Page 22

ceramic substrates as parts of electronic integrated circuits and

microassemblies under HTSUS subheading 8542.90:

As the instant articles are eventually cut into
multiple parts, the protestant relies on Benteler
Indus., Inc. v. U.S., 840 F.Supp. 912 (CIT 1993), for
the proposition that the laser cutting process used on
the substrates negates the need for markings. In
Benteler, measurements for cutting the steel tubing
sections used in car doors were programmed into the
laser-cutting machine. We find this argument unper-
suasive. In that case, the court held that an indis-
cernible number of articles could not be made from the
steel tubing sections upon entry. See id[.] at 918.
The number of beams to be cut from the sections was
known prior to importation, and the sections were
color-coded and number-coded, as the design of each
section was specific to a particular door type and
door structure. See id. That is not the case here.
The number of individual substrates, and thus
integrated circuits, to be made on the blank ceramic
substrates is not discernible upon importation. The
blanks are sold to “laser houses,” where various
integrated circuits are fabricated according to
customer specifications.

Moreover, the premise that small articles
imported in one piece should be classified as if
already cut apart when all that remains to be done is
the cutting, see United States v. Buss, 5 Ct. Cust.
App. 110, T.D. 34138 (1914), is not relevant here
because what remains to be done to the substrates is
far more than mere cutting. The “laser houses” first
must fabricate integrated circuits, which involves a
series of etching and implantation steps on the whole
piece of ceramic before it can be cut into individual
parts. . . . These steps exceed the minimal processes
performed on the screens in Ludvig Svensson . . ..

Without the post-importation processing, or any
other identifying characteristic, the ceramic pieces,
Court No. 02-00705 Page 23

like the rolls of Oxyphan in Baxter . . . cannot be
distinguished at importation as parts of electronic
integrated circuits or microassemblies. The identity
of the substrates as parts of electronic integrated
circuits or microassemblies is not fixed with
certainty because the substrates are blank; there are
no circuit elements. Accordingly, neither type of
blank ceramic substrate [is] classifiable under sub-
heading 8542.90, HTSUS.

In its motion for summary judgment, the plaintiff

counters that

it is clear that the absence of visible markings on
the IC substrates to indicate individual parts does
not preclude classification of the merchandise as
parts. As the Court of International Trade recognized
in Benteler, . . . where the imported merchandise is
to be cut using a laser cutting machine programmed to
cut the merchandise, visible markings on the imported
merchandise are unnecessary.

Plaintiff’s Memorandum, p. 14. HQ 964811, however, discusses

Benteler in determining that the substrates are not parts and

clearly distinguishes that case where “[t]he number of beams to

be cut from the sections was known prior to importation”, and

the sections were appropriately coded. Emphasis added.

Although the plaintiff would interpret Customs’ use of the word

“discernible” to signify visible markings for cutting lines, it

is clear to this court that that agency usage is akin to

“fixed”, as used in Baxter and Benteler, supra, and in keeping
Court No. 02-00705 Page 24

with the established rule regarding “parts” as discussed herein-

above.

Given that Kyocera generally did not know at the time

of importation (1) “the sizes of individual integrated circuits

[] into which any of the subject substrates would ultimately be

cut”; (2) “the number of resistors, transistors, diodes, and/or

capacitors which were intended to be placed on each of the ICs”;

(3) “the specific intended design of the interconnects [] to be

placed on each of the ICs”; (4) “the electric or electronic

articles which would incorporate the ICs”;5 or whether any bi-

polar substrates or metal-oxide semi-conductor ICs are made on

any of the subject substrates,6 the court cannot conclude that HQ

964811 is unfounded and therefore not “eligible to claim

respect” within the meaning of Skidmore, supra.

(3)

Should the court defer to HQ 964811, it still must

ensure that the Customs choice of tariff classification is

“correct”. Jarvis Clark Co. v. United States, 733 F.2d 873,

876-78, reh’g denied, 739 F.2d 628 (Fed.Cir. 1984). While, as

5
Defendant’s Statement of Undisputed Material Facts, paras.
1 to 4.
6
See id., paras. 5, 6.
Court No. 02-00705 Page 25

quoted above, that ruling letter concludes that the identity of

the substrates as parts of electronic integrated circuits or

microassemblies is not fixed with certainty because the

substrates are blank; there are no circuit elements, further

discussion is warranted.

When pre-importation processing leaves a good in such

“an advanced manufactured state” or “of such high technology,

design and planning” that it is dedicated for one purpose, its

identity can be said to have been set. See generally E.M.

Chemicals and Ludvig Svensson (U.S.) Inc., supra. For post-

importation processing to be substantial, it must “alter the

function or composition of the [import]”. Ludvig Svensson

(U.S.) Inc. v. United States, 23 CIT at 583, 62 F.Supp.2d at

1180. Here, it is undisputed that, pre-importation, KICC’s

imports are fabricated in such a manner as to engender technical

properties that are required for use as IC substrates. See

Plaintiff’s Statement of Material Facts as to Which There is No

Genuine Issue to Be Tried, paras. 2 and 27; Defendant’s Response

to Plaintiff’s Statement, paras. 2 and 2. In fact, it is

reasonably clear that “ceramic products” can be highly developed

7
Plaintiff’s statement has consecutive paragraphs numbered
“2”.
Court No. 02-00705 Page 26

where their manufacturing process includes preparation of the

paste, shaping, drying, firing, and finishing. See, e.g., World

Customs Organization, Harmonized Commodity Description and

Coding System, 3 Explanatory Notes 995-96 (2d ed. 1996).

Ludvig Svensson (U.S.) Inc., E.M. Chemicals and Baxter

Healthcare Corp. all dealt with imports in an advanced

manufactured state. In the first two of those cases, the court

found that the imports were merely assembled post-importation.

In Baxter, the court found that cutting lengths of the imported

Oxyphan®, tying them together, wrapping them around a cylinder

22 times and enclosing them in a manifold was significant post-

importation processing.

In this action, at the times of importation of the

substrates, KICC did not know the IC finished size, materials

therein, or ultimate use thereof. See Defendant’s Statement of

Undisputed Material Facts, paras. 1-8. The blanks were sold to

some 60 companies, typically laser houses rather than IC

manufacturers, where, in turn, such houses would score the

substrates, create required holes, and then generally sell them

further processed to IC manufacturers. See id., paras. 9-12.

If this, in fact, was what first happened to plaintiff’s
Court No. 02-00705 Page 27

products upon entry, it cannot be said that they were not

subjected to substantial further processing, as discussed and

defined in the cases cited. It was that processing which

transformed the imported ceramic ware for technical use into

part of an electronic integrated circuit. Ergo, this court is

required to conclude that plaintiff’s products were and are

properly classified under HTSUS subheading 6909.11.40, supra.

III

In view of the foregoing, plaintiff’s motion for

summary judgment as filed must be denied. Judgment will enter

accordingly.

Decided: New York, New York
December 21, 2006

/s/ Thomas J. Aquilino, Jr.____
Senior Judge