Motorola, Inc. v. United States

Slip Op. 06-165

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

________________________________________
:
MOTOROLA, INC., :
:
Plaintiff, :
: Court No.
v. : 01-00126
:
UNITED STATES, :
:
Defendant. :
________________________________________:

Held: Plaintiff’s motion for summary judgment denied. Defendant’s
cross-motion for summary judgment granted. Final judgment entered
for Defendant.

November 13, 2006

Pisani & Roll, (Michael E. Roll)(Mark S. Zolno, of counsel)
for Motorola, Inc., Plaintiff.

Peter D. Keisler, Assistant Attorney General; Barbara S.
Williams, Attorney-in-Charge, International Trade Field Office,
Amy M. Rubin, Commercial Litigation Branch, Civil Division, United
States Department of Justice; of counsel, Chi S. Choy, Office of
the Assistant Chief Counsel, International Trade Litigation,
United States Bureau of Customs and Border Protection, for the
United States, Defendant.

OPINION

TSOUCALAS, Senior Judge: This case is before the Court pursuant

to a remand ordered by the United States Court of Appeals for the

Federal Circuit (“CAFC”) in Motorola, Inc. v. United States, 436

F.3d 1357 (Fed. Cir. 2006)(“Motorola II”). Therein, the CAFC

mandated that this Court determine “whether either the 900
Court No. 01-00126 Page 2

‘bypass’ entries or the PRLs [preclassification ruling letters]

constituted ‘treatment’ within the meaning of section 1625(c)(2),

as interpreted in light of 19 C.F.R. § 177.12(c)(1)(ii).” Id. at

1368. Thus, on remand, this Court will address whether the

“entries at issue in this case were processed without review or

examination by Customs, and thus fall within the scope of the

regulation . . . .” Id. at 1367. For the reasons set forth

below, the Court enters judgment for the United States (“Customs”

or “Defendant”).

JURISDICTION

This Court has jurisdiction over this matter pursuant to 28

U.S.C. § 1581(a)(2000).

DISCUSSION

I. Background

The facts of this case have been set forth in the prior

decisions of the CAFC and this Court. See Motorola II, 436 F.3d

1357; Motorola, Inc. v. United States, 28 CIT __, __, 350 F.

Supp. 2d 1057 (2004)(“Motorola I”).1 The facts and procedural

history relevant to the instant inquiry are as follows.

The merchandise initially at issue in Motorola I, was eight

models of circuits used in battery packs for Motorola cellular

1
Familiarity with both of these decisions is presumed.
Court No. 01-00126 Page 3

phones, entered between January and June of 1998. See Motorola

II, 436 F.3d at 1358. Motorola, Inc. (“Plaintiff” or “Motorola”)

declared these entries to be duty free, classifiable as “hybrid

integrated circuits” under subheading 8542.40.00 of the Harmonized

Tariff Schedule of the United States (“HTSUS”). See id. In

October 2000, the United States Customs Service2 rejected

Motorola’s proposed classification and liquidated the merchandise

under HTSUS subheading 8536.30.80, subject to a duty rate of 3.2

percent ad valorem. Id. Customs based this decision on

Headquarters Ruling (“HQ”) 961050, issued on May 1, 2000, in

response to an earlier protest by Motorola concerning different

circuits.3 See id. HQ 961050 reflected that certain Motorola

circuits were classifiable under HTSUS subheading 8536.30.80. See

HQ 961050 (May 1, 2000). At the time HQ 961050 was issued,

Motorola had entered the contested circuits under HTSUS subheading

8542.40.00. See Motorola II, 436 F.3d at 1358. Customs, however,

had not yet liquidated those entries, and thus was able to

2
The United States Customs Service was renamed the Bureau
of Customs and Border Protection of the Department of Homeland
Security, effective March 1, 2003. See H.R. Doc. No. 108-32
(2003).

3
In 1996 the Customs Port Director in Chicago reviewed 92
of the 900 bypass entries and determined that they should be
classified under a different HTSUS subheading, not providing for
duty free entry. After Customs liquidated the 92 entries under
the new subheading and with duty, Motorola protested. In
response, Customs issued HQ 961050. See Motorola I, 350 F. Supp.
2d at 1060.
Court No. 01-00126 Page 4

liquidate them under HTSUS subheading 8536.30.80. Plaintiff

protested the classification, and Customs denied in full. Id.

Thereafter, Motorola filed an action in this Court, the decision

of which was appealed to the CAFC. Id.

In Motorola II, the Federal Circuit affirmed this Court’s

finding that the contested circuits are classifiable under HTSUS

subheading 8536.30.80, not under 8542.40.00. See id. at 1368.

The CAFC also affirmed this Court’s holding that four of the eight

contested circuits were not “substantially identical” to the

circuit models that Customs liquidated on bypass. Id.

This remand, however, concerns more than 900 entries of

circuits entered duty free through Customs’ bypass procedure, and

entries made pursuant to the two preclassification ruling letters

(“PRLs”). The liquidation of these entries is relevant because

Plaintiff contends that Customs violated the notice and comment

provisions of 19 U.S.C. § 1625(c)(2000) (“the statute”) when it

issued HQ 961050. See Pl.’s Mem. Law Remand (“Pl.’s Mem.”) at

1–3. This statute requires that Customs publish for notice and

comment, any interpretative ruling or decision that would “have

the effect of modifying the treatment previously accorded by the

Customs Service to substantially identical transactions[.]” 19

U.S.C. § 1625(c).

In 1992 and 1994, Customs issued two PRLs to Motorola. A PRL
Court No. 01-00126 Page 5

is a letter from Customs to the requesting party, advising the

party of how the merchandise specified therein, will be classified

upon entry. See Motorola II, 436 F.3d at 1362; see also 19 C.F.R.

§ 177.1, 177.2(a)(2006). In both letters sent to Motorola,

Customs classified each part number specified in the PRL request

under HTSUS subheading 8542.20.00, the predecessor to the current

subheading 8542.40.00. Both subheading 8542.20.00 and its

successor, provide for duty free entry into the United States.

See Motorola II, 436 F.3d at 1362.

Then, between 1995 and 1997, Motorola made over 900 entries

of circuits (“bypass entries”) pursuant to Customs’ bypass

procedures. See id. Customs liquidated the majority of these

entries duty free under HTSUS subheading 8542.40.00. See id.

Motorola contends that the issuance of the two PRLs, and the

liquidation of the bypass entries each established a “treatment”

that could only be modified in accordance with the notice and

comment provisions of § 1625(c)(2). See Pl.’s Mem. at 3-10. On

remand, the remaining issue, then, is whether the particular

bypass entries at issue, or the goods imported pursuant to the

PRLs were subject to “treatment” by Customs.
Court No. 01-00126 Page 6

II. The Liquidation of the Bypass Entries at Issue Does Not
Constitute Treatment Within the Meaning of 19 U.S.C.
§ 1625(c)(2) and 19 C.F.R. § 177.12(c)(1)(ii)

First at issue is whether the entries liquidated under

Customs’ bypass procedures were subject to “treatment” for

purposes of 19 U.S.C. § 1625(c). In Motorola II, the CAFC vacated

this Court’s finding that the term “treatment” in § 1625(c)(2) was

unambiguous, and thus, not entitled to Chevron deference. See

Motorola II, 436 F.3d at 1365–68. Instead, the CAFC found that

the word treatment is ambiguous, and that 19 C.F.R.

§ 177.12(c)(1)(ii) (“the regulation”) contains a permissible

construction of the statute, entitled to Chevron deference. Id.

As result, on remand, this Court revisits its analysis of

treatment in light of § 177.12(c)(1)(ii). Id. at 1367.

As will be discussed infra, whether treatment has occurred

depends upon the degree of review or examination by Customs.

Accordingly, the CAFC directed that this Court address “whether

the particular bypass entries at issue . . . were processed

without review or examination by Customs, and thus f[e]ll within

the scope of the regulation, or whether the goods were examined or

the entries otherwise reviewed in a manner that would take them

out of the reach of the regulation.” Id.
Court No. 01-00126 Page 7

A. Contentions of the Parties

Motorola contends that the liquidation of the bypass entries

qualifies as treatment under § 177.12(c)(2)(ii). See Pl.’s Mem.

at 4. Specifically, it argues that Customs reviewed Motorola’s

bypass entries, and that the “Customs’ Rule 30(b)(6) agent . . .

confirmed that Customs actually reviewed entries put on bypass .

. . .” Id. at 5 (emphasis in original). Motorola maintains that

Customs has a “detailed procedure” for determining which entries

are placed on bypass status. Inherent in this decision, Plaintiff

claims, is a review of the entries in order to select which

entries will be processed through bypass.4 Id. at 5–6.

Customs responds that Motorola has failed to demonstrate that

its bypass entries establish a treatment. See Def.’s Resp. Pl.

Mem. Law Remand (“Def.’s Mem.”) at 4–14. It sets forth several

arguments as to why Plaintiff’s proffered evidence does not

support a finding that the entries at issue were reviewed.

See id. For all that Motorola offers in support of its position,

Customs’ conclusion is the same: although Motorola’s evidence may

tend to show that there may have been some sort of review-like

4
In its memorandum, although noting its perceived
connection between the PRLs and the bypass entries, Plaintiff
itself analyzes the bypass entries and PRLs separately. See Pl.’s
Mem. at 9. During oral argument, however, counsel for Plaintiff
set forth argument urging the Court to determine whether there had
been treatment based on the PRLs and 900 bypass entries taken
together. See generally Trans. Oral Arg. Oct. 27, 2006. The
Court finds this argument unconvincing.
Court No. 01-00126 Page 8

function of bypass entries, it is not the type of review that

constitutes treatment, and there is no evidence that the

particular entries at issue were actually reviewed.5 The Court

finds Customs’ arguments to be convincing.

B. Analysis

a. Statutory and Regulatory Framework

The starting point of the Court’s analysis is § 1625(c).

This provision provides that:

A proposed interpretive ruling or decision
which would –

(1) modify (other than to correct a
clerical error) or revoke a prior
interpretative 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
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.

5
As the Court concurs with the majority of Customs’
arguments it does not needlessly reiterate them in its opinion.
Court No. 01-00126 Page 9

19 U.S.C. § 1625(c). Relevant to the instant matter, is the

interpretation and application of subsection (c)(2) of the

statute. To establish a violation of § 1625(c)(2), Plaintiff must

show that: (1) an interpretative ruling or decision; (2)

effectively modified; (3) a “treatment” previously accorded by

Customs to “substantially identical transactions;” and (4) the

interpretative ruling or decision had not been subject to the

notice and comment process set forth in § 1625(c)(2).6 See id.;

see also Arbor Foods, Inc. v. United States, 30 CIT __, Slip Op.

06-74 at 8 (May 17, 2006) (not published in the Federal

Supplement); Precision Speciality Metals, Inc. v. United States,

24 CIT 1016, 1040, 116 F. Supp. 2d 1350, 1374 (2000).

Because neither the statute, nor its legislative history

define “treatment,” in the past this Court has applied its

ordinary meaning. See Precision Speciality Metals, 24 CIT at

1042, 116 F. Supp. 2d at 1376. In Precision Specialty Metals, the

Court found that the term treatment denotes a consistent pattern

of actions by Customs, and allows importers to order their

behavior based on these prior actions. Id. at 1044 (holding that

“importers may order their actions based not only on Customs’

formal policy, ‘position,’ ‘ruling,’ or ‘decision,’ but on its

6
It is undisputed that HQ 961050 is an interpretative
ruling or decision, and that it was not published in the Customs
Bulletin.
Court No. 01-00126 Page 10

prior actions.”). In Motorola II, however, although the CAFC

found this definition to be a useful “starting point,” it

indicated that it, alone, did not answer the question presented

herein, i.e., what degree of action constitutes treatment, and is

sufficient to bind Customs. See Motorola II, 436 F.3d at 1365.

(defining the issue as whether “bypass entries of the sort at

issue in this case involve a sufficient degree of action by

Customs to constitute “treatment.”). Instead, the Court found

that the term treatment in § 1625(c)(2) is ambiguous, and that 19

C.F.R. § 177.12(c)(1)(ii) contains a permissible construction of

the statute entitled to Chevron deference. Id. at 1366. (citing

Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc.,

467 U.S. 837 (1984)).

In order to reach its conclusion, the Motorola II Court

engaged in Chevron analysis and explained that:

When Customs liquidates bypass entries without
inspecting the goods, it may be said to have
‘acted’ in the sense that it has chosen not to
scrutinize the entries more closely, but it is
not clear on the face of the statute that
Customs has ‘treated’ the goods as being what
the importer says they are. The question of
what degree of action (as opposed to
acquiescence) is sufficient to bind Customs is
not an issue that Congress directly addressed.

Id. As a result, the Court held that the word treatment is

ambiguous and proceeded to the second step of the Chevron

analysis. Id. Chevron requires that the court determine whether
Court No. 01-00126 Page 11

the agency’s answer to the question presented, here

§ 177.12(c)(1)(ii), is based on a permissible construction of the

statute. See, Chevron, 467 U.S. at 843. The CAFC indicated that,

“[t]urning to the text of the regulation itself, we believe that

the agency’s answer to the specific question at issue is a

reasonable and permissible construction of the statute.” Motorola

II, 436 F.3d at 1366. It found that it “is reasonable to conclude

that goods which are admitted pursuant to representations by the

importer and are not independently examined or reviewed . . . are

not “treated” by Customs . . . .” Id. (emphasis added). Because

the CAFC found Customs’ interpretation of the word treatment to be

reasonable, this Court may not substitute its own construction of

the statutory provision. See Chevron, 467 U.S. at 843. As a

result, the Court revisits its analysis of the word treatment,

with the regulation as a guide.

The regulation, entitled “Treatment previously accorded to

substantially identical transactions,” provides, in relevant part,

that:

(ii) The determination of whether the
requisite treatment occurred will be
made by Customs on a case-by-case basis
and will involve an assessment of all
relevant factors. In particular,
Customs will focus on the past
transactions to determine whether there
was an examination of the merchandise .
. . by Customs or the extent to which
those transactions were otherwise
reviewed by Customs to determine the
Court No. 01-00126 Page 12

proper application of the Customs laws
and regulations. For purposes of
establishing whether the requisite
treatment occurred, Customs will give
diminished weight to transactions
involving small quantities or values,
and Customs will give no weight
whatsoever to informal entries and to
other entries or transactions which
Customs, in the interest of commercial
facilitation and accommodation,
processes expeditiously and without
examination or Customs officer review[.]

§ 177.12(c)(1)(ii). Thus, in order to discern whether treatment

has occurred, Customs must determine: (1) whether there was an

examination of the entries; or (2) the extent to which the entries

were otherwise reviewed to determine the proper application of the

Customs laws and regulations. Id. Whether the review or

examination constitutes treatment, however, is a matter of degree.

See Motorola II, 436 F.3d at 1365. The analysis of whether

treatment has occurred, therefore, is both qualitative and

quantitative.

In determining whether treatment has occurred, the regulation

also specifies which transactions Customs will accord diminished,

or no weight, and will thereby disqualify from constituting a

treatment. Section 177.12(c)(1)(ii) instructs that “[f]or

purposes of establishing whether the requisite treatment occurred,

Customs will give diminished weight to transactions involving

small quantities or values . . . .” § 177.12(c)(1)(ii). It

further directs that Customs “give no weight whatsoever to . . .
Court No. 01-00126 Page 13

entries and transactions which Customs, in the interest of

commercial facilitation and accommodation, processes expeditiously

and without examination or Customs officer review[.]” Id. In

other words, for an entry or transaction to be totally disregarded

it is not sufficient that the entries be processed to expedite

commercial interests; there must also be an absence of examination

or review.

Lastly, the regulation instructs that to qualify as

treatment, the purpose of the review must be in order to

“determine the proper application of the Customs laws and

regulations.” See id.

b. Application of “Treatment” in Light of
§ 177.12(c)(1)(ii)

As discussed supra, the CAFC found that “the admission of

entries expeditiously and without examination or Customs officer

review does not constitute treatment within the meaning of section

1625(c)(2).” Motorola II, 436 F.3d at 1367 (internal quotations

omitted). It is undisputed that entries subject to Customs’

bypass procedure are processed expeditiously, in the interest of

commercial facilitation and accommodation. See G & R Produce Co.,

v. United States, 27 CIT __, __, 281 F. Supp. 2d 1323, 1333–34

(2003)(“ Customs uses its bypass procedure to manage its workload.

. . . Customs elected to place entries . . . on bypass for its own

convenience . . . .”). As a result, in order to prove the
Court No. 01-00126 Page 14

existence of a treatment and thereby prevail, Motorola need only

demonstrate that a Customs Official examined or reviewed the

particular entries to a sufficient enough degree. See Notice of

Proposed Rulemaking, 66 Fed. Reg. 37,370, 37,375 (Dep’t Treasury

July 17, 2001) (“the burden of proving the existence of a

treatment is on the person claiming the treatment.”).

Specifically, it is incumbent upon Motorola to demonstrate both

that the particular entries fall within the general rule of the

regulation, and that the limiting language of the regulation does

not apply to the entries at issue. See § 177.12(c)(1)(ii)(giving

“diminished” or “no” weight to certain entries or transactions.).

The disposition of this issue, then, turns on whether there

has been sufficient examination or review by Customs. Neither the

statute nor the regulation, however, define these terms. A basic

principle of statutory construction is that a Court will give an

undefined term its “ordinary, contemporary, common meaning.”

Perrin v. United States, 444 U.S. 37, 42, (1979). A dictionary is

an appropriate resource for gleaning that ordinary meaning. See

Koyo Seiko Co., Ltd. v. United States, 36 F.3d 1565, 1571 n.9

(Fed. Cir. 1994); see also Best Power Tech Sales Corp. v. Austin,

984 F.2d 1172, 1177 (Fed. Cir. 1993)(“It is a basic principle of

statutory interpretation, however, that undefined terms in a

statute are deemed to have their ordinary understood meaning. For

that meaning, we look to the dictionary.”)(citation omitted).
Court No. 01-00126 Page 15

Rules of statutory construction are similarly applicable to the

Code of Federal Regulations, interpreting a statute. See Harak v.

United States, 30 CIT __, __, Slip Op. 06-106 at 28 (July 18,

2006)(not published in the Federal Supplement)(applying the

“cannons of statutory construction [to] the regulation at

issue.”).

Black’s Law Dictionary defines review as “consideration,

inspection, or reexamination of a subject or thing.” Black’s Law

Dictionary 1345 (8th ed. 2004). Similarly, Webster’s defines

review as “to study or examine again; to consider

retrospectively.” Webster’s II New Riverside University

Dictionary 1006 (Riverside Publishing Company 1994).

“Examination” is defined as an “investigation; search;

inspection[.]” See Black’s Law Dictionary 557 (6th ed. 1990).

Webster’s Dictionary defines “examine” as “to inspect in detail[;]

to analyze or observe carefully; to question formally.”

Webster’s, 449. In determining whether the bypass entries were

reviewed or examined, and thereby received treatment, the Court

applies these common, ordinary dictionary definitions.

In an effort to demonstrate that its bypass entries were

processed with review or examination, Plaintiff relies upon

various Customs sources. In order to fully understand both

Plaintiff and Defendant’s arguments, however, the Court first sets
Court No. 01-00126 Page 16

forth a summary of the relevant bypass procedure, as laid out in

Customs’ Directive 3550-26 (“Directive”). See generally Directive

3550-26 (Dep’t of Commerce Sept. 8, 1987). As an initial matter,

the Directive pertains to “primary” or “pure” bypass. See

Directive ¶ 3. Moreover, at that time, a manual bypass system was

in operation.7 Id. ¶ 2.

Entry summaries are subject to a process known as “entry

segregation.” See Directive ¶¶ 3, 4.A & B. Entry segregation

occurs at the entry level but “prior to the import specialist

review.” Id. ¶ 4.B. During entry segregation, entries are sorted

by entry unit personnel in accordance with a criteria list based

on data contained in Customs Form (“CF”) 7501. Id. The criteria

list “delineates the entries that will not be bypassed.” Id. ¶

4.A (emphasis added). Indeed, the criteria list is a default to

bypass.8 In other words, any type of entry summary not falling

7
The June 12, 1981 Headquarters Manual Supplement number
3500-02 established national guidelines for implementation of a
manual entry selection system or bypass. See Directive ¶ 2. The
1987 Directive established “a uniform national procedure for
processing entries under the current manual entry selection
procedures.” Id. ¶ 2. This manual system, however, was an
interim procedure. As summary selectivity was implemented, an
automated bypass supplanted the manual procedure. At the time the
Directive was written, however, manual bypass was “the only viable
bypass system,” and the Directive pertained solely to the manual
bypass procedure. See Id. ¶¶ 1, 2.
8
The following entry categories are not forwarded to
bypass:
Absolute Quota and/or Visa
(continued...)
Court No. 01-00126 Page 17

within the criteria on the list receives bypass processing; any

entry category meeting the criteria is not forwarded to bypass.

The soundness and integrity of this criteria is ensured by

regional and district managers through a review of a random sample

of the entries processed through bypass. See Id. ¶ 4.C. This

check is performed after bypass processing. Id. Once the entries

have been sorted for bypass processing, the Entry Aids verify the

presence of the following on the CF 7501: Importer; TSUSA (the

predecessor to HTSUS); Country of Origin; Value; and Signature or

Approved Facsimile on CF 7501. Id. ¶ 4.B. Absence of any of

these data elements result in the entry being routed through the

Entry Officer for any appropriate action under the broker

compliance program. Id. No other data is verified. Id. Once

an entry is deemed eligible for bypass, it undergoes immediate

liquidation processing. Id.

With this framework in mind, the Court addresses Plaintiff’s

contentions. First, Motorola urges that “this Court . . . reach

the same result as in its original decision [finding that the

bypass entries were treated] because Customs reviewed Motorola’s

(...continued)
Steel Requiring SSSI
Antidumping Duty Actions
Countervailing Duty Actions
Significant Trade Issues
Headquarters Directed Actions.

See Directive ¶ 4.A.
Court No. 01-00126 Page 18

bypass entries.” Pl.’s Mem. at 5. In support of its position,

Motorola first relies upon deposition testimony taken from a

Customs Rule 30(b)(6) agent (“Agent Dep.”). Id. at 5 (citing to

Deposition of John Elkins at 26). Motorola quotes the following

testimony, which it purports buttresses its conclusion that

“Customs actually reviews entries put on bypass”:

Q: So Customs doesn’t look at the shipment or
the paperwork on bypass entries. Is that –

A: Quite often they don’t, yes, other than for a
periodic maybe verification, an audit spot check type of
thing that happens, a quality-assurance type function.
That would be the only way they would look at it, unless
there was some specific allegation that somebody was
doing something wrong with their merchandise that was on
bypass.

Id. (citing Agent Dep. at 26).

The Court interprets the Agent’s testimony differently than

Motorola, and finds that it detracts from, rather than supports

Motorola’s claim. The question posed to the Agent was whether

Customs “looks at” the bypass shipment or paperwork. The Agent

responded that “quite often” Customs does not, “other than for a

periodic . . . audit spot check type of thing.” Id. This

response indicates to the Court that most often, Customs does not

“look,” let alone review, the bypass entries’ shipment or

paperwork. Thus, the Agent’s testimony cannot be properly viewed

as supporting the conclusion that Customs “reviews” the bypass

entries. Assuming arguendo that the agent does “look” at the

entries, a look does not rise to the level of review, i.e., a
Court No. 01-00126 Page 19

“consideration,” or “inspection.” The “audit spot check type of

thing” referenced by the Agent appears to be the exception, rather

than the norm. Indeed, the Agent characterized the audit as

“periodic.” Id. Moreover, if and when this periodic check does

occur, its purpose is not for determining the proper application

of the Customs laws and regulations, as is required by the

regulation, but instead for a “quality assurance type function.”

Id. Motorola characterizes this function as “spot checks” and

claims that they are “central to the bypass program.” Id.

Motorola cites no authority in support this proposition. The

Court, however, finds testimony relevant to these “checks.” See

Pl.’s Mem., Ex. A at 26 (Agent Dep.). The Agent Deposition

reflects that “there is no checking. The documentation is all

accepted electronically. There is no paperwork. It is a mutual

trusting relationship that exists.” Id. Although, Motorola

claims that the “checks” are integral to the bypass program, the

Court finds that the Agent’s testimony suggests otherwise.

Next, Motorola relies upon Customs Directive 3550-26. Pl.’s

Mem. at 6 (citing Directive ¶3, 4). According to Plaintiff, the

Directive instructs that Customs sort all entries for possible

placement on bypass status based on certain criteria, “including

tariff classification.” Id. (“[C]lassification is one of the

criteria used to determine whether to place an entry on bypass

status.”). Despite Plaintiff’s assertion, the Directive indicates
Court No. 01-00126 Page 20

that the criteria “delineates those entries which cannot be

processed through bypass.” Directive ¶3 (emphasis added).

Although the Directive states that the criteria will be “based

upon data found on the CF 7501,” it does not list tariff

classification as one of the criterion.9

Motorola also relies upon the Directive for the proposition

that Customs’ managers review a “random sample, generally 2 to 10

percent” of entries placed on bypass to “ensure . . . the

integrity and soundness of criteria used to identify bypass

entr[ies].” Pl.’s Mem. at 6 (quoting Directive ¶ 4.C). This,

Motorola contends, rebuts Customs’ claim that it never reviewed

Motorola’s entries because they were on bypass, when “between 2 to

10 percent of [its] entries were, in fact, reviewed by Customs for

classification accuracy.” Id. at 7. The Court finds Motorola’s

argument unconvincing.

The cited paragraph of the Directive, entitled “Bypass

Review,” reflects the following:

Regional and district managers will ensure

9
The Court notes that a reference to “TSUSA,” the
predecessor to HTSUS, appears in paragraph 4 of the Directive.
See Directive ¶ 4. This reference, however, is simply part of a
list of information that must appear on CF 7501, including inter
alia, “importer”; “Country of Origin”; and “Signature of approved
facsimile on CF 7501.” Id. That TSUSA is present on this list,
however, does not support Plaintiff’s statement that
“classification is one of the criteria used to determine whether
to place an entry on bypass status.” See Pl.’s Mem. at 6.
Court No. 01-00126 Page 21

that the integrity and soundness of criteria
used to identify bypass entry summaries are
maintained. They will accomplish this through
a review of a random sample, generally 2 to 10
percent, of the entry summaries processed
through bypass. . . . The import specialist
team responsible for the merchandise on the
bypassed entries shall thoroughly review the
random sample. . . . Random sampling, and
import specialist, or supervisory import
specialist review, shall be the only method of
bypass review used.

Directive ¶ 4.C. First, the Directive makes clear that this

limited “review” is intended only to ensure the maintenance of the

criteria used to identify bypass entries. It is not, however,

intended to verify tariff classification. Second, the review is

limited to a random sampling of only two to ten percent of all

entries placed on bypass. Id. It is highly unlikely that given

the universe of all of the bypass entries, that two to ten percent

of Motorola’s entries were reviewed.10 Moreover, it is a near

10
Defendant makes the following, similar argument:

While the 1987 Directive instructed
regional and district managers to review
a random sampling of 2-10% of bypassed
entries, the universe of entries to be
randomly sampled would have included all
importers in a given region or district.
For any random sampling to have resulted
in 2-10% of Motorola’s entries being
reviewed would have meant that Motorola
was the sole importer in the Customs
region or district (or at least the only
importer whose entries were selected for
“random” review). This is highly
unlikely considering that the majority
of the bypass entries upon which
(continued...)
Court No. 01-00126 Page 22

statistical impossibility for all of Motorola’s bypass entries to

have fallen within the random two to ten percent sampling. In any

event, the Court is not convinced that simply because Customs

randomly reviews a small percentage of entries, that such random

review is of a degree sufficient enough to constitute treatment.

See Motorola II, 436 F.3d at 1365. Here, a random review of two

to ten percent of all bypass entries is insufficient to constitute

treatment.

Lastly, Motorola points to Customs Head Quarter Ruling 225191

(Apr. 19, 1994)(“HQ 225191”). See Pl.’S Mem. at 7. This,

Motorola claims, further supports its position that Customs

reviews bypass entries for classification, and by accepting or

rejecting a particular classification, reaches a legal

determination. Id. at 7–8 (citing HQ 225191)(“Customs itself has

made clear that Customs officers make determinations with respect

to bypass entries and that Customs, when it accepts a

classification . . . has made a legal determination[.]”).11 The

(...continued)
Motorola is relying were made through
major ports, i.e., Atlanta, Georgia;
Anchorage, Alaska; and Chicago,
Illinois.

Def.’s Mem. at 12.
11
The relevant text of the cited HQ Ruling, is as follows:

Entry summaries are evaluated
(continued...)
Court No. 01-00126 Page 23

language highlighted by Motorola, however, is not properly

interpreted as indicating that, in accordance with the Directive,

the liquidation of a bypass entry is equivalent to a Customs

officer actually reviewing the entry and independently determining

the correct tariff classification. Rather, when manual bypass was

in operation under the Directive, entry segregation was a clerical

task performed by Entry Unit personnel, not by an import

specialist with the authority to classify goods. See Directive ¶

4; Def.’s Mem. at 10–11. An import specialist would only see the

entries if they met the criteria disqualifying them from bypass

status. See Directive ¶ 4. Under manual bypass procedure, the

only classification-type function that might have been performed

by an Entry Aid would be to verify the presence of a TSUS tariff

provision on the CF 7501. Id. Ensuring the appearance of a tariff

provision on a Customs form does not constitute a review

sufficient for classification purposes. As commonly defined, a

(...continued)
against a pre-set criteria. One of
the elements in this criteria is
classification. See C.D. 3550-26,
Entry Simplification - Bypass
Procedures, issued September 8,
1987. Once the appropriate Customs
officers has determined that an
entry summary is eligible for
bypass processing and has accepted
the classification asserted by the
filer as correct, a legal
determination has been made . . .
.”
Pl.’s Mem. at 8 (citing HQ 225191).
Court No. 01-00126 Page 24

review involves “consideration” or “inspection.” Black’s 1345.

Consideration is defined as “continuous and careful thought.”

Inspection is defined as “view[ing] closely in critical

appraisal.” See Meriam-Webster Online Dictionary 2004,

http://www.meriam-webster.com (last visited Nov. 7, 2006).

Indeed, both of these terms connote a critical appraisal, rather

than a quick glance meant to confirm the appearance of a code in

an allotted space. Were the entry specialist charged with

ensuring the correct tariff classification, a different result

would obtain. This, however, is not what the Directive instructs.

Accordingly, the Court finds that HQ 225191 fails to support

Motorola’s position.

The history of the regulation lends further support to the

Court’s conclusion that no treatment was accorded to the bypass

entries. The legislative history of § 177.12(c)(2)(ii) indicates

that bypass entries should generally be disregarded in determining

the existence of treatment. See 66 Fed. Reg. at 37,375. Indeed,

the Notice of Proposed Rulemaking for § 177.12(c)(2)(ii) explains

that the proposed text was intended to reflect Customs’

operational reality, that “under selectivity and bypass and

related procedures Customs simply does not intervene in the vast

majority of the approximately 18 million formal entries filed

annually . . . . Customs believes that it would be inappropriate

to conclude, as a legal matter, that Customs accorded treatment to
Court No. 01-00126 Page 25

a transaction in those circumstances.” Id. The Notice of the

Final Rule similarly indicates that as a result of bypass

procedure “the vast majority of import transactions do not receive

Customs review. Since those unreviewed transactions receive no

action on the part of Customs, they should not be considered to

constitute a ‘treatment’ within the meaning of 19 U.S.C. 1625(c).”

Final Rule, 67 Fed. Reg. 53,483, 53,491 (Dep’t Treasury Aug. 16,

2002). The references to bypass in the Federal Register indicate

that Customs intended for bypass entries to be included among the

transactions that are given “no weight whatsoever” under

§ 177.12(c)(2)(ii). See Id.; 66 Fed. Reg. at 37,370.

In the event that the Court “disagree[s] with [its] assertion

. . . that Customs reviewed [its] entries[,] Motorola requests the

opportunity to reopen discovery. . . .” See Pl.’s Mem. at 7 n.6.

Defendant responds that this request is a concession by Motorola

that it does not address whether the particular entries at issue

were processed without review or examination.12 See Def.’s Mem. at

12
In addition, Defendant argues that the Court should find
that Motorola had ample opportunity to conduct its discovery.
Moreover, due to Motorola’s paperless electronic filing,
additional discovery would be futile. Def.’s Mem. at 14.
Electronic filing only reflects limited information and would not
provide enough information for Customs to perform a substantive
review for classification purposes. Defendant notes that in order
for Customs to have performed the type of examination necessary to
determine if Motorola’s entries fell outside of the ambit of
§ 177.12(c)(1)(ii), Plaintiff would have had to provide Customs
with invoices supporting each entry. Id.
Court No. 01-00126 Page 26

13. Because Plaintiff did not make a motion to reopen discovery,

however, the Court will not address this point. See USCIT R. 7(f)

(“An application to the court for an order shall be by motion . .

. shall be in writing and shall state, with particularity, the

grounds therefor.”).

Finally, inherent in Plaintiff’s failure to demonstrate that,

as a general matter, bypass entries are subject to treatment is

its failure to show that the particular bypass entries at issue

were treated. In Motorola II, the CAFC directed that this Court

address “whether the particular bypass entries at issue in this

case were processed without review or examination by Customs . .

. .” See Motorola II, 436 F.3d at 1367. Logic dictates that if,

on remand, Plaintiff fails to prove a broader proposition, then it

certainly has not proven the narrower point, i.e., that the

particular entries were subject to treatment. The Court,

therefore, finds that Motorola’s proffered support does not show

that Customs treated the particular bypass entries at issue.

For the foregoing reasons, the Court finds that Motorola has

not demonstrated that the 900 bypass entries at issue were subject

to examination or review sufficient to constitute “treatment” for

purposes of 19 U.S.C. § 1625(c)(2), as interpreted by 19 C.F.R.

§ 177.12(c)(ii)(1). It is incumbent upon the party claiming

treatment to demonstrate that such has occurred. See 66 Fed. Reg.
Court No. 01-00126 Page 27

at 37,374. Plaintiff has failed to do so.

III. The Issuance of the Preliminary Ruling Letters Does Not
Constitute Treatment Within the Meaning of 19 U.S.C.
§ 1625(c)(2) and 19 C.F.R. § 177.12(c)(1)(ii)

In Motorola I, this Court found that the PRLs at issue met

“the definition of interpretative rulings, and that HQ 961050

d[id] not modify or revoke a prior interpretative ruling.

Accordingly, Customs’ failure to publish HQ 961050 in the Customs

Bulletin did not violate 19 U.S.C. § 1625(c)(1).” Motorola I, 30

CIT at __, 350 F. Supp. 2d at 1068. This finding was not appealed

and, thus, is not a subject of this remand determination.

Instead, Plaintiff now contends that Customs violated 19 U.S.C.

§ 1625(c)(2), because the issuance of the two PRLs established a

“treatment.” See Pl.’s Mem. at 8.

A. Contentions of the Parties

Plaintiff characterizes the issue as whether entries made

pursuant to the PRLs constitute treatment, under 19 C.F.R.

§ 177.12(c)(1)(ii).13 See Pl.’s Mem. at 8. Because the PRLs did

not support a claim under § 1625(c)(1), Plaintiff claims that the

issuance of the PRLs involved “substantial review” and

“classification” of “substantially identical merchandise” by

13
In Motorola I, although acknowledging that Plaintiff
raised the issue, this Court did not rule on whether the PRLs
issued by Customs in 1992 and 1994 constituted treatment. In
light of the CAFC’s decision in Motorola II, however, this Court
will now decide this issue on remand.
Court No. 01-00126 Page 28

Customs, and thus constitutes treatment. See id. at 8–9. See

generally § 1625(c)(2) (providing for notice and comment procedure

where there has been a modification of a “treatment.”).

Defendant responds that “Motorola’s goal appears to be to

have the Court accept that, even when an interpretative ruling

(here, Motorola’s PRLs) cannot support a claim under 1625(c)(1),

the ruling can nevertheless form the basis for a treatment under

1625(c)(2).” Def.’s Mem. at 15. Defendant finds Plaintiff’s

argument both unsupported and unconvincing and instead maintains

that a “more logical reading of [the statute] is that Congress

intended subsections (c)(1) and (c)(2) to have the same impact,

but under different situations, the former when a prior

interpretative ruling . . . has been issued, and the latter when

no previous interpretative ruling or decision has been issued.”

Id. Reading subsection (c)(2) as including interpretative

rulings, Defendant argues, would render subsection (c)(1)

redundant.14 Id. The Court agrees.

B. Analysis

As an initial matter, the Court must determine whether a

“prior interpretative ruling” may also constitute a “treatment”

under § 1625(c). The Court begins its analysis by looking at the

14
Both Plaintiff and Defendant put forth additional
substantive arguments, however, the Court need not address these
arguments. See e.g., Pl.’s Mem. at 10–15; Def.’s Mem. at 17–22.
Court No. 01-00126 Page 29

language of the statute itself. See United States Dep’t Treasury

v. Fabe, 508 U.S. 491, 500 (1993); Group Life & Health Ins. Co. v.

Royal Drug Co., 440 U.S. 205, 210 (1979). As set forth infra, 19

U.S.C. § 1625(c) provides that:

A proposed interpretive ruling or decision
which would –

(1) modify . . . or revoke a prior
interpretative 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 the Customs Service to
substantially identical transactions;

shall be published in the Customs Bulletin
. . . .
in order to ensure compliance with the notice and comment

procedures set forth therein. See 19 U.S.C. § 1625(c).

Plaintiff’s interpretation of the statute requires the Court

to find that a prior interpretative ruling which does not fall

within the parameters of subsection (c)(1), can nonetheless be

properly classified as a treatment under subsection (c)(2). Under

such a reading, however, every prior interpretative ruling could

qualify as a treatment, and thereby render subsection (c)(1)

nugatory. General principles of statutory construction preclude

this result.

As previously explained, subsection (c)(1) pertains only to

“prior interpretative rulings and decisions.” See § 1625(c)(1).
Court No. 01-00126 Page 30

It is undisputed that a PRL is a prior interpretative ruling. See

Motorola II, 426 F.3d at 1368. Subsection (c)(2) pertains solely

to “treatment” by Customs. See id. Treatment involves a pattern

of action by Customs involving, inter alia, a sufficient degree of

examination or review for classification purposes. See Motorola

II, 436 F.3d at 1365; Precision, 24 CIT at 1043, 116 F. Supp. 2d

at 1377. It seems that the issuance of a PRL necessarily involves

treatment because Customs is reviewing the entries for

classification purposes. See Customs Directive, 3610-02, ¶ 2

(Dep’t Commerce Mar. 8, 1989), Pl.’s Ex. D (“During a

preclassification review, a Customs Field National Import

Specialist will review and propose a product classification . . .

The National Import Specialist (NIS) Division will review all

classification determinations proposed during a preclassification

review.”). This notwithstanding, because a PRL is a prior

interpretative ruling, it is governed by (c)(1) and therefore not

within (c)(2).

Construing § 1625(c) in the manner urged by Plaintiff would

create a fictitious catchall in subsection (c)(2), which would

render subsection (c)(1) meaningless. That is, every PRL issued

would fall within the parameters of subsection (c)(2) and would

eliminate any need for subsection (c)(1). This would violate the

tenet that, where possible, the Court will avoid reading a statute

in a manner that would render some words redundant. See Gustafson
Court No. 01-00126 Page 31

v. Alloyd Co., Inc., 513 U.S. 561, 575 (1995). The Court will not

interpret a statute to render other provisions of the same statute

superfluous. See FDA v. Brown & Williamson Tobacco Corp., 529

U.S. 120, 133 (2000)(citation omitted). Rather, a court must

“interpret the statute as a symmetrical and coherent regulatory

scheme, and fit, if possible, all parts into an harmonious whole.”

Id. Indeed, a “cardinal principle of statutory construction is to

save and not to destroy.” See United States v. Menasche, 348 U.S.

528, 538 (1955)(citation omitted).

The construction issue may also be resolved by the doctrine

of noscitur a sociis, i.e., “a word is known by the company it

keeps.” Gustafson, 513 U.S. at 574. Here, the word “treatment”

is in the company of its alternative subsection (c)(1), covering

“interpretative rulings.” See § 1625(c)(1),(2). Specifically,

the doctrine provides that a court should “avoid ascribing to one

word a meaning so broad that it is inconsistent with its

accompanying words, thus giving ‘unintended breadth to the Acts of

Congress.’” Id. (quoting Jarecki v. G.D. Searle & Co., 367 U.S.

303, 307 (1961)). Here, ascribing meaning to the word “treatment”

that encompasses the otherwise provided for “prior interpretative

rulings,” gives unintended breadth to subsection (c)(2). Under

Plaintiff’s proposed interpretation, the phrase “prior

interpretative ruling” would be subsumed entirely within the term

“treatment” and the disjunctive “or” would be rendered
Court No. 01-00126 Page 32

meaningless. Basic principles of statutory construction preclude

such an interpretation. See Beck v. Prupis, 529 U.S. 494, 506

(2000).

For the foregoing reasons, the Court finds that the issuance

of the two PRLs, previously determined to be prior interpretative

rulings, cannot for purposes of § 1625(c), also constitute a

“treatment.”

IV. Because the Entries at Issue Were Not Subject to Treatment,
Customs Did Not Violate 19 U.S.C. § 1625(c)

Section 1625(c) requires publication, with notice and

comment, where a prior interpretative ruling or decision modifies

the treatment previously accorded by Customs to substantially

identical transactions. See § 1625(c)(2). Here, Customs did not

violate the statute because: (1) the 900 bypass entries at issue

were not subject to treatment; and (2) the two PRLs at issue were

found to be prior interpretative rulings covered by subsection

(c)(1), and thereby not within the parameters of subsection

(c)(2). Accordingly, Customs was not required to comply with the

notice and comment provisions of § 1625(c).

Conclusion

The Court finds that the liquidation of the 900 bypass

entries at issue does not constitute treatment within the meaning

of 19 U.S.C. § 1625(c)(2), as interpreted by 19 C.F.R.
Court No. 01-00126 Page 33

§ 177.12(c)(1)(ii). The Court further finds that the issuance of

the two preliminary ruling letters does not constitute treatment

within the meaning of 19 U.S.C. § 1625(c)(2) and 19 C.F.R.

§ 177.12(c)(1)(ii). Accordingly, the Court finds that Customs did

not violate § 1625(c)(2) by failing to publish HQ 961050 in the

Customs Bulletin. For the foregoing reasons, the Court enters

judgment for Defendant, United States, and dismisses this action.

Judgment shall be entered accordingly.

/s/ Nicholas Tsoucalas
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: November 13, 2006
New York, NY