Adc Telecomms., Inc. v. United States

• Decision Date: 18 October 2017
• Docket Number: Court No. 13-00400,Slip Op. 17 - 144
• Parties: ADC TELECOMMUNICATIONS, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

ADC TELECOMMUNICATIONS, INC., Plaintiff,
v.
UNITED STATES, Defendant.

Slip Op. 17 - 144
Court No. 13-00400

UNITED STATES COURT OF INTERNATIONAL TRADE

October 18, 2017

Before: R. Kenton Musgrave, Senior Judge

OPINION

On Customs' classification of certain value added modules, plaintiff's motion for summary judgment denied; defendant's cross motion for summary judgment granted.

Michael E. Roll and Brett Ian Harris, Pisani & Roll LLP, of Los Angeles, CA, for the plaintiff.

Guy R. Eddon, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, NY, for the defendant. On the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, and Amy M. Rubin, Assistant Director. Of counsel on the brief was Beth C. Brotman, Attorney, Office of the Assistant Chief Counsel, U.S. Customs and Border Protection, of New York, NY.

Musgrave, Senior Judge: This test case is before the court on cross-motions for summary judgment on the proper customs classification of a single entry of three types of "Value Added Modules" ("VAMs") imported from Mexico in June 2012. The plaintiff claimed to U.S. Customs and Border Protection ("Customs") that its VAMS are classifiable in Harmonized Tariff Schedule of the United States ("HTSUS"), subheading 8517.62.00, as "machines for the reception, conversion and transmission or regeneration of voice, images or other data", duty-free. Customs

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classified the VAMS in NY L80881 (Dec. 1, 2004) and at liquidation as "other optical appliances and instruments" within subheading 9013.80.90, HTSUS, and assessed customs duties of 4.5 percent. Upon denial of its protest, number 2402-13-100078, the plaintiff brought this suit. Having fulfilled the prerequisites therefor, 28 U.S.C. §2637(a), jurisdiction is proper pursuant to 28 U.S.C. §1581(a).

For the following reasons, judgment will be entered in favor of the defendant.

I. Standard of Review

The court hears de novo a civil action contesting the denial of a protest under section 515 of the Tariff Act of 1930 on the basis of the record made before the court. See 28 U.S.C. §2640(a)(1). On such actions, summary judgment is appropriate when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." USCIT R. 56(c). "[W]here . . . a question of law is before the [c]ourt on a motion for summary judgment, the statutory presumption of correctness is irrelevant." Toy Biz, Inc. v. United States, 27 CIT 11, 17 (2003), quoting Blakley Corp. v. United States, 22 CIT 635, 639, 15 F. Supp. 2d 865, 869 (1998). The court "must consider whether the government's classification is correct, both independently and in comparison with the importer's alternative." Jarvis Clark Co. v. United States, 733 F.2d 873, 878 (Fed. Cir. 1984).

Determining the classification of imported merchandise is a two-step process. First, the court must determine the meaning of relevant tariff provisions, a question of law, and second, the court must determine whether the "nature" of the merchandise falls within the tariff provision as properly construed, a question of fact. See, e.g., Orlando Food Corp. v. United States, 140 F.3d 1437 (Fed. Cir. 1998). "When the nature of the merchandise is undisputed . . . the classification

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issue collapses entirely into a question of law." Cummins Inc. v. United States, 454 F.3d 1361, 1363 (Fed. Cir. 2006). See, e.g., Bausch & Lomb, Inc. v. United States, 148 F.3d 1363, 1365-66 (Fed. Cir. 1998); Clarendon Marketing, Inc. v. United States, 144 F.3d 1464, 1466 (Fed. Cir. 1998). Here, the parties' separate factual recitations do not reveal any material factual disputes, and the matter may therefore be resolved summarily. In that analysis, a measure of deference is accorded to Customs classification rulings in proportion to their "power to persuade". United States v. Mead Corp., 533 U.S. 218, 235 (2001), citing Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).

II. Undisputed Facts

The parties aver as follows. The merchandise at issue consists of fiber optic telecommunications network equipment. Plaintiff's Rule 56.3 Statement of Material Facts Not in Dispute ("Pl's MFNID"), ECF No. 33, ¶1; Defendant's Response to Plaintiff's Statement of Material Facts Not in Dispute ("Def's MFNID"), ECF No. 38, ¶1. Fiber optic telecommunications networks operate by pulses of light in the infrared wavelength range, which transmit voice, sound, images, video, e-mail messages, and other information from one point in the network to another. Pl's MFNID ¶2; Def's MFNID ¶2. Digital data is encoded into the light pulses by varying the amplitude and the length of laser light that is sent through the network. Pl's MFNID ¶3; Def's MFNID ¶3. Fiber optic telecommunications networks are generally designed to use light at infrared wavelengths. Pl's MFNID ¶5; Def's MFNID ¶5. Optical fiber shows much lower transmission losses at these wavelengths than comparable electrical or copper networks, meaning that there is little degradation or attenuation of the light signals even over long distances. Id. There is no other use for the merchandise other than in optical communication networks. Pl's MFNID ¶6; Def's MFNID ¶6. The wavelength of the light typically used to transmit data in a fiber optic telecommunications network

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is approximately 1260 nanometers to 1650 nanometers; whereas human eyes can see light only in the wavelength range from about 400 nanometers to 700 nanometers. Pl's MFNID ¶¶ 7-8; Def's MFNID ¶¶ 7-8. Assuming the telecommunications network equipment at issue is used as one would expect in conventional fiber optic telecommunication networks, humans would not be able to see the light that is used in that equipment or those networks. Pl's MFNID ¶8; Def's MFNID ¶8.

The merchandise at issue is included in the plaintiff's "Value Added Module" or "VAM" product line, and the format of each product is intended to ease installation of the articles into the plaintiff's telecommunications network operator customers' fiber optic networks. See Pl's MFNID ¶10; Def's MFNID ¶10. Two different features of the VAM products enable this ease of use: first, the optical fibers used in these products include connectors on the ends of the fibers, eliminating the need for telecommunications network providers to splice the fibers into their networks; second, the optical fibers in the VAM products are protected either in a housing or with a jacketing over the actual fiber itself. Pl's MFNID ¶11; Def's MFNID ¶11. This protects the fibers from damage either during the installation process or from the environment during use. Id.

The products at bar fall within three different categories of telecommunications network equipment -- splitter modules, monitor modules, and wavelength division multiplexer ("WDM") modules. Pl's MFNID ¶12; Def's MFNID ¶12. Splitter modules take individual signals from a single optical fiber and divide them, enabling that single signal to reach multiple telecommunication network subscribers.¹ Pl's MFNID ¶13; Def's MFNID ¶13. The plaintiff's

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monitor modules allow access to signaling and control functions of a communications network in order to evaluate performance and detect problems.² Pl's MFNID ¶16; Def's MFNID ¶16. Its WDM modules permit infrared signals of two different wavelengths to travel simultaneously on a single fiber, thereby increasing the capacity.³ Pl's MFNID ¶21; Def's MFNID ¶21.

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None of the products at issue contain any electronic components or electrical circuit boards. Pl's MFNID ¶28; Def's MFNID ¶28. Each of the products at issue is used primarily or exclusively for purposes of data transmission in a telecommunications network, and is operated exclusively using light in the infrared wavelength range. Pl's MFNID ¶29; Def's MFNID ¶29.

Customs issued New York Ruling Letter ("NYRL") L80881 to the plaintiff in 2004, advising the plaintiff that the VAMs were to be classified in HTSUS subheading 9013.80.90. Pl's MFNID ¶30; Def's MFNID ¶30. There are no material differences between the subject merchandise and the VAMs that were the subject of NYRL L80881. Pl's MFNID ¶32; Def's MFNID ¶32. From 2009 to 2011, Customs approved 44 of the plaintiff's protests involving substantially identical VAMs to the VAMs at issue in this case. Pl's MFNID ¶12; Def's MFNID ¶12. Customs denied the protest at bar in year 2013. Pl's MFNID ¶¶ 37-39; Def's MFNID ¶¶ 37-39.

III. Analysis A.

Proper classification under the HTSUS is directed by the General Rules of

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Interpretation ("GRIs") and, if relevant, the Additional U.S. Rules of Interpretation ("ARIs"). See, e.g., Orlando Food Corp., supra, 140 F.3d at 1439-40. The GRIs are statutory,⁴ not optional, and they are applied in numerical order. See Honda of America Manufacturing, Inc. v. United States, 607 F.3d 771, 773 (Fed. Cir. 2010); See also Orlando Food Corp., 140 F.3d at 1440; Bauerhin Technologies Ltd. Partnership v. United States, 110 F.3d 774, 777 (Fed. Cir. 1997) ("we begin our inquiry by examining the descriptions of the relevant headings, subheadings, and accompanying notes").

GRI 1 provides, inter alia, that the "titles of sections, chapters and subchapters are provided for ease of reference only" and that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to" GRIs 1 through 6. GRI 3, which codified a judicial rule of specificity, provides that when goods are, prima facie, classifiable under two or more headings, classification shall be effected in the following order: (a) by the heading that provides the most specific description over the more general description, (b) by the "material" or component which gives the goods their essential character, or (c) if headings merit equal consideration then by that which is last in...