ADC Telecomms., Inc. v. United States

• Decision Date: 19 February 2019
• Docket Number: 2018-1316
• Citation: 916 F.3d 1013
• Parties: ADC TELECOMMUNICATIONS, INC., Plaintiff-Appellant v. UNITED STATES, Defendant-Appellee
• Court: U.S. Court of Appeals — Federal Circuit

916 F.3d 1013

ADC TELECOMMUNICATIONS, INC., Plaintiff-Appellant

v.UNITED STATES, Defendant-Appellee

2018-1316

United States Court of Appeals, Federal Circuit.

Decided: February 19, 2019

Michael Edward Roll, Pisani & Roll LLP, Los Angeles, CA, argued for plaintiff-appellant. Also represented by Brett Harris, Robert J. Pisani, Washington, DC.

Guy Eddon, Commercial Litigation Branch, Civil Division, United States Department of Justice, New York, NY, argued for defendant-appellee. Also represented by Amy Rubin; Jeanne Davidson, Joseph H. Hunt, Washington, DC; Beth C. Brotman, Office of the Assistant Chief Counsel, United States Bureau of Customs and Border Protection, United States Department of Homeland Security, New York, NY.

Before Prost, Chief Judge, Dyk and Wallach, Circuit Judges.

Wallach, Circuit Judge.

Appellant ADC Telecommunications, Inc. ("ADC") sued Appellee United States ("the Government") in the U.S. Court of International Trade ("CIT"), challenging U.S. Customs and Border Protection’s ("Customs") classification of imported Value Added Modules ("VAM") consisting of fiber optic telecommunications network equipment under Harmonized Tariff Schedule of the United States ("HTSUS")¹ Subheading 9013.80.90, which bears a duty rate of 4.5% ad valorem . ADC and the Government filed cross-motions for summary judgment, with ADC arguing that the subject merchandise should be classified under HTSUS Subheading 8517.62.00, which bears a duty-free rate. The CIT denied ADC’s Cross-Motion, and granted the Government’s Cross-Motion, holding that Customs properly classified the subject merchandise under HTSUS Subheading 9013.80.90. ADC Telecomms., Inc. v. United States , No. 13-00400, 2017 WL 4708021, at *9 (Ct. Int’l Trade Oct. 18, 2017) ; see J.A. 12 (Judgment).

ADC appeals. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5) (2012). We affirm.

BACKGROUND

The subject merchandise "consists of fiber optic telecommunications network equipment" and "is included in [ADC’s VAMs] product line." ADC , 2017 WL 4708021, at *2 (citations omitted).² "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." Id. (citations omitted). "The wavelength of the light typically used to transmit data in a fiber optic telecommunications network 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," meaning "humans would not be able to see the light that is used" in the subject merchandise. Id. (citations omitted).

The VAM product line "is intended to ease installation of the articles into [ADC]’s telecommunications network operator customers’ fiber optic networks" by including "connectors on the ends of the fibers, eliminating the need for telecommunications network providers to splice the fibers into their networks," and protective "housing" or "jacketing over the actual fiber itself" to prevent damage to the optical fibers "either during the installation process or from the environment during use." Id. (citations omitted). There are three categories of products in the VAM product line: (1) splitter modules, which "take individual signals from a single optical fiber and divide them, enabling that single signal to reach multiple telecommunication network subscribers," (2) monitor modules, which "allow access to signaling and control functions of a communications network in order to evaluate performance and detect problems," and (3) wavelength division multiplexer ("WDM") modules, which "permit infrared signals of two different wavelengths to travel simultaneously on a single fiber, thereby increasing the capacity." Id. (citations and footnotes omitted). The subject merchandise "is used primarily or exclusively for purposes of data transmission in a telecommunications network ... exclusively using light in the infrared wavelength range," and the merchandise does not "contain any electronic components or electrical circuit boards." Id. at *3 (citations omitted).

The CIT determined that HTSUS Heading 9013, which covers "other optical appliances and instruments, not specified or included elsewhere in this chapter," is "an apt description of [ADC’s] VAMs ... because such appliances and instruments, used in conjunction with the ‘optical fibers’ of [HTSUS H]eading 9001 ... are plainly covered by [C]hapter 90." Id. at *6 (internal quotation marks omitted). The CIT explained that HTSUS Heading 8517, which covers "other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network)," "would appear apt insofar as it describes the sole purpose of the VAMs." Id . at *5 (internal quotation marks omitted). However, the CIT concluded that the subject merchandise "are prima facie classifiable" in HTSUS Heading 9013, and because they are included in Chapter 90, they are "therefore excluded from [C]hapter 85 pursuant to [Section XVI] Note 1(m)." Id . at *6 (italics omitted).

DISCUSSION

I. Standard of Review

We review the CIT’s decision to grant summary judgment de novo, applying the same standard used by the CIT to assess Customs’ classification. See Otter Prods., LLC v. United States , 834 F.3d 1369, 1374–75 (Fed. Cir. 2016). "Although we review the decision of the CIT de novo, we give great weight to the informed opinion of the CIT and it is nearly always the starting point of our analysis." Schlumberger Tech. Corp. v. United States , 845 F.3d 1158, 1162 (Fed. Cir. 2017) (internal quotation marks, alterations, and citation omitted). The CIT "shall grant summary judgment if the movant shows that 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(a).

The classification of merchandise involves a two-step inquiry. See LeMans , 660 F.3d at 1315. First, we ascertain the meaning of the terms within the relevant tariff provision, which is a question of law, and, second, we determine whether the subject merchandise fits within those terms, which is a question of fact. See Sigma-Tau HealthSci., Inc. v. United States , 838 F.3d 1272, 1276 (Fed. Cir. 2016). Where, as here, no genuine dispute exists as to the nature of the subject merchandise, the two-step inquiry "collapses into a question of law we review de novo." LeMans , 660 F.3d at 1315 (citation omitted).

II. The CIT Properly Granted Summary Judgment for the Government

A. Legal Framework

The HTSUS governs the classification of merchandise imported into the United States. See Wilton Indus., Inc. v. United States , 741 F.3d 1263, 1266 (Fed. Cir. 2013). The HTSUS "shall be considered ... statutory provisions of law for all purposes." 19 U.S.C. § 3004(c)(1) (2012) ; see Chemtall, Inc. v. United States , 878 F.3d 1012, 1026 (Fed. Cir. 2017) (explaining that "the tenth-digit statistical suffixes ... are not statutory," as those suffixes are not incorporated in the HTSUS’s legal text).

"The HTSUS scheme is organized by headings, each of which has one or more subheadings; the headings set forth general categories of merchandise, and the subheadings provide a more particularized segregation of the goods within each category." Wilton Indus. , 741 F.3d at 1266. "The first four digits of an HTSUS provision constitute the heading, whereas the remaining digits reflect subheadings." Schlumberger , 845 F.3d at 1163 n.4. "[T]he headings and subheadings ... are enumerated in chapters 1 through 99 of the HTSUS (each of which has its own section and chapter notes) ...." R.T. Foods, Inc. v. United States , 757 F.3d 1349, 1353 (Fed. Cir. 2014). The HTSUS "also contains the ‘General Notes,’ the ‘General Rules of Interpretation’ (‘GRI’), the ‘Additional [U.S.] Rules of Interpretation’ (‘ARI’),^{[3 ]} and various appendices for particular categories of goods." Id. (footnote omitted).

The GRI and the ARI govern the classification of goods within the HTSUS. See Otter Prods. , 834 F.3d at 1375. "The GRI apply in numerical order, meaning that subsequent rules are inapplicable if a preceding rule provides proper classification." Schlumberger , 845 F.3d at 1163. GRI 1 provides, in relevant part, that "classification shall be determined according to the terms of the headings and any relative section or chapter notes." GRI 1 (emphasis added). "Under GRI 1, [we] first construe[ ] the language of the heading, and any section or chapter notes in question, to determine whether the product at issue is classifiable under the heading." Schlumberger , 845 F.3d at 1163 (internal quotation marks and citation omitted). "[T]he possible headings are to be evaluated without reference to their subheadings, which cannot be used to expand the scope of their respective headings." R.T. Foods , 757 F.3d at 1353 (citations omitted). "Absent contrary legislative intent, HTSUS terms are to be construed according to their common and commercial meanings, which are presumed to be the same." Well Luck Co. v. United States , 887 F.3d 1106, 1111 (Fed. Cir. 2018) (internal quotation marks and citation omitted). "To discern the common meaning of a tariff term, we may consult dictionaries, scientific authorities, and other reliable information sources." Kahrs Int’l, Inc. v. United States , 713 F.3d 640, 644 (Fed. Cir. 2013) (citation omitted).

"After consulting the headings and relevant section or chapter notes" consistent with GRI 1, we may consider the relevant Explanatory Notes ("EN"). Fuji Am. Corp. v. United States , 519 F.3d 1355, 1357 (Fed. Cir. 2008). "The [ENs] provide persuasive guidance and are generally indicative of the proper interpretation, though they do not constitute binding authority." Chemtall , 878 F.3d at 1019 (internal quotation marks and citation omitted).

Once we determine the appropriate...