Apple Inc. v. United States, Slip Op. 19-32

• Decision Date: 11 March 2019
• Docket Number: Slip Op. 19-32,Court No. 13-00239
• Citation: 375 F.Supp.3d 1288
• Parties: APPLE INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

375 F.Supp.3d 1288

APPLE INC., Plaintiff,

v.UNITED STATES, Defendant.

Slip Op. 19-32

Court No. 13-00239

United States Court of International Trade.

Dated: March 11, 2019

David Phillips Sanders, Cassidy Levy Kent (USA) LLP, of Washington, DC, argued for plaintiff Apple Inc. With him on the brief was Nina Ritu Tandon.

Beverly A. Farrell, Trial Attorney, U.S. Department of Justice, Civil Division, Commercial Litigation Branch, International Trade Field Office, of New York, NY, argued for defendant. With her on the brief were Amy M. Rubin, Assistant Director, and Chad A. Readler, Acting Assistant Attorney General. Of Counsel on the brief was Paula S. Smith, Office of the Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection.

OPINION

Kelly, Judge:

The action before the court concerns the classification of two models of the iPad 2 Smart Cover ("Smart Cover"). Plaintiff, Apple, Inc., moves for summary judgment, requesting the court find, as a matter of law, that both models of Plaintiff's imports are properly classified within subheading 8473.30.51, Harmonized Tariff Schedule of the United States (2011) ("HTSUS"),¹ and order United States Customs and Border Protection ("CBP" or "Customs") to reliquidate the subject merchandise as such and refund the excess duties paid with interest. Pl.'s Mem. Law Supp. of Pl.'s Mot. Summary J., Mar. 1, 2019, ECF No. 117-1 ("Pl.'s Br.").² Defendant opposes the motion and cross-moves for summary judgment, requesting the court find, as a matter of law, that imports of the Smart Cover model with the plastic outer layer are properly classified within subheading 3926.90.99, HTSUS. See Def.'s Mem. Law Opp'n Pl.'s Partial Mot. Summary J. & Supp. Def.'s Cross-Mot. Partial Summary J. at 8–20, Jan. 27, 2017, ECF No. 69 ("Def.'s Resp. Br."). Defendant also argues that this Court does not have jurisdiction to hear Plaintiff's challenge to CBP's classification of the Smart Cover model with the leather outer layer because that merchandise was liquidated duty-free and Plaintiff can claim no injury for which this Court can provide a remedy. See id. at 7–8; Def.'s Resp. Pl.'s Suppl. Br. at 3–6, Jan. 19, 2018, ECF No. 102 ("Def.'s Suppl. Br."). For the reasons that follow, Plaintiff's motion is denied and Defendant's cross-motion is granted.

BACKGROUND

At issue is the proper classification of one entry containing two models of a product known as the "Smart Cover" for the Apple iPad 2. See Def.'s Statement Material Facts as to Which There are no Genuine Issues to be Tried ¶ 1, Mar. 1, 2019, ECF No. 115-1 ("Def.'s 56.3 Statement") ;³ Pl.'s Resp. [Def.'s 56.3 Statement] ¶ 1, Mar. 1, 2019, ECF No. 117-3 ("Pl.'s Resp. Def.'s 56.3 Statement"). On July 8, 2011, CBP liquidated the plastic Smart Cover under subheading 6307.90.98, HTSUS,⁴ dutiable at seven percent, and the leather Smart Cover under subheading 4205.00.80, HTSUS,⁵ duty-free. Am. Compl. ¶ 4, Aug. 2, 2013, ECF No. 11 ("Am. Compl.") ; Answer to Am. Compl. ¶ 4, Dec. 9, 2013, ECF No. 19 ("Answer") ; Def.'s 56.3 Statement ¶¶ 4–5; Pl.'s Resp. Def.'s 56.3 Statement ¶¶ 4–5.

Plaintiff timely filed an administrative protest asserting that the proper classification for the leather and plastic Smart Cover is subheading 8473.30.51, HTSUS, duty-free. Am. Compl. ¶¶ 5–7; Answer ¶¶ 5–7. Subheading 8473.30.51, HTSUS, covers:

Parts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with machines of headings 8469 to 8472: Parts and accessories of the machines of heading 8471: Other.

Subheading 8473.30.51, HTSUS. In the interim between filing its protest and CBP issuing a ruling, Plaintiff submitted a letter to the Center of Excellence and Expertise in Long Beach, California, seeking classification guidance; the letter prompted the generation of an Internal Advice Request. See Am. Compl. ¶ 8; Answer ¶ 8. On October 9, 2012, CBP's Office of International Trade, Commercial and Trade Facilitation Division ("CBP Headquarters"), responded to the request and issued ruling HQ H216396. Am. Compl. ¶ 9; Answer ¶ 9. The ruling addressed the proper classification of leather and plastic covers, the model numbers of which are not covered by Plaintiff's protest but that are materially similar to the leather and plastic Smart Covers at issue here. See Am. Compl. ¶ 9; Answer ¶ 9; Exs. to Pl.'s Mem. Law. Supp. Mot. Summary J. at Ex. D at 1–3, Mar. 1, 2019, ECF No. 117-2 ("HQ H216396")⁶ (reproducing the ruling and describing the two models at issue as iPad Smart Covers with a microfiber lining capable of buffing off fingerprints or smudges and a top layer consisting of either plastic or leather). The ruling rejected Plaintiff's position that the iPad Smart Covers, leather and plastic, are classifiable under heading 8473, HTSUS, and instead ruled that the plastic iPad Smart Cover is properly classified under subheading 3926.90.99, HTSUS ("Other articles of plastics and articles of other materials of headings 3901 to 3914: Other: Other"), dutiable at a rate of 5.3%, and the leather iPad Smart Covers under subheading 4205.00.80, HTSUS ("Other articles of leather or of composition leather: Other: Other: Other"), duty-free. See Am. Compl. ¶ 10; Answer ¶ 10; HQ H216396 at 5–8. On January 9, 2013, CBP denied Plaintiff's protest, did not reliquidate the merchandise at the tariff classifications identified in the ruling, and continued to apply the classifications and duty rates under which the imports were liquidated. See Am. Compl. ¶¶ 11–13; Answer ¶¶ 11–13.

Plaintiff commenced this action to contest CBP's denial of its protest. Summons, July 2, 2013, ECF No. 1 (subsequently amended by ECF No. 10) ; Compl., July 2, 2013, ECF No. 5 (subsequently amended by ECF No. 11). Plaintiff alleges that both models of its merchandise are properly classified within subheading 8473.30.51, HTSUS. Am. Compl. at 7; see Pl.'s Br. at 15–31. Specifically, Plaintiff alleges that although heading 8473, HTSUS, excludes "covers, carrying cases and the like," the Harmonized Commodity Description and Coding System's Explanatory Notes ("Explanatory Notes") to that heading carve out an exception to the exclusion for covers that are also stands, like the Smart Cover. See Pl.'s Br. at 20–26. The Explanatory Note Plaintiff invokes states,

[b]ut [ ] heading [8473, HTSUS] excludes covers, carrying cases and felt pads: these are classified in their appropriate headings. It also excludes articles of furniture (e.g. cupboards or tables) whether or not specifically designed for office use (heading 94.03). However, stands for machines of headings 84.69 to 84.72 not normally usable except with the machines in question, remain in this heading.

EN 84.73. Defendant contends that the plastic Smart Cover model is not classifiable within subheading 8473.30.51, HTSUS, because it is a cover and covers are explicitly excluded from that subheading and that the Explanatory Note's exception applies to stands of furniture, which the Smart Cover is not. See Def.'s Resp. Br. at 10–17. As to the leather Smart Cover model, Defendant contends that Plaintiff failed to allege a redressable injury and that the claim should be dismissed for lack of jurisdiction. See id. at 7–8. On September 20, 2017, the court held oral argument. Partially Closed Oral Arg., Sept. 20, 2017, ECF No. 87 ("Oral Arg.").

This action was reassigned pursuant to 28 U.S.C. § 253(c) (2012)⁷ and Rule 77(e)(4) of the Rules of the U.S. Court of International Trade. See Order of Reassignment, Jan. 9, 2019, ECF No. 104.

STANDARD OF REVIEW

The court will grant summary judgment when "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). In order to raise a genuine issue of material fact, it is insufficient for a party to rest upon mere allegations or denials, but rather that party must point to sufficient supporting evidence for the claimed factual dispute to require resolution of the differing versions of the truth at trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; Processed Plastics Co. v. United States, 473 F.3d 1164, 1170 (Fed. Cir. 2006) ; Barmag Barmer Maschinenfabrik AG v. Murata Machinery, Ltd., 731 F.2d 831, 835–36 (Fed. Cir. 1984).

UNDISPUTED FACTS

Plaintiff is the importer of record of the merchandise in the one entry at issue in this case, which entered at the port of San Francisco International Airport, San Francisco, California on January 28, 2011. Am. Compl. ¶ 20; Answer ¶ 20; Pl.'s [56.3 Statement] ¶ 2, Mar. 1, 2019, ECF No. 117-2 ("Pl.'s 56.3 Statement") (appearing as Ex. A to Pl.'s Br.); Def.'s Resp. Pl.'s [56.3 Statement] ¶ 2, Mar. 1, 2019, ECF No. 115-2 ("Def.'s Resp. Pl.'s 56.3 Statement"). The merchandise consists of two models of the Smart Cover. Def.'s 56.3 Statement ¶ 1; Pl.'s Resp. Def.'s 56.3 Statement ¶ 1. The two models differ as to their outer layer—one is composed of plastic,⁸ the other of leather. Def.'s 56.3 Statement ¶ 3; Pl.'s Resp. Def.'s 56.3 Statement ¶ 3. CBP liquidated the former merchandise under subheading 6307.90.98, HTSUS, dutiable at seven percent, and the latter merchandise under subheading 4205.00.80, HTSUS, duty free. Def.'s 56.3 Statement ¶¶ 4–5; Pl.'s Resp. Def.'s 56.3 Statement ¶¶ 4–5. Plaintiff filed a timely protest. Pl.'s 56.3 Statement ¶¶ 4–5; Def.'s Resp. Pl.'s 56.3 Statement ¶¶ 4–5.

The Smart Cover is rectangular in shape and is constructed of rectangular panels that enable the user to fold the Smart Cover into a "stand" position or to reveal the iPad 2's back facing camera. Pl.'s 56.3 Statement ¶ 12; Def.'s Resp. Pl.'s 56.3 Statement ¶ 12; Def.'s 56.3 Statement ¶¶ 27, 35; Pl.'s Resp. Def.'s 56.3 Statement ¶¶ 27, 35. It is sized to fit directly and precisely over the screen of an iPad 2, and was designed to be used exclusively and only with that device. Pl.'s 56.3 Statement ¶¶ 16–19; Def.'s Resp. Pl.'s 56.3...