Benq Am. Corp.. v. United States

• Decision Date: 27 May 2011
• Docket Number: No. 2010–1259.,2010–1259.
• Citation: 33 ITRD 1033,646 F.3d 1371
• Parties: BENQ AMERICA CORPORATION, Plaintiff–Appellant,v.UNITED STATES, Defendant–Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

646 F.3d 1371

33 ITRD 1033

BENQ AMERICA CORPORATION, Plaintiff–Appellant,

v.UNITED STATES, Defendant–Appellee.

No. 2010–1259.

United States Court of Appeals, Federal Circuit.

May 27, 2011.

V. James Adduci, II, Adduci, Mastriani & Schaumberg, L.L.P., of Washington, DC, argued for plaintiff-appellant. With him on the brief were Munford Page Hall, II and William C. Sjoberg.Barbara S. Williams, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice, of New York, New York, argued for defendant-appellee. With her on the brief were Tony West, Assistant Attorney General, and Jeanne E. Davidson, Director, of Washington, DC. Of counsel on the brief was Beth Brotman, Office of the Assistant Chief Counsel, International Trade Litigation, United States Customs and Border Protection, of New York, New York. Of counsel were Mikki Cottet and Edward F. Kenny, Attorneys, of New York, NY.William D. Outman, II, Baker & McKenzie LLP, of Washington, DC, for amicus curiae Hewlett–Packard Company. With him on the brief were Michael E. Murphy and Kevin J. Sullivan.Before LINN, SCHALL, and DYK, Circuit Judges.SCHALL, Circuit Judge.

BenQ America Corporation (“BenQ”) appeals the final decision of the United States Court of International Trade in BenQ America Corp. v. United States, 683 F.Supp.2d 1335 (Ct. Int'l Trade 2010) (“ BenQ ”). In its decision, the court denied BenQ's motion for summary judgment and granted the government's cross-motion for summary judgment. In so doing, the court upheld the ruling of the Bureau of Customs and Border Protection (“Customs”) classifying certain liquid crystal display (“LCD”) monitors imported by BenQ from China in 2004 under subheading 8528.21.70 of the Harmonized Tariff Schedule of the United States (“HTSUS”). BenQ had protested the classification, arguing that the monitors should be classified under subheading 8471.60.45 of the HTSUS. Because we conclude that the Court of International Trade erred in not conducting a principal use analysis with respect to the imported goods, we vacate the grant of summary judgment in favor of the government and remand the case to the court for further proceedings consistent with this opinion.

Background

I.

The products at issue are flat-panel LCD monitors with screens measuring 20.1 inches on the diagonal. The monitors are equipped with five different types of connectors for receiving data: (1) a 15–pin D-sub analog video connector; (2) a DVI–D digital video connector; (3) an S-video connector; (4) a composite connector; and (5) USB ports. The D-sub analog video and DVI–D digital video connectors can receive signals from a personal computer, whereas the S-video and composite connectors can receive video signals from devices such as DVD players and VCRs. The USB ports allow the monitors to be connected to digital cameras and other devices. The monitors are imported with a stand for use on a desktop but can also be mounted on a wall. BenQ imported the monitors, Dell™ 2001FP Flat Panel Color Monitors, for BenQ Corporation, a Taiwanese company that manufactured the monitors for Dell™.

Upon importation, BenQ entered the monitors under HTSUS heading 8471, subheading 8471.60.45, both of which are part of Section XVI of the HTSUS. Subheading 8471.60.45 is a duty-free provision for:

Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included: Input or output units, whether or not containing storage units in the same housing: Other: Display units: Other: Other.¹

In due course, Customs classified and reliquidated the monitors under HTSUS heading 8528, subheading 8528.21.70, dutiable at 5% ad valorem, and assessed duties on the monitors at that rate. Heading 8528 and subheading 8528.21.70 also are part of HTSUS Section XVI. Subheading 8528.21.70 provides for:

Reception apparatus for television, whether or not incorporating radiobroadcast receivers or sound or video recording or reproducing apparatus; video monitors and video projectors: Video monitors: Color: With a flat panel screen: Other: Other.²

BenQ filed a timely protest of Customs' reclassification, arguing that the monitors are of a kind solely or principally used in an automatic data processing (“ADP”) system and thus classifiable under subheading 8471.60.45 pursuant to Notes 5(B) and (C) of Chapter 84 of the HTSUS. After Customs failed to take action on the protest, the protest was deemed denied.

II.

BenQ filed suit in the Court of International Trade under 28 U.S.C. § 1581(a) to contest the denial of its protest. After designating the action a test case to control the outcome of at least one other action, the court entertained the parties' respective motions for summary judgment. In its motion, BenQ argued that the court should apply a principal function analysis under Note 3 to HTSUS Section XVI. Note 3 provides that, “[u]nless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.” According to BenQ, the principal function of the Dell™ monitors is to serve as a monitor for a computer or an automatic data processing machine. Hence, they should be classified under HTSUS subheading 8471.60.45, as BenQ claimed at the time of importation.

For its part, the government urged that, in order for the Dell™ monitors to be classified in heading 8471, BenQ must satisfy the criteria of Note 5(B) to Chapter 84, which requires a principal use analysis pursuant to HTSUS Additional U.S. Rule of Interpretation (“ARI”) 1(a). Chapter 84, Note 5(B)(a) states that a unit can be classified under heading 8471 if it is “of a kind solely or principally used in an automatic data processing system.” ARI 1(a) states in relevant part that, “[i]n the absence of special language or context which otherwise requires—(a) a tariff classification controlled by use (other than actual use) is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use.” Such an analysis, the government contended, compelled the conclusion that the Dell™ monitors could not be classified under HTSUS subheading 8471 because BenQ did not present evidence regarding the class or kind of goods to which the monitors belong. The government also pointed to an Explanatory Note to heading 8471 limiting “Display units of automatic data processing machines” to those machines that are “capable of accepting a signal only from the central processing unit of an automatic data processing machine....” World Customs Org., Harmonized Commodity Description & Coding System, Explanatory Notes (“Explanatory Notes”) 1579 (2002). In the government's view, the Explanatory Note provided additional support for its position that the monitors should not be classified under heading 8471 because the Dell™ monitors accept signals from sources other than automatic data processing machines. According to the government, the monitors were properly classified in heading 8528, a provision encompassing video monitors.

The Court of International Trade granted the government's motion and denied BenQ's motion, holding that Customs had properly classified the monitors under HTSUS heading 8528. BenQ, 683 F.Supp.2d at 1347–48. The court, however, followed an approach somewhat different from that urged by either BenQ or the government. Instead of employing either a principal use or principal function analysis, the court relied on Note 5(E) to Chapter 84, HTSUS, and the Explanatory Notes to heading 8471. The court determined that the Dell™ monitors can perform a specific function other than data processing, that function being serving as a video monitor for a video source. Id. at 1345. This ability, the court concluded, meant that the monitors could not be classified under heading 8471 because Note 5(E) provides that “[m]achines performing a specific function other than data processing and incorporating or working in conjunction with an automatic data processing machine are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings.” ³ Note 5(E) to Chapter 84, HTSUS. Since the Dell™ monitors are admittedly capable of connection to a video source for use as video monitors, the court reasoned that they can “perform[ ] a specific function other than data processing” and thus had to be classified, not under heading 8471, but under “the heading[ ] appropriate to their respective function[ ]....” BenQ, 683 F.Supp.2d at 1345–46 (quoting Note 5(E) to Chapter 84, HTSUS). That heading, according to the court, was the broad eo nomine heading 8528 (“Reception apparatus for television, whether or not incorporating radiobroadcast receivers or sound or video recording or reproducing apparatus; video monitors and video projectors”) because the monitors are video monitors. Thus, the court upheld Customs' classification of the monitors under subheading 8528.21.70. The court rejected BenQ's reliance on Note 3 to Section XVI on the ground that the Note includes the express proviso that it applies “[u]nless the context otherwise requires.” Id. at 1341–42. The terms of heading 8471 and the relevant Chapter Notes, the court found, “plainly constitute a ‘context [which] otherwise requires,’ ” overriding the general default rule in Note 3 to Section XVI. Id. at 1342.

BenQ timely appealed the decision of the Court of International Trade. We have jurisdiction pursuant to ...