BENQ AMERICA CORP. v. US

• Decision Date: 01 March 2010
• Docket Number: Slip Op. 10-20. Court No. 05-00637.
• Citation: 683 F. Supp.2d 1335
• Parties: BENQ AMERICA CORPORATION, Plaintiff, v. The UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

683 F.Supp.2d 1335

BENQ AMERICA CORPORATION, Plaintiff, v. The UNITED STATES, Defendant.

Slip Op. 10-20. Court No. 05-00637.

United States Court of International Trade.

March 1, 2010.

Adduci, Mastriani & Schaumberg, L.L.P., Washington, DC (V. James Adduci II, Harvey B. Fox, Munford Page Hall, II, and Paul G. Hegland), for Plaintiff.

Tony West, Assistant Attorney General; Barbara S. Williams, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Mikki Cottet); Beth C. Brotman, Office of the Assistant Chief Counsel, International Trade Litigation, Bureau of Customs and Border Protection, U.S. Department of Homeland Security, Of Counsel; for Defendant.

OPINION

RIDGWAY, Judge.

In this action, Plaintiff BenQ America Corporation challenges the decision of the Bureau of Customs and Border Protection denying BenQ's protest concerning the tariff classification of certain liquid crystal display ("LCD") monitors imported from the People's Republic of China in mid-May 2004.¹

The Government maintains that Customs properly classified the merchandise at issue—Dell™ 2001FP Flat Panel Color Monitors—as "video monitors" under heading 8528 of the Harmonized Tariff Schedule of the United States ("HTSUS"), assessing duties at the rate of five percent ad valorem. See generally Defendant's Memorandum in Opposition to Plaintiff's Motion for Summary Judgment and in Support of Defendant's Cross-Motion for Summary Judgment ("Def.'s Brief"); Reply to Plaintiff's Opposition to Defendant's Cross-Motion for Summary Judgment ("Def.'s Reply Brief"); see also Heading 8528, HTSUS (2004).²

BenQ contends that the monitors instead should have been classified as display units for automatic data processing ("ADP") machines under HTSUS heading 8471, duty-free. See generally Plaintiff's Memorandum of Law in Support of Motion for Summary Judgment ("Pl.'s Brief"); Plaintiff's Memorandum of Law in Response to Defendant's Opposition to Plaintiff's Motion for Summary Judgment and Cross-Motion for Summary Judgment ("Pl.'s Reply Brief"); see also Heading 8471, HTSUS.

This action, which has been designated a test case pursuant to USCIT Rule 84, is before the Court on cross-motions for summary judgment. Jurisdiction lies under 28 U.S.C. § 1581(a) (2000).³ As discussed below, Customs properly classified the imported merchandise as video monitors under HTSUS heading 8528. Accordingly, BenQ's motion for summary judgment must be denied, and the Government's cross-motion granted.

I. Background

The imported merchandise—Dell™ 2001FP Flat Panel Color Monitors—are flat panel LCD (liquid crystal display) monitors, with screens measuring 20.1 inches on the diagonal, which were manufactured for Dell™ by BenQ Corporation (a Taiwanese company of which Plaintiff BenQ America was a part). See Dell™ 2001FP Flat Panel Color Monitor User's Guide (Pl.'s Exh. 16) at 16-4, 16-50; Pl.'s Brief at 9, 23; see also id. at 1, 6; Def.'s Brief at 2-3.⁴

According to a study commissioned by BenQ, which surveyed purchasers of the monitor at issue (and a somewhat earlier model), "a very large majority (86.6 percent) of survey respondents ... purchased the monitors ... for use principally as a display unit for computer uses," and "an overwhelming majority (more than 99 percent of survey respondents)" were using the monitors with a computer. See Pl.'s Brief at 1-2, 18-19, 20, 24, 27, 29; Pl.'s Reply Brief at 3, 5, 6, 13-15, 24, 25-26; but see Def.'s Brief at 19-20, 23, 24-25; Def.'s Reply Brief at 4-14.⁵

As imported, however, each monitor is equipped with four separate inputs: (1) an analog RGB connector (also called the "D-sub 15" connector); (2) a digital video interface ("DVI-D") connector; (3) a separate video ("S-video") connector; and (4) a composite video connector. See Dell™ 2001FP Flat Panel Color Monitor User's Guide (Pl.'s Exh. 16) at 16-15, 16-18, 16-30, 16-51, 16-53 to 16-56; see also Pl.'s Brief at 1, 9; Def.'s Brief at 3. The analog RGB and DVI-D inputs are connections for a personal computer. See Pl.'s Brief at 9; Def.'s Brief at 3. On the other hand, the S-video and composite video inputs are connections for use with video devices including DVD players and VCRs, as well as game consoles (such as Xbox and PlayStation®3). See Pl.'s Brief at 9; Def.'s Brief at 3, 6, 22, 25.⁶

Thus, as designed, manufactured, and imported, the monitors at issue are equipped to receive signals from both computers and other non-computer devices. See Pl.'s Brief at 1, 2, 9; Pl.'s Reply Brief at 16-18, 24-25; Def.'s Brief at 3. The monitors even include a "picture-in-picture" feature, allowing a user to split the monitor's screen and simultaneously display, for example, both a movie and data from a personal computer. See Def.'s Brief at 3; Dell™ 2001FP Flat Panel Color Monitor User's Guide (Pl.'s Exh. 16) at 16-39 to 16-40.

In short, BenQ and the Government agree that the monitors here are "multimedia monitors," which are "designed to function as" and have "the physical characteristics of both an ADP system monitor and a video monitor." See Pl.'s Brief at 9; Def.'s Brief at 12; see also Pl.'s Reply Brief at 1-2, 7-9, 12; Def.'s Brief at 3, 6; Def.'s Reply Brief at 4.

Asserting that the "principal function" of the imported merchandise is "as a computer monitor," BenQ contends that the merchandise should be classified under HTSUS heading 8471 ("Automatic data processing machines and units thereof"), duty-free, as BenQ claimed at the time of importation. See, e.g., Pl.'s Brief at 1-2, 18-19, 30; Pl.'s Reply Brief at 1, 26.⁷ In contrast, the Government maintains that Customs correctly classified the monitors under heading 8528 ("Reception apparatus for television ...; video monitors and video projectors: Video monitors"), dutiable at the rate of five percent ad valorem, and that Customs' denial of BenQ's protest should therefore be sustained. See, e.g., Def.'s Brief at 1, 4, 6, 8, 29; Def.'s Reply Brief at 1, 15.⁸

II. Standard of Review

Customs classification decisions are reviewed de novo, through a two-step analysis. See 28 U.S.C. § 2640; Faus Group, Inc. v. United States, 581 F.3d 1369, 1371-72 (Fed.Cir.2009). The first step of the analysis addresses the proper meaning of the relevant tariff provisions, which is a question of law. The second step involves determining whether the merchandise at issue falls within a particular tariff provision as construed. See id. (citing Orlando Food Corp. v. United States, 140 F.3d 1437, 1439 (Fed.Cir.1998)).

Under USCIT Rule 56, summary judgment is appropriate where "there is no genuine issue as to any material fact" and the moving party is entitled to judgment as a matter of law. See USCIT R. 56(c). Summary judgment is thus appropriate in a customs classification case if there is no genuine dispute of material fact (because the nature of the merchandise at issue is not in question), such that the decision on the classification of the merchandise turns solely on the proper meaning and scope of the relevant tariff provisions. See Faus Group, 581 F.3d at 1371-72.

In the present case, the parties disagree as to the meaning and scope of the tariff provisions at issue. They are, however, in agreement as to the nature of the imported merchandise. Accordingly, in the absence of any dispute of material fact, this matter is ripe for summary judgment.

III. Analysis

The tariff classification of all merchandise imported into the United States is governed by the General Rules of Interpretation ("GRIs"), which provide a framework for classification under the HTSUS, and are to be applied in numerical order. See BASF Corp. v. United States, 482 F.3d 1324, 1325-26 (Fed.Cir.2007); 19 U.S.C. § 1202.⁹ Under GRI 1, a classification analysis must begin with the language of the headings, and any relevant Section and Chapter Notes, to determine whether the merchandise at issue is classifiable under a particular tariff provision. See Avenues in Leather, Inc. v. United States, 423 F.3d 1326, 1333 (Fed.Cir.2005).

The first step in a classification analysis is thus to construe the terms of the headings of the HTSUS, together with any pertinent Section and Chapter Notes (which are statutory law), to determine whether they require a specific classification. See Avenues in Leather, 423 F.3d at 1333 (explaining that Section Notes and Chapter Notes "are not optional interpretive rules, but are statutory law, codified at 19 U.S.C. § 1202") (internal quotation marks omitted); Degussa Corp. v. United States, 508 F.3d 1044, 1047 (Fed.Cir.2007) (stating that "the section and chapter notes are integral parts of the HTSUS, and have the same legal force as the text of the headings.").

The Explanatory Notes to the Harmonized Commodity Description and Coding System ("Explanatory Notes") are similarly instructive, and further illuminate the scope and meaning of tariff terms. See generally World Customs Organization, Harmonized Commodity Description and Coding System (3d ed.2002).¹⁰ The Explanatory Notes are the official interpretation of the Harmonized Commodity Description and Coding System (on which the HTSUS is based), as set forth by the World Customs Organization (the same body which drafts the international nomenclature). See Rocknel Fastener, Inc. v. United States, 267 F.3d 1354, 1360 (Fed. Cir.2001) (noting that Explanatory Notes are "prepared by the World Customs Organization to accompany the international harmonized schedule"). As Congress has recognized, the Explanatory Notes "provide a commentary on the scope of each heading of the Harmonized System and are thus useful in ascertaining the classification of merchandise under the system." H.R. Conf. Rep. No. 576, 100th Cong., 2d Sess. 549 (1988), reprinted in 1988 U.S.C.C.A.N. 1547, 1582; see also Guidance for Interpretation of Harmonized System, 54 Fed.Reg. 35,127, 35,128 (Aug. 23, 1989) (noting that the Explanatory Notes provide a commentary on...