Channel Master, Div. of Avnet, Inc. v. U.S.

• Decision Date: 12 September 1988
• Docket Number: No. 88-1213,88-1213
• Citation: 856 F.2d 177
• Parties: , 6 Fed. Cir. (T) 175 CHANNEL MASTER, DIV. OF AVNET, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 177

856 F.2d 177

10 ITRD 1817, 6 Fed. Cir. (T) 175

CHANNEL MASTER, DIV. OF AVNET, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.

No. 88-1213.

United States Court of Appeals, Federal Circuit.

Sept. 12, 1988.

Richard C. King, Fitch, King and Caffentzis, New York City, argued, for plaintiff-appellant.

Saul Davis, Commercial Litigation Branch, Dept. of Justice, New York City, argued, for defendant-appellee. With him on the brief, were John R. Bolton, Asst. Atty. Gen., David M. Cohen, Director and Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office.

Before NIES, NEWMAN and MICHEL, Circuit Judges.

MICHEL, Circuit Judge.

Channel Master, Div. of Avnet, Inc., appeals the judgment of the United States Court of International Trade, 648 F.Supp. 10 (Ct. Int'l Trade 1986) (Re, Chief Judge), upholding the classification by the United States Customs Service of Channel Master's imported merchandise as "other solid state (tubeless) radio receivers" under items 685.23 or 685.24 of the Tariff Schedules of the United States. We affirm.

Background

This case concerns three types of solid state "scanners" imported from Japan by the appellant during the years 1974 through 1977. Each type of scanner is designed, upon insertion of one or more crystals, to receive radio frequencies corresponding to the inserted crystals. However, the scanners are not exported with crystals. Instead, the crystals are inserted into the scanners by eventual purchasers after importation. Crystals are inserted into a scanner by removing the back panel of the scanner and placing the crystals in an empty space designed for their receipt.

Channel Master's scanners were classified by the Customs Service under the Tariff Schedules of the United States as "other solid-state (tubeless) radio receivers," dutiable at a rate of 10.4 percent of their value. In an action it filed in the Court of International Trade contesting denial of a protest, Channel Master objected to the "radio receiver" classification and asserted that, since its scanners, as imported, lacked crystals, the merchandise properly should have been classified as "parts of radio receivers" or "other radio broadcasting reception apparatus," under the Schedules, dutiable at a rate of 6 percent of their value. In response, the government argued that Channel Master's scanners were at least "unfinished" radio receivers and, therefore, correctly classified as radio receivers in keeping with the applicable rule of interpretation for the Tariff Schedules, 19 U.S.C. Sec. 1202 General Headnotes and Rules of Interpretation 10(h) (1982), which states that:

unless the context requires otherwise, a tariff description for an article covers such article, whether assembled or not assembled, and whether finished or not finished.

The Court of International Trade, relying upon Daisy-Heddon, Div. Victor Comptometer Corp. v. United States, 600 F.2d 799 (CCPA 1979), binding precedent of one of our predecessor courts, held that assembled portions of an article indeed may be classified as the article itself when the imported assembly, although lacking "essential" parts, constitutes a "substantially complete article." The Court of International Trade further held that Channel Master's scanners are substantially complete radio receivers which, with the addition of the crystals, perform the basic functions

of radio receivers, namely, selection, amplification, and detection. Accordingly, the Court of International Trade determined that the scanners had been properly classified and dismissed Channel Master's action. We are in agreement with the court's basic analysis.

OPINION

On appeal, Channel Master attacks the Court of International Trade's legal conclusion that imported assemblies which constitute a "substantially complete article" but which lack one or more "essential" parts nonetheless may be classified as the unfinished article. According to Channel Master, since its scanners, as imported, cannot perform the basic functions of radio receivers, and could do so only with the insertion of the crystals, the imported scanners cannot be radio receivers or classified as such. We disagree.

As the Court of International Trade pointed out, the Daisy-Heddon case clearly established that the test to be applied is not solely whether an omitted part is "essential," but whether Channel Master's assembled pieces result in a "substantially complete" article. Channel Master argued essentially that the crystals have unique functional significance and, therefore, are indisputably "essential." But the Daisy-Heddon court specifically stated that it is improper for an importer to have "seized" on the word "essential" and to have ignored other factors indicative of whether an article is substantially complete. 600 F.2d at...