Fujitsu America, Inc. v. U.S.

• Decision Date: 06 August 2004
• Docket Number: No. 00-08-00429.,SLIP OP. 04-97.,00-08-00429.
• Citation: 342 F.Supp.2d 1326
• Parties: FUJITSU AMERICA, INC., Fujitsu it Holdings, Inc., Plaintiffs, v. THE UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

342 F.Supp.2d 1326

FUJITSU AMERICA, INC., Fujitsu it Holdings, Inc., Plaintiffs, v. THE UNITED STATES, Defendant.

SLIP OP. 04-97.

No. 00-08-00429.

United States Court of International Trade.

August 6, 2004.

Neville Peterson LLP (Michael K. Tomenga, Lawrence J. Bogard, George W. Thompson), Washington, D.C., for Plaintiffs.

Peter D. Keisler, Assistant Attorney General; Barbara S. Williams, Attorney-in-Charge, International Trade Field Office; Saul Davis, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, United States Department of Justice; Chi S. Choy, Attorney, Office of Assistant Chief Counsel, International Trade Litigation, United States Customs and Border Protection, for Defendant, of counsel.

OPINION

CARMAN, Judge.

Plaintiffs Fujitsu America, Inc. and Fujitsu IT Holdings, Inc. ("Plaintiffs") move for summary judgment. Plaintiffs challenge the United States Customs Service's¹ ("Customs"), classification of the Coolant Distribution Unit of the Amdahl 5995M Series Processor mainframe computer. Defendant cross-moves for summary judgment, asserting that the Coolant Distribution Unit was properly classified as liquidated, under heading 8419 of the Harmonized Tariff Schedule of the United States ("HTSUS"). This Court has jurisdiction to review this matter under 28 U.S.C. § 1581(a) (2000). For the reasons detailed below, this Court denies Plaintiffs' motion for summary judgment and grants Defendant's cross-motion for summary judgment.

BACKGROUND

The subject merchandise at issue in this case is a Coolant Distribution Unit ("CDU"), a component of the Amdahl 5995M Series Processor mainframe computer system ("Amdahl Processor"), an automatic data processing ("ADP") machine. (Pls.' Statement of Material Facts Not in Dispute ("Pls.' Statement") ¶¶ 1, 3; Def.'s Resp. to Pls.' Statement of Material Facts to Which There Is No Genuine Dispute ("Def.'s Resp.") ¶¶ 1, 3.) The CDU design is an "air-cooled heat exchanger type." (Pls.' Statement ¶ 2; Def.'s Resp. ¶ 2.) This CDU is only compatible for use with and is used exclusively with the Amdahl Processor. (Pls.' Statement ¶ 4; Def.'s Resp. ¶ 4.) According to Plaintiffs' product literature, the CDU has three basic functions: "heat exchange, coolant distribution, and MLA cooling." (Pls.' Resp. to Def.'s Statement of Material Facts as to Which There is No Genuine Dispute ("Pls.' Resp.") ¶ 2; see aslo Def.'s Statement of Material Facts as to Which There is No Genuine Dispute ("Def.'s Statement") ¶ 2.) "In the heat exchange function, the [CDU] collects the heat generated in the [multilayer glass ceramic assembly (`MLA')] and dissipates that heat." (Def.'s Statement ¶ 3; Pls.' Resp. ¶ 3.) "In the coolant distribution function, the [CDU] supplies coolant to the MLAs, in conjunction with other parts of the [CDU]." (Def.'s Statement ¶ 4; Pls.' Resp. ¶ 4.) "In the MLA cooling function, the [CDU], in conjunction with other parts of the coolant distribution system, provides coolant which absorbs heat generated by the MLAs." (Def.'s Statement ¶ 5(A); Pls.' Resp. ¶ 5(A).)

The CDU "is attached to the Central Processor Unit frame of the [Amdahl Processor] by hoses, through which de-ionized water is pumped from the CDU to the [Central Processor Unit] frame and back." (Pls.' Statement ¶ 1; Def.'s Resp. ¶ 1.) The CDU is necessary for the operation of the Amdahl Processor because it "prevents the overheating of the [Amdahl Processor's MLAs] by enabling heat from the MLAs to conduct into the coolant and then radiate from the coolant into the ambient air." (Pls.' Statement ¶¶ 4, 12; Def.'s Resp. ¶¶ 4, 12.)

The CDU contains a Control Unit, which is comprised of "a control circuit containing a microprocessor unit (`MPU')," a sensor circuit board "that monitors the temperature of coolant in the [CDU's] Resorvoir Tank Module," "an electrical relay circuit board, a back panel and a power supply unit." (Pls.' Statement ¶¶ 6(a), (c); Def.'s Resp. ¶¶ 6(a), (c).) The Control Unit of the CDU has three functions: (1) "`Initialization,' in which [it] establishes electronic correspondence among the pumps"; (2) "`Control,' in which [it] starts and stops the fans and pumps in the CDU"; (3)" `Monitoring,' in which [it] collects data from sensors detecting coolant temperature, coolant level, coolant flow and fan speed." (Pls.' Statement ¶ 6(b); Def.'s Resp. ¶ 6(b).) "The Control Unit distributes coolant based on data received from... the [Amdahl Processor's] Service Processor component (`SVP')." (Pls.' Statement ¶ 6(a); Def.'s Resp. ¶ 6(a).) The MPU "includes a SVP interface to enable it to communicate with the SVP." (Pls.' Statement ¶ 6(c); Def.'s Resp. ¶ 6(c).) The SVP interface "consists of a serial interface and a power control interface." (Pls.' Statement ¶ 6(c); Def.'s Resp. ¶ 6(c).) The "serial interface interrupts the MPU." (Pls.' Reply to Def.'s Resp. To Pls.' Statement of Facts as to Which There is No Genuine Dispute ¶ 6(c); Def.'s Resp. ¶ 6(c).) The Control Unit's remaining components enable it to distribute coolant to the Amdahl Processor. (Pls.' Statement ¶¶ 6(d-e), 7-9; Def.'s Resp. ¶¶ 6(d-e), 7-9.)

The subject entries were entered as "Automatic data processing machines and units thereof, ...: Other," under subheading 8471.99.90,² HTSUS, and its successor subheading 8471.80.90, HTSUS, and as "Parts and accessories of the machines of heading 8471: not incorporating a cathode ray tube" under subheading 8473.30.40,³ HTSUS, and its successor subheading 8473.30.50, HTSUS. (Pls.' Statement ¶ 14; Def.'s Resp. ¶ 14.) The subject entries were liquidated as "Machinery, plant or laboratory equipment ... for the treatment of materials by a process involving a change of temperature...: Other" under subheading 8419.89.50,⁴ HTSUS, and its successor subheading 8419.89.90, HTSUS, at a duty rate of 4.2% ad valorem. (Pls.' Statement ¶ 15; Def.'s Resp. ¶ 15.)

Plaintiffs timely filed protests challenging the classification of the subject entries under 8419.89.50, HTSUS, and its successor subheading between 1995 and 1997. (Pls.' Statement ¶ 16; Def.'s Resp. ¶ 16.) In June 1998, Customs issued Headquarters Ruling Letter HQ 960415, denying Plaintiffs' protests. Customs Ruling Letter HQ 960415 (June 9, 1998) ("HQ 960415") at 6 (Pls.' Ex. E) (Def.'s Attach. to Reply); (see also Pls.' Statement ¶¶ 17, 18; Def.'s Resp. ¶¶ 17, 18.) In HQ 960415, Customs evaluated the information about the CDU provided to it by Plaintiffs and determined that the CDU was "described under subheading 8471.99.90, HTSUS," and under heading 8419, HTSUS. HQ 960415 at 4-5. Having found the CDU classifiable under two headings, Customs applied Chapter 84, Note 2 and concluded that the CDU is "better described under subheading 8419.89.50." Id. at 5 (quoting Chapter 84, HTSUS, Note 2) ("[A] machine or appliance which answers to a description in one or more of the headings 8401 to 8424 and at the same time to a description in one or more of the headings 8425 to 8480 is to be classified under the appropriate heading of the former group and not the later."). Customs also considered Plaintiffs' alternative classification under heading 8473, HTSUS, and concluded that "[b]ased upon [C]hapter 84, [N]ote 2, classification of the CDU in heading 8473", HTSUS, is precluded. (Id. at 6) (referring to Section XVI, Note 2, HTSUS).

Plaintiffs timely filed their summons with the Court to challenge Customs' decision in HQ 960415. (Pls.' Statement ¶ 19; Def.'s Resp. ¶ 19.) In March 2000, Customs denied an additional protest pursuant to HQ 960415. (Pls.' Statement ¶ 20; Def.'s Resp. ¶ 20.) Plaintiffs again filed suit to challenge this Customs decision. (Pls.' Statement ¶ 21; Def.'s Resp. ¶ 21.) The two matters were consolidated in July 2002 by order of this Court. (Pls.' Statement ¶ 22; Def.'s Resp. ¶ 22.)

STANDARD OF REVIEW

A party's summary judgment motion will be granted if the record before the Court shows that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." USCIT R. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "In classification actions, summary judgment is appropriate when there is no genuine dispute as to ... what the merchandise is ... or as to its use." ERO Indus., Inc. v. United States, 118 F.Supp.2d 1356, 1359-60 (CIT 2000). When there are no factual issues in dispute, "the `propriety of the summary judgment turns on the proper construction of the HTSUS, which is a question of law,' subject to de novo review." Toy Biz, Inc. v. United States, 248 F.Supp.2d 1234, 1241 (CIT 2003) (quoting Clarendon Mktg., Inc. v. United States, 144 F.3d 1464, 1466 (Fed.Cir.1998); Nat'l Advanced Sys. v. United States, 26 F.3d 1107, 1109 (Fed.Cir.1994); and citing 28 U.S.C. § 2640(a)(1)).

Customs classification rulings are entitled to some degree of deference. See United States v. Mead Corp., 533 U.S. 218, 234-35, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001) (quoting Christensen v. Harris County, 529 U.S. 576, 587, 120 S.Ct. 1655, 146 L.Ed.2d 621) (Customs "classification rulings are best treated like `interpretations contained in policy statements, agency manuals, and enforcement guidelines.' They are beyond the Chevron pale. To agree ... that Customs ruling letters do not fall within Chevron is not ... to place them outside the pale of any deference whatever. Chevron did nothing to eliminate Skidmore' s holding that an agency's interpretation may merit some deference whatever its form, given the `specialized experience and broader investigations and information' available to the agency, and given the value of uniformity in its administrative and judicial understandings of what a national law requires."). The Court may uphold a Customs classification ruling based upon its "power to persuade," Id. at 235, 121 S.Ct. 2164 (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944)) (citations...