Kyocera Indus. Ceramics Corp. v. U.S.

• Decision Date: 21 December 2006
• Docket Number: Slip Op. 06-187. Court No. 02-00705.
• Citation: 469 F.Supp.2d 1301
• Parties: KYOCERA INDUSTRIAL CERAMICS CORPORATION, Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

469 F.Supp.2d 1301

KYOCERA INDUSTRIAL CERAMICS CORPORATION, Plaintiff, v. UNITED STATES, Defendant.

Slip Op. 06-187. Court No. 02-00705.

United States Court of International Trade.

December 21, 2006.

DeKieffer & Horgan, Washington, DC (J. Kevin Horgan and A. David Lafer) for the plaintiff.

Peter D. Keisler, Assistant Attorney General; Barbara S. Williams, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Jack S. Rockafellow); and Office of Assistant Chief Counsel, International Trade Litigation, U.S. Bureau of Customs and Border Protection (Michael W. Heydrich), of counsel, for the defendant.

Opinion

AQUILINO, Senior Judge.

Defendant's motion to dismiss plaintiff's amended complaint for lack of subject-matter jurisdiction having been denied by the court in slip opinion 03-148, 27 CIT 1703, 293 F.Supp.2d 1360 (2003), reh'g denied (Nov. 18, 2004), familiarity with which is presumed, the parties have now interposed cross-motions for summary judgment as to the correct classification of certain imported ceramic substrates for electronic integrated circuits ("IC substrates") that underlie this action.

I

As recited in slip opinion 03-148, paragraph 7 of the amended complaint avers that,

[p]rior to March 10, 1999, blank IC substrates imported by KICC¹ were classified under HTSUS subheading 8542.90, as parts of integrated circuits, based on HQ 088157 (July 2, 1992), i.e., the "Diacon Ruling," which classified ceramic pieces used as bases for integrated circuits under HTSUS 8542.90, a duty-free classification. The classification determination made in the Diacon Ruling was followed by KICC and Customs until Customs issued N.Y. D88010 (March 10, 1999), which classified blank IC substrates of porcelain under HTSUS 6914.10.8000 as "Other ceramic articles: Of porcelain or china: ... Other," dutiable at 9% ad valorem.

27 CIT at 1706, 293 F.Supp.2d at 1362 (footnote omitted). Certain numbered protests covered by this pleading encompass entries prior to that day in 1999. Moreover, plaintiffs papers in opposition to defendant's motion to dismiss contained a copy of the following declaration to the Customs Service sworn to soon thereafter by KICC's erstwhile import/export specialist:

2. In 1992, I became aware of a new ruling, HQ 088157 (July 2, 1992) (i.e., the "Diacon Ruling"), which affected the tariff classification of blank ceramic substrates imported by KICC. The Diacon Ruling held that "ceramic pieces" used as mounting bases for electronic integrated circuits were properly classified under subheading 8542.90 of the ... HTSUS[] as parts of integrated circuits.

3. Upon learning of the Diacon Ruling, I transmitted a copy ... to all of KICC's customs brokers in the ports then being used by KICC to import ceramic substrates. I instructed the brokers to classify all of KICC's ceramic substrates for integrated circuits, in accordance with the Diacon Ruling.

4. At the same time I advised KICC's customs brokers to attach a copy of the Diacon Ruling to each ceramic substrates entry packet submitted to USCS.

5. When KICC underwent a National Customs Survey Audit by the USCS in 1993-95, the auditors reviewed the tariff classification of KICC's imports, including the tariff classification of blank ceramic substrates. The auditors did not object to any of KICC's classifications.

6. On several occasions during my tenure with KICC, I discussed with employees of USCS the implications of the Diacon Ruling for the tariff classification of ceramic substrates imported by KICC. During these conversations, the USCS employees never objected to the classification of ceramic substrates in accordance with the Diacon Ruling.²

A

The plaintiff takes the position that Customs "issued a new ruling modifying the Diacon Ruling but has not published notice of that ruling in the Customs Bulletin." First Amended Complaint, para. 15. Hence, this "new ruling" is ineffective upon a reading of 19 U.S.C. § 1625(c), which provides:

A proposed interpretive ruling or decision which would —

(1) modify (other than to correct a clerical error) or revoke a prior interpretive ruling or decision, which has been in effect for at least 60 days; or

(2) have the effect of modifying the treatment previously accorded by ... Customs ... to substantially identical transactions;

shall be published in the Customs Bulletin. The Secretary shall give interested parties an opportunity to submit, during not less than the 30-day period after the date of such publication, comments on the correctness of the proposed ruling or decision. After consideration of any comments received, the Secretary shall publish a final ruling or decision in the Customs Bulletin within 30 days after the closing of the comment period. The final ruling or decision shall become effective 60 days after the date of its publication.

The focus of plaintiff's complaints has been on foregoing subsection (c)(1). Plaintiff's subsequently-filed memorandum in support of its motion for summary judgment, pages 9-10, added that subsection (c)(2) required Customs to publish

notice in the Customs Bulletin before implementing a ruling modifying the tariff treatment of Kyocera's blank ceramic substrates because the ruling had the effect of modifying the treatment accorded to substantially identical transactions involving' the importation of blank ceramic substrates by Kyocera during the preceding seven years.

This additional claim caused the defendant to file a motion to strike it from this action or to stay proceedings herein and remand it for initial administrative determination. This court granted the alternative relief prayed for. Whereupon Customs and Border Protection, as it has now become known, issued HRL 967539 (April 25, 2005), concluding that

there is insufficient evidence to substantiate that KICC had a treatment. KICC's treatment claim is hereby denied.

(1)

According to the plaintiff, "the Diacon Ruling required that all ceramic substrates for integrated circuits be classified under HTSUS 8542.90"³ and the subsequent rulings "constituted a modification of the Diacon Ruling by limiting its application". Plaintiff's Memorandum, p. 19. That it pertained to all ceramic substrates for integrated circuits, however, cannot be gleaned from the `text of the ruling. Indeed, the word "substrate" is not to be read therein. Appended as exhibits 9-12 to plaintiffs summary-judgment memorandum are the protest that resulted in the Diacon Ruling; an April 30, 1992 Memo re Meeting with Laboratories & Scientific Services Related to Diacon Ruling; a Memo from Laboratories & Scientific Services to Chief, Metals and Machinery Branch Related to Diacon Ruling; and a September 19, 1990 Letter from Sandler, Travis & Rosenberg Related to Diacon Ruling. These exhibits do contain the phrases "ceramic substrates or chip carriers", "ceramic substrate, a housing for an electronic integrated circuit", "ceramic substrate or chip carriers", and "alternatively referred to as ... [']ceramic substrates'", respectively. But compare HQ 088157, wherein the word substrate does not once appear.

Be the exact content of that Diacon Ruling as it is, the defendant

flatly reject[s] the conclusion that the [subject imports] — or that earlier entries of substantially similar merchandise — were substantially identical to the ceramic pieces at issue in the Diacon Ruling. In contrast, [it] direct[s] the Court's attention to the drawings and accompanying description in the Diacon Patent, which demonstrate that the ceramic pieces described as "substrate" therein are each used to house an individual IC chip [], and are not used themselves, as is Kyocera's substrate, in making IC chips.

Defendant's Memorandum in Opposition, p. 3 (internal citation omitted; boldface in original). Plaintiff's exhibits, which, as noted, do refer to the imports in Diacon as "substrates", nonetheless support defendant's position that, whatever their nomenclature, they were used for housing IC chips, not in making such chips, which is the function of the ceramic pieces at bar. The exhibits cited also contain phrases such as "[t]he ceramic substrates or chip carriers are the housings for semiconductor devices or integrated circuits"; "[i]t is a ceramic substrate, a housing fir an electronic integrated circuit"; "the ceramic base does not come into contact with the electrical circuit"; and "used exclusively in the semiconductor industry in leaded chip carriers, flatpacks, hybrid packages, etc .... which house electronic integrated circuit chips."

A substrate is defined in The Free Online Dictionary of Computing, http:// foldoc.org/, © 1993-2005 Denis Howe, as

[t]he body or base layer of an integrated circuit, onto which other layers are deposited to form the circuit.... It is used as the electrical ground for the circuit.

The aforementioned Memo from Laboratories & Scientific Services to Chief, Metals and Machinery Branch Related to Diacon Ruling states that "the ceramic base does not come into contact with the electrical circuit and does not appear to serve any electrical insulating function." In contrast thereto, plaintiff's proffered Statement of Material Facts as to Which There is No Genuine Issue to Be Tried explains:

1. ... The substrates, are used in the United States solely or principally as bases in the production of integrated circuits []....

* * * * * *

4. At the time of importation, these substrates are dedicated to their use as IC substrates. There is no other regular commercial application for these articles.

5. In general, Kyocera's customers for blank ceramic substrates are laser houses that will ... generally sell the scored substrates to IC manufacturers who will, in the case of thick-film substrates, use screen printing to place resistors and electrical interconnects for multiple IC's on the substrate. In the case of thin film substrates, resistors and...